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 - 2021 Heritage Index of Economic Freedom:
- Singapore (Freedom score: 89.7)
- New Zealand (83.9)
- Australia (82.4)
- Switzerland (81.9)
- Ireland (81.4)
- Taiwan (78.6)
- United Kingdom (78.4)
- Estonia (78.2)
- Canada (77.9)
- Denmark (77.8)
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 - 2018 Fraser Institute:
- Hong Kong (China)
- New Zealand
- United States
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.
For a full list of countries and their level of capitalist freedom, see the table below. Note that scores of 70 or higher would generally be considered capitalist countries, while those from 60.0-69.9 would be borderline.