There is no standard way of running economies in the world thus giving way to a variety of economic systems. Though methods of running governments are highly different, capitalism and socialism have been identified as the most prevalent forms of economic systems. Capitalism is defined as a form of economic system where the means of production are owned by a few people who then determine which products can be produced and which ones cannot (Henslin, 2011).
Nowadays, capitalism is used to refer to a system in which government interference to certain areas of the economy is minimal or absent. In this system, the means of production are therefore controlled by the private sector. On the other hand, socialism refers to an economic system where means of production are communally owned through cooperatives, trade unions or the state (Henslin, 2011). In this regard, the control of the means of production is with the people as a whole and not any individual.
It should be noted that the two types of economic systems have various differences though they share some ideas. To begin with, capitalism insists on the maximization of individual profits by the owners of the means of production. As a result, capitalists care more about how much they earn rather than how other people will gain.
On the other hand, socialism requires people to contribute to the society according to their ability while each person should be allocated resources according to his or her contribution. Similarly, socialism demands that in addition to the wages that employees receive, the profits made should be distributed among members of the workforce.
Moreover, it is the idea of socialists that the markets has various imperfections and thus cannot perfectly meet the requirements (Henslin, 2011). Consequently, government intervention is required to guide the market. On the same note, socialism emphasizes on equal opportunities for all to succeed.
In addition, workers are expected to have a say at their places of work. On the contrary, capitalism is based on the beliefs of market freedom. In this regard, the government is supposed to keep its distance as far as the regulation of the market is concerned since this will make the market inefficient (Henslin, 2011). Therefore, owners of the means of production produce what they feel they have a competitive advantage in producing.
Generally, capitalism supports competition between producers to produce a given commodity and among consumers to get the commodities produced. Consequently, capitalists are usually competing to either make the highest profits or to secure the cheapest prices when buying commodities.
On the contrary, socialists are proponents of cooperation among members of the society to ensure that they produce what the society as a whole needs. It is the philosophy of socialism that the welfare of the society should come first before many individual is considered (Henslin, 2011). Furthermore, socialists believe that it is the moral duty of every member of the society to care for others and this will make people work hard. As a result, it is pointless to make people compete in the hope that they will increase their productivity.
It is important to note that the two systems of economic governance have proved successful in various nations. Therefore, it will be unfair to say that one of them is better than the other. However, human beings are highly motivated to work when their personal wealth increases.
Therefore, capitalism leads to high individual productivity compared to socialism. On the other hand, there are some sensitive sectors of the economy which cannot be left to the private sector. Consequently, in the long run it is a mixture of the two forms of economic system that will prevail.
References
Henslin, J. M. (2011). Sociology: A Down-to-Earth Approach. Upper Saddle River: Pearson.