capitalism

noun
cap·​i·​tal·​ism | \ ˈka-pə-tə-ˌliz-əm How to pronounce capitalism (audio) , ˈkap-tə-\

Definition of capitalism

: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

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Communism, Socialism, Capitalism, and Democracy

Communism, socialism, capitalism, and democracy are all among our top all-time lookups, and user comments suggest that this is because they are complex, abstract terms often used in opaque ways. They're frequently compared and contrasted, with communism sometimes equated with socialism, and democracy and capitalism frequently linked.

Part of the confusion stems from the fact that the word communism has been applied to varying political systems over time. When it was first used in English prose in the mid-19th century, communism referred to an economic and political theory that advocated the elimination of private property and the common sharing of all resources among a group of people; in this use, it was often used interchangeably with the word socialism by 19th-century writers.

The differences between communism and socialism are still debated, but generally English speakers use communism to talk about the political and economic ideologies that find their origin in Karl Marx’s theory of revolutionary socialism, which advocates a proletariat overthrow of capitalist structures within a society; societal and communal ownership and governance of the means of production; and the eventual establishment of a classless society. The most well-known expression of Marx’s theories is the 20th-century Bolshevism of the U.S.S.R., in which the state, through a single authoritarian party, controlled a society’s economic and social activities with the goal of realizing Marx’s theories. Socialism, meanwhile, is most often used in modern English to refer to a system of social organization in which private property and the distribution of income are subject to social control. (The term is also often used in the phrase democratic socialism, which is discussed here.)

Communism and socialism are both frequently contrasted with capitalism and democracy, though these can be false equivalencies depending on the usage. Capitalism refers to an economic system in which a society’s means of production are held by private individuals or organizations, not the government, and where products, prices, and the distribution of goods are determined mainly by competition in a free market. As an economic system, it can be contrasted with the economic system of communism, though as we have noted, the word communism is used of both political and economic systems. Democracy refers not to an economic system but to a system of government in which supreme power is vested in the people and exercised through a system of direct or indirect representation which is decided through periodic free elections. For discussion about whether the United States is accurately described as a democracy or as a republic, see the article here.)

Readers should consult the individual entries for a full treatment of the various ways in which each of these four words is used.

Did You Know?

Capital is wealth—that is, money and goods—that's used to produce more wealth. Capitalism is practiced enthusiastically by capitalists, people who use capital to increase production and make more goods and money. Capitalism works by encouraging competition in a fair and open market. Its opposite is often said to be socialism. Where a capitalist economy encourages private actions and ownership, socialism prefers public or government ownership and control of parts of the economy. In a pure capitalist system, there would be no public schools or public parks, no government programs such as Social Security and Medicare, and maybe not even any public highways or police. In a pure socialist system, there wouldn't be any private corporations. In other words, there's just about no such thing as pure capitalism or pure socialism in the modern world.

