The free enterprise systems

 The American economy is based on the principles of capitalism and free markets, which places it into the category of a free enterprise system. The American free enterprise system finds its base in the following five main ideologies. First is the freedom of the choice of business, second is the right to own property, third is the motive of profit which is the main goal of business, the fourth is the existence of competition and last but not least, is the ideology of consumer sovereignty. This last ideology broadly means that the consumer controls the output of the producer by determining the demand and supply. 

Self-interest is the driving force behind free enterprise and the US economy. Generally, there is a separation between government and commerce and America’s economic success appears to confirm this view of a separation between these two. However, in America’s free enterprise system business is not as free to do as it pleases contrary to common appearance.  Complex mazes of regulations keep a check on businesses and determine what these are actually allowed to do.

Advantages of the free enterprise system are that it promotes freedom and choice. People are free to change careers or set up a business enterprise of any sort, without having to serve an apprenticeship or become a member of a guild. It promotes innovation, as firms need to adapt to change in demands and competition. Prices tend to be socially optimal as long as there is adequate competition in the economy.

Disadvantages ensue when the concept of supply and demand is tempered with and consumer exploitation occurs.  The principles of free enterprise allow producers to purposely withhold supply, causing consumers to pay higher prices.  As free enterprise is driven by self-interest and the profit motive, moral issues such as the exploitation of labour, detrimental environmental impacts and the use of questionable business practices can occur.