Benefitsof Capitalism over Socialism
Capitalismand socialism are two opposing economies whose major differencesrevolve around equality of economics and the role of the government.Capitalists believe that the private sector uses economic resourcesmore efficiently as compared to the government. Therefore,capitalists suppose that the society will be much better if peoplecan have free markets where the consumers determine the economicwinners and losers (Scott 59). In this economic structure, theentrepreneurs are free to fill in the market space without thegovernment interference. Accordingly, the markets distribute thefactors of production such as labor, land, and capital to match thesupply and demand levels (Scott 28). The government’sresponsibility in a capitalist economy is to enact and enforce rulesof fair play. On the other hand, socialism is almost the completeopposite. The socialist economy was introduced in the 1800s as atechnique to end the inequality created by capitalism. Socialism isan organized market where the government owns and controls all theresources. The government divides the wealth equally among the peopleto ensure that the country has greater social welfare and lowerbusiness fluctuations (Shepard 387). Moreover, the governmentdetermines the types and amounts of goods produced and thedistribution channels. However, capitalism is better than socialismbecause it promotes consumers’ choices, economic freedom, andgrowth.
Capitalismpromotes consumer choice where individuals choose the products theyprefer to consume or those that meet their unique needs. Thecapitalist economy encourages the production of desirable productswhile discouraging unnecessary goods (Scott 30). Hence, themarketplace is self-regulating, which leaves less space forgovernment interference and mismanagement. For example, excess supplyleads to a decline in prices and eventually reduced amounts of goodsin the market. Accordingly, capitalism promotes more competition.Producers or service providers compete freely in a capitalist economywithout the interference from the government or other externalforces. The capitalists assume that the most deserving producers orservice providers will become the market leaders (Van and Schaffner72). Consequently, the producers have to keep the price of goods andservices low because they believe that the consumers will prefer thebest products for the lowest prices. In contrast, socialism deniespeople the freedom of choice. The buyers have to use the goodsprovided by the government, which sometimes do not meet the uniqueneeds of the consumers (Shepard 387).
Furthermore,the businesses produce better goods and services to consumers due toincreased competition in the market. The market promotes innovationand ingenuity hence, it maximizes individual prosperity and economicgrowth while providing various goods for the consumers. Capitalismcreates incentives to avoid producing excess products, which willresult in waste and increased costs of production (Van and Schaffner73). For example, firms in a capitalist-based society use differentforms of incentives to increase efficiency and produce goods thatmatch and satisfy customers’ demand. As a result, competitioneliminates the less productive activities or inferior products andstrengthens the market winners by encouraging them to adapt to changesuch as using advanced technology. Capitalism also facilitates theproductive use of societal resources to ensure that the customers’needs are met in the short run while raising the standards of livingin the end. Hence, the government’s regulatory frameworks promoteproductivity rather than equalize competitive resources (Van andSchaffner 76). On the contrary, a socialist economy lacks incentive,which makes the businesses inefficient since the government is lesswilling to reduce the workforce or use innovative working practices.Then again, people are discouraged from working because they will notmake more money despite putting in much effort. For example, asocialist society ensures that the basic needs of everyone are metthus, people have less incentive to compete, increase efficiency, andinnovate (Otteson 15).
Capitalismpromotes economic growth and development. A capitalist economy growsexponentially because the more money a business makes, the more ithas to invest in production, growth, and expansion. Thus, itincreases the Gross Domestic Product and wealth circulation in theeconomy, which leads to improved standards of living. Consequently,it leads to improved standards of living where everyone can benefitfrom the increased wealth because it trickles down from the rich tothe poor (Meltzer 3). On the contrary, the benefits in a socialisteconomy are provided at the expense of the many. For example,individuals who do not work hard to make as much as other people inthe economy receive similar benefits as everyone else, which may bevery appealing. Thus, such people may not find it necessary to work.Consequently, a socialist economy forces the hard working people togain fewer benefits for their work. In theory, everyone in asocialist economy is equal. However, the government planners are notperfect or incorruptible. Hence, hierarchies emerge where the partyofficials and the well-connected individuals are in better positionsto receive high-quality goods and services (Otteson 13).
