The purpose of this paper is to examine comparisons and contrasts between capitalism and socialism. These are all forms of economies that are practiced in different regions or states in the world. There two existing schools of thought where each one prefers one system to the other. Capitalism is a system where the means of production are privately owned and the market forces of demand and supply determine decisions regarding production of goods and services (Lamb). The aim is the accumulation of wealth for the entrepreneurs. On the other hand, socialism is a system where the means of production, capital is communally owned (Lamb). The government makes the decisions on investment. In this case, benefits are to accrue to the community as a whole. Thus, there is no personal gain from the investment. The thesis statement for this essay is, ’a mixed economy of capitalism and socialism is better than pure socialism or pure capitalism’.
Capitalism is based on the concept of a free market (Lamb). In this scenario, the investment decisions are guided by the market forces. Demand and supply are the indicators on what to produce, amount to produce and the prices for selling. Since the objective in this case is the profit accruing to the risk taker, the most profitable investments are sought given the availability of capital. According to socialism, investment decisions are determined through prior planning. The aim is to ensure equitable distribution of resources, thereby no profit accrues to any particular individual. The investments undertaken hereby are community guided towards satisfaction of the general needs of the whole society as opposed to capitalism where it is only the investor who benefits. The resources under capitalism are provided by the entrepreneur while under socialism, they are funded by the state.
Socialism aims at achieving economic equality (Lamb). The government is responsible for the equal distribution of resources. All the resources in a country are apportioned in a manner that reflects the financial strength of the entire population. For example, the government might introduce taxes on high incomes of people to get funds to help those whose incomes are low or do not have any income sources. Through such initiatives, the state is to bring equality amongst its citizens. This is in contrast to the ideology shared in capitalism. In this school of thought, accumulation of personal wealth is encouraged. The government has a regulatory role to play. It only ensures a level playing field but not to impede the business. This is done through the laws guiding the carrying out of such investments that are enforced by various organs like the judicial provisions.
From the foregoing, each system has its merits and demerits. Both economic systems are concerned with resources. However, they greatly differ on the modes of acquisition of the rights on property. While capitalism favors ‘work and earn’ ideology, socialism favors ‘government distribute from the rich to the poor’ ideology. The capitalist approach is the most common across the globe given the merits accruing from it. It invites the state intervention as a regulator. In other economies, the state encourages and recognizes capitalism as the legitimate system. In such systems, the state has a role of providing the needy with provision of services that the private sector cannot offer. For example, where huge amounts of capital are required or where no profits can be earned, the state often intervenes in this process. In major states, it is a mixed economic system with the government involved in it to remedy the shortcomings of the purely capitalist system.
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