Capitalism Vs. Socialism Essay, Research Paper
In order to debate between Capitalism and Socialism, it is necessary to understand what the
differences, advantages, and disadvantages are of both systems. Basically, Capitalism advocates
private property, and that society does better when an individual can purchase and produce as
they see fit. Socialism, in essence, is the theory that property ownership should reside in the
hands of the government, and that the government can do more with the assets than individuals
can.
The difference between Capitalism and Socialism can be summed up by their definitions. They
are based upon completely opposite philosophies. Capitalism is a political and economic system
in which factories, companies, land, etc. are owned privately in order to create profit for the
owners. Prices of goods and services fluctuate depending on the desire of the consumer and the
availability of the goods (the law of supply and demand). In a capitalist society, there will be
significant differences in wealth and power between those who have capital (machines, factories,
ships, land, etc.) and those who do not. Capitalism is the only politico-economic system based on
the doctrine of individual rights. This means that capitalism recognizes that each and every
person is the owner of his own life, and has the right to live his life in any manner he chooses as
long as he does not violate the rights of others.
Socialism is a political and economic system which advocates collective or governmental
ownership and the administration of the means of production and distribution of goods. In a
socialist society, there is no private property and, at least theoretically, everyone cares for those
less fortunate. In this form of government everyone has generally the same amount of money,
which means the rich person?s money goes to the poor so that everyone can be middle class. In
Socialism, the concentration of
Characteristic Pure Socialism Modified Socialism Modified Capitalism Pure Capitalism
Ownership of means of production All publicly owned Much publicly owned Most privately
owned All privately owned
LIMIT on accumulation of private property Severe Major limitation Small limitation No
limitation
Government REGULATION of economy Yes Yes Yes No
Government MANAGEMENT of economy Yes Yes Yes No
Government PLANNING of economy Yes No No No
Size of welfare system Immense Quite extensive Small to moderate No welfare system
power by the state is at the expense of individual freedom. Socialism upholds that man is not an
end in himself, and that he must sacrifice his own convictions for the sake of the greater good of
the collective entity.
There are advantages under capitalism. The individual’s pursuits of his own economic selfinterest simultaneously benefits the economic self-interests of all others in the society. In
allowing each individual to act unhampered by government regulations, capitalism causes wealth
to be created in the most efficient manner possible which ultimately raises the standard of living,
increases the economic opportunities, and makes available a growing supply of products for
everyone. The free-market operates in such a way so that as one man creates more wealth for
himself, he simultaneously creates more wealth and opportunities for everyone else, which
means that as the rich become richer, the even poor become richer. Capitalism serves the
economic self-interests of everyone, including non-capitalists in the society. Accelerated
economic growth, prosperity and rapid progress in science and technology are all benefits of
Capitalism. Capitalism naturally divides into certain stratas, but they will be much less
authoritative than in a centralized government as under Socialism. More people will have access
to wealth which means more power. Capitalism does not command people how to use their
power or wealth.
In theory, there are advantages to Socialism. It sounds noble to advocate the equality of
everyone, and supply national retirement and health care systems to make ordinary people better
off. Theoretically, under Socialism, there should be no unemployment, no inflation, and no
disparity of wealth, status, or power. However, in actuality, the under-privileged in most socialist
countries have ?benefits? that are expensive, substandard and hard to obtain.
Although Marx, the ?Father of Modern Socialism? predicted that Capitalism would fail, actually
Socialism has been the greater failure historically. Since the socialist state holds a universal
monopoly on labor and production, no economic incentive exists for the socialist state to provide
anything more than minimum physical subsistence for the workers. Exploitation is inherent to
the nature of socialism because individuals cannot live for their own sake, rather, they exist
merely as means to whatever ends the socialist rulers may have in mind.
Capitalism has its disadvantages as well: high unemployment, the ?boom-slump? cycle, poverty
and crime. Despite those disadvantages, however, capitalist societies, historically, have done
remarkably well in improving the human condition as a whole over the long run, while strict
socialist societies have had severe declines in economic welfare.
In conclusion, it has been proven by history that a free-market economy (Capitalism) increases
the living standards of most people more than an economy controlled by the command of the
state (Socialism). An excellent natural example of this is East and West Germany. During the
middle of this century, West Germany was a capitalistic ?free? society, while East Germany was
controlled by a socialistic government. Living conditions in East Germany were deplorable and
East Germans routinely tried to escape to West Germany. The Berlin Wall was erected by the
East German government to keep their own people from defecting. However, eventually, the
socialistic East German government and the Berlin Wall both failed and Capitalism and freedom
prevailed. Personally, I am very glad to live in a free, Capitalistic society.
Characteristic Pure Socialism Modified Socialism Modified Capitalism Pure Capitalism
Ownership of means of production All publicly owned Much publicly owned Most privately
owned All privately owned
LIMIT on accumulation of private property Severe Major limitation Small limitation No
limitation
Government REGULATION of economy Yes Yes Yes No
Government MANAGEMENT of economy Yes Yes Yes No
Government PLANNING of economy Yes No No No
Size of welfare system Immense Quite extensive Small to moderate No welfare system
Characteristic Pure Socialism Modified Socialism Modified Capitalism Pure Capitalism
Ownership of means of production All publicly owned Much publicly owned Most privately
owned All privately owned
LIMIT on accumulation of private property Severe Major limitation Small limitation No
limitation
Government REGULATION of economy Yes Yes Yes No
Government MANAGEMENT of economy Yes Yes Yes No
Government PLANNING of economy Yes No No No
Size of welfare system Immense Quite extensive Small to moderate No welfare system
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