Full Guide of Capitalist Economy: Characteristics, Types And Examples
Talking about the economy must be related to capital. But what is a capitalist economy? Capitalist comes from the word capitalism, which is a term to name the owners of large capital in the economy. Each country will adapt its economic system to its own characteristics and capacity.
Keep reading to find out more about what a capitalist economy is, its characteristics and examples!
Characteristics of Capitalist Economy
The economic system of a country can be seen from the economic characteristics of the country. Here is a list of capitalist economic characteristics that you can find out to determine the economic system of a country:
1. The state is not involved much in the economic system
Countries that use a capitalist economic system are completely left to the private sector, therefore the government does not contribute much to the economy.
2. Market mechanism determines the economy
In this case, the government cannot intervene in market prices, because the market mechanism determines the balance between supply and demand.
3. Recognition of personal rights
All residents in countries with a capitalist system are free to collect wealth without having to care about other people who do not have the same ability.
4. The tools of production are individually owned
Countries that hold a capitalist economic system allow businesses or businesses to be owned individually, the means of production can be owned individually because of the large capital owned.
5. Full freedom in economic activities
People have the freedom to carry out economic activities according to their ideas, capital, and abilities. However, the government still takes part by facilitating.
6. Important role of capital
Private capital is decisive for private parties who want to seek large profits through businesses and ventures. Because capital is a very important role for the capitalist economic system.
7. Economic activities are focused on making profits
The freedom to make large profits makes the capitalist economic system oriented towards this alone, because it allows for massive exploitation that allows for even greater profits.
Types and Example of Capitalist Economy
There are several types and examples of capitalist economies, here is an explanation that you can learn about:
1. Coordinated market economy
This type of capitalism frees economic movement but must be coordinated by certain institutions. Examples of countries that apply this are Japan and Sweden.
2. Liberal market economy
This type of capital allows each region to regulate and process the economic market, but of course subject to central rules. Countries that have adopted this system are Britain and America.
3. Entrepreneurial capitalism
This type of capitalism is where entrepreneurs control and determine market rules. They will earn profits and will create jobs according to market demand.
4. Oligarchic capitalism
This capitalism does not fully provide economic freedom for non-government, large projects are still part of state-owned enterprises, because the goal of oligarchy is for small people who do not have large capital.
5. State-regulated capitalism
Almost similar to oligarchy, this type of capitalist economy is determined by the government which sectors need economic encouragement.
6. Large company capitalism
This type of capitalism is where large companies monopolize many areas of business, such as food, health, and oil.
After reading further explanations of capitalist economy, you will understand what are the characteristics, types and examples. Now you can use your knowledge to analyze a country’s economic system by looking at its capacity.
