Reading: Capitalism in the US

Capitalism in the US

Democratic capitalism is a political, economic, and social system with a market-based economy that is largely based on a democratic political system.

KEY points

  • The United States is often seen as having a democratic capitalist political-economic system.
  • The three pillars of democratic capitalism include economic incentives throughfree markets, fiscal responsibility, and a liberal moral-cultural system that encourages pluralism.
  • Some commentators argue that, although economic growth under capitalism has led to democratization in the past, it may not do so in the future; for example, authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.
  • Proponents of capitalism have argued that indices of economic freedom correlate strongly with higher income, life expectancy, and standards of living.
  • Democratic Peace Theory states that capitalist democracies rarely make war with each other, and have little internal conflict. However, critics argue that this may have nothing to do with the capitalist nature of the states, and more to do with the democratic nature instead.


  • Capitalism:  A socio-economic system based on the abstraction of resources into the form of privately-owned money, wealth, and goods, with economic decisions made largely through the operation of a market unregulated by the state
  • Tripartite:  In three parts.
  • Polity:  An organizational structure of the government of a state, church, etc.
  • Pluralism:  A social system based on mutual respect for each other’s cultures among various groups that make up a society, wherein subordinate groups do not have to forsake their lifestyle and traditions, but, rather, can express their culture and participate in the larger society free of prejudice.


  • Singapore’s de facto one-party system has been described as an example of an authoritarian capitalist system that other authoritarian governments may follow. However, polls have recently suggested that the ruling PAP party is suffering declines in popularity, suggesting that increasing material gains may not make up for a lack of political freedoms. The Singaporean government has introduced limited political concessions, suggesting that authoritarian capitalist systems may transition to democracy in time.

Democratic Capitalism and the US

The United States is often seen as having a democratic capitalist political-economic system. Democratic capitalism, also known as capitalist democracy, is a political, economic, and social system and ideology based on a tripartite arrangement of a market-based economy that is based predominantly on a democratic polity. The three pillars include economic incentives through free markets, fiscal responsibility, and a liberal moral-cultural system, which encourages pluralism.

In the United States, both the Democratic and Republican Parties subscribe to this (little “d” and “r”) democratic-republican philosophy. Most liberals and conservatives generally support some form of democratic capitalism in their economic practices. The ideology of “democratic capitalism” has been in existence since medieval times. It is based firmly on the principles of liberalism, which include liberty and equality. Some of its earliest promoters include many of the American founding fathers and subsequent Jeffersonians.

This economic system supports a capitalist, free-market economy subject to control by a democratic political system that is supported by the majority. It stands in contrast to authoritarian capitalism by limiting the influence of special interest groups, including corporate lobbyists, on politics. Some argue that the United States has become more authoritarian in recent decades.

The Relationship between Democracy and Capitalism

The relationship between democracy and capitalism is a contentious area in theory and among popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred alongside the development of industrial capitalism. Since democracy became widespread at the same time as capitalism, many theorists have been led to posit a causal relationship between them. In the 20th century, however, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, absolute monarchies, and single-party states.

While some argue that capitalist development leads to the emergence of democracy, others dispute this claim. Some commentators argue that, although economic growth under capitalism has led to democratization in the past, it may not do so in the future. For example, authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom. States that have highly capitalistic economic systems have thrived under authoritarian or oppressive political systems. Examples include:

  • Singapore, which maintains a highly open market economy and attracts lots of foreign investment, does not protect civil liberties such as freedom of speech and expression.
  • The private (capitalist) sector in the People’s Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government.
  • Augusto Pinochet’s rule in Chile led to economic growth by using authoritarian means to create a safe environment for investment and capitalism.

Peoples’ Republic of China’s Nominal Gross Domestic Product (GDP) Between 1952 to 2005
Scatter graph of the People’s Republic of China’s GDP between years 1952 to 2005, based on publicly available nominal GDP data published by the People’s Republic of China and compiled by Hitotsubashi University (Japan) and confirmed by economic indicator statistics from the World Bank.


A clash or disagreement, often violent, between two opposing groups or individuals.


An incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation.

Economic system

An economic system is the combination of the various agencies, entities (or even sectors as described by some authors) that provide the economic structure that defines the social community.


Collective focus of the study of money, currency and trade, and the efficient use of resources. The system of production and distribution and consumption. The overall measure of a currency system; as the national economy.

Free Market

Any economic market in which trade is unregulated; an economic system free from government intervention.


Something that motivates, rouses, or encourages. It is used to motivate individuals (often, employees) for better performance by providing financial or other types of rewards. An anticipated reward or aversive event available in the environment. Something that motivates an individual to perform an action.


The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed. A great attention and concern from someone or something; intellectual curiosity.


The placement or expenditure of capital in expectation of deriving income or profit from its use.


Potential opportunity for a sale or transaction, a potential customer.


To handle or control a situation or job.


A group of potential customers for one’s product. One of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.


An individual(s) who advocates or supports a particular stance on an issue.


Something used as a measure for comparative evaluations. A level of quality or attainment.


A whole composed of relationships among the members. The part of the universe being studied, arbitrarily defined to any size desired.


The process of change from one form, state, style, or place to another. A word or phrase connecting one part of a discourse to another.