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Capitalism

Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned and controlled rather than commonly, publicly, or state-owned and controlled. In capitalism, the land, labor, and capital are owned, operated, and traded by private individuals or corporations, and investments, distribution, income, production, pricing and supply of goods, commodities and services are primarily determined by voluntary private decision in a market economy largely free of government intervention. A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers. In a “capitalist state”, private rights and property relations are protected by the rule of law of a limited regulatory framework. In the modern capitalist state, legislative action is confined to defining and enforcing the basic rules of the market, though the state may provide some public goods and infrastructure.

Some consider laissez-faire to be “pure capitalism” Laissez-faire (French, “let it be”), signifies a policy of only minimal intervention by the state in the economy, with the state confined mostly to protecting property rights rather than exercising control over the means of production. This has never existed. Because all large economies today have a mixture of private and public ownership and control, some feel that the term “mixed economies” more precisely describes most contemporary economies. In the “capitalist mixed economy”, the state intervenes in market activity and provides many services.

During the last century capitalism has often been contrasted with centrally planned economies. The central axiom of Capitalism is that the best allocation of resources is achieved through consumers having free choice, and producers responding accordingly to meet collective consumer demand. This contrasts with planned economies in which the state directs what shall be produced. A consequence is the belief that privatization of previously state-provided services will tend to achieve a more efficient delivery thereof. Further implications are usually in favor of free trade, and abolition of subsidies. Although individuals and groups must act rationally in any society for their own good, the consequences of both rational and irrational actions are said to be more readily apparent in a capitalist society.

Capitalistic economic practices have incrementally become institutionalized in England between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages. Capitalism has been dominant in the Western world since the end of feudalism. From Britain, it gradually spread throughout Europe, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world.