What is Capitalism?

What is Capitalism?

The concepts of capitalism and classical liberalism are often used interchangeably, because capitalism can be used in a wide or a narrow sense.

In the broad, philosophical sense, capitalism is the same as liberalism: the individual is at the center, and you have full sovereignty over your own life, body, and property.

The narrower definition involves purely economic aspects, such as the means of production being privately owned, the market being free from government interference, profits being smart ( smart, and so on.

Volunteerism and Collaboration

When it comes right down to it, capitalism is a social system, where individuals enter into voluntary contracts, deals, and collaborative endeavors in a society and market that is not controlled by the government.

Under capitalism, employees and employers enter into voluntary contracts regarding wages, working hours, job duties, and insurance. Anyone can start his or her own business, without anyone else deciding how, where, or when, as long as the entrepreneur respects the freedom of others, i.e. their right to decide over their own bodies and property.

Practical Consequences

A capitalist system is a natural result of a liberal constitutional government. You can do business with whom you want, you can start your own business, and you can work for the employer of your choice – but contracts must be respected, as long as they are not unconstitutional.

This does not mean that a larger company can threaten a smaller company to get out of the market, nor that a store can swindle its customers. Such actions will always be forbidden under capitalism, since in that case, you are letting your freedom limit other people’s freedom. If you don’t like a workplace or you think you get paid too little, you can have a chat with the boss or resign in accordance with the time limits set out in your contract.

Greater Social Mobility

In a capitalist economy, the market is free. This means that there would be a more flexible job market than today, due to less regulations and significant demands on the employers. In other words, in that case it’s not as big a deal, if you lose or quit a job, since it’s much easier to get a new job or start working for yourself.

Employers have greater motivation to hire and keep good people, since they are dependent on their employees, but they no longer have to worry about payroll taxes and other requirements by the government that make the businesses of today hesitate to hire people.

General Prosperity Benefits Everyone

A freer society, where people are protected against violence and oppression, and where each individual is free to create and produce in peace, leads to increased production, innovation, and prosperity. This benefits everyone, and this increase in prosperity is possible, because productive people are left alone, so they can develop both themselves and their dreams.

Sure, the rich may get richer, but the best possible conditions for entrepreneurship and technological development necessarily results in benefitting all people by offering more and more solutions to make our day-to-day living and our lives easier.


  • In a broad sense, capitalism is the same as liberalism
  • Property rights are central: People have full control over their own property and body without interference from government
  • We do not have a capitalist system today
  • Voluntary trade and collaboration are key concepts
  • You get more social mobility because of a more flexible labor market
  • If the government leaves peaceful entrepreneurs alone, the general economy and technological development will benefit everyone



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