Capitalism

Capitalism is an economic and political system in which a country's trade and industry
are controlled by private owners for profit, rather than by the state. In a capitalist market
economy, decision-making and investment is determined by the owners of the factors of
production in financial and capital markets, and prices and the distribution of goods are
mainly determined by competition in the market.

According to G.D.H. Cole “Capitalism is a system of production for profit under which
Instruments and materials of production are privately owned, the work is done mainly by
hired labor, the product belonging to the capitalist owner or owners”.

Characteristics of Capitalism

1. Profit Motive: The motive for all companies is to make and sell goods and
services only for profits. Companies do not exist solely to satisfy people's needs.
Even though some goods or services may satisfy needs, they will only be available
if people have the resources to pay for them.
2. Market competition: True capitalism needs a competitive market. Without
competition, monopolies exist, and instead of the market setting the prices, the
seller is the price setter, which is against the conditions of capitalism. So, in
capitalist economy market competition always exists.
3. Freedom of Occupation: In a capitalist economy, a person is free to select any
occupation. This freedom of choice enables the individuals to enter the field in
which they have knowledge and purchase the property, which yields maximum
profit. This type of freedom enables the businessmen to earn profit from their
business. More resources flow into those areas where yield is more.
4. Willingness to change: The capitalism is the ability to adapt and change.
Technology has been a game changer in every society and the willingness to allow
change and adaptability of societies to improve inefficiencies within economic
structures is a true characteristic

5. Free Enterprise Economy: Capitalism is also called as free enterprise economy. This
is because under capitalist system, individuals and private firms have the right to own and
use property. They have the right to earn, save and spend incomes also. They are allowed
to obtain resources, to organize production and to sell the products in any manner they
like and to anyone.

6. Private Ownership: Under capitalist economy, the factors of production like labor,
land, capital and organization are privately owned. Private property is protected,
controlled and enforced by law. Individuals have the right to own property and also free
to use it as they like.

7. Market Mechanism: The market mechanism is the most important characteristic

feature of capitalist economy. It is also called as price mechanism. Under capitalist
economy, profit, which is related with market mechanism, guides the allocation of
resources. Under this system the whole economic system moves in and around the market
mechanism.

8. Consumers’ Freedom of Choice: Under capitalist economy consumers have complete

freedom to choose what to purchase. Consumer is the king of the market under
capitalism. Manufacturers consider consumers’ demand, taste, preference etc. while
producing goods.