Capitalism : Meaning, Characteristics, Types


Meaning Of Capitalism

Capitalism is considered to be an economic system in which the private sector, be it individuals or businesses, owns their capital goods for profit. To handle such a system, the business owners hire workers and make them work under them, as by this they would not become the owners of the business but work for it for the owners and make it profitable.

Under capitalism, the production of goods and services is based totally on the market scenario, i.e., the need and demand for that service in the market rather than proper central planning, which is undertaken by any governmental organization.

It is a system that includes and works on the concept of private property and market competition with the aim of making a profit.

The free market is considered to be the purest form of capitalism where the individuals working privately are not restricted and where they are free to decide the amount and place of investment, the services or goods that need to be produced or sold in the market, and even their prices. They are not bound where they cannot take even the slightest of decisions as this marketplace works without keeping any check or control over the individual.

Characteristics of Capitalism

Some of the characteristics of capitalism include:

An Economy of Free Enterprise

The concept of capitalism is also known as a free enterprise economy, as the individuals who are working here have the right to make their own decisions and also use their property. They have the permission to use the resources in any way they want to and even sell the products in any manner they wish. They are not bound by any governmental restrictions and are thus free to run a business of any kind. Hence, the employee is given complete freedom to do the work he wants to do and the way to do the same.

Individual Ownership

The factors such as land, capital, organization, and labour are privately owned under capitalism. This property, which is privately owned, is controlled and protected by laws. Here, the individual has the right to own the property and can even use it in the way he wants to.

Mechanism of the Market

It is considered to be the most essential characteristic of capitalism, which is also known as the price mechanism. Under the capitalist system, the entire economic system revolves around the mechanism of the market. Thus, there is a lack of proper planning, which results in the poor distribution of resources. This mechanism is used for regulation in capitalism.


In capitalism, the consumer has the right to spend his own income in the way he wants. There are no restrictions on the consumer and he can even save the money he is earning and can even spend more than his earnings.

No central plan

Under the concept of capitalism, there is no such thing as a central plan that can be used to guide and even control business activities. It all works according to the market, which affects the allocation of resources and even decisions. Any government involvement is not involved.


There is competition among the sellers, which is one of the characteristics of the capitalist system, which motivates the producers to make the best use of their abilities and all the factors involved in the production of services and producing goods at the minimum expense. The competition in them makes them do better than others, and thus, free-market competition is considered to be an important characteristic that would help to protect consumers.

Sovereignty of the Consumer

In capitalism, all consumers have complete freedom to choose the goods or services they want to purchase. He is the head of the market under the system of capitalism. It is the duty of manufacturers to consider the demands, choices, and tastes of the consumer while the goods are being produced.

Types Of Capitalism

There are different types of capitalism depending on the region. Types of capitalism are:


One of the several types of capitalism is advanced capitalism. It is the situation that is applied to a society where the capitalist model has been developed for a long period of time. This type of capitalism uses nominal wages to increase the restless sections of the work force. It focuses on the stabilisation of the economic system.


Corporate capitalism is a type of capitalism that is characterised by a free market that is dominated by a system of hierarchy and bureaucracy. It has been criticised for its excessive powers over government policies. A corporation is usually known as a public entity where some part of the business can be bought from the stock market in the form of shares. This is a method of raising capital to help the corporation’s investments.


Finance capitalism is a type of capitalism that is a part of the processes that are involved in the production of and collection of monetary profits in a financial system. Thus, it is a type of capitalism where the process of saving is the main function that will have effects on social evolution and political processes in the future.

The free market

Free market capitalism is a system in which the prices of services and goods are decided completely by the force of supply and demand without the involvement of any government organization. It has the involvement of support for markets in a competitive world and privately owned membership. This market involves transparent transactions.


Sustainable capitalism is a type of capitalism that involves the conceptual form of sustainable practises that will assist in protecting humanity and our planet. This form of capitalism still needs to expand and find its space in the market as the system of capitalism is dangerous for the environment and also for individuals.


Welfare capitalism is a system that involves various policies regarding social welfare. It exists in a mixed economy in some cases, which is capitalism based on a market that involves ownership of both private and public products.


State capitalism is a type of capitalism that is mainly dominated by state-owned enterprises. Here, the enterprises of the state are considered to be businesses for the sake of profits. It is a system that includes the involvement of the government, be it autocratic or democratic, that has a major influence on the economy.


Capitalism is a concept that involves the creation of wealth. It is an economic system where individuals own and have control of property in the way they want. The main aim of capitalism is to make as much profit as possible. Here, the owners choose the labour and make them work on assets, which may include railroads or factories that are privately owned. The labour is given money and, in return, has to do the work that suits the competitive market, which is decided by the owner himself. In this system, the prices of services and goods are decided entirely on the basis of the demand in the market.