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Economics Paper: Why Capitalism Is the Best Economical System?

The collapse of Feudalism in the late 16th century ushered about a world crossroads. The economic microcosm characterized by the family farm was expanding beyond known borders and rapidly crossing into unknown economic territory. The methods in which individuals acquired and sold goods shifted to mercantilism, which in turn formed the root basis of the capitalist model successfully utilized by many countries today (Wood). Capitalism is the paramount economic system because it provides limitless opportunity, encourages innovation, and has not been proven inferior to alternative economic systems.

First and foremost, capitalist economic systems provide limitless opportunity for each individual. Capitalism is the only economic system which allows every individual an equal chance of success, regardless of inherited social class. Motivation for success hinges on the guarantee that there are no limitations on the acquisition of wealth. The guaranteed chance of success provided by capitalism inspires hard work, perseverance, and hope.

Moreover, capitalism results in an overall increase of innovation and economic growth. In a capitalist driven economic system, consumers make decisions, or votes, on preferences for products and services. The providers of goods and services are therefore motivated to create the best product to win the consumer. Constant competition results directly in pressure for the producer to continually increase the quality of the product while maintaining price. In this way, the power that capitalism inherently bestows to the consumer drives a force for innovation. Without capitalism, innovation is not a priority. In addition to expanding markets, innovation also further increases efficiency, reinforcing and adding to the feedback loop. In recent years, innovation within capitalist economies has increased so rapidly that it has spurred the emergence of an entirely new economic doctrine. This doctrine, dubbed “innovation economics,” centers all economic models around innovation and entrepreneurship, as opposed to traditional models, which are based on public policy. Proponents of the innovation economy predict that exponential growth of capitalist economies is not only feasible, but probable (Schramm et al.).

Winston Churchill, a British politician, was famously recorded stating that “democracy is the worst form of government, except all those others that have been tried” (Raymond). Similarly, capitalism is considered by many to be the best economic system by default due simply to the absence of a more successful model. Modern countries attempting variations of the communist economic system struggle to reach the standard of living which most capitalist countries have achieved (Malik). These countries are often plagued by governmental corruption and lack of motivation among workers. For example, the Chinese Communist Party was recently ranked 78th of 178 countries in the Transparency International’s Corruption Perception index. This ranking is the worst among comparable developed countries (“Corruption Perceptions Index 2013”). The communist USSR under Stalin’s rule suffered heavily due to shortages in basic consumer goods such as food and hygiene products. These shortages were attributed to a lack of motivation among workers to reach outrageous government production quotas (Fitzpatrick). In the last ten years, communist countries are tending towards legislation which increases privatization, causing a gradual governmental shift towards the capitalist model (Moscoso Boedo).

Free people and free markets are the driving force behind the success of the capitalist model. No other economic model inherently bestows limitless opportunity and power to each individual. The temptation of success and power drives the economy forever forward, creating exponential growth, unprecedented among any other economic systems attempted to date.

Works Cited

“Corruption Perceptions Index 2013.” Transparency International, 2013,
Fitzpatrick, Sheila. Everyday Stalinism: Ordinary Life in Extraordinary Times: Soviet Russia in the 1930s. Oxford University Press, 1999.
Malik, Khalid. Human Development Report 2013: the Rise of the South: Human Progress in a Diverse World. United Nations Development Programme, 2013.
Moscoso Boedo, Hernan. Former Communist Countries and Their Transition to Capitalism. 2006,
Raymond, Walter J. Dictionary of Politics: Selected American and Foreign Political and Legal Terms. Brunswick Pub. Co, 1978.
Schramm, Carl Jude, et al. “Innovation Measurement: Tracking the State of Innovation in the American Economy.” SSRN Electronic Journal, 2008, doi:10.2139/ssrn.1090630.
Wood, Ellen M. The Origin of Capitalism: A Longer View. Verso, 2002.

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