Arguably, one of the most outstanding features in human beings is their ability to design systems that help them develop various aspects of their civilizations. Over the last century, nations all over the world have implemented various systems that help them allocate, distribute and govern the available resources accordingly.
Despite the effectiveness exhibited by these systems, various scholars and system analysts have come up with evidence that either support or disapprove such systems in relation to how they help the citizenry achieve their needs, and how the governments allocate various resources. Among the most common systems adopted by most nations are the capitalistic and the socialistic economic systems.
Through their use, these systems have in the recent past proven to be effective to some and detrimental to others. This research paper shall set out to explore the differences and similarities between these two systems. A detailed analysis of how each of these systems affects the distribution of wealth and resources within different nations shall also be provided.
This shall aim at elaborating the extent to which each of these systems has proven to be effective in maintaining certain socioeconomic aspects such as human right, health care, social economy, model of development and social wellness among others in specific nations.
According to Hooker, Capitalism traces its roots back to the early middle ages where individuals participated in a form of trade known as mercantilism (1). In this trade practice, individuals would distribute goods and services with the main aim of getting profits (Hooker 1).
One of the recurrent characteristic in this form of trade was that merchants would buy goods from one region and redistribute the same to other regions at a higher price. As time went by, this system of trade was introduced and adopted by other nations across Europe. It is from here that the word capitalism was used to define this evolved economic practice.
Considering these undertones, Capitalism can be defined as an economic system in which individuals exercise a high level of freedom in matters regarding to acquisition of property, price determination and private ownership of resources. Members of a capitalistic economic system have the freedom to make their own decisions as relating to how best they can utilize the scarce resources in their possession as well as the freedom to own and operate a business of ones choice (Blumenthal 8).
This indicates that in such economies there is little to no government interference on how businesses, income and profits are earned or regulated. In economic terms, Petras asserts that capitalistic economies are run by the forces of demand and supply (1).
In light of this definition and description, one would argue that this is the most convenient system of economic governance because individuals have the freedom to conduct business in a manner that best meets their business goals (making profits and market expansion), all the while appealing to their creativity in running business endeavors (survival for the fittest). However, documented and practical (real life situations) evidence has in the recent past proved that this assumption is far from the truth.
In the world we live in today, historical as well as present economic situations have proven that granting individuals the freedom to determine market trends (prices, supply, resource allocation and distribution among others) is not only detrimental to ethical business practices, but also prevents the less fortunate from having access to some much needed social amenities such as roads, hospitals, schools and in some instances land.
The socialistic economic system is based on the principles of equality, freedom of expression and individual’s ability to exercise democracy. As such, is an economic system through which government and other significant regulatory bodies determine how, scarce resources should be allocated and distributed equally to all sectors of their economy.
In regard to the above description, socialism can be described as a political and economic theory which advocates for the equal distribution of a nation’s scarce resources and wealth through the government (Pierce 16). Arguably, this is a convenient economic system in today’s world which is characterized by greed, injustices and high inequalities in both the social and economic/income perspectives.
Ask yourself this question: what would happen to the world if people were allowed to only produce goods and services that earned them high profits? Would you afford to buy a car, use the roads, hospitals or even have access to a descent education? The answer that pops up in my head is; ‘NO’. This is mainly attributed to the fact that such amenities have proven to be of great use to us as human beings. In other words, they are highly demanded by people.
It therefore goes without saying that if they were individually owned with no government interference or regulations, the prices charged on such amenities would be insanely high such that only the rich in the society would benefit. So what happens to the poor members of the populace? This scenario highlights the differences between these two economic systems.
According to Blumenthal, capitalists believe in the notion that survival is indeed for the fittest (274). As such, the author suggests that capitalists are firm believers of the fact that everyone has a right to own as much land, property, resources as he/she is able to acquire.
Pierce further reiterates that capitalistic economies are defined by the notion that people who do not work as hard as those with property and other resources should not eat or be given special considerations because wealth is a reward for a person’s determination, creativity and aggressiveness in similar business situations (387).
These are logical arguments considering the fact that if people were spoon-fed without any ambitions or efforts, the world would have been a sad place characterized with low productivity, poor growth and development and poverty. As such, the capitalistic economic system would be most desirable if a nation wishes to promote determination, wealth creation and hard work among its citizenry.
However, Ross asserts that this economic system and its proponents fail to acknowledge the fact that there is no country within which people enjoy equitable distribution of natural resources (85). This is mainly due to geographical and climatically factors which in most cases affect the level of resources that can be found in a specific region within a country. In addition, people do not have equal mental skills.
This means that while an individual in Afghanistan can comfortably do some productive farming in the desert, another individual in the Sahara desert may not necessarily posses the same intellect or skills to do the same. In addition, the capitalistic economic system undermines the fact that no government can guarantee employment to all its citizens.
