Download Capitalism and socialism are somewhat opposing

Capitalism and socialism are somewhat opposing schools of thought in economics. The central
arguments in the socialism/capitalism debate are about economic equality and the role of government:
socialists believe economic inequality is bad for society and the government is responsible for reducing
it via programs that benefit the poor. e.g. free public education, free or subsidized healthcare, social
security for the elderly, higher taxes on the rich. On the other hand, capitalists believe that government
does not use economic resources as efficiently as private enterprise and therefore society is better off
with the free market determining economic winners and losers. The U.S. is widely considered the
bastion of capitalism and large parts of Scandinavia and Western Europe are socialist democracies.
However, the truth is every developed country has some programs that are socialist.
Capitalism (in action)
Free Market Economy – Ask yourself what the term free market sound likes to you.
Philosophy of Capitalism - Capital (or the "means of production") is owned, operated, and traded for the
purpose of generating profits for private owners or shareholders. Emphasis on individual profit rather than
on workers or society as a whole
Idea of Capitalism - Laissez-faire means to "let it be"; opposed to government intervention in economics
because capitalists believe it introduces inefficiencies. Free market produces the best economic outcome for
society. Govt. should not pick winners and losers.
How it works economically (in action) - Relies principally on markets to determine investment,
production and distribution decisions. Markets may be free-markets, regulated-markets, or may be
combined with a degree of state-directed economic planning or planning within private companies.
Key Elements - The accumulation of capital drives economic activity - the need to continuously produce
profits and reinvest this profit into the economy. "Production for profit": useful goods and services are a
byproduct of pursuing profit.
Ownership and Management Structure - The means of production are privately-owned and operated for
a private profit. This drives incentives for producers to engage in economic activity.
Way of Change or Growth - Fast change within the system. In theory, the relationship between buyer and
seller (the market) is what fuels what is produced. Government can change rules of conduct/business
practices through regulation or ease of regulations.
Socialism (in action)
Controlled Market Economy – Ask yourself what the term controlled market sounds likes to you.
Socialism - Wealth redistributed so that everyone in society is given somewhat equal shares of the benefits
derived from labor, but people can earn more if they work harder. Means of production are controlled by
the workers themselves.
Philosophy of Socialism - From each according to his ability, to each according to his contribution.
Emphasis on profit being distributed among the society or workforce in addition to receiving a wage
Idea of Socialism - All people should be given an equal opportunity to succeed. Workers should have most
say in their factory's management. The free market suffers from problems like tragedy of the commons.
Government regulation is necessary.
How it works economically (in action) Planned-Socialism relies principally on planning to determine
investment and production decisions. Planning may be centralized or decentralized. Market-socialism relies
on markets for allocating capital to different socially-owned enterprises.
Key Elements - Economic activity and production especially are adjusted to meet human needs and
economic demands. "Production for use": useful goods and services are produced specifically for their
usefulness.
Ownership and Management Structure - The means of production are socially-owned with the surplus
value produced accruing to either all of society (in Public-ownership models) or to all the employeemembers of the enterprise (in Cooperative-ownership models).
Way of Change or Growth - Workers in a Socialist-state are the agent of change rather than any market or
desire on the part of consumers. Change by the workers can be swift or slow, depending on change in
ideology or even whim.
The Debate on Socialism versus Capitalism
One of the central arguments in economics, especially in the socialism vs. capitalism debate, is the
role of the government. A capitalist system is based on private ownership of the means of
production and the creation of goods or services for profit. A socialist system is characterised
by social ownership of the means of production, e.g. cooperative enterprises, common ownership,
direct public ownership or autonomous state enterprises.
Proponents of capitalism espouse competitive and free markets, voluntary exchange (over forced
exchange of labor or goods). Socialists advocate greater government involvement but they differ in
the type of social ownership they advocate, the degree to which they rely on markets versus
planning, how management is to be organised within economic enterprises, and the role of the state
in constructing socialism.
Criticisms of Capitalism
Critics argue that capitalism is associated with: unfair and inefficient distribution of wealth and
power; a tendency toward market monopoly or oligopoly (and government by oligarchy);
imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation;
repressions of workers and trade unionists, and phenomena such as social alienation, inequality,
unemployment, and economic instability. Critics have argued that there is an inherent tendency
towards oligopolistic structures when laissez-faire is combined with capitalist private property.
Capitalism is regarded by many socialists to be irrational in that production and direction of the
economy is unplanned, creating many inconsistencies and internal contradictions.
Criticisms of Socialism
Criticisms of socialism range from claims that socialist economic and political models are
inefficient or incompatible with civil liberties to condemnation of specific socialist states. There is
much focus on the economic performance and human rights records of Communist states, although
there is debate over the categorization of such states as socialist. In the economic calculation
debate, classical liberal Friedrich Hayek argued that a socialist command economy could not
adequately transmit information about prices and productive quotas due to the lack of a price
mechanism, and as a result it could not make rational economic decisions. Ludwig von Mises
argued that a socialist economy was not possible at all, because of the impossibility of rational
pricing of capital goods in a socialist economy since the state is the only owner of the capital goods.
Hayek further argued that the social control over distribution of wealth and private property
advocated by socialists cannot be achieved without reduced prosperity for the general populace, and
a loss of political and economic freedoms.