There are different economic systems that countries can choose to implement. The two that have gained the most publicity over the past century have been capitalism and communism. Communism did not turn out so well, as suggested by the fall of the Soviet Union in 1989 and early 1990s. The main problem with communism is that government makes economic decisions that are best left to the marketplace to decide. Adam Smith, author of The Wealth of Nations in the 18th century, believed that if we leave everything to the marketplace, there is an invisible hand that will guide people to make decisions that not only work for themselves as individuals, but also for society as a whole. Communism on the other hand has the government making decisions instead of the marketplace. Under the communist economic system, the government decides if a company should succeed or fail. In capitalism, if people do not buy a product, the company fails. However, if the government interferes, that sends a false signals to investors, and the economy collapses if it goes on for long enough.
A practical example is the government bailout of the automobile industry in the United States. When the U.S. Government bailed out these companies, it behaved in a communist fashion. A true capitalist would say that the market decided that these companies were no longer offering a product worth buying.
Capitalism is preferable to communism because it is built on an eternal principle, that of freedom of choice. The government should not tell people what they want to buy or force them to buy something. People should be able to decide for themselves. Communism tries to force people to do what they want. Capitalists say do what you want, but there are consequences.
