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Individualism is generally understood to be a social context or environment in which individuals are the focal operating units as opposed to states or social groups; the social context has to be sustained by the beliefs of the people within it. The term individualism has also been used to describe individual initiative and freedom of the individual in general.

Societies and groups can differ in the extent to which they are based upon predominantly "self-regarding" (individualistic and arguably self-interested) rather than "other-regarding" (group-orientated and group or society minded) behaviour. There is also a distinction relevant in this context between guilt societies (internal reference standard) and shame societies (e.g. Japan) with an external reference standard and where people look to their peers for feedback as to whether an action is acceptable.

The extent to which society or groups are individualistic can vary from time to time and from country to country. For example, Japanese society is more group orientated (e.g. decisions tend to be taken by groups rather than individuals) and it has been argued that "personalities are less developed" (than is usual in the West). The USA is usually thought of as being at the individualistic (it's detractors would say atomistic) end of the spectrum, whereas European societies are more inclined to believe in public-spiritedness, state spending, and public initiatives.

J.K. Galbraith made a classic distinction between private affluence and public squalor in the USA and private squalor and public affluence in e.g. Europe and there is a correlation between individualism and degrees of public sector intervention and taxation. Such issues tie in with the theory of free markets as set out e.g. by Adam Smith; they also tie in with theories of liberty and development where it is generally argued that excessive state intervention tends to reduce liberty and slow development (see pluralism).

Individualism is often contrasted with totalitarianism and collectivism, but in fact there is a spectrum of behaviours ranging at the societal level from highly individualistic societies (e.g. the USA) through mixed societies (a term the UK has used in the post-WW2 period) to totalitarian.

Individualism, closely associated with some variants of the ideals of capitalism, libertarianism and classical liberalism, typically takes it for granted that individuals know best and that public authority or society has the right to interfere in the person's decision-making process only when a very compelling need to do so arises (and maybe not even in those circumstances). This type of argument is often observed in relation to policy debates regarding regulation of industries.

At the time of the formation of the United States, many of its citizens had fled from state or religious oppression in Europe and were influenced by the egalitarian and fraternal ideals that later found expression in the French revolution. Such ideas influenced the framers of the U.S. Constitution (the Jeffersonian Democratic-Republicans) who believed that the government should seek to protect individual rights in the constitution itself; this idea later led to the Bill of Rights.

Individualism has negative connotations in certain societies and environments where it is associated with selfishness. For example, individualism is highly frowned upon in Japan where self-interested behaviour is traditionally regarded as a kind of betrayal of those to whom one has obligations e.g. family and firm. The absence of universal health care in the United States, which traces back to a belief in individual (rather than societal) responsibility, is widely criticised in Europe where universal health care (usually funded in Europe through general taxation) is seen as protecting individuals from the vagaries of health problems; health care is seen in Europe as a classic case where insurance at a societal level is right and sensible.

Capitalism and Individualism

Karl Marx argued that the structure of production (structure of the economy) determined the structure of society, and there is little doubt that evolving trends in society, many to do with the evolution of industry and trade, influence society and the way people interact. For example, the emergence of automobile and air transportation, together with the speed of economic change, has tended to fracture families in the West and to erode the influence of the extended family. The opening of the Japanese economy to international free markets has tended to erode its ability to have consensus decision-making at a societal level.

It can be argued that capitalism is not based on individuals but largely on firms and institutions, and that individuals' roles are largely determined by institutions. However, compared to socialist states, many of which have either collapsed or started to convert to capitalism during the late 1980s and early 1990s, capitalism is considered still individualistic. In capitalism, individuals have choices with regard to institutional affiliation (for which institution s/he works), whereas in many socialist economies workplaces, as well as place of residence, spending, and artistic and political expression, are heavily regulated or determined by the state.

See: self purpose, tragedy of the commons,