Comparing Economic Systems

Karl Marx, German philosopher, economist, and , laid the ideological groundwork for modern and . and turned the world upside down. Until the publication of their 1848 Communist Manifesto, much of the followed a course where individuals owned private , enterprises, and the profits that resulted from wise investments. Marx and Engels pointed out the uneven of in the capitalist world and predicted a worldwide popular uprising to distribute wealth evenly. Ever since, nations have wrestled with which direction to turn their .

Capitalism

is based on private of the means of and on individual . Most of the , such as factories and , are owned by private individuals and not by the . Private owners make decisions about what and when to produce and how much products should cost. Other characteristics of capitalism include the following:  Free . The basic rule of capitalism is that should compete freely without interference from government or any other outside force. Capitalism assumes that the most deserving person usually win. In theory, will be kept as low as possible because consumers will seek the best product for the least amount of .  Supply and demand. In a capitalist system prices are determined by how many products there are and how many people want them. When supplies increase, prices tend to drop. If prices drop, demand usually increases until supplies run out. Then prices will once more, but only as long as demand is high. These of supply and demand work in a cycle to control prices and keep them from getting too high or too low.  Laissez Faire Government. In order for the free to occur Government must have a “Hands Off” approach and not interfere with control or . This allows competition and the of supply and demand to drive the market not outside interference.

Communism Karl Marx, the 19th century father of communism, was outraged by the growing gap between rich and poor due to the Industrial . He saw capitalism as an outmoded that exploited workers, which would eventually rise against the rich because the poor were so unfairly treated. Marx thought that the economic system of communism would replace capitalism. Communism is based on principles meant to correct the problems caused by capitalism. The most important principle of communism is that no private ownership of property should be allowed. Marx believed that private ownership encouraged greed and motivated people to knock out the competition, no matter what the consequences. Property should be shared, and should ultimately control the . The government should exercise the control in the name of the people, at least in the transition between capitalism and communism. The goals are to eliminate the gap between the rich and poor and bring about economic equality. In the classic view of communism, a communist was the ultimate goal and destination for humankind. Followers of classic communism realized that it would be impossible to switch to communism directly from a capitalistic system they deemed immoral. They believed that society needed time for transition. During that transition, called socialism, the representatives of people should be in charge of the means of production, and guide the society toward communism. This was the essence of the very of of Socialist . They had their of the , but the longer they were in power, the less they talked about transition to communism. Communism/Socialism frequently results in low production, mass and limited advancement. Poverty spread so widely in the Soviet Union in the that its citizens revolted and the Soviet Union collapsed. In , their communist party ended up leading the transition to small forms of capitalism after seeing the collapse of the Soviet Union. Communism as a political system never was implemented anywhere. was flirting with it within the first few years after the revolution. China tried to in that direction during the . might make some claims, too. But, in , all of these countries always have been socialistic countries.

Socialism Socialism, like communism, calls for putting the major means of production in the hands of the people, either directly or through the government. Socialism also that wealth and income should be shared more equally among people. Socialists differ from communists in that they do not believe that the workers will overthrow capitalists suddenly and violently. Nor do they believe that all should be eliminated. Their main goal is to narrow, not totally eliminate, the gap between the rich and the poor. The government, they say, has a responsibility to redistribute wealth to make society more fair and just. The socialistic system as established almost 100 years ago in the Soviet Union was intended as an egalitarian society run by people’s representatives in the best of all. It does not sound too bad, and has some connotations to the American political system. The is in the freedoms of individuals. In socialism, by definition, the good of the society as a whole is collectively defined, and the representatives are given powers to implement it. Those powers imply suppression of the and aspirations of individuals who are perceived as not going along with what is believed as the good of the society at the time. In the Soviet Union, the right to own private property was one of these rights not recognized there. The freedom of expression was another one, as it was perceived as disturbing people’s minds with obsolete and immoral capitalistic ideas. In capitalism, personal freedoms - in particular, protection of private property, freedom of enterprise and freedom of expression - are essential; people should be free in pursuing their economic interests. In the capitalistic system, the government’s role should be solely in guaranteeing safety and equal freedoms for everyone. The concept is that the good of the society as a whole is achieved optimally if people are free from government coercion in pursuing their personal goals, be it economic, ideological, scientific, religious, philanthropic, or any other activity. Government should not be involved in any of these activities. This concept of the society (this is how capitalism was labeled before the term “capitalism” came into existence) to a great extent was adopted as the base of the political system in the Unites States at the time of its inception. There is no purely capitalist or communist economy in the world today. The capitalist has a Security system and a government-owned postal service. Communist China now allows its citizens to keep some of the profits they earn. These categories are models designed to shed greater light on differing economic systems.