Characteristics of a Capitalist Economic System - In this present article, we will discuss a system that significantly dominates today's global economy - the capitalist economic system. This system represents a paradigm where economic control, including asset ownership and management, is in the hands of private parties primarily aiming to seek profit.

A capitalist could be an individual or a corporation owning substantial capital and controlling vital economic sectors such as industry, trade, and others, all in the pursuit of maximum profit.

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    However, it's essential to understand that comprehension of capitalism varies based on perspectives. Various figures and economic experts hold their unique views about capitalism, from Karl Marx to Adam Smith.

    Without further ado, let's delve into understanding what the capitalist economic system is, and who exactly is referred to as a capitalist in this context.

    Understanding the Capitalist Economic System

    Characteristics of a Capitalist Economic System
    Characteristics of a Capitalist Economic System

    The capitalist economic system is a system that grants economic control freedom to private parties or actors to seek profit. The private parties mentioned here could be the public, corporations, or individuals.

    A capitalist is a private party with significant capital. A capitalist is someone who will control industry sectors, trade, and other economic sectors to gain as much profit as possible.

    The term 'capitalist' is derived from 'capitalism,' which carries various meanings according to several economic experts and significant country figures.

    • According to Karl Marx, capitalism is defined as a system where the capital owner plays a role in determining market policies and goods prices to gain maximum profit.
    • Max Weber argues that capitalism is an economic system that applies within a market, and its trading activities aim to seek profit.
    • Adam Smith stated that capitalism is a system that can provide welfare to its adhering society, provided there is no government intervention in the market mechanisms and policies.
    • According to the opinion of Ir. Soekarno, capitalism is a social system that emerges in society due to the separation between the labor class and production tools.

    Characteristics of a Capitalist Economic System

    Capitalism is considered a civilization that creates an ideology and becomes a lifestyle. This system provides individuals with the freedom to own resources, like competition among individuals in fulfilling life needs, or competition among business entities in seeking profit.

    Citing Wikipedia, the capitalist system has the following characteristics:

    1. Self-Interest

    Every individual possesses complete freedom in business competition, using various methods to gain as much profit as possible. Where all economic and social activities are wholly carried out for self-interest.

    2. Guarantee of Individual Ownership Rights

    Every individual has the right to accumulate personal wealth as much as possible, ignoring the position of others who do not have the ability to do the same.

    3. Full Freedom Provision

    Capitalism provides full freedom to every person to conduct economic activities. State intervention in economic activities is limited only as a facility provider; therefore, everyone can smoothly run their economic activities.

    4. Free Competition

    The capitalist system also allows competition among economic actors in society. This competition can occur among sellers who can provide quality to buyers. Conversely, some buyers can also compete to offer the best price.

    5. Price as a Determinant (Price System)

    Capitalism implements a market mechanism that works to determine equilibrium prices between supply and demand for goods or services. Therefore, the state should not intervene in the market. If a price decline occurs, the state is asked to remain silent because the market mechanism will automatically determine the new equilibrium price.

    Consequently, it can be stated that the state has a minimal role and functions only for security and order, establishing private property rights, and maintaining competition without obstacles. Understanding what capitalism means is extremely vital in the economic field, particularly when delving into economic science.


    Capitalism, as a dominant economic system, provides broad freedom for individuals or corporations to control and manage economic resources. However, this approach has weaknesses and potential issues, especially concerning wealth and economic power disparities.

    In this system, the state usually plays a minimal role, limited to law enforcement, protection of private rights, and maintaining healthy competition. But, knowledge about capitalism is extremely important in the field of economics; especially for those who delve into economic science.

    A deep understanding of this system can assist in designing fairer and more efficient economic policies and inform public debates on significant economic issues.

    Frequently Asked Questions (FAQs)

    1. What is a capitalist economic system?

    A capitalist economic system is a system that turns over financial control flexibility to private events to look for earnings.

    2. Who is referred to as a capitalist?

    A capitalist is a private party that possesses substantial resources plus regulates market sectors, trade and other private sectors to get as much revenue as feasible.

    3. What are the features of a capitalist economic system?

    The capitalist economic system includes self-interest, individual property rights, freedom in economic activities, free competition, and also a price mechanism.

    4. What is the federal government's function in a capitalist economic system?

    The federal government generally plays a minimal role in the capitalist system such as police, defense of personal legal rights, along with keeping healthy and balanced competitors.

    5. Why is it crucial to comprehend the capitalist economic system?

    Recognizing the capitalist economic system is exceptionally essential, particularly for those that wish to look into economic science. This understanding can help in creating economic policies as well as informing public debates on considerable financial concerns.

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