Capitalism and Socialism the Two Dominant Economic

Capitalism and Socialism

The two dominant economic systems we have in the world today are socialism and capitalism. In this text, I will in addition to comparing and contrasting socialism and capitalism also discuss the shortcomings of these two economic systems. Further, amongst other things, I will highlight the overlaps between the two.

Capitalism vs. Socialism

In seeking to highlight the key differences between socialism and capitalism, it would be prudent to first offer a concise definition of the two terms. Capitalism in the words of Brinkerhoff, White, Ortega, and Weitz (2007) "is the economic system in which most wealth (land, capital, and labor) is private property, to be used by its owners to maximize their own gain." As the authors in this case further point out, this particular economic system is largely founded on competition. Socialism on the other hand is defined as "an economic structure in which productive tools are owned and managed by the workers and used for the collective good" (Brinkerhoff et al., 2007). From the definitions, it is clear that unlike capitalism, socialism favors a situation whereby there is deliberate control as well as planning of economic activities on behalf of the entire community. In the case of capitalism, no attempt is made to have economic activities controlled from a central point on behalf of the community. Here, enterprises are allowed to compete in the supply of goods and services as they seek to rake in monetary returns. The key driving force of the latter economic system is communal welfare while that of the former is profit. It is also important to note that unlike socialism, capitalism permits (and perhaps encourages) class differences in the society (Furze, Savy, Brym, and Lie, 2012). When it comes to capitalism, class inequalities are seen as the unavoidable consequence of the economic system. Socialism abhors class inequalities and instead seeks to foster equality.

It is important to note that over time, significant criticism has been leveled against both economic systems. To begin with, there are those who are convinced that capitalism is largely exploitative. Adherents of the socialism system argue that in a capitalist system, the need for equality cannot be reconciled with the drive for profits. As Andresen and Taylor (2007) point out, capitalism has been opposed in the past by amongst others, Carl Marx, who was of the opinion that the same could lead to the creation of a class of workers that was largely exploited. Adherents of capitalism are on the other hand convinced that it is only in a capitalist society where sufficient motivation (in the form of profits) exists to stimulate the production of more goods and services for the benefit of the entire society. According to Brinkerhoff et al., (2007), capitalism encourages not only technical innovation but also hard work. For this reason, socialism is seen as a system that effectively stifles growth and development.

The Overlap in Socialism and Capitalism