Capitalism and socialism are divergent economic thoughts. The two differing philosophies have had an extensive analysis and are applied in different parts of the world. Some countries have however sought to mix these two varying ideas. These two theories majorly differ in their ideas with reference to ownership and control of resources in an economy.
Compare and contrast capitalism and socialism and discuss their shortcomings as criticized
Capitalism is an economic structure where individuals posses economic resources and production. In this system, every individual has a duty of protecting their personal interests in the available market system. Additionally, the latent success of every person is recognized and highly valued. Individuals in a capitalist system are further motivated to express their talents to their own benefits (Hoppe, 2010). The situation is slightly different in a socialist system. Here, the government is the planner, producer and distributer of goods and services in the available market system. As much as individuals may be allowed to own resources in this system, their profits are largely taxed. In a socialist state therefore, citizens are required to work while the state avails necessary services like health and education at minimal costs (Hoppe, 2010). Additionally, the political system in a capitalist government stresses on the importance of competition for property in increasing the county’s economic capital capacity. However, this emphasis in a socialist system is usually on resource distribution with a goal of meeting individual needs using collective capital(Hoppe, 2010).
Both the capitalist and socialist economic systems have been extensively criticized by their respective opponents. The critics of the capitalist economic system assert that this system is characterized by unfair and incompetent allocation of wealth and rule. This according to them results to other negative implications like inequality in societies, high unemployment rates and instability in the economy (Hoppe, 2010).Consequently, socialists particularly criticize the capitalist economy as being irrational. They posit that production activities and the direction of the same is not well planned resulting to unreliability and incongruities in the internal system. Furthermore, environmentalists also criticize the capitalist system. They argue that its emphasis on economic growth will certainly lead to depletion of the earth’s natural resources (Hoppe, 2010). On the other hand, various arguments have also been posed against socialism. Opponents of this system assert that the system’s economic and political patterns are irreconcilable with civil liberties to disapproval of specific repressive socialist states. Capitalists further argue that it is impossible for a socialist state to make valid economic decisions. This is because such a state according to them cannot sufficiently convey information on important economic issue like prices in the market (Hoppe, 2010).
Describe the overlap in capitalism and socialism and the economic theory associated with it
Accordingly, there happens to be an overlap between capitalism and socialism. Capitalism is seen as an indispensable precursor to the socialist economic system. This is according to the Marxist economic theory (Boswell, 1999). According to Marx, the capitalist economic system would result into the formation of social classes in society. As a result, the proletariat class being tired of being dominated by the rich elites, predictably rebel from the capitalist system. Consequently, an unavoidable system of socialism replaces the capitalism system. To Marx therefore, capitalism is only but a means to an end. The end goal of capitalism according to him is therefore socialism (Boswell, 1999). This eventually results into a democratic society that caters for the interests of all individuals in society.
Boswell, T., & Chase-Dunn, C. K. (1999). The spiral of capitalism and socialism: Toward
global democracy. Boulder, Co: Lynne Rienner Publishers.
Hoppe, H.-H. (2010). A theory of socialism and capitalism: Economics, politics, and ethics.
Auburn, Ala: Ludwig von Mises Institute