A capitalist economy is a free market economy, where individuals are encouraged to produce goods privately and acquire private property without any intervention from the government.

However, no government intervention doesn’t mean any involvement of government. The government will only involve protecting private property and assets. This minimal intervention distinguishes the capitalist economic system from anarchism.

What are the main Characteristics of a Capitalist Economic System?

There are five main characteristics of a free market economy. Top of all is a two-class system. A two-class system means a division between two classes; capitalist class and working class. The capitalist class owns the means of production and distribution, whereas the working-class provide their labor or services in exchange for wages.

Another primary feature of a free market economy is that it is profit-driven. The private individuals or business owners who own the means of production and distribution work towards gaining profit on the goods they produce. Even though the products of a particular company are need-based goods, it will only be available for purchase if one has the means to pay for them.

Minimal government involvement is another key characteristic of a capitalist economic system. In a free-market economy, prices of goods produced by private individuals are set based on demand and supply. The more demand for a product and lesser supply means prices to be high. On the contrary, if the demands are low, yet the supply is efficient, the prices will automatically fall.

As private individuals are paving their way to produce profitable goods, it increases competition in the market. If there is no competition a business becomes a monopoly, which can result in unaffordable pricing. It is why a competitive market becomes one of the features of a capitalist economy.

Lastly, change is another characteristic of a free market economy. The world is changing fast and the capitalist economic system gives opportunities to private business owners and individuals to adopt the change and produce goods that meet the public demand.

We have clearly described the top five characteristics of a free market economy; let’s look at different types of a free market economy.

Types of the Capitalist Economic System

A capitalist economy is categorized into five types; Turbo capitalism, Crony capitalism, State capitalism, Responsible capitalism, and Advanced capitalism.

To know more about these types in detail, read further.

1. Turbo Capitalism

Turbo capitalism is an unregulated form of free-market that involves fiscal deregulation and lower taxes for the capitalist class.

2. Crony Capitalism

Crony capitalism is when the success of the business is dependent on authoritative say such as; strategic influences, politicians, or civil servants. To better understand this type of free-market economy, refer to the twentieth-century era where business owners favored politicians for profitable gains.

3. State Capitalism

State capitalism is when public industries are involved with private industries. Under this kind of economic system, government and private firms work hand in hand. China can be described as a potential state capitalist country.

4. Responsible Capitalism

Responsible capitalism is when the businesses are given an open hand to produce whatever they want, but the government decides some guidelines, which helps to reduce inequalities between classes and equalize the distribution of income.

5. Advanced Capitalism

Advanced capitalism is when consumerism is more important than government involvement. It means that governments do not intervene much, and there is little political activism.


In this write-up we shed light on what are the main characteristics of a capitalist’s economic system and its different types to answer one of the most asked questions; Which statement best describes a capitalist economy? Before we conclude, let us also give you some names of countries with a capitalist economic system. These countries are; the USA, Canada, Singapore, Hong Kong, China, etc.