America has a capitalism economic system, but it’s hybrid capitalism just like it is a hybrid Republic. Nothing in the constitution ensures capitalism, rather the current economic system simply falls under the definition of captilisim: “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.”
Does America Have a Capitalist Economic System?
America’s economic system meets the definition of capitalism, but not pure free market capitalism. America has a mixed-market economy. This means it is a hybrid of corporate, state, social, free-market, crony, neoliberal, neocon, mercantile, etc. capitalism. In historical terms, America is more Keynes (social liberal mixed-market) than Smith (classical liberal-libertarian free-market).
Although the underlying theme is most certainly one of capitalism, America’s economic system as a whole is no more free market than Walmart’s relationship with subsidization (see the corporatocracy argument). That said, the specifics of to what degree the US is capitlist or mixed market differ by industry, the current set of laws, the current government, and more.
So, in the same way, America is a hybrid Republic, America also employs a hybrid form of capitalism.
After the Reagan years, you might believe that America employs free-market capitalism, but this is incorrect (Reagan said free-market, but he was a protectionist who favored tariffs, deregulation, and less income taxes; a classically Republican position).
The proper term for America and most other Western Democracies is “a mixed-market economic system,” a form which draws from all the different types of capitalism. It is a form that typically employs theories by those like Smith and Keynes, but rarely overtly Marx.Economic Schools of Thought: Crash Course Economics #14.
What Makes America’s Economy Capitalist?
America’s economic system is capitalist because it is based on the private ownership of the means of production, and their operation for profit. It is a hybrid form of this because it embraces regulations, taxation, and subsidization to varying degrees and for varying interests.
Any sub-system of the American economy can be discussed using a wide-array of economics terms related to capitalism types, and while this paints a clear picture, it goes beyond the scope of this page. (You can see one take on the types of Capitalism here).
With the above said, the basic concept, that America has a capitalist economic system, becomes obvious when you read the definitions of capitalism and socialism.
- Capitalism: An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. The focus is on maximizing profits (even at the expense of the availability of goods and services).
- Socialism: A social system or theory in which the government owns, controls, and/or regulates the means of production (as factories) and distribution of goods. The focus is on maximizing the production and distribution of goods and services deemed necessary (even at the expense of profits).
NOTE: Just because capitalism focuses on profits and socialism focuses on production doesn’t mean the result of capitalism is more production and of socialism less production. In fact, as I’m sure you can imagine, there is an argument that the output of capitalism is often favorable.Capitalism and Socialism: Crash Course World History #33.
TIP: Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by the owners of the factors of production in financial and capital markets, and the market combines with competition to determine prices and the distribution of goods. Learn more about Capitalism.