Examples of capitalism in a Sentence

Capitalism is at once far too rational, trusting in nothing that it cannot weigh and measure, and far too little as well, accumulating wealth as an end in itself. — Terry Eagleton, Harper's, March 2005 The United States has assumed a global burden—not just fighting terrorism and rogue states, but spreading the benefits of capitalism and democracy … — Brian Urquhart, New York Review Of Books, 9 Oct. 2003 The city was then the great maw of American capitalism. — Christopher Hitchens, Atlantic, August 2002 I am not the first to point out that capitalism, having defeated Communism, now seems to be about to do the same to democracy. The market is doing splendidly, yet we are not, somehow. — Ian Frazier, On The Rez, 2000 Even Cuba's famed health-care system has been unable to resist the siren song of capitalism. The Frank Pais Hospital … now offers "for pay" surgery to foreigners. — Ann Louise Bardach, Vanity Fair, March 1995
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Recent Examples on the Web An oilman who undertook a number of audacious takeover bids, Mr Pickens came to define American tooth-and-claw capitalism in the 1980s. The Economist, "Business this week," 14 Sep. 2019 Willi Schlamm observed that the problem with capitalism is capitalists, and, likewise, the problem with Christianity is and always has been Christians, from Saint Peter forward. Kevin D. Williamson, National Review, "Playing God," 8 Sep. 2019 In short: This bastion of capitalism on China’s southern coast is still going about its business. Russell Goldman, BostonGlobe.com, "In Hong Kong, life goes on, despite the whiff of tear gas," 27 Aug. 2019 But most womyn’s lands have anti-capitalism in their DNA. Fortune, "Womyn’s Lands Adapt to the 21st Century: The Broadsheet," 26 Aug. 2019 Within ethnic studies, scholars are often very critical of the system of capitalism as research has shown that Native people and people of color are disproportionately exploited within the system. Dustin Gardiner, SFChronicle.com, "Complaints of biased curriculum may sideline California’s ethnic studies push," 21 Aug. 2019 But progressives should embrace the reordering of capitalism as their priority. Steven Vogel, Vox, "Why 2020 Democrats need to have a serious debate about policing," 29 July 2019 More Democrats now have a positive view of socialism than capitalism. Elizabeth Schmidt, The Conversation, "Investors, consumers and workers are changing capitalism for the better by demanding companies behave more responsibly," 24 July 2019 Cliff Asness wrote a wonderful piece for Bloomberg a few years ago about the idea of index investors being free riders: The use of price signals by those who played no role in setting them may be capitalism’s most important feature. Ben Carlson, Fortune, "Yes, Passive Investing Has Exploded. But Here’s Why Fears of a Bubble are Overblown," 14 Sep. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'capitalism.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of capitalism

1833, in the meaning defined above

History and Etymology for capitalism

see capital entry 2

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Learn More about capitalism

Statistics for capitalism

Last Updated

31 Oct 2019

Time Traveler for capitalism

The first known use of capitalism was in 1833

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More Definitions for capitalism

capitalism

noun

Financial Definition of capitalism

What It Is

Capitalism is an economic and social system in which participants privately own the means of production -- called capital. Free market competition, not a central government or regulating body, dictates production levels and prices.

How It Works

Under capitalism, prices and wages are determined by the forces of supply and demand.

Members of a capitalist economy are driven to obtain the maximum amount of utility ("benefit" or "profit") at the least cost. Privately owned industry caters to a consumer sector that wants goods and services of the highest value for the lowest price. Competition forces companies to keep prices low to attract consumers. The role of government in a capitalist society is to protect the legal rights of actors in the economy, not to regulate the free market system.

In capitalism, the most effective companies are those that create the greatest amount of utility. The most inefficient companies will be forced out of the market when the consumer discovers he can obtain the same goods for a lower cost elsewhere.

Why It Matters

Capitalism characterizes the behavior of the global economy. Since the disintegration of the Soviet Union, capitalism has become the dominant economic system worldwide.

Capitalism is often considered the antithesis of Socialism -- an economic and political system where the ownership of capital (the means of production) is commonly owned. Socialist industry and production is regulated by the central government.

The Efficient Market hypothesis, an ideal of capitalism, states that finance market prices are always at the correct level at any given time considering all public information and expectations. Supporters of this theory believe that prices are necessarily always fair and correct. Dissidents believe that prices are often the result of random mistakes and misunderstandings and do not always represent the true value of a stock.

Through the ongoing balancing act of supply and demand, a capitalist economy is constantly striving to reach a level of long-term equilibrium where supply matches demand causing prices to stabilize. In the real world, political policy, natural weather events, consumer confidence and a whole host of other outside effects constantly affect the market, making the long-term equilibrium goal nearly impossible to achieve.

Source: Investing Answers

capitalism

noun
How to pronounce capitalism (audio)

English Language Learners Definition of capitalism

: a way of organizing an economy so that the things that are used to make and transport products (such as land, oil, factories, ships, etc.) are owned by individual people and companies rather than by the government

capitalism

noun
cap·​i·​tal·​ism | \ ˈka-pə-tə-ˌliz-əm How to pronounce capitalism (audio) \

Kids Definition of capitalism

: a system under which the ownership of land and wealth is for the most part in the hands of private individuals

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More from Merriam-Webster on capitalism

Rhyming Dictionary: Words that rhyme with capitalism

Spanish Central: Translation of capitalism

Nglish: Translation of capitalism for Spanish Speakers

Britannica English: Translation of capitalism for Arabic Speakers

Britannica.com: Encyclopedia article about capitalism

Comments on capitalism

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