Capitalism and socialism are somewhat
opposing schools of thought in economics. The central arguments in the
socialism/capitalism debate are about economic equality and the role of
government: socialists believe economic inequality is bad for society and the
government is responsible for reducing it via programs that benefit the poor.
e.g. free public education, free or subsidized
healthcare, social
security for the elderly, higher taxes on the rich. On the other hand,
capitalists believe that government does not use economic resources as
efficiently as private enterprise and therefore society is better off with the
free market determining economic winners and losers. This lack of government involvement in the
economy is called “laissez faire” (literally “let it be”)
The U.S.
is widely considered the defender of capitalism and large parts of Scandinavia
and Western Europe are socialist democracies. However, the truth is every
developed country has some programs that are socialist.
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Capitalism:
At its root,
capitalism is an economic system based on three things: wage labor (working for
a wage), private ownership of the means of production (things like factories,
machinery, farms, and offices), and production for exchange and profit (you pay
for what you get). While some people own
means of production, or capital, most of us don't and so to survive we need to
sell our ability to work in return for a wage.
In terms of
government involvement in the economy, capitalists believe in the principle of
“Laissez-faire economics, which means to "let it
be". Therefore, capitalism is
opposed to government intervention in economics because capitalists believe it
is inefficient. Rather, a free market produces the best economic
outcome for society. Govt. should not pick winners and losers.
![http://organizationsandmarkets.files.wordpress.com/2008/07/adamsmith.jpg](file:///C:/Users/ADRIAN~1/AppData/Local/Temp/msohtmlclip1/01/clip_image004.jpg)
Influential
Leader: Adam Smith is often identified as the
father of modern capitalism. In his
book, Wealth of Nations, he discusses
the importance of division of labor
and free trade, the limits on government intervention, all signify the moment
when economics transitions to the “modern.”
Socialism
Socialism is an
economic system where the means of production, such as money and other forms of
capital, are owned by the state (the government) or public. Under a socialist
system, everyone works for wealth that is, in turn, distributed to everyone.
Under capitalism, you work for your own wealth. A socialist economic system operates
on the premise that what is good for one is good for all. Everyone works for
their own good and the good of everyone else. The government decides how wealth
is distributed among the people.
![http://free.clipartof.com/7-Free-Teamwork-Clip-Art-Of-A-Circle-Of-Diverse-People-Holding-Hands.png](file:///C:/Users/ADRIAN~1/AppData/Local/Temp/msohtmlclip1/01/clip_image006.png)
In a socialist
economy, the government provides for the people. The taxes are usually higher
than in a capitalist system. There may be government-run health care and a
complete system of government-operated education. It is a misconception that
people do not pay for these services. They do pay for them through higher
taxes. Socialist systems emphasize equal distribution of wealth among the
people.
Communism
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![http://www.onthisdeity.com/wp-content/uploads/2011/03/Karl_Marx.jpg](file:///C:/Users/ADRIAN~1/AppData/Local/Temp/msohtmlclip1/01/clip_image010.jpg)
German economist, philosopher, and
revolutionist, and one of the most original and influential thinkers of modern
times, Karl Marx produced much of the theory of modern socialism and
communism. In his publication the Communist Manifesto, Marx declared that
all history was the history of class struggles. Under capitalism, the struggle
between the working class and the business class would end in a new society, a
communist one.
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