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What is capitalism?

Capitalism is generally defined as an economic system in which trade and industry are controlled by private owners for profit, rather than by the state. More broadly, capitalism is a social system based on the principle of individual rights, which politically entails laissez–faire or economic freedom, and legally a system of rules that are universally applicable. Economically, when such freedom is applied to the sphere of production its result is the free–market.

Capitalism is characterised by respect for property rights, with pure or “sticky” propertarianism the prodominant position taken by advocates of the system. By sticky it is meant that property remains owned by an individual or group regardless of whether they are in direct possession or occupation, which contrasts with the less popular view — held by Georgists and mutualists — that certain kinds of property can be considered abandoned the moment the owner is no longer in immediate contact with it.

Another aspect of capitalism is the understanding that money, as a medium of exchange, is more beneficial to society than other forms of exchange, such as barter, which suffers from the problem of the coincidence of wants. Capitalism also recognises the importance of profit, which not only serves as a reward for hard–work and risk–taking, but also serves as a means of investing in the growth of an enterprise, which results in benefits to the rest of society in the form of cheaper goods and services, as well as creating more opportunities for employment, whether that be working for oneself or for someone else.

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