Capitalist and Socialist Economic Systems

Posted: August 25th, 2021

Capitalist and Socialist Economic Systems

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Capitalist and Socialist Economic Systems

Capitalism and socialism are the primary economic systems used by different countries to control their means of production while regulating their economic resources. In a capitalist economy, private individuals and entrepreneurs, instead of the government, have monopolized ownership and management of production factors, such as labor, entrepreneurship, natural resources, and capital goods (Shaikh, 2012). In essence, capitalism is a free market economy that depends wholly on the law of demand and supply to allocate goods and services (Shaikh, 2012). Conversely, socialism is the exact opposite of capitalism. In socialism, the government undertakes centralized planning to determine when, in what quantities, and what goods and services to produce (Shaikh, 2012). Thus, presence or absence of government intervention in an economic system dictates whether this system becomes capitalist or socialistone and defines the mode of availing goods and services to the consumers.

As indicated previously, socialism is an economic system in which the government determines the allocation of factors of production to achieve cooperative equity among its citizens. However, the simplest service that most citizens acquire from the government-controlled economy is healthcare. The motive is to ensure people are always healthy to meet their individual and more significant social needs through the available resources (Shaikh, 2012). A study by Salman Shaikh (2012) highlights why consumers are not better off in a capitalist economy. He argues that this system has encouraged a legal cover to most exploitative institutions operating on “a free market” basis. This trend endangers the safety of consumers through distributional inequality witnessed in the global market today. Therefore, even as capitalism remains free for competitive personnel, there is an urgent need for the government to streamline mechanisms that can quickly lead to egalitarian and equitable socio-economic systems. This move will help curtail the persistent poverty that deepens by the day.

Even though capitalism has severe demerits of how the system operates, countries that have adopted exclusive socialism are at their worst state of the economy. In Syria, for instance, the government has taken control over social programs, healthcare, and distribution of other goods and services (Shaikh, 2012). Taking control over all factors of production has sparked hostility, especially from the competitive population who are seeking to disrupt and overthrow the authority for their gain (Shaikh, 2012). As a result, people’s productivity has collapsed and has been replaced by civil unrest and economic instability.

References

Shaikh, S. (2012). Comparative economic systems: A brief review. Retrieved from http://mpra.ub.uni-muenchen.de/42499/