Socialism and capitalism are two of the most discussed economic systems that are quite the opposite of each other. Capitalism is an economic system where the forces of demand and supply or market forces determine what, when and how to produce (Fornas, 2013). The system allows private ownership of property and the factors of production such as land, labor, and capital. In a capitalist economy, the government does not control the factors of production. On the other hand, socialism is an economic and political system where the community collectively owns and controls production, property, and goods equally (Mentan, 2012). In a socialist economy, the government controls the factors of production and there is no free market. Therefore, the people enjoy the fruits of their labor each according to their ability and contribution. For instance, workers get their share after part of their salaries and wages have been deducted for the common good of the society. One of the key principles of socialism is that the system assumes the cooperative nature of the society. However, socialism as a political and economic system is not superior to capitalism. Most of the socialist economies failed while the remaining nations such as Venezuela lavish in poverty (Mentan, 2012). So, Should Socialism as an economic system be preferred to Capitalism? No, capitalism is the preferred economic whose superiority socialism cannot match.
Socialism is a failed or inferior economic system because it destroys the "will" to work. Socialism does not reward people for being competitive and entrepreneurial (Li, 2017). As a result, the system leads to low motivation and kills the peoples' desire to be efficient and excellent employees. In a socialist economy, there is no reason for hard work because after all, they will not receive more or less of their efforts. Furthermore, since people lack the incentive to make more money, socialism leads to the lack of creativity and innovation. Why burn the midnight oil creating a business idea and the efforts will not pay out. Therefore, socialist governments fail to produce goods and services for the citizens because the available funds are directed towards health, transport, communication, and perhaps education. In the 20th century, the Soviet Communist countries were noted for the lack of adequate goods and services for their citizens. Unlike socialism, capitalism nurtures creativity, innovation, and entrepreneurship because of the competition in the market. The private ownership of factors of production leads to the production of surplus goods and services for both the domestic and international markets. Hard work pays under capitalism because the government does not interfere with the market forces of demand and supply. The capitalist economy is a motivator because entrepreneurs and businesses compete in an attempt at gaining more market share than the other, leading to quality products and successful business ventures. Therefore, capitalism rewards people for being competitive and entrepreneurial, while socialism does not (Fornas, 2013).
In socialist economies, there is a higher possibility that the democratically elected government voted to power to represent the general public may claim power for itself in what is known as the abuse of power. Socialism favors the community over the individual leading to the loss of rights and freedom and most socialist governments were viewed as totalitarians. The Soviet Union that practiced socialism as a transition period to communism was a police state. There is no country on earth that practiced full communism (Mentan, 2012). Therefore, the government controlled the media freedoms and the right to free speech. The more a country practices pure socialism, the more tyrannical the government becomes. Socialism cannot survive while people are free to make their own choices or free to criticize the woes of the economic system. Moreover, socialism nurtures increased bureaucracy and increased government centralization, leading to a distance between the state and its people. Besides that, socialism did not achieve equality and wealth distribution as the tenets in theory proclaimed. Unfortunately, socialist countries yielded high poverty levels, famine, and unsustainable economic growth. On the contrary, capitalism has been successful because it generates the increased absolute wealth of a nation together with its citizens. Even though critics argue that capitalism created wealth disparity, it has also created an opportunity to enjoy high-quality life in the developed nations. For instance, families described as poor in the US, Canada or any other developed country can still manage to own two cars (Zimbalist, 2014). Most capitalist states have unlimited freedom of speech and movement. Competition leads to the creation of better services and affordable prices. In summation, the negative implications of capitalism do not overweigh the positive benefits, hence making the most preferred economic system.
The socialist ideology collapsed because of the failure of operating under a profit and loss accounting system. In the profit-loss system, there is a continuous evaluation of the economic performance of business enterprises (Li, 2017). The most successful and efficient firms at providing goods and services to the masses are rewarded with profits while inefficiency is punished with losses. The rewards for success the penalty for failure promotes a strong mechanism for discipline. Under the centrally planned economy, there is a missing profit and loss system to account for success or failure of various government initiatives. Without rewards in terms of profit, there is no method of disciplining firms to be efficient and successful. Therefore, socialism failed because the government could not account for the programs that needed expansion for a better service to the community. In addition, socialism strangles the economy by penalizing success and rewarding the failed incentives. For example, when the economic system loots the successful people with progressive heavy taxes and gives it to the less fortunate in the society, it reduces the number of successful persons and promotes failure. It leads to a vicious cycle of poverty because the more the populations of the poor, the more the successful are penalized. That is what happened to the Soviet Union because it strangled the economy until it could not generate enough taxes to fund economic growth and development (Zimbalist, 2014).
Lastly, socialism has a fatal disregard for private property. Private ownership of property promotes economic incentives that lead to growth and development. Unlike the success of capitalism, socialism created the "tragedy of commons." In the 16th century, the British experimented on communal ownership of the grazing land (Zimbalist, 2014). The villagers overgrazed and exploited the land until its value depreciated and the land became worthless. The socialist ideology does not create wise stewardship when the community collectively owns assets. In capitalism, private property ownership creates the desire for the responsible use of the assets. However, community ownership promotes an irresponsible stewardship, mismanagement, and neglect, and is what the British call the tragedy of commons. Socialism enhances this tragedy on a national scale leading to economic stagnation and or collapse (Zimbalist, 2014).
In conclusion, capitalism is the superior economic system and most preferred as compared to socialism. The capitalist economies have remained economically strong over the decades. The US as a steward for capitalism has maintained its status as the world's largest and strongest economy. China now uses a mixture of both communism and capitalism and it has emerged as the second-biggest economy. However, the countries that remained as socialists like Cuba and Venezuela suffer from high poverty index and economic stagnation (Li, 2017). Therefore, communal ownership of property kills the economy by struggling the motivation, innovation, and creativity. There is no reward for success in socialism because every the return are shared by the community. On the other hand, capitalism operates under a free market where success, competition, and innovation are highly rewarded. Capitalism creates wealth for both the state and its citizens. Therefore, capitalism has withstood the test of time and remains the most viable economic option.
Fornas, J. (2013). Capitalism. Hoboken: Taylor and Francis.
Li, K. (2017). Capitalism and Socialism. Redefining Capitalism in Global Economic
Development, 59-73. doi:10.1016/b978-0-12-804181-9.00005-7
Mentan, T. (2012). Socialism. Oxford: Langaa RPCIG.
Zimbalist, A. (2014). Comparing Economic Systems. Elsevier Science.
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