Hello everyone! Say, have you ever heard of the American Free Enterprise System? Well, you experience it every time you buy goods or services. The price that you pay, the types of goods that are available to you, where you spend your money, and the customer service that you experience are all mostly determined by business owners making free decisions regarding how to operate their business. Essentially, the American Free Enterprise System is an economic system where there is minimal government regulation and intervention on the types of business activities or ownership in which citizens participate. You might know this system by its other name - capitalism. The free enterprise is comprised of 5 economic pillars- what are they?
The first factor of the American Free Enterprise System is economic freedom. For people, this includes the freedom to choose your career, your employer, and your job location. You can also leave your job and move to a new one. Businesses also enjoy economic freedom. They can hire employees of their choice and produce the products they think will be the most profitable. They can also make as many items as they desire, and sell those items wherever they please. They are also free to set their own prices. Essentially, they are free to risk success or failure.
The second factor of the AE system is the right to private property. This right allows people to own and control their possessions. It allows people to use or even abuse their possessions, as long as they don’t harm others’ rights. Private property gives people the incentive to participate in the economy, in that it allows people to make the financial decisions they want to with their property.
The third factor of the AE system is profit motive. Profit motive is the incentive to increase one’s wealth through successful investments. This factor is the primary cause of economic growth within the AE system. Profit motive is what drives people to start and develop businesses. Therefore, profit motive ensures that there is always a constant stream of businesses who are willing to give us the goods and services that we need.
The fourth factor of the AE system is competition. Competition is the constant contest between businesses to attract the most consumers. Competition is only possible due to economic freedom, as it allows businesses and entrepreneurs to make the decisions that they think will result in greater profits. Aside from allowing businesses to make more profit, competition also benefits consumers. Competition ensures that unpopular goods and services will fail and cease to be produced. It also ensures that producers will always work to develop new, better, and less expensive products.
The final factor of the AE system is consumer sovereignty. This essentially means that consumers have the final say in production decisions. Since there is competition in the AE system, consumers use their spending power to decide which products and services are profitable. Therefore, they determine which ones stay in the market. Through this, they also determine which businesses succeed and which fail by deciding which ones make a profit.
These five factors of economic freedom, the right to private property, profit motive, competition, and consumer sovereignty make up our economic system. It is through these factors and this economic system that we are able to enjoy the lifestyles that we currently have. Check out our other blog posts to see how you, as a consumer, can support our economy and this great economic system by shopping local during the coronavirus pandemic. Be sure to also take a look at what some of the local businesses we are partnering with have to offer!