How Capitalism Reduces Poverty and Creates Wealth

It has to be more than just ‘free markets.’ Here is the truth.

James T. Moodey | August 30, 2026

The word capitalism was coined in the 1700s.  The definition was vague.  It generally meant “private property traded freely” or “free markets.”  However, most non-totalitarian countries had free markets, and these countries in Europe and elsewhere were not particularly wealthy.  Their rural people were paupers living off the land, even in England, France, and the U.S. at our founding.

We generally regard capitalism as creating wealth, but free markets are not what created the enormous wealth that occurred in the United States.  I knew that and studied our economic history to find out: If it was not free markets, what was it?  What specifically were the mechanics of “our capitalism” that created such wealth?  

I found the answer.  However, I also learned that capitalism cannot be taught without properly defining wealth.

Wealth of a nation is its amount of usable goods.  I use the term usable goods to exclude paintings and other speculative items.  Poverty is a lack of usable goods, such as clothes or food.  A large supply of usable goods brings prices down and reduces poverty.  We became wealthy because we produced an enormous amount of usable........

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