The recent happenings in the stock market and the seat of power, Washington D.C., have highlighted our economic system and our need to understand our free-market system called capitalism. Our economic system is based upon the private ownership of the means of production and the ability to wisely borrow funds to enable the means of production. Private ownership – not government ownership.

To reiterate, capitalism is an economic system in which the means of production are privately owned. Business organizations produce goods for a market guided by the forces of supply and demand. Capitalism requires a financial system that enables business firms to borrow large sums of money, or capital, to maintain and expand production.

Underlying capitalism is the presumption that private enterprise is the most efficient way to organize economic activity. Adam Smith, the economist,  expressed this idea in his Wealth of Nations (1776), extolling the free market in which the businessman is "led by an invisible hand to promote an end which was no part of his intention."

The marketplace is the center of the capitalist system. It determines what will be produced, who will produce it, and how the rewards of the economic process will be distributed. From a political standpoint, the market system has two distinct advantages over other ways of organizing the economy:

(1) No person or combination of persons can control the marketplace. This means that power is diffused and cannot be monopolized by a party or a clique (e.g., the government and/or government agencies.
(2) The free-market system tends to reward efficiency with profits and to punish inefficiency with losses. Businesses that fail should be allowed to fail – not consumed by the government in large transfers of wealth and power.

Economists often speak of capitalism as a free-market system ruled by competition. But capitalism in this ideal sense cannot be found anywhere in the world. The economic systems operating in Western countries today are mixtures of free competition and governmental control. Anything less than capitalism is socialism. And, socialism is a failed experiment. The recent crash of the home lending market and the near crash of the stock market was caused by faulty governmental policies not our capitalist economic free-market system. Remember that as you count your losses. Remember that when you vote.