What Type of Economy Does the United States Have?

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The United States has a capitalist economy. Capitalism is an economic system in which businessmen privately own the means of production, which is referred to as capital. Free market competition dictates prices and production levels. Under the capitalist system, prices and salaries are determined by supply and demand. The government’s role in this system is to protect the rights of financial motivators of the economy.

In capitalism, the most successful business people are the ones who create the greatest amount of profit for the least amount of expense. Competition forces companies to keep prices low in order to attract and keep consumers.

Capitalism began as a result of the industrial revolution of the 18th century. Since the disintegration of the Soviet Union, the growth of Japan and other Asian countries as serious competitors to the U.S. economy and an increase in the level of globalization, capitalism has become the dominant economic system worldwide.

The term "capitalist" was originated by social theorist Karl Marx to describe a system wherein a small group of people control large amounts of money and make the most important economic decisions. Marx believed that a capitalist system concentrates power in the hands of wealthy people, who want mainly to maximize their profits.