6.4d Capitalism

An economy is the system used to produce, sell, and consume goods and services. Capitalism, also called a market economy, is an economic system in which the means of production (recall these are land, labor, and capital) are mainly held in private rather than government hands. The incentive for economic activity is the accumulation of profits rather than the equitable distribution of wealth. The United States, the European Union, Singapore, Australia, and Canada all have capitalist economies (World Population Review, 2025).

What is Capitalism?

Capitalism has three key features: market competition, private ownership of the means of production, and the pursuit of profit. Market competition means that a product’s price is determined by supply and demand for the good. Therefore, a plain mass-produced t-shirt may range from a few dollars at a discount store to several hundred dollars for a limited-edition designer brand. Private ownership means that individuals or corporations own the factories, land, and technologies needed to produce goods or services and fund such production, not the government. Those who own these means of production can extract profits through rent paid by workers — including hairstylists, exotic dancers, and farmers. Thepursuit of profitis usually valued over all else, including worker safety and environmental protection. Corporations will reduce labor costs by laying workers off or sending them home early to continue making a profit if they are not selling as much as expected.

The United States is one of the most capitalist nations in the world. Still, the U.S. economy also takes on some limited aspects of a mixed economy, meaning that some government regulation of economic activities exists for the welfare of the people. Federal government agencies like the Food and Drug Administration (FDA) and the Occupational Safety and Health Administration (OSHA) exist to help keep consumers and workers safe.

The FDA requires food companies to label their products with ingredients, nutrients, calorie count, and so on. Before the FDA required food to be labeled, consumers had no way of knowing what was in their food. OSHA’s role is to ensure workplaces are safe for workers, such as by requiring employers to train employees who must use dangerous equipment or to provide safety gear to protect workers from exposure to harmful elements.

Other capitalist nations take on more aspects of welfare capitalism than the United States. For example, Sweden, Norway, Finland, Denmark, and Iceland provide extensive social welfare benefits to their people, such as government-paid health care, childcare, and pensions.

Photo 6.9

OSHA Requires Employers to Provide Safety Gear Like Hard Hats and Reflective Vests in Some Occupations

While capitalism may produce benefits such as an improved standard of living for middle- and upper-income households, it also contributes to social problems like economic inequality. In the United States, many workers live paycheck to paycheck and struggle to afford housing (Barber, 2025). Further, some people are unemployed or underemployed, meaning they want full-time employment but can find only a part-time position or a job for which they are overqualified.

College Education Under Capitalism

As discussed earlier in this chapter, researchers understand that a college education is a critical factor in achieving the American dream and one that is assumed to be within an individual’s control. When a college education was primarily available only to White men, it was treated as a public good (benefits society rather than only the individual). As more people of color began attending college at higher rates, the federal government shifted from providing grants for low-income students to loans that must be repaid (Carlson, 2016).

Photo 6.10

Students in For-Profit Colleges Have Higher Student Loan Debt

This government disinvestment in higher education has led to skyrocketing tuition at public universities, trying to compensate for the loss of funding and the growth of the for-profit college sector. For-profit colleges have lower job placement rates and wage returns (Cottom, 2017), and their students take on more student loan debt (Armona et al., 2022) than students in nonprofit colleges.

Cottom (2017) studied how for-profit colleges recruited students. She was an insider because she had worked as a recruiter at for-profit colleges before conducting her study. As an employee, she learned that for-profit colleges aim to get as much tuition from students as possible. As a researcher, she posed as a prospective student to understand recruiting as a student. Cottom argues that for-profit colleges occur where education is viewed as a product to be sold for a profit (or a commodity) instead of as a public good. In other words, under capitalism, a college education can be sold for whatever amount of money people are willing to pay for it.