Under the free enterprise system, individuals are free to own property. They can live safe from the fear of having their businesses nationalized by their government. There are three main aspects of the freedom of ownership.
In capitalist societies, individuals are allowed to own productive property. Productive property is any property that is used to generate wealth. There are two types of productive assets: tangible and intangible. Tangible assets are those that can be touched and easily measured in value. Factories, land, and financial products are all considered tangible property. Intangible assets are those that cannot be touched, such as trademarks and copyrights. Both types of productive property are able to generate wealth for the owner. Allowing individuals to own productive property prevents governments from mismanaging the resources of nations.
The right to own personal property is important. This is because individuals find personal property to have utility, thus incentivizing them to use productive property to create personal property. Personal property includes necessities such as food and clothing. It also encompasses such luxuries as yachts and mansions. The owner of a chain of retail stores might decide that he or she wants another mansion, and so they will invest in several new stores to be able to afford the purchase. This method of rewarding producers with what they desire causes them to expand output. Economic systems such as communism forbid the ownership of personal property, disincentivizing production. Free enterprise allows individuals to enjoy the fruits of their creation.
Each person is entitled to the pursuit of profit in market economies. Profit arises not from exploitation or manipulation, but from the addition of value to inputs and subsequent voluntary trades. An oil refinery earns a profit by purchasing crude oil from the owners of oil wells and then creating new petroleum-based products, such as gasoline, which are then sold to gas stations. The act of refining the oil makes the oil more valuable, since that requires the use of machinery and labor. Distributors, which do not alter or improve products, still add value by moving products from manufacturer to retailer. Neither an oil refinery nor a distributor can earn any money without the consent of their vendors and customers. That applies to all businesses. The freedom to earn and own a profit creates a system in which individuals can use their profit to expand output via reinvestment in productive property or to purchase personal property that creates happiness and pleasure.
The freedom of ownership allows individuals to derive benefits from their production, exchange, and thought. Refer to “Free Enterprise System Definition and Characteristics” to learn more about similar freedoms.