What is capitalism?
Capitalism is an economic system in which private individuals and businesses own property and the means of production. Prices are mainly set by markets. People are free to trade, start businesses and keep profits. Most modern economies, including the UK, are mixed, combining markets with some state ownership and regulation.
Capitalism grew in Europe from the 1600s and took off with the Industrial Revolution, which began in Britain. The Scottish thinker Adam Smith argued in 1776 that people pursuing their own interests in free markets could benefit society as a whole. Key features include private property, competition, profit, wage labour and markets that set prices. Owners take risks with their capital in the hope of profit.
In practice, no country runs pure capitalism. The UK is a mixed economy. Most goods and services are produced by private firms. But the state runs the NHS and state schools, regulates markets and redistributes income through taxes and benefits. The balance shifts over time. After 1945 many industries were nationalised, while the 1980s saw large privatisations. The mix keeps shifting with each government.
Supporters credit capitalism with huge rises in living standards, innovation and choice. Critics argue it produces inequality, insecure work, financial crises and environmental damage unless it is controlled. Debates in UK politics are rarely about whether to have capitalism, but about how much to regulate it, tax it and share its rewards. These arguments run through almost every Budget and election campaign.
Where you've seen it
Industrial Britain in the 1800s, the United States, Hong Kong in the late 1900s, and most of the world's economies today in some mixed form.
In the UK today
The UK is a mixed capitalist economy. Debates about tax levels, regulation, privatisation and the role of the City of London are all arguments about how capitalist to be.
The left argues capitalism needs strong regulation, worker rights and redistribution, and some on the far left want to replace it.
The right argues free markets are the best way to create wealth and freedom, and that government should interfere as little as possible.
Britain is split. Now you decide.
In Population Decides you can nationalise or privatise industries, cut or raise business taxes and see how far you want to push markets.
Play Population Decides freeCommon questions
Is the UK a capitalist country?
Yes, it is a mixed economy based mainly on private enterprise, with a large public sector.
Who invented capitalism?
No one person. It developed over centuries, though Adam Smith is often called the father of economics.
What is the opposite of capitalism?
It is usually contrasted with socialism or communism, where the state or community owns production.
Under capitalism, who mostly owns businesses and property?
Private owners. Capitalism is a system where businesses and property are mostly privately owned and run for profit.
In a capitalist economy, what mainly sets prices?
Supply and demand in markets. In capitalism, prices are set by supply and demand in markets.