Source: The Fiscal Times: Opinion- Mark Thoma- Inequality in a Capitalist System is Not Inevitable
I would describe capitalism, or private enterprise, meaning private businesses and wealth controlled by individuals or groups of individuals, not by the state, as the worst type of economic system in the world, except for all the rest. Actually, as has been pointed out on this blog many times, what I call liberal capitalism is capitalism designed to include everyone, where everyone has economic freedom and is not controlled by the special few or by government. This is the worst form of capitalism, except for all the rest.
I mention that because there are several forms of capitalism, and all developed countries and rapidly developing countries, large countries like Mexico, Brazil, Russia, China, India, and Pakistan, have one form or another of a capitalist economic system. And the beauty of each of these different types of capitalist systems is the idea that your competitors cannot just outclass you but also put you out of business. So in this system, you must deliver the best services possible at the most affordable and competitive prices or be driven out of business.
The disadvantage of capitalism is that some people do very well for whatever reason, for example, starting off very rich along with getting the best education possible, or simply coming from modest roots but working very hard and productively and reaping the benefits so they are more than capable of caring for themselves and their families.
But on the other side, there are people at the bottom who, for whatever reason, either through bad personal choices, such as not finishing their education or having children before they were ready to raise them properly, or coming from a low-income family without access to a decent education, now find themselves living in poverty as adults and perhaps raising children as well.
That is where social insurance, or the safety net, jumps in to help the people at the bottom, where they are ignored by the private market or did not take advantage of the opportunities presented by the private market to make a good life for themselves. The safety net covers temporary financial assistance for people living in poverty and not currently working and provides access to education and job training, which provide the tools needed to achieve economic freedom by finding a good job with a living wage.