Capitalism, the Free Market & Free Enterprise Capitalism Rocks!

Capitalism, the Capitalism, the Free Market & Free Market & Free EnterpriseFree Enterprise

Capitalism Rocks!

Adam Smith on Free MarketsAdam Smith on Free Markets Self-InterestSelf-Interest concept concept

Incentive for personal gain motivates marketsIncentive for personal gain motivates markets

Spurs on competitionSpurs on competition

Encourages innovationEncourages innovation

Produces efficiencyProduces efficiency

““Invisible Hand”Invisible Hand” The force resulting from the above, which regulates The force resulting from the above, which regulates

the market without any central direction.the market without any central direction.

Capitalism Rocks!Capitalism Rocks!

CharacteristicsCharacteristics

Economic FreedomEconomic Freedom

People can choose their… People can choose their… Occupation HoursOccupation Hours Employer Employer Work for themselvesWork for themselves Not work at allNot work at all

Businesses can choose their…Businesses can choose their… WorkersWorkers Products/services to offerProducts/services to offer LocationLocation Price of goods soldPrice of goods sold



Voluntary ExchangeVoluntary Exchange

Buyers and Sellers willingly trade - make Buyers and Sellers willingly trade - make market transactionsmarket transactions

Both earn a profit – they are better off than Both earn a profit – they are better off than they were before.they were before.

Both believe they have something worth more Both believe they have something worth more than they had before…money or a product.than they had before…money or a product.

Capitalism Capitalism Rocks!Rocks!


Private PropertyPrivate Property

Right and privilege to control possessions -Right and privilege to control possessions -

Physical items, skills, talents, brain powerPhysical items, skills, talents, brain power

Can keep, sell or trade propertyCan keep, sell or trade property

Prospect of Prospect of gaingain gives people gives people incentive incentive to work, to work,

save and investsave and invest



Profit MotiveProfit Motive

ProfitProfit – the extent to which people or organizations – the extent to which people or organizations are better off after a transaction period, than are better off after a transaction period, than they were before it.they were before it.

Free EnterpriseFree Enterprise rewards people who risk resources rewards people who risk resources intelligently in business ventures, with a profit. intelligently in business ventures, with a profit.

Keeps free enterprise alive and well.Keeps free enterprise alive and well.


EntrepreneursEntrepreneursDrive the Drive the Free Enterprise Free Enterprise system by starting system by starting

new businesses. new businesses.

Combine the other factors of production…Combine the other factors of production…land, capital & labor to seek the reward of a land, capital & labor to seek the reward of a profit.profit.

Create jobs, supply wants and needs for Create jobs, supply wants and needs for consumers, pay taxes.consumers, pay taxes.

Starts a chain of events leading to new Starts a chain of events leading to new products, higher quality and lower prices of products, higher quality and lower prices of needed goods and services.needed goods and services.


Consumers RoleConsumers Role

““Consumer is King!”Consumer is King!”

““The customer is always right!”The customer is always right!”

Control what is produced by accepting or Control what is produced by accepting or rejecting products and services. rejecting products and services.

Dictate prices with willingness or Dictate prices with willingness or unwillingness to buy.unwillingness to buy.


Laissez-Faire…to a pointLaissez-Faire…to a point

MostlyMostly markets operate efficiently w/o government. markets operate efficiently w/o government.““Invisible Hand”Invisible Hand”

Since free market guided by Since free market guided by incentivesincentives…some things …some things would never get done – schools…roads…parks.would never get done – schools…roads…parks.

Some freedoms could be trashed…property rights.. Some freedoms could be trashed…property rights.. contracts…contracts…

So governments create laws to protect those & to act in So governments create laws to protect those & to act in the interest of the people (corporate citizens too!)the interest of the people (corporate citizens too!)

Balance is importantBalance is important


Government’s RoleGovernment’s Role

Protector of the ConsumerProtector of the Consumer

Laws against false ads, impure food, Laws against false ads, impure food, unsafe products and unsafe products and

environmental environmental hazardshazards

Protects property rights, fairness & Protects property rights, fairness & enforces contractsenforces contracts



Producer and Consumer ItselfProducer and Consumer Itself

Produces services, (Defense, Healthcare, Produces services, (Defense, Healthcare, Education)Education)

Consumes products in performance of Consumes products in performance of this role.this role.

In many ways acts like a business In many ways acts like a business itselfitself



RegulatorRegulator Preserves competition so Capitalism Preserves competition so Capitalism

doesn’t “implode”.doesn’t “implode”. Oversees interstate commerce, Oversees interstate commerce,

communications, banking, the communications, banking, the investment business and nuclear powerinvestment business and nuclear power

Local Government “zones” business areas, Local Government “zones” business areas, and controls commercial permits to and controls commercial permits to preserve preserve competition and quality of life.competition and quality of life.


Government’s RoleGovernment’s RolePromotes National GoalsPromotes National Goals

Empowers agencies/corporations that Empowers agencies/corporations that modify the economy or alter consumer modify the economy or alter consumer behavior.behavior.

Federal Reserve BoardFederal Reserve Board – – manipulates manipulates interest rates. interest rates.

Sallie MaeSallie Mae – lends money to students– lends money to students

HUDHUD – promote low interest mortgages – promote low interest mortgages

Creates Creates safety nets safety nets for the public so for the public so they can remain a part of the economy.they can remain a part of the economy.


How much How much

Government is Government is

enough?enough?

Modern Economy - Mixed EconomyModern Economy - Mixed Economy

Capitalism has matured to the pointCapitalism has matured to the point where we see that elimination of where we see that elimination of competition will ruin the system.competition will ruin the system.

We now accept some elements ofWe now accept some elements of ““Command” Command” in order to preserve thein order to preserve the integrity of the system.integrity of the system.

The debate remains lively about howThe debate remains lively about how much much “Command” “Command” is enough. is enough.


Economies in TransitionEconomies in Transition Moving from “planned” central to marketMoving from “planned” central to market

BRICBRIC…. Brazil, Russia, India and China…. Brazil, Russia, India and China

Retain some elements of “planned” economiesRetain some elements of “planned” economies

Growth is managedGrowth is managed Money supply is controlledMoney supply is controlled Specific sectors are targeted for expansionSpecific sectors are targeted for expansion

Capitalism, the Free Market & Free Enterprise Capitalism Rocks!

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