1 - Introduction

Summary

The economic crisis that almost all industrial capitalist nations experienced at the end of the first decade of the twenty-first century has given rise to questions about the nature of capitalism that are seldom asked when times are good: What is capitalism? How does it usually perform? Where are we going? Do we need to totally change our economic system to avoid another economic meltdown in the future?

When I converse with others about our economic system, I often feel we are talking past each other. They seem to consider only one arrangement of institutions and policies as “capitalism” and everything else as some other economic system, such as “socialism” or “fascism.” On the contrary, I believe that capitalist economic systems appear in many forms and that a broader view is important, an approach necessary so that trade-offs before us regarding institutions and policies can be more clearly evaluated. Although we live in a capitalist economy system, it is often difficult to gain a perspective on how its important institutions work together as a system.

The purpose of this short book, aimed at a general audience, is to provide a broad view of the economics of capitalism – its origins, the different ways in which its institutions can be structured, its performance in recent years, and the directions of its institutional development in the coming years. I carry out the discussion by defining, comparing, and contrasting four different types of capitalist economic systems.