The most important aspects of a capitalist system are private property, private control of the factors of production, accumulation of capital, and competition. The starkest counterpoint to capitalism is communism. In a communist system, there is no private property, a central government controls the means of production, capital is not accumulated by individuals or private businesses, and competition is nonexistent. Put simply, a capitalist system is controlled by market forces, while a communist system is controlled by the government.

Private Property

The right to private property is a central tenet of capitalism. Citizens cannot accumulate capital if they are not allowed to own anything, nor can they buy or sell things. As long as the owner stays within the parameters of the law, which generally are broad in capitalist systems, he may do what he wants with the property he owns.

A private citizen may purchase property from another private citizen at a price that is mutually agreed upon and not dictated by a government. In a capitalist system, the free market forces of supply and demand, rather than a central governing body, set the prices at which property is bought and sold.

Factors of Production

In capitalism, private enterprise controls the factors of production, which include land, labor, and capital. In contrast to a communist system where the government owns and controls these factors and thereby sets production levels and prices, private companies control them in a capitalist system and set prices and production at levels that maximize profit and efficiency.

A common indicator of whether the factors of production are privately or publicly controlled is what happens to surplus product. In a communist system, surplus product is distributed to society at large, while in a capitalist system, it is held by the producer and used to achieve additional profit.

Accumulation of Capital

The centerpiece of a capitalist system is the accumulation of capital. In a capitalist system, the driving force behind economic activity is to make a profit. Devotees of communist and socialist systems consider this greedy and selfish. Capitalists, however, see amassing profits as a way to provide a powerful incentive to work harder, innovate more and produce things more efficiently than if the government had sole control over citizens' net worth. This financial incentive is the reason capitalist economies see innovation as going hand-in-hand with their market system.


Competition is the other vital attribute of a capitalist system. Private businesses compete to provide consumers with goods and services that are better, faster and cheaper. The principle of competition forces businesses to maximize efficiency and offer their products at the lowest prices the market will bear, lest they get put out of business by more efficient and better-priced competitors.

While doing business with a particular company in a capitalist system is voluntary, in contrast, the central government in a communist system has effective monopolies in all industries. This means it has no incentive to operate efficiently or provide low prices because its customers do not have the option of looking elsewhere.