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Why Capitalism Is a More Functional System Than Communism

Student Name

University Level Department, College of Humanities, Prince Sultan University

ENG103: Research Writing Techniques

Ms. Weaam Baashen

November 26, 2020

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Why Capitalism Is a More Functional System Than Communism

1.0 Introduction

Capitalism, born in the 17th century, is an economic and political system in which a country’s

market, industries, and trade are owned and operated by the private sector. Private ownership and

operations within a capitalist system are unaccompanied by any government intervention.

However, capitalism is not the only system operating the economies of countries around the world.

There has always been a long-standing debate on whether capitalism or its opposing economic

system, communism, is the more functional system. This research paper investigates the

functionality of capitalism as the superior economic system and its impact on economic growth in

comparison to communism.

2.0 Research Question

Q1: Why do leading countries practice capitalist systems as opposed to communist regimes?

3.0 Hypothesis

H1: Capitalism promotes economic growth, whereas communism would limit it.
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4.0 Methodology

4.1 Participants

The survey was distributed to a group of business students in both Prince Sultan University and

King Saud University located in Riyadh, Saudi Arabia. The participants were chosen based on

their college majors. All 27 participants have taken an economics course and/or have specific

knowledge on the topic presented. The age range of the participants falls between 18 to 22 years

old.

An email interview was conducted on November 10th, 2020 with Dr. Nourah Alyousef;

professor of economics in King Saud University, member of the Shura Council in its seventh

session, and Chair of the Board of Directors of the Saudi Economic Association. Having earned

her PhD from the capitalist United States, Dr. Nourah Alyousef has specific knowledge on matters

of the economic system. The interview contained three questions that allowed the interviewee to

share her thoughts on the comparison of the two economic systems discussed in this research paper.

Another email interview was conducted on November 23rd, 2020 with Dr. Nazia Hashmi,

assistant professor of various economics courses in the College of Business Administration in

Prince Sultan University. The interview questions were the exact same as those of Dr. Nourah

Alyousef’s.
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4.2 Instruments

A survey of five questions was conducted on Google Forms and distributed on November 6th,

2020. One of the questions was multiple choice, two were through the Likert scale system, and the

last two were check-all-that-apply questions.

Both interviews were conducted entirely via email. The interviews contained the same set of

questions. The questions were constructed to yield the opinions of the interviewees, rather than

propose a biased ultimatum. All three questions were broad enough to allow the interviewees to

provide reasons and explanations for their answers.

4.3 Procedure

A link to the survey was shared to two targeted WhatsApp groups. Both groups were economics

course groups; one for Prince Sultan University students and one for King Saud University

students. This guaranteed that all respondents would have specific knowledge on the subject being

discussed. After receiving a total of 27 responses, the form was edited to accept no more.

Both Dr. Nourah Alyousef and Dr. Nazia Hashmi were emailed three interview questions. The

questions asked for the interviewees’ opinions on the functionality of capitalism, as opposed to

communism, and the characteristics that they believe have made capitalism superior and

communism inferior. The interviewees were highly cooperative and have given detailed answers

to the questions asked. Their responses were timely and clear.

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5.0 Results

5.1 Quantitative Results

The survey was conducted in order to explore the opinions of individuals with enough knowledge

to understand the complexity of the questions proposed.

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5.2 Qualitative Results

Below are the answers of Dr. Nourah Alyousef to the interview questions proposed:

Q1) For what reasons do you believe capitalism would be a more functional system than

communism?

I believe that capitalism would be a more functional system than communism for four key

reasons.

1 - Factors of production: Factors of production include land, labor, and capital. In a capitalist

economy, factors of production are owned by individuals (the private sector). In a communist

economy, the factors of production are owned by the government.

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2 - Decision of production: In a capitalist economy, production is determined by free market forces

such as supply and demand. In a communist economy, the government determines which goods

and services get produced and how much is available at any given time.

3 - Price Determination: In a capitalist economy, prices are set by market competition.

In a communist economy, the government sets the prices for goods and services.

4 - Resource allocation: In a capitalist economy, demand determines the allocation of resources,

based on micro- and macro-economics. In a communist economy, the government determines

resource allocation depending on political considerations.

Q2) Which system do you believe promotes significant economic growth and why?

Capitalism and communism are both economic systems imposed by countries around the world.

Both systems were created to manage a country’s economic resources and regulate its means of

production. Countries that adopt capitalism manage to allocate their resources more efficiently,

which leads to economic growth. On the other hand, communism relies on government planning

and is a system without an effective incentive mechanism to direct economic activity.