On the other hand, socialists believe in the notion that the government should be responsible for the allocation and distribution of resources within their countries.
This sentiment is further accentuated by the fact that government-regulated resource allocation is the most viable means of promoting equal growth and development within the country as well as an effective tool for combating inequalities and poverty within a nation. With these undertones, this report shall use various parameters to indicate the differences and similarities between these systems.
Arguably, people go to work or spend most of their time working so that they can accumulate their wealth base and get financial rewards which in turn enable them to achieve set goals and objectives. According to Ross, capitalistic economies are governed by very strict policies regarding the ownership of private property (128).
As such, it would be safe to suggest that economic beliefs held by capitalists are most often influenced by private investment and innovation. This means that capitalistic economies are designed in such a manner that citizens can freely buy and sell their own property/possessions. This is not the case in socialistic economies in which private ownership of property is to a large extent discouraged or lack property rights (Kronenwetter 67).
In regard to investments, Pierce alludes that socialism discourages its proponents from investing (214). Personal investment means that some people will have more resources or wealth than others and this would go against the principles that govern this economic system.
In addition, people probably shy away from investing because at the end of the day, their effort will not matter as much as the notion that they should share their wealth and resources with those who do not have regardless of their effort or contribution in the investment (Pierce 229). Blumenthal therefore asserts that in a socialist setting, the probability of lazy people exploiting their hardworking counterparts is significantly high (114).
On the other hand, Blumenthal argues that unlike socialism, capitalism is a source of encouragement in regard to creativity and innovation (267).
The author suggests that due to the unequal distribution of resources that is normally backed by the capitalists’ desire to succeed; people are often under pressure to exhibit high levels of innovativeness and creativity as they struggle to remain relevant in an economy characterized by high levels of competition related to resource and market share acquisition.
This assertion is further reinforced by the fact that in most cases, people who have limited resources tend to work harder than their counterparts with more resources.
Similarly, Blumenthal sheds some light on the fact that capitalists have a right to patent their property as long as they do not infringe the rights of other people (28). As such, monopoly is a common and acceptable practice in capitalistic economies. However, this is not the case with socialism where every piece of property is government owned and monopolistic business entities are not allowed (Pierce 38).
A great example to expound this fact is the American health care system which is documented as being the most expensive in the world. This is mainly due to the fact that most insurance companies as well as health care facilities are owned by private parties who normally prioritize profits before safeguarding the wellbeing of their clients.
However, this is not the case with Australian health systems where the universal health care system which allows all citizens equal treatment is adopted. The American health care system is an example of a capitalistic business practice while the Australian system represents the socialistic approach in healthcare delivery.
Similarly, a look at the capitalistic Russia indicates that capitalism is detrimental to the growth of any economy. For example, since Poland shifted turned into a capitalistic nation, more than 20% of its labor force were considered unemployed by the year 2004.
In addition, 30% of the employed citizens get low paying jobs. Additionally, the real per capita growth of Poland has decreased significantly in comparison to the preceding 15 years that the country was socialistic in nature (Petras 1). The economic situation being experienced by the people of Poland are similarly being experienced by people in Bulgaria, Romania and most parts of East Germany which is filled with capitalists.
In addition, Russia which is a capitalistic economy has in the past two decades experiences political and economic unrests and declined progress due to the fact that most of the resources therein are owned by a numbered few who use illegal means such as murder, corruption, intimidation and violence to cut-off competition.
In addition, the nation is run by criminals who pillage resources for personal gains. As a result, the provision of social amenities such as hospitals and schools has declined significantly since such issues are not given adequate budgetary allocations in the national budget.
Similarly, the prevalence of sexually transmitted diseases and HIV/AIDS has increased even among young children who are subjected to child labor or forced labor as prostitutes and drug peddlers. In regards to mortality and life expectancy rates, the number of premature deaths increased above 15 million deaths after Russia transitioned to capitalism.
Petras suggest that these numbers would have been significantly lower if Russia stayed as a socialist nation (1). In addition, the life expectancy rate of Russian men decreased from 64 years to 58 years as a result of the increased rates of suicide, drug abuse, alcoholism and prostitution which came about after the transition into capitalism.
On the same not, a country like Armenia which was recognized as a technological hub has been reduced to a sad state of affairs where the number of scientists and researchers reduced from 20, 000 in 1990 to a shocking low of 5,000 professionals in 1995 (Petras 1).
Currently, the country is run by criminals and most of the population therein do not have access to power and heat facilities. These are the side effects that capitalism has on an economy.