Additionally,the scarce resources are more valuable in a capitalist economy. Forexample, when oil begins to decrease in the market, the pricesincrease, which has made it economically possible to search for newoil fields. Therefore, the oil sites that were previously tooexpensive to drill have now become a profitable business venture(Meltzer 7). On the other hand, the economy starts developing newmethods for utilizing alternative sources of energy such as solar,the wind, and nuclear power. In contrast, socialists believe thateconomic inequality is not good for the society. The governmentensures that everyone has equal access to the available resources,which does not affect the prices for these products. As a result, thepeople do not have the need to look for alternative resources(Otteson 5).
Capitalismencourages entrepreneurship. The government in a capitalist economygives people equal opportunities with few basic rules and regulations(Meltzer 13). For example, individuals in a capitalist economy startbusinesses to earn more money and build a better life. Furthermore,capitalism is beneficial when allocating capital to areas where it ismost valued. The businesses have to give the customers what theydesire otherwise, they will get it from other producers. Capitalismhas also created jobs in the service sector. The service economy isdivided into higher paying jobs, which require more education, buteven those with lower education standards and fewer skills can workin low-paying positions such as retail sales, food service, andgroundskeeping. As a result, it has created the need for education,which has raised the education standards in economically developednations such as the United States. In contrast, socialism is too slowto adapt. Therefore, most of the socialist economies rely onmanufacturing jobs because they lack the opportunities that areintroduced by capitalism in the service sector. A socialist economydoes not offer people the same entrepreneurship opportunities.Likewise, the drivers of economic growth are weaker (Otteson 7).
Capitalisticsystems are not rigid, which allows economies to have differenteconomic styles depending on their resources and unique needs.Capitalism permits adaptation and change to various economicsituations (Meltzer 21). For instance, different societies developrules and processes that reflect their cultural requirements. On theother hand, socialism aims at a creating a perfect economy, whichmakes it very rigid because it restricts choices only to thosepermitted by the government. In a socialist economy, there areshortages of even the most essential goods since the economy does nothave a free market. Accordingly, it is hard to adjust productions tomeet demand, and the system may not regulate itself on time asrequired (Otteson 4).
Inconclusion, capitalism and socialism are opposing economicstructures. Capitalism is based on the idea that individual effortsare better than a government-controlled economy because it producessuperior market mechanisms. Capitalism promotes the economic growthof the country since it creates wealth and improves the standards ofliving. Therefore, everyone works hard while firms use the latesttechnology and best production methods to minimize waste and reduceproduction costs. Capitalism is the most viable economy that allowspeople to grow and innovative since their work is recognized,appreciated and rewarded. Thus, it encourages potential entrepreneursto invest. Therefore, the efficiency of economies ensures that goodsand services produced in the market are based demand. Capitalismoffers people the freedom to make choices that align with their needsor market requirements. A capitalist economy allows for theproduction of a variety of goods and services. These products areusually the best quality and at reasonable prices to meet theconsumers’ financial capabilities. Then again, capitalism promotescompetition where the producers try to make as much profit aspossible by offering the best products and lower prices. Therefore,the prices are set by market demand and supply. Capitalism works inline with human nature because the harder the people work, the betterthe possible returns and benefits. However, the socialist governmentsdo not offer incentives for people to work hard because wealth isequally distributed among everyone. This discourages hard work, whichresults in a lower Gross Domestic Product, and eventually it lowersthe living standards in a socialist country. Socialism governmentsdetermine the rates of any product, which can lead to surplus orshortages. Accordingly, capitalism thrives because it recognizes thatpeople are different in their needs and desires.
Meltzer,Allan H. WhyCapitalism? Oxford:Oxford University Press, 2012. Print.
Otteson,James. TheEnd of Socialism.New York: Cambridge University Press, 2014. Print.
Scott,Bruce R. Capitalism:Its Origins and Evolution as a System of Governance.New York: Springer, 2011. Internet resource.
Shepard,Jon M. Sociology.Belmont, CA: Wadsworth Cengage Learning, 2010. Print.
Van,Horn C. E, and Herbert A. Schaffner. Workin America: An Encyclopedia of History, Policy, and Society.Santa Barbara, Calif: ABC-CLIO, 2003. Print.