An Overview

The marriage between the United States economy and the free enterprise system has been a hugely successful one, but not one without problems. From the time of early American statesman Alexander Hamilton, there has been conflict over what should be the proper role of government in the economy; at various times government has intervened to stimulate the growth of certain industries, to regulate business when abuses began to appear, to provide protection in the form of tariffs for industries hurt by imports, and sometimes to redistribute wealth. Government's role has ebbed and flowed, according to the needs of the time.

The United States has what is usually described as a capitalist economy. But capitalism is a term coined by Karl Marx that referred to the concentration of control of the most important parts of the economy by a small group of capitalists. By contrast, most Americans think of capitalism as meaning "free enterprise," a system that benefits millions, not just a few. Free enterprise as an idea can be simply described, but it is how this idea is applied to real life that is important. This chapter attempts to describe how free enterprise works in the United States as evidenced by the historical record.