What type of economic system exists in the United States today? Although the United States is often regarded as a capitalist system, it is actually a “mixed economy.” Adam Smith emphasized that private property rights, freedom of choice and competition are necessary and fundamental elements of pure capitalism. Does the United States economy fulfill these conditions? Sort of. The U.S. economic system does have a high degree of private ownership and individual freedom, (see link for an index of economic freedom) but a significant component of the economy is controlled by the government. In fact, current estimates indicate that Federal government spending accounts for up to one-third of our economy.
This wasn’t always the case. Prior to the Great Depression of the 1930s, the United States was primarily a free-market capitalist system and government involvement was minimal. But the massive unemployment and widespread poverty of the Great Depression caused some to believe that capitalism, as an economic system, had failed. John Maynard Keynes revolutionized economic thought and proposed a system of “managed capitalism.” As a result of the Keynesian revolution government took a more active role in regulating the economy. This period created a change in the nature of government and the assumption of government’s responsibilities. Franklin Delano Roosevelt famously created an economic bill of rights that specified certain rights that were to be afforded to all. These included the right to an education, affordable health care and housing. The government assumed the responsibility to house, feed and educate its citizens.
For more information on John Maynard Keynes and his theories, see
Resources for John Maynard Keynes
John Maynard Keynes: Capitalism’s Savior? http://www.vision.org/visionmedia/article.aspx?id=1327