The Relationship Between Capitalism and Socialism
1- The topic:
Describe how Capitalism and Socialism are two economic systems that have opposing views
on the end goal
2- 800 ward
3- Some recourses :
States and Industrial Transformations", in Peter Evans, Embedded Autonomy: States and
Industrial Transformation. Princeton: Princeton University Press
Charles Tilly, ³War Making and State Making as Organized Crime´. Bringing the State Back,
edited by Peter Evans, Dietrich Rueschemeyer, and Theda Skocpol (Cambridge: Cambridge
University Press, 1985).
Martinelli and Smelser, Economy and Society. London: Sage, 1990
Robert Rotberg, The Failure and Collapse of Nation- States: Breakdown, Prevention, and
Repair". When States Fail: Causes and Consequences. edited by R. Rotberg. Princeton:
Princeton University Press.
Timothy Mitchell, The Limits of the Statist Approaches and Their Critics´ The American
Political Science Review, 85 (1), 1991
R. Swedberg, Principles of Economic Sociology. Princeton: Princeton University Press
Immanuel Wallerstein, The Rise and Future Demise of the World Capitalist System: Concepts
for Comparative Analysis´. Comparative Studies in Society and History. 1974
Joseph Stiglitz, Globalization and the Economic Role of the State in the New Millennium´.
Industrial and Corporate Change, 2003.
OECD, ´Concepts and Dilemmas of State Building in Fragile Situations: From Fragility to
Resilience´; Journal of Development. 2008.
Alvaro J. de Regil, The Neo- Capitalist Assault: Keynesian Economics and the Welfare State´
The Jus Semper Global Alliance. 2001,
International Institutions Today: An Imperial Global State in the Making´. European Journal
of International Law. 2004.
Solution
Introduction
Capitalism and Socialism are economic systems that countries use to manage their
economic resources and regulate their means of production. In the United States, capitalism has
always been the predominant system. It is defined as an economic system where private
individuals or businesses, rather than the government, own and control the factors of production
that is entrepreneurship, capital goods, natural resources and labor. Capitalism's success is
dependent on a free-market economy, driven by supply and demand of available goods and
services. With socialism, all legal production and distribution of commodities are made by the
government, with individuals depending on the government for food, employment, healthcare
and better standards of living (Evans, 1995). The government takes full responsibility for
determining the amount of output, or supply and the pricing levels of these goods and services.
Communist countries, like China, North Korea, and Cuba, tend to apply the rule of socialism,
while Western European countries favor capitalist economies. But, even at their extremes, both
systems have their advantages and disadvantages.
Capitalist economies
In capitalist economies, governments play a minimal role in deciding what to produce,
how much to produce, and when to produce it, basically leaving the cost of goods and services to
the free market economy. As people pursue personal profit under capitalism, they compete with
each other for the greatest profits, businesses try to attract more demand for their products in
many ways, including lowering prices, creating better products, and advertising how wonderful
their products are. According to Skocpol (1995), in capitalist theory, such competition helps
ensure the best products are sold at the lowest prices, benefiting society as a whole. Such
competition also helps ensure that no single party controls an entire market. When entrepreneurs
CAPITALISM AND SOCIALISM 3
notice available opportunities in the marketplace, they rush in to fill the space since capitalism is
based around a free market economy, implying an economy that distributes goods and services
according to the laws of supply and demand.
The law of demand states that increased demand for a product increases prices for that
product. Signs of higher demand lead to increased production of available goods and services.
An increase in supply leads to different variances in prices of commodities leading to
competition and only the strongest competitors remain in the market economy. Competitors will
always try to earn the most profit by selling their goods for as much as they can while keeping
costs low to favor every customer. Also part of capitalism is the free operation of the capital
markets, supply and demand determine the fair prices for stocks, currencies, and commodities at
the market (Skocpol, 1995).
Socialist economies
In socialist economies, important economic decisions are not left to the markets or
decided by self-interested individuals, instead the government which owns and controls much of
the economy's resources decides how production will be effected. This approach is also called
centralized planning, command economy, or communist economy. According to Mitchell (1991),
the most important goal of socialism is not the pursuit of personal profit but rather working for
the collective good that is the needs of society are considered more important than the needs of
the individual. Because of this view, individuals do not compete with each other for profit but
instead they work together for the good of everyone. Advocates of socialism argue that the equal
sharing and distribution of resources and the impact of social planning allow for a more equal
distribution of goods and services and a more fair society for the citizens of that nation.
Differences
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In capitalist economies, people have a strong motivation to work hard, increase
efficiency, and produce superior products that will compete effectively in the free market
economy. The market can maximize economic growth and individual prosperity while providing
a variety of goods for consumers which generates profit. Also, by encouraging the production of
desirable goods and discouraging the production of unwanted or unnecessary ones, the market
economy can make long term goals leaving less room for government interference and
mismanagement. But under capitalism, because market mechanisms are mechanical, there are no
guarantees that each person's basic needs will be met, economic inequity is reduced, along with
economic insecurity although the necessities are provided for.
The government itself can be able to produce the goods people require to meet their
needs, even if the production of those goods does not result in a profit. However in socialism,
there's more room for value judgments since the government makes most of the decisions,
paying less attention to calculations involving profit. According to Rotberg (2003), socialist
economies can also be more efficient, in the sense that there’s less need to sell goods to
consumers who might not need them, resulting in less money spent on product promotion and
marketing efforts. In socialism people have less to strive for and feel less connected to the fruits
of their efforts unlike in capitalism where people work hard and are connected to the fruits of
their labor. In addition, socialism has lack of equality since well-connected individuals find
themselves in better positions than the ones who are poor contrary to capitalism where every
individual is treated fairly and accorded same rights despite the background. Capitalism is said
by its critics to encourage selfishness and even greedy behavior in that individuals try to
maximize their profit they do so at the expense of others unlike in socialism where people work
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collaboratively and the government helps to distribute resources equally, promote development
and decide how production will be effected.
CAPITALISM AND SOCIALISM 6
References
States and Industrial Transformations" in Peter Evans, Embedded Autonomy: States and
Industrial Transformation. Princeton: Princeton University Press
Charles Tilly, ³War Making and State Making as Organized Crime´. Bringing the State Back,
edited by Peter Evans, Dietrich Rueschemeyer, and Theda Skocpol (Cambridge:
Cambridge University Press, 1985).
Timothy Mitchell, The Limits of the Statist Approaches and Their Critics´ The American
Political Science Review, 85 (1), 1991
Robert Rotberg, The Failure, and Collapse of Nation-States: Breakdown, Prevention, and
Repair" When States Fail: Causes and Consequences. edited by R. Rotberg.
Princeton: Princeton University Press.
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