Capitalism is an economic ideology in which the means of production is controlled by private business. This means that individual citizens run the economy without the government interfering in production or pricing. Instead, pricing is set by the free market. This means that value is based on supply and demand and the relationship between producers and consumers.
Capitalism is very different from socialism and communism, in which the government maintains tight control of the economy. The United States is arguably the most well-known country with a capitalist economy, which many citizens see as an essential part of democracy and building the "American Dream." Capitalism also taps into the American spirit, being a more "free" market when compared to the more government-controlled alternatives.
Despite this distinction, the United States falls short of the top 10 in terms of the most capitalistic countries in a 2021 report from The Heritage Foundation and Global Finance Magazine. According to the Heritage Organization's Economic Freedom of the World Index, the top 10 countries with the most capitalist economies (ranked from highest score to lowest) are:
Top 10 Countries with the Most Capitalist Economies - 2023 Heritage Index of Economic Freedom:
This list stands as a bit of a contrast from a 2018 list compiled by the Fraser Institute:
Top 10 Countries with the Most Capitalist Economies - 2021 Fraser Institute:
There are benefits and drawbacks to a capitalist economy. For example, capitalism cultivates competition, which often drives both innovation and affordability, with the best products selling at the best possible prices. Economic growth is another benefit. On the other hand, one of the most significant disadvantages of capitalism is that it does not promote equality of opportunity. In short, some people may not get the opportunities that others receive. Moreover, the unrestrained "supply and demand" nature of the free market can result in prices too high for lower income individuals to afford.
Does absolute capitalism exist?
In theory, yes. In practice, no country in the world has ever achieved a 100% capitalist, "laissez-faire," or free-market economy. All capitalist economies are mixed to one degree or another. The following are some high-profile examples.
Is America capitalist?
Yes, but not completely. The United States is actually referred to as a mixed market economy, meaning that it blends characteristics of both capitalism and socialism.
In the United States, the means of production (such as manufacturers or importers) are privately owned and operated for profit. This is a clearly capitalist approach. However, because the economy has regulations, taxation, and some subsidization, the United States is not a purely capitalist society. The government has at least partial control over education, roads, health care, and postal deliveries. It also provides subsidies to sectors including oil companies, financial companies, and agricultural producers. Additionally, private businesses must register with government agencies, and certain types of companies need government-approved licenses.
Is Russia capitalist?
It's arguably borderline. While many people equate Russia with socialism, the economic truth is a bit more complex. Some experts suggest that Russia is a "state capitalist" economy, but others maintain that Russia is a "mixed market" economy. State capitalism is an economic system in which the government, or state, undertakes for-profit economic activity, and the means of production are state-owned enterprises. The state controls approximately 55% of Russia's economy, and directly employs 20 million workers (28% of the workforce). Additionally, the existence of oligarchs in Russia makes the country non-capitalist.
Is Japan capitalist?
Yes, but in an altered form. Japan is a capitalist country in the form of "collective capitalism". In Japan's collective capitalist system, workers are usually compensated with job security, pensions, and social protection by their employers in return for loyalty and hard work. Collective capitalism focuses on long-term relationships, such as companies owning shares in other companies, resulting in cooperation between companies because they are invested in one other's prosperity.
Note that scores of 70 or higher would generally be considered capitalist countries, while those from 60.0-69.9 would be borderline.
FAQs
In practice, no country in the world has ever achieved a 100% capitalist, "laissez-faire," or free-market economy.
Are most developed countries are either 100% capitalist or 100% socialist? ›
There are very few examples of purely socialist and capitalist countries. Rather, most countries use elements of both while swaying heavily toward the principles of one. For instance, the United States operates a mixed system with predominantly capitalistic principles.
What is the economic prediction for 2024? ›
GDP growth in the United States is projected to be 2.6% in 2024, before slowing to 1.8% in 2025 as the economy adapts to high borrowing costs and moderating domestic demand.
