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Main Qualities of Capitalist Economies

There are several types of economic systems employed by nations. Two such designs, socialism and capitalism are the most common. Capitalism is often referred to as a free market in its purest contact form; a common type of socialism is definitely communism. 


Embedded in these economic systems are political and social elements that influence the degree of purity of each system. Put simply, many capitalist nations have components of socialism interwoven. Thus even though there are different degrees or degrees of determination to the ideals of capitalism, there are numerous traits that are common among all capitalists.

1. A Two-Class System

Historically, a capitalist society is characterized by the split around two classes of individuals-the capitalist class, which owns the means for producing and distributing merchandise (the owners) and the working class, who sell their labor to the capitalist class in exchange for wages. The market is work by the persons (or corporations) who very own and operate firms and make decisions as to the application of resources. But there exists a “division of labor” which allows for specialization, typically occurring through education and schooling, further breaking down the two class system into sub-classes (e.g., the middle class). 

2. Profit Motive

Companies exist to produce a profit. The motive for all businesses is to make and sell things and services only for profits. Companies do not exist solely to satisfy people's needs. Even though some goods or services may fulfill needs, they will only be available if the many people have the resources to pay for them.

Understanding Capitalist Economy Traits

3. Minimal Government Intervention

Capitalist societies believe market segments should be left alone to operate without government intervention. On the other hand, a totally government-free capitalist world exists in theory, only. Even in the United States--the poster children for capitalism, the federal government regulates certain industries, including the Dodd-Frank Work for financial institutions. By contrast, a purely capitalist contemporary society would allow the markets to set prices based on demand and supply for the purpose of making profits. 

4. Competition

True capitalism needs a competitive market. Without competition, monopolies exist, and rather than the market setting the prices, the seller is the price setter, which is against the types of conditions of capitalism. 

5. Willingness to Change

The last characteristic of capitalism may be the ability to adapt and change. Concept has been a game changer in every society, and the willingness to allow modification and adaptability of societies to improve inefficiencies within financial structures is a true characteristic of capitalism. 

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