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Capitalism and Socialism

Capitalism and Socialism Nathan Zychal College of Dupage Elizabeth Anderson December 4, 2013

Capitalism and Socialism Capitalism and Socialism Government Systems: A Brief Introduction There are several types of government economic systems around the world; however, there is only one that actually produces a populous that is thriving. Socialism and capitalism are two popular

schools of thought for government economic rule. Socialism is a system in which individuals do not have ownership of assets, but rather the local community owns and controls assets. Capitalism is a system that relies on individuals who control and own assets. Communism is a similar concept to socialism but relies on control being with the state government. Socialism is thought of as a predecessor to communism. A closer look at socialism and capitalism will be advanced here. Socialism As A Way of Life Socialism is a system of government wherein its leaders believe that the individual should not have ownership of land, capital, or industry. It is often thought that the idea of socialism derives from the work of Karl Marx (Heilbroner, Socialism). Mr. Marx believed From each according to his abilities, to each according to his need (Karl Marx Quotes, 2001). This quote represents the foundation of socialism. The overall population in these societies own everything. Everyone works for the betterment of their community, and society as a whole. Under socialism people are rewarded according to their contribution. The emphasis is that the profit is distributed among the society, all the people. Socialism allows for redistribution of wealth. Wealth that has been redistributed gives everyone in the society equal shares of the benefits derived from labor. The poor and needy share equally, a very noble concept in theory. Socialism relies on planning to determine investment and what to bring to market.

Capitalism and Socialism Capitalism As A Way of Life In a capitalist government, individuals own and control assets. People are given more liberties and freedoms than any other type of government. Individuals own land, businesses, cars and houses

(Capitalism, Socialism, Communism, 2013). In this society you have freedom to live where you want and go after the type of employment you want. In general there is minimal government interference. The emphasis is profit that is made is for the individual rather than for workers or society as a whole. The market determines the product. The means of production are privately owned and profit is the incentive.

Arguments of Socialism Socialism takes from the rich to give to the poor. Socialism considers inequality in wealth and incomes as an injustice. Redistribution sounds like a good idea in practice, and is done for the pursuit of equality, but in reality there are many problems that come from implementing this system. To implement socialism and expect success, the assumption is that everyone will work for each other, so that their country will grow as a whole. People are selfless and they want the betterment of themselves and their countrymen. By redistribution to the poor the society will achieve equality for the bettering of mankind. This assumption is one of the flaws of socialism. People are at many times looking out for themselves, and not concerned about society as a whole.

Capitalism and Socialism

Socialism destroys the will to work. Creativity, innovation, growth, and achievement in a society is limited due to wage control. The lack of wage profits discourages individuals from putting forth the effort required to do harder jobs such as being a doctor, teacher, or engineer. The risk of opening a business or creating a new product do not have a significant financial incentives. While it is possible for individuals to have businesses or provide services, they are usually taxed heavily on their profits. The socialism efforts toward economic equalization have resulted in common poverty, except maybe for the ruling class. Cuba and North Vietnam are prime examples of this. Socialists believe that all the ills of society can be remedied by government programs via high taxation and generous social programs. Another aspect of socialism that damages the society as a whole, is that the economy and production are adjusted by the government. The items produced as specified by the government sometimes causes an excess in what is not needed and a shortage of what is needed. The controlling government weakens the individual. The over regulation of businesses discourages competition. Without competition, growth is discouraged, and there is slower progression toward technological advancement. Socialism is the Big Lie of the twentieth century. While it promised prosperity, equality, and security, it delivered poverty, misery, and tyranny. Equality was achieved only in the sense that everyone was equal in his or her misery (Why Socialism Failed, 1995). Lack of property ownership in a socialist society has proven to be a problem. If the individual doesnt own the property they tend not to take care of it. Because no one owns it, no one takes care of 4

Capitalism and Socialism it. Even though the methods and ideologies of socialism may seem like a decent system in theory, it has many problems and obstacles when used in the real world. Arguments of Capitalism

Capitalism has financial reward as an incentive. Money inspires people to work hard and achieve their goals. The accumulation of wealth drives the economy. Capitalism is based on the assumption that individuals operate to better themselves, but this has the side effect of propelling other toward success. The capitalists try to judge the market and adjust production accordingly in order to realize the greatest possible profit (Julia L., 2009, p. 3). The need that business owners have to continuously produce profits drives the economic engine. Useful goods and services have become a byproduct of the capitalistic society. Individuals are aware in this society of the many opportunities that through hard work allow them to achieve personal prosperity, and success. Ingenuity, improvement, advancement in the society is only limited by the individuals imagination. Increases in wages, encourage individuals to put forth the effort required to do harder jobs such as being a doctor, teacher, or engineer. The risk of opening a business or creating a new product do have a significant financial incentives. In a capitalist society there is the little government intervention compared to other types of governments, and this allows more freedom overall. The economy and production are market driven. The market picks the winners and the losers. Government intervention is thought to cause inefficiencies. Competition and rivalry create stimulation. Capitalism drives competition up accelerating technological advancement, and innovative ideas. The capitalist society does have a small population of rich and poor people, but to its credit, a large and flourishing middle class with a better standard of living. Property and business ownership have proven an asset in this society. Individuals with a vested interest have proven to take care of their assets. Conclusion 5

Capitalism and Socialism

Socialism is an economic theory that has failed everywhere it has been tried. Socialism leads to a large intrusive government that diminishes the role and value of the individual. It results in the loss of freedom and the rise of government. Capitalism works because the individual has a fair chance at making a profit. Freedom reassures competition which encourages people to better themselves. A byproduct of capitalism is that the economy grows and society progresses. Capitalism has realized what socialism has not achieve in terms of achieving a prosperous, industrial, and self-sustaining nation.

Capitalism and Socialism


Heilbroner, R. (n.d.). Socialism: The Concise Encyclopedia of Economics | Library of Economics and Liberty. Retrieved December 4, 2013, from Julia, L. HowStuffWorks "Evolving Economics". (n.d.). Retrieved December 4, 2013, from Why Socialism Failed : The Freeman : Foundation for Economic Education. (n.d.). Retrieved December 4, 2013, from Book Rags Media. (2001). Karl Marx Quotes. Retrieved December 6, 2013, from Brainy Quote website: karl_marx.html Capitalism, Socialism, Communism. (2013, September). Retrieved December 6, 2013, from Government Styles website: