Differences between Capitalism and Socialism Essay
Capitalism and socialism constitute opposing economic and political ideologies. The main proponents of modern capitalism and socialism are Adam Smith and Karl Marx respectively. Among the best models of free market economies include Hong Kong and Singapore. Some eastern European nations run variants of socialism (Hanson, 2003, p. 121).
Capitalism is an ideology of production in which factors of manufacturing belong to and are controlled by individuals with the object of profit making (Gale Group, 2010a). A capitalist economic system is characterized by wage labour, accumulation of capital and competitive markets.
Socialist economic systems are marked by state ownership and control of factors of production (Gale Group, 2010b). In such a system, the economy is managed through cooperative enterprises. The model is grounded on the tenet of production for consumption, where goods and services are made to meet people’s needs and economic demands (Hanson, 2003, p. 121).
There exist clearly cut differences between the capitalist and the socialist economic systems. The altercations in the capitalist-socialist discourse concern equality and function of government. Capitalists contend that individuals are more adept to efficiently using resources than the state (Gale Group, 2010a). On the contrary, socialists hold that the government has an obligation to correct the economic inequalities existing in the society (Gale Group, 2010b).
The philosophies and ideologies behind capitalism and socialism are divergent. Capitalism is founded on the philosophy of private ownership of capital with the motive of making profit. Capitalists have little concern for the workforce as emphasis is laid on the profit accruing from an investment. On the flip side, socialism is grounded on the principle of public ownership of the factors of production. Individuals in this system are compensated depending on their contribution in the production process.
Capitalism calls for the creation of a laissez-faire economic system (Gale Group, 2010a). The capitalists argue the government intervention in the production process leads to inefficiencies and hence the free market is the best placed economic model to achieve efficiency in resource allocation. Socialists believe in the ideology of collective benefit (Hanson, 2003, p. 121).
Economic planning and coordination are also at the centre of the capitalist-socialist discussion. In capitalist economies investment, manufacturing and distribution decisions are determined by the markets (Gale Group, 2010a). Markets in a capitalist economy may be free, regulated or mixed with some extent of government directed plans and planning by the private sector.
Socialist economies depend heavily on state planning to chart investment and manufacturing decisions. Centralized or decentralized planning may be exercised in a socialist economy. Though the competitive markets may also exist in socialist system, their function is to allocate the factors of production to different publicly owned enterprises (Lavigne, 1995, p. 52).
In capitalist economic models, the rate of employment is determined by the pressures of demand and supply in the labor markets. At times of economic boom the level of joblessness in market economies decline tremendously (Gale Group, 2010a). Nevertheless, during an economic recess the capitalist systems of production witness soaring levels of unemployment. In socialist economic systems, the state directs employment.
This implies that governments can lender full employment even when employees are not engaged in anything essential. Price determination is also a major aspect of departure between capitalism and socialism. In capitalist economic models price determination is within the ambit of market forces. Companies with monopoly power are able to take advantage of their position and levy higher prices. In economic systems modeled in the socialist ideologies the state sets and controls prices (Gale Group, 2010b).
Some advocates hold that capitalism is the bedrock of personal and political freedom (Gale Group, 2010a). It is argued that social interactions can only be best organized in a capitalist society because it provides space for free will and reason. Generally, socialists value justice more than profit (Gale Group, 2010b). Leading socialists blame the world economic crisis, poverty and environmental degradation on the profit seeking culture.
Gale Group. (2010a). Capitalism: Opposing Viewpoints in Context. Web.
Gale Group. (2010b). Socialism: Opposing Viewpoints Online Collection. Web.
Hanson, P. (2003). The Rise and Fall of the Soviet Economy: An Economic History of the USSR. Harlow: Pearson Education.
Lavigne, M. (1995). The Economies of Transition: From Socialist Economy to Market Economy. London: Macmillan.
Introduction America’s economic development can be traced over several centuries ago. Economic historians in the United States have established America’s development to the 16th, 17th, and 18th centuries during the […]
Anthropologists make attempts to establish the relationships between cultural and economical sides of the life of the society, deciding between the materialistic and spiritualistic approaches or trying to integrate both […]
Introduction Mercantilism is an outdated analysis of finances, which was common from 16th to 18th century. By definition, “the theory states that the world only contained a fixed amount of […]
The paper will start by giving an overall impression of the documentary, followed by an examination of what the documentary meant to me. This will be followed by an analysis […]
Introduction Socialism has been regarded as kind of economy which relocates its means of production from individual ownership to state ownership and communal ownership. A state that operates under socialism […]
Introduction The idea of alienation was developed by Karl Marx and it can be used to analyze the nature of human interaction in the current world. Alienation is widespread today […]
Introduction A report by the US Census Bureau provided in September last year, confirmed that what every American has already known; the gap between the poor and the rich is […]
The emergence of capitalism has contributed to the development of the community exchange system. Introducing money as a tool for measuring use-value of commodities has provided a revolution into the […]
Introduction Capitalism is a type of economic organization or an economic system that describes how people are related. Some essential features of capitalism include accumulation of industrial capital, private ownership […]
Capitalism and socialism constitute opposing economic and political ideologies. The main proponents of modern capitalism and socialism are Adam Smith and Karl Marx respectively. Among the best models of free […]