Which country is an example of a capitalist country responses? ›
Countries like the United States and New Zealand are very capitalistic, although they also embody features of mixed market economies. Other, less capitalistic mixed market economies include India and Russia.
Is Mexico a capitalist country? ›
Answer and Explanation: Mexico is not a socialist country, but rather employs a free market, capitalist economic system. It is considered an emerging market economy, meaning it is making strides in growth and GDP, but still falls short of being classified as a developed country.
Is Japan a capitalist country? ›
Japan's collective capitalism relies on cooperation, but ignores the fact that the means of production are private. It cannot be considered socialist because the means of production belongs to corporations.
Is any country truly socialist? ›
Examples of countries directly using the term socialist in their names include the Democratic Socialist Republic of Sri Lanka and the Socialist Republic of Vietnam, while a number of countries make references to socialism in their constitutions, but not in their names. These include India and Portugal.
Which countries are truly socialist? ›
Marxist–Leninist states
| Country | Since | Duration |
|---|
| People's Republic of China | 1 October 1949 | 74 years, 223 days |
| Republic of Cuba | 24 February 1976 | 48 years, 77 days |
| Lao People's Democratic Republic | 2 December 1975 | 48 years, 161 days |
| Socialist Republic of Vietnam | 2 September 1945 | 78 years, 252 days |
Politically, capitalist countries range from democracies to monarchies to oligarchies to despotisms. Most western countries are capitalist, including the United States, Canada, the United Kingdom, Ireland, Switzerland, Australia, and New Zealand.
What countries are in a recession in 2024? ›
On Thursday, both Japan and the UK found themselves in recessions, joining Finland and Ireland, as they reported two consecutive negative quarters of gross domestic product (GDP), meeting the widely accepted definition of a recession.
Key Takeaways. S&P Global Ratings expects U.S. real GDP growth of 2.5% in 2024 as the labor market remains sturdy. We continue to expect the economy to transition to slightly below-potential growth in the next couple of years.
Will there be a global recession in 2024? ›
Data for 2024 is a forecast. UN Trade and Development (UNCTAD) forecasts global economic growth to slow to 2.6% in 2024, just above the 2.5% threshold commonly associated with a recession. This marks the third consecutive year of growth below the pre-pandemic rate, which averaged 3.2% between 2015 and 2019.
What countries don't use capitalism? ›
As of 2020, only Laos, China, Cuba, and Vietnam claimed to follow the principles of socialism as dictated by Marxist and Leninist theories. More often, however, it is difficult to label countries as solely capitalist or socialist.
Is Russia a capitalist country? ›
The Russian economy is volatile. Since 1989 its institutional environment was transformed from a socialist command economy to a capitalistic market system. Its industrial structure dramatically shifted away from heavy investment in manufacturing and agriculture toward market services, oil, gas, and mining.
Is Switzerland a socialist country? ›
No, Switzerland is not a socialist country; it is a capitalist country. Switzerland has a history of direct democracy, wherein the people control the laws and changes to the constitution. Switzerland's political system is a semi-direct democratic federal republic.
Is the United States a pure capitalist country? ›
Key Takeaways. The U.S. has a mixed economy which exhibits characteristics of both capitalism and socialism. A mixed economy embraces the free market when it comes to capital use, but it also involves government intervention for the public good.
What is the least capitalist country? ›
Capitalism is the dominant economic system in Western countries. In comparison, fewer countries use socialist economic systems. As of 2020, only Laos, China, Cuba, and Vietnam claimed to follow the principles of socialism as dictated by Marxist and Leninist theories.
Is Switzerland communist or capitalist? ›
Answer and Explanation: No, Switzerland is not a socialist country; it is a capitalist country.
Are all 1st world countries capitalist? ›
While highly subjective, “first world” is a term that consists of countries that may have the following characteristics: stable democracies, high standards of living, capitalist economies, and economic stability.
