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Individualism, in general, is a term used to describe a theoretical or practical emphasis of the individual, as opposed to, and possibly at the expense of, the group. It is thus directly opposed to collectivism.
From a social standpoint, individualism is generally understood to be a 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 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 oriented (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 (its 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 Europe, and identified a correlation between individualism and degrees of public sector intervention and taxation.
Individualism is often contrasted with either totalitarianism or 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 collectivist. Also, many collectivists (particularly supporters of anarchism or libertarian socialism) point to the enormous differences between liberty-minded collectivism and totalitarian practices.
Individualism, sometimes closely associated with certain variants of libertarianism or 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, such as family or firm. The absence of universal healthcare in the United States, which traces back to a belief in individual (rather than societal) responsibility, is widely criticised in Europe and other countries where universal healthcare (usually funded through general taxation) is seen as protecting individuals from the vagaries of health problems; healthcare is seen in Europe as a classic case where insurance at a societal level is right and sensible.
Proponents of such public initiatives and social responsibility argue that their policies are beneficial for the individual, and that excessive individualism may actually hurt the individuals themselves. Opponents hold that such public initiatives may have unintended consequences beyond the issues they are intended to address.
Capitalism and Individualism
Karl Marx argued that the structure of production (the structure of the economy) determined the structure of society, and there is little doubt that many evolving trends in the economy (often linked to 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 coincided with many important changes in interpersonal and family relationship patterns. Marx called this theory historical materialism.
Critics of modern capitalism sometimes argue that capitalism is not based on individuals but largely on firms and institutions, and that individuals' roles are largely determined by these institutions. However, compared to various forms of political collectivism, capitalism is usually still considered individualistic.