Capitalism and Socialism
An economic system is a system of production and exchange of goods, services, and resources. Although very closely related, it is different from political systems, such as democracy, republic, monarchy, or communism, which involve the selection leaders, chains of command and formulation of laws. Different types of economic systems have different approaches on how to satisfactorily run an economy. These systems have different attacks on what to produce, how the production shall be carried out, and who will act as the consumer for the production.
Capitalism is a system of economic relations in which the means of production, such as factories, are a private property. They serve the purpose of creating profit for the owners. The law of supply and demand guides the trends in the prices of goods and services, and these prices are subject to the availability of the goods and the demand of the consumer. Capitalism promotes ownership of private properties. Capitalism believes that a society performs better when individuals can freely purchase and produce according to his will. Companies and enterprises are sustained by the motive of gaining profit under the influence of capitalism.
Socialism promotes mutual or governmental ownership of resources. The government assumes the right to the management of the means of production and distribution. Private properties do not exist in a socialist society. Prices are standardized by the government and everyone has been distributed the same amount of money. Essentially, socialism conceptualizes that ownership of properties should be vested in the decision of the government. By doing so, the government can increase the efficiency of producing and distributing things with the economic assets compared to an individualistic approach.
Fundamentally, this means that individuals can work toward financial freedom in a capitalist economy. This results to a competitive market, therefore increasing the prospects in the market for economic growth. It also increases opportunities for capitalists to proliferate their wealth. An individual’s hard work is compensated under a capitalist economic system and this is frequently regarded as one of the strengths of capitalism.
On the other hand, socialism advocates equality among its people by giving every individual the same social benefits. Socialism allows consumers to pay for goods without certainly expecting a financial payoff, and think of it as just for the greater good. One of the strengths of socialism, as reflected by a socialist goal, is that its concept of equality may bring about a gradual, but peaceful progress.