Capitalism, Socialism & Communism: Introduction
Capitalism is an
economic and political system in which individuals own economic resources and
industry, whereas under socialism, the state plans and produces goods, and
either owns or redistributes resources among its citizens. In a capitalist
economy, the political system emphasizes competition for resources as a means
of increasing capital (or wealth) and developing personal success. In a
socialist economy, the emphasis is on distributing wealth so that individual
needs are met with collective capital. There are many different versions of
both capitalism and socialism, and most modern societies are a blend of the
two.
Capitalism
Individualism and
competition are fundamental to capitalism. In a purely capitalist society,
individuals are responsible for protecting their own interests in the
marketplace and within their communities. The potential success of each
individual is also valued. People are encouraged to direct their talents in a
way that benefits themselves, such as by starting a business or entering a
highly profitable profession.
Capitalism relies on a
system of checks and balances brought about through competition. Individuals
who own capital can compete with others to provide goods and services to the
marketplace; those who produce and effectively market goods that are in demand
and at a price that people want to pay are likely to succeed. Similarly,
businesses that treat their workers well and pay good wages are most likely to
attract good employees, which is more likely to mean success for the business.
Those who offer inferior service or fail to attract good workers will
eventually fail and leave the marketplace.
Low taxes are generally
a goal of capitalistic governments. In addition, government funding for public
services, like social service benefits, is generally kept to a minimum. Health
care systems may also be primarily funded by the private sector, requiring citizens
to purchase their own health insurance or rely on an employer to provide
insurance.
Types of Capitalism
When discussed
theoretically, capitalism has several unique defining characteristics. In
practice, however, nuance has developed and as a result, it can be separated
into a variety of types:
• Free-market capitalism: This type of capitalism leaves all aspects of a society to be
governed by the market, with little or no intervention from the government.
Here, the role of the government is limited to protect the lives and property
of the citizens.
• Corporate capitalism:
In this type of economy, large, bureaucratic corporations dominate the economy.
This allows for long-term planning and efficiency, but less innovation. Large
corporations may also have an equally large influence over the government,
leading to legislation designed to protect the interests of those companies.
• Social-democratic
or social market economy: This economic system is an attempt
to balance the benefits of a free-market system with a strong social support
structure. While most industries are privately owned, the government is more
heavily involved in making sure that competition is fair, unemployment is low,
and social welfare is provided for those who need it.
• State-lead
capitalism: In this economy, the means of production are owned by the
government, but run in a “capitalistic” way — meaning for profit. The term is
also sometimes used to describe an economy in which the government steps in to
protect the interests of businesses.
Socialism
Socialism relies on
governmental planning, rather than the marketplace, to distribute resources.
While it is usually possible for individuals living in a socialist country to
own businesses or offer professional services directly to consumers, they are
usually taxed heavily on their profits. Public services are typically numerous
and funded by taxpayer money. Citizens are expected to work, but the government
provides services such as education, healthcare, and public transportation for
free or at very low cost. Socialist countries also often have extensive social
welfare systems to aid the unemployed, disabled, and elderly.
In addition to paying
higher taxes, business owners in socialist countries are often expected to
comply with very strict labor laws designed to protect workers against
exploitation. These laws include restrictions on work hours and mandate regular
vacations, sick time, and leave for numerous reasons, such as the birth or
adoption of a baby. Employers are typically not expected to provide health
insurance coverage, however, as medical care is usually provided through
national health care systems.
Types of Socialism
There are a wide range
of socialist political philosophies, including Marxism and reformism. Marxism,
originating from the works of Karl Marx and Friedrich Engels, argues that
socialism is the mid-point between capitalism and communism, with the means of
production controlled by the working class but with the state guiding the
economy on the workers’ behalf. Reformism, sometimes called social democracy,
is focused on changing capitalist societies from within, through the political
process and government reform.
In addition, there are a
number of different economic theories of socialism:
• Market socialism
involves running public or cooperative companies within the free market. Rather
than depending on taxes, the government takes all profits and redistributes
them by paying employees, funding public institutions, and offering social
services.
• In a planned economy,
the government owns the means of production, and plans out what will be
produced, how much will be made, and the price it will sell for.
• Self-managed economies
depend on the collective actions of specific groups to make decisions. For
example, a self-managed company may be owned by its workers, who collectively
decide the direction of the business.
• State socialism or
state-directed economies have industries that are owned cooperatively, but
which operate with some planning or direction from the government.
Communism
While it is a different
economic system, many people confuse socialism with communism. Under communism,
everything is owned communally, or by everyone. Ideally, there is no government
or class division, and no money; each person contributes to society as best as
he or she is able, and takes from that society only what he or she needs. The
decisions made by that society are supposed to benefit the people as a whole,
not any individual.
Historically, countries
that have been called “communist” actually practiced some form of socialism,
usually run by one political party. The state typically owned all forms of
production and practiced very strict central planning — meaning that the
government decided how all resources were to be used. Many critics argue that
most governments that are called “communist” are really very different from the
word’s true meaning.
Mixed Economies
Very few societies are
purely capitalist or purely socialist, although most are more strongly one than
the other. The United States, for example, is considered to be a capitalist
society, but the Social Security system, which provides support for people who
are unable to work, is socialistic. Sweden is considered by some people to be a
socialist country because of its high tax rate and large welfare system, but
the majority of industry in the nation is in private hands, which is
capitalistic.
Critiques
The criticisms of both
capitalism and socialism largely stem from different opinions about how
economic forces should shape governments and societies. Some critics believe
that the human spirit needs competition to fully develop, while others
emphasize the need for people to cooperate with each other, ensuring that the
needs of all citizens are met. Within each philosophy, there are additional
critics who disagree about how each economic or political system would work
best.
Critics of capitalism
note that the marketplace can be unstable, presenting real dangers to the
well-being of those who are not wealthy or who are otherwise vulnerable. Giving
business owners free rein to set the terms of employment and to keep most of
the profits from their enterprises to themselves, can establish a wealthy class
which, in turn, can suppress the freedom of others. These critics also note
that a purely capitalist society does not address the needs of those who are
truly unable to compete either as business owners or as laborers. Without some
social support systems, such as Social Security or welfare, those who cannot
work or earn enough money to survive must lead a precarious existence, and may
be forced to rely on family or private charity for support.
Those who criticize socialism
observe that heavy taxation to provide equal social services for all citizens
can discourage business owners from innovation and excellence, given that the
owner won’t personally profit from his or her efforts. In addition, when the
government plans the economy, some critics question whether officials and their
policy advisors really understand what is best for a country’s citizens; such
socialist governments may give their citizen’s no choice in deciding what kinds
of services they really want or need. In addition, capitalist critiques of
generous socialist social welfare programs note that these programs may
discourage people from working, as people may be able to live reasonably well
on government benefits rather than having to hold a job. As a result, families
may slip into generational poverty, as the children may grow up feeling
entitled to government support
No comments:
Post a Comment