The fact that people in capitalistic economies have unrestricted rights to do as they please means that the rich will get richer while the poor becomes poorer. The level of lawlessness exhibited in the above mentioned capitalistic nations is proof enough that without regulatory systems, most of the core values that hold a nation together are most likely bound to be neglected as people try to fight for survival and accumulation of personal wealth.
In contrast, Cuba and Bangladesh have recorded significant progresses since they adopted the socialistic system of economic governance. For example, by the year 2003, Cuba’s infant mortality had improved significantly (6 deaths per 1000 live births) as compared to statistics presented in 1989 (11 deaths per 1000 live births).
In addition, Russia only spent an average of 5% of its GNP on public and private health care while Cuba spent a little over 16.7% to support the same. In addition, the male life expectancy rates increased to 74 years in 2003 while it reduced to 54 in Russia (Petras 1).
During the same year, unemployment reduced by 3% in Cuba. This was as a result of the government initiative which enabled the youth to access training and educational programs that facilitated their efforts of acquiring employment. In contrast, capitalistic Poland had a 21% increase in unemployment during that period (Petras 1). Poverty has also reduced significantly in Bangladesh and Cuba.
This is mainly due to the fact that socialistic economies have regulated minimum wages which are increased in accordance to the type of job being done. In addition, the fact that resources are government owned means that they are distributed equally thereby promoting balanced progress in all sectors all the while ensuring that citizens have access to the basic social amenities. These are the characteristics of socialism that have aided such countries progress to such unimaginable statuses.
Ross states that the distribution of resources is the key concern in both the Socialism and Capitalism systems. In capitalistic settings, resources are distributed by those who have the ability to acquire them while in socialistic economies; resources and wealth are distributed by the governments. Similarly, both systems have proven to be unfair to various members of the economies. In both cases, wealth and resources are not distributed fairly.
For example, since the government allocated and distributes wealth and resources in a socialistic economy, people who work hard are at a loss since their efforts and rewards will be shared amongst those who do not have regardless of the reasons behind their lack of performance. The same case applies in capitalistic economies where those who are able acquire more resources than those who cannot access them regardless of the reasons behind their inabilities.
As regarding to company policies and management, both economic systems share the concept that markets can be monopolized. For example, the government in socialistic economies controls the market since it has all the resources. The same is true in capitalistic economies where the person/organization with the most resources controls the market (Blumenthal 231).
Regardless of the characteristics, the government has the power to decide and intervene in both systems. By using various economic policies, the government can influence capitalistic markets just as much as it does on socialistic markets. On the same note both systems make provisions for their citizens upon retirement.
For example, in capitalistic economies, private organizations as well as those owned by the government offers their retired employees pensions which help them cope and survive after their contracts have expired. Similarly, governments in socialistic economies have programs that cater for the needs of retired employees when the time comes. These are some of the similarities that are evident in socialistic and capitalistic economic systems.
This report has effectively illustrated that there are differences as well as similarities between socialism and communism. While each has various strengths and weaknesses, the discussion herein has shown that capitalism is not the best economic system to adopt in this day and age.
The risks associated with capitalism far outweigh the benefits as has been proven by the examples illustrated in this paper. Considering the fact that both systems have loyal followers, it would be best if they set aside their differences and learn from the weaknesses inherent in their preferred systems.
For example, while socialism advocates for the spirit of brotherhood (sharing and equality) among its followers, it has been noted that lazy socialists may take advantage of their hardworking counterparts and conveniently survive on their effort and sweat. On the other hand, capitalism is based on the Darwinian concept that survival is of the fittest. However, there are capitalists who may suffer due to inadequate access to resources despite the fact that they may want to succeed.
As such it stands to reason that socialists should adopt the Darwinian concept in a bid to promote hard work among fellow socialists and at the same time, the capitalists can utilize the brotherhood concept and share with those who are less fortunate in their economies.
Implementing such a strategy would not only guarantee economical success in terms of growth and development, but it would also ensure that followers in these systems enjoy some peace, equality and fairness as they go about their day-to-day activities. By accepting these changes, the world can finally look forward to a future characterized by practices that work for the common good of all.
Blumenthal, Max. Republican Gomorrah: Inside the Movement that Shattered the Party. Minnesota: Minneapolis, 2009. Print.
Hooker, Richards. Capitalism. Web. 21 April, 2011.
Kronenwetter, Michael. Capitalism versus Socialism: Economic Policies of the US and the USSR. California: San Francisco, 1986. Print.
Petras, James. Capitalism versus socialism: The great debate revisited. Web. 21 April, 2011.
Pierce Charles, P. Idiot America: How Stupidity Became a Virtue in the Land of the Free. Massachusetts: Yarmouth, 2009. Print.
Ross, John. Murdered by Capitalism: A memoir of 150 Years of Life and Death on the American Left. California: San Francisco, 2006. Print.