Models of Capitalism

There is more than one type of capitalism. These different types, or models, of capitalism vary by the role the government has in the economy. None of the models is inherently “better” than the any of the others. The choice of which model to follow is up to each nation. As a result of this, a variety of capitalist models exist in countries throughout the world.

Laissez-Faire Capitalism

Under this type of capitalism, the government has no direct involvement in the economy. There are no central banks and no regulations. This model of capitalism was practiced by countries such as the United States and Britain during the nineteenth century. Due to certain problems inherent to this system, laissez-faire capitalism is not practiced by any countries.

Anglo-Saxon Capitalism

After the fall of laissez-faire capitalism, the English-speaking world adopted what is now known as Anglo-Saxon capitalism. This variant of free enterprise emphasizes a lack of government intervention. It advocates for the existence of a central bank to stabilize the economy, as well as some government programs to stimulate the economy. Social nets in these economies are typically non-comprehensive and as such do not cover all of the basic needs of the poor. Low taxes and low government spending are frequently present in this economic system. This model is built on the ideal of freedom.

Rhenism Capitalism

Rhenish capitalism, also known as stakeholder capitalism, is considered to be the economic system of Germany and other related countries. This model involves strong government regulation and institutions for the economy. Countries that practice rhenish capitalism focus on long-term growth and stability, as well as economic freedom. Taxes tend to be much higher than in Anglo-Saxon countries, although the social safety nets of these countries also provide more for the lower class.

Nordic Capitalism

Nordic capitalism is practiced in Scandinavian countries. Under this model, the government provides a universal safety net that adequately meets the needs of the underprivileged, thus equalizing opportunity in society. Nordic economies try to reduce income inequality through the tax structure of the countries. Government also has an important role in setting wages and prices. Despite regulations, controls, and high taxes, economic freedom is quite high in the Nordic countries. This economic system is built on the ideals of freedom, stability, and equality of opportunity.

Dirigisme

Dirigisme is the economic system invented by France after the end of World War II. It later spread to some other countries, particularly in East Asia. Dirigisme, like Rhenish and Nordic capitalism, involves a strong state. Under dirigisme, the government directs the economy for the purpose of a stable, growing economy and society. The government directs investment and business much more so than in Rhenish and Nordic capitalism. There are also moderate or high taxes, just as in the two previously mentioned systems. State-owned enterprises have an important role in dirigiste economies.


One should remember that these models of capitalism share some similar characteristics. Despite their differences, they all share the unifying principle of economic freedom for the individual. The countries that practice these systems have been made much more wealthy, as well as economically free and stable.