Capitalism Vs Socialism; A Comparative Study
The globe has divided by human beings in to various countries. From ancient time itself, various civilizations started in different areas. Later most of them developed a system of administration. Then the concepts of land area, population, wealth, army, trade etc are come in to existence. Now the world has changed a lot. Now around 200 countries are there with different identities. Each of them is independent from others in various matters such as culture, language, society, life style etc. Now the world economy is the combination of various countries of identity. Here this hub is focusing on the various forms of economies such as capitalism, socialism and mixed economy.
What type of economic system exists in the world?
Capitalist form of economies are more popular particularly in the names of developed countries. But actually there is no perfect capitalist country. Capitalism is the free system in which market determines all the economic functions such as production, consumption, exchange etc. there will be no more governmental role in the economy. But in modern economies even in developed countries, government regularly intervening in the state matters. So there is no pure capitalism, but there are some market based economies like United States of America, United Kingdom, and Canada etc.
Nature of Capitalism
Capitalism is a concept initially mentioned by Adam Smith. So the classical economists including Adam Smith and his followers referred many things about this system. It was at the time of industrial revolution in Europe. The most common nature of capitalism in their minds was the free economy or laissez-faire system. Under which the central problems of the economy will be automatically cleared. That is there is no need of intervention by the government in the economy to bring economic stability. Every problem will be cleared by the market without any determined force or action. So, capitalism is the system of society which is purely based on the automatic demand and supply adjustments. Based on this, some common features can be seen in the capitalist economies as listed below.
- Maximum freedom for the economic agents such as producers, consumers etc.
- Profit motive and private domination.
- Superiority of capitalist or business class over the working class.
- High competition among economic agents.
- Role of price mechanism (that is the working of demand and supply forces).
CAPITALISM; Merits and Demerits
Higher efficiency and competitiveness
Threaten to environment
Faster economic growth
More consumer choices
Higher capital formation
Inequality may exist
Optimum utilisation of resources
Chances of monopoly
Automatic adjustments of economic problems
Socialism and Communism
Socialism is another popular social setup. It was initially found in ancient Greek. The greatest Greek philosophers like Plato and Aristotle. At the same time most of their ideologies were utopian or unrealistic. In this modern era, the concept of socialism and communism arose again in 16th and 17th century onwards from the various parts of Europe. Karl Marx was one of the greatest leaders of school of thought. Basically this social system is the opposite of capitalism. Under this system the government or authority has to play a leading role in the society. The oldest USSR is a best example of this system.
Nature of Socialism and Communism
As mentioned above socialism or communism is a system of complete control over the economy. So the authority or government will work for the society without any profit motive. It will be more welfare oriented to bring equality and justice in the society. The authoritarian socialism of countries like China is the communism. But nowadays, only liberal socialism is exists in the world. That means the presence of market or private forces. In liberal socialist system, the government only intervenes in the matter of production. The remaining economic functions such as distribution, consumption and exchange etc are done by the market. Anyhow, a socialist economy function with the following features.
- Central supervision over the economy
- Social welfare, equality and justice
- Planning is the key to run the economy
- Less private ownership of properties and there is no profit motive
- Less economic freedom to economic agents except government.
SOCIALISM; Merits and Demerits
Less inequality snd higher justice
No consideration for individual demands
No unnecessary competition
Less autonomy among economic agents
Less quality and competitiveness
Minimum consumer choices
Mixed economies are those economies featured with both capitalism and socialism. This form of economy is dominated in the world. Under this system, it aims to develop a system by combining benefits of both capitalism and socialism. So, there will be private and public forces actively participate in the economic functions of the country. India is the best example of mixed economies. In such countries, some of the crucial sectors are managed by the government alone and the remaining sectors will be handled by private agents or both private and public agents. Now this form of economy has higher importance because of its distinguished merits. Some of them are mentioned below.
- Government can control the economy
- Autonomy with restrictions
- Less exploitation and inequality
- Utilization of both private and public resources
- Public interest will be considered
- Less chances for monopolies.
Each country may have its own different features in many matters such as language, culture, tradition, customs etc. Moreover the system of society and the economy will be also different. Basically there are three most popular economic systems are there such as capitalism, socialism and mixed economy. Each of them has their own merits as well as demerits. At the same time nowadays, there is no pure capitalism or socialism. Every economy is mixed economies by the co-existence of private and public agents in the economic matters.