Capitalism

From Simple English Wikipedia, the free encyclopedia

Capitalism is a kind of economic system where things (property for example) are owned by persons, not by a government or communities. This is called the "free market". Most countries in the world today do have some government controls, so they are actually called "mixed economies" instead of totally free markets. Some people disagree on whether capitalism is a good idea, or how much capitalism is a good idea.

The word comes from "capital", meaning something of value. This can be money ("financial capital") or any other goods that can be traded. "Capital" originally comes from the Latin word caput, meaning "head", because it was used to mean how many "head" of cattle a wealthy person owned, in days long ago when cattle were used as money. (In fact, the words "capital" and "cattle" both come from caput.)

[edit] Buying, selling, working, and hiring

In capitalism, people may sell or lend the things they own, and other people may buy or borrow them. If one person wants to buy, and another person wants to sell to them, they do not need to get permission from any king or group. This is also called the free market — people can have a market (buying and selling with each other) without anyone else telling them to. The definition of capitalism and the free market economy was introduced by Adam Smith in his book The Wealth of Nations.

People can also choose to work for anyone who will hire them in a free market. People can also hire anyone who wants to work for the pay they offer. The government does not tell people what job to take. The government also does not stop people from doing a job.

This is different from many older economic systems. In feudalism, most people are serfs and have to work for the people who own the land they live on. In mercantilism, the government makes it hard to buy things from other countries. In many countries with mixed economies (part capitalism and part socialism) there are laws about what you can buy or sell, or what prices you can charge, or whom you can hire or fire.

[edit] Investing

There is also investment in capitalism. People can put their money together to buy or build things, even if they are too big for one person to make alone. The people who invest get to be the owners of what they buy or build together. The stock market lets people buy and sell investments.

Investing is important to capitalism. The word "capitalist" can mean two things: it can mean someone who likes capitalism; but it can also mean someone who invests. For example, a venture capitalist invests in new businesses.

People who start businesses, or invest in businesses, can make a lot of money. A business sells things that people want. The investors make extra money, which is called profit. Investors can take their profit and invest it in more businesses, or in making the business bigger. The investors can get more and more profit if the businesses are successful.

[edit] People who disagree

Socialists, anarchists and communists are people who do not support capitalism. They say it hurts workers, because businesses make more money by selling things than they pay to the workers who make the things. Karl Marx was a famous communist from Germany. He wrote a famous book called The Capital (or Das Kapital in the German language). He said that capitalism would go away after workers decided to take over the government in a revolution. There were violent communist revolutions in many countries, and many people were killed because of this. But capitalism did not go away, and most of these Communist systems have collapsed and do not exist today, or else they have become more capitalist, because Marx's ideas didn't really work.

There are different words for people who support capitalism. In many parts of the world, these people are called liberals. But in the United States, the word "liberal" means someone whose beliefs lean toward socialism. People who support capitalism strongly (in the U.S. and a few other countries) are called libertarians. People who call themselves conservatives often support capitalism too.

People who support capitalism also have disagreements. Most people agree that capitalism can only work if the government keeps people from stealing other people's things. If people could steal anything, then nobody would want to buy things.

In most countries, the government does more than that. It tries to make sure that people buy and sell fairly, and that businesses do not hurt workers. Because the government takes a lot of money in taxes, it also buys a lot of things and gives a lot of money away. It spends money on guns and ships for the military; on science research in universities; and on schools and libraries. It also gives money to people who do not have jobs, and to businesses that the political leaders think are important. Sometimes government gives money to people just because those people support the politicians who are in office. When the government is in charge of part of the economy, this is called a "mixed economy". It is only partly capitalism.

A few people think that people can protect themselves without any government. Instead of having laws against stealing, people could protect their own things, or agree with other people to protect each other from thieves. This belief is called "anarcho-capitalism". It is not very common. People who think this, often think that the government is a thief, because it takes taxes away from everyone.