Is There an Economic System Better Than Capitalism?

In our daily lives, we often hear the word "capitalism". Especially when talking about the economy, it's not uncommon for you or your conversation partner to link your discussion to the capitalist system. Indeed, we live in a highly capitalist world.

Everything is for sale. Everything we see and touch has become part of a commodity-driven system aimed at capital accumulation. Capitalism has gone through a long historical journey. Since the collapse of communism in most parts of the world by the end of the 21st century, capitalism—rooted in liberal and democratic values—has asserted itself as the reigning economic system.

Today, the majority of countries base their economies on capitalism. Yet, it continues to face criticisms and flaws. Capitalism has been challenged both empirically and rationally, accused of consolidating power among the few, exploiting workers, prioritizing profit over social goods, polluting the environment, and perpetuating inequality and economic instability.

So, is there an economic system better than capitalism? Or are the systems currently adopted in countries like China simply extensions of capitalism?

The End of Mercantilism

For those unfamiliar, mercantilism was the dominant economic theory during the British colonial period in Canada. It proposed that the world's wealth was fixed, and therefore a country could only gain wealth by exporting more than it imported.

Linked closely with imperialism, colonialism, tariffs, and subsidies, this system was used by European powers such as France and Great Britain from the 16th to the mid-19th century. But by the late 18th century, mercantilism was falling out of favor. According to The Canadian Encyclopedia, the repeal of the Corn Laws and Navigation Acts in the mid-19th century marked the definitive end of British mercantilist practices.

The system was famously criticized by Adam Smith in The Wealth of Nations, which laid the foundation for classical economics and modern economic thought.

Capitalism and Adam Smith

Simply put, capitalism is an economic system that grants individuals full freedom to control economic activities for the purpose of making a profit. The idea originates from Adam Smith, a key figure in classical economics and the proponent of free-market theory. His 1776 book, The Wealth of Nations, remains a core reference in modern economics.

Smith, born in Scotland on June 5, 1723, outlined the core tenets of capitalism through concepts such as laissez-faire and the invisible hand—principles that became foundational to capitalist thinking on the value of goods and services.

Today, most countries adopt capitalism as their primary economic system. According to the Heritage Foundation's Index of Economic Freedom, 168 nations rely on capitalist systems. Singapore, Switzerland, and Ireland rank as the top three most capitalist countries. Interestingly, the UK and the US, often associated with capitalism, rank lower at 24th and 25th respectively.

In the US, capitalism is defined as a system in which private individuals or businesses—not the government—own and control production: entrepreneurship, capital goods, natural resources, and labor. Its success depends on a free market economy driven by supply and demand.

Democratic Socialism

One critical issue with industrial capitalism is that it is not designed to meet the needs of those participating in it. It's not the first system ever created, but it is the latest—and most dominant. We live in such a system, often blindly accepting assumptions that may not hold up to scrutiny. Back to the question: is there a better system than capitalism?

Allan G. Johnson offers an interesting proposition. In his essay “If Not Capitalism, So What?” he writes, “We need a system designed first and foremost to meet the needs of people, the planet, and the non-human species that call it home—one that respects the biological and moral realities of life: that we live together.” Norway is one country that reflects this kind of system.

Norway was relatively unaffected by the 2008 global financial crisis, largely because it didn’t allow individual and corporate greed to dominate its economy. Its banks and financial institutions are heavily regulated, and high income taxes ensure that every citizen has access to basic needs, including education and healthcare.

This system is called democratic socialism. We’re often told that socialism means the end of freedom and individualism—examples like the Soviet Union and China come to mind. But Johnson argues that there are more humane and ecological models: Norway, Sweden, Finland, Denmark, Switzerland, and even the Netherlands all practice versions of socialism quite different from Soviet or Chinese models.

Ultimately, if “freedom” under capitalism means doing anything regardless of its consequences, then socialism means a more limited freedom—one that respects the rights of others.

Post-Capitalism

Following repeated economic crises in capitalist countries, many thinkers from economics, politics, and philosophy have speculated about capitalism’s future. Among the most cited is Karl Marx, who argued that material conditions shape social life—"Das Sein bestimmt das Bewusstsein". That is, existence determines consciousness; how we live and work influences what we think and feel.

Marx predicted that capitalism would collapse under the weight of its internal contradictions. The 2007 economic crisis, which saw millions lose their jobs and homes, is one example of its instability.

So, what might define the world after capitalism? Some thinkers propose post-capitalism, a system that emerges naturally once capitalism becomes obsolete.

In 1993, Peter Drucker described this possibility in Post-Capitalist Society. He argued that knowledge—not capital, land, or labor—would become the new basis of wealth. The post-capitalist society would consist of knowledge workers and service workers, replacing the capitalist-proletariat divide.

Drucker predicted this transformation would be complete by 2010–2020. And perhaps, it’s already happening—just unnoticed. For instance, we no longer need to visit cinemas to watch movies. We can subscribe to a platform and access content instantly. As Drucker envisioned, consumers would pay subscriptions, and producers would assume that everything is reproduced and shared through digital networks.

In 2015, Paul Mason noted that rising income inequality, recurring economic crashes, and capitalism’s role in climate change were driving serious discussions about post-capitalist futures. This new system could be enabled by advancements in automation and information technology—developments that drastically reduce the cost of production, potentially to zero.