Capitalismo Vs Socialismo Debate

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Tenets

One of the central arguments in economics, especially in the socialism vs. capitalism debate, is the role of the government. A capitalist system is based on private ownership of the means of production and the creation of goods or services for profit. A socialist system is characterized by social ownership of the means of production, e.g., cooperative enterprises, common ownership, direct public ownership, or autonomous state enterprises.

Proponents of capitalism espouse competitive and free markets and voluntary exchanges (instead of the forced exchange of labor or goods). Socialists advocate greater government involvement, but the opinions of supporters differ in terms of types of social ownership they advocate, the degree to which they rely on markets versus planning, how management is to be organized within economic enterprises, and the role of the state in regulating businesses to ensure fairness.

Capitalismo Vs Socialismo Debate. At the same time, deepening inequality has turned ever-larger populations into capitalism's critics. Talk of reform and revolution has crowded onto political agendas. The capitalism versus socialism debate has returned everywhere.

Criticisms of Socialism and Capitalism

Criticisms of Capitalism

'When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.' —French economist Thomas Piketty in Capital in the Twenty-First Century

Capitalism is criticized for encouraging exploitative practices and inequality between social classes. In particular, critics argue that capitalism inevitably leads to monopolies and oligarchies, and that the system's use of resources is unsustainable.

In Das Kapital, one of the most famous critiques of capitalism, Karl Marx and Friedrich Engels claim that capitalism centers profits and wealth in the hands of the few who use the labor of others to gain wealth.

The concentration of money (capital and profits) in capitalism can lead to the creation of monopolies or oligopolies. As postulated by British economist John Maynard Keynes, oligopolies and monopolies can then lead to oligarchies (government by a few) or fascism (the merging of government and corporations with monopolistic power). Laissez faire capitalism, as espoused in 19th century U.S. business growth, did reach the point where monopolies and oligopolies were formed (e.g., Standard Oil), which gave rise to antitrust laws, trade union movements, and legislation to protect workers.

Critics such as Richard D. Wolff and environmental groups also state that capitalism is destructive of resources both natural and human, as well as disruptive to economic stability, though this is actually considered a plus in the 'creative destruction' facet of Joseph Schumpeter's economic theories. The unplanned, almost chaotic, factors of a capitalist economy, with its recessions, unemployment, and competition, are often