Q3) Why have attempts at communism failed?

Communism’s reliance on government intervention in the market completely abolishes the idea

of a free market, therefore providing no incentive for increased production and market competition.

The growth of an economy is limited under a government-controlled market, which is one main

reason why attempts at communism thus far have failed.

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Below are the answers of Dr. Nazia Hashmi to the interview questions:

Q1) For what reasons do you believe capitalism would be a more functional system than

communism?

Capitalism is the paramount economic system because it provides limitless opportunity,

encourages innovation, and has not been proven inferior to alternative or other economic systems.

It is the only economic system which allows every individual an equal chance of success,

regardless of inherited social class. It gives people the freedom to do as they wish and allows them

the opportunities to work to gain great wealth, or to just survive in society. Whereas communism

sets direct demands on the work you do and what you need to produce, so others can benefit as

well as you from your hard work. The rule by communist parties leads to totalitarianism, political

repression, restrictions of human rights, poor economic performance, and cultural and artistic

censorship.

Q2) Which system do you believe promotes significant economic growth and why?

Firms in a capitalist-based society face incentive to be efficient and produce goods which are

in demand. With firms and individuals facing incentives to be innovative and work hard, this

creates a climate of innovation and economic expansion. This helps to increase real GDP and lead

to improved living standards. This increased wealth enables a higher standard of living; in theory,

everyone can benefit from this increased wealth, and there is a ‘trickle-down effect’ from rich to

poor. It is an economic system in which private actors own and control property in accord with

their interests, and demand and supply freely set prices in markets in a way that can serve the best

interests of society. The essential feature of capitalism is the motive to make a profit.
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Q3) Why have attempts at communism failed?

The most significant disadvantage of communism stems from its elimination of the free market.

The laws of supply and demand do not set prices—the government does. Planners lose the valuable

feedback these prices provide about what the people want. They cannot get up-to-date information

about consumers' needs, and as a result, there is often a surplus of one thing and shortages of

others. Also, it is inefficient at allocating resources and dividing labor. A communist society has

no idea of what it needs to produce in what quantity using the most efficient process nor does it

have any incentive to do so.

To compensate, citizens create a black market to trade the things the planners do not provide,

which destroys the trust in Marx's pure communism. People no longer feel the government can

give "to each according to his needs."

In short:

● It hampers personal growth. One of the setbacks of communism is its being too controlling

on the lives of the people.

● It dictates on the people. In a communist society, the government has the power to dictate

and run the lives of people.

● It does not give financial freedom.

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6.0 Discussion

The hypothesis that a capitalist system is a significant promoter of economic growth, whereas a

communist system bears an opposite effect, limiting economic growth, is proven to be accurate

based on the answers of the results of the conducted survey. The majority of the survey answers

to each of its questions show greater support towards capitalism rather than communism. Both

interviewees also advocate for capitalism through their detailed answers to the interview questions.

These findings agree with the idea that capitalism is superior to communism in, specifically but

not limited to, matters of economic growth. Ultimately, it is proven that countries should practice

capitalism rather than communism in order to thrive and ensure their economic growth.

7.0 Conclusion and Recommendations

Despite a small number of survey answers with opposing views, a great number of responses

have shown support towards the hypothesis. Overall, the participants of the survey and both

interviewees were in great favor of capitalism over communism. As the research has shown,

capitalism is a significant factor in the growth of a country’s economy. The system’s effects have

proven to be superior to those of the opposing system’s, communism, in aiding in a country’s

growth and improvement. It is highly recommended that countries worldwide switch to 100%

capitalist systems, which would likely spike a significant growth in the world economy.
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References

Fuchs-Schündeln, N., & Schündeln, M. (2020). The Long-Term Effects of Communism in Eastern

Europe. Journal of Economic Perspectives, 34(2), 172-191.

Forbes, S. (2012, July 11). How Capitalism Will Save Us. Forbes. Retrieved from

https://www.forbes.com/2009/11/03/capitalism-save-us-opinions-forbes_land.html

Pettinger, T. (2019, December 10). Problems of Capitalism. Economicshelp. Retrieved from

https://www.economicshelp.org/blog/77/economics/problems-of-capitalism/

Flisfeder, M. (2020). Capitalism is the Parasite; Capitalism is the Virus. The Bullet. Retrieved from

https://www.academia.edu/43716070/Capitalism_is_the_Parasite_Capitalism_is_the_Virus_The

_Bullet
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Appendix

Survey Questions:
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Interview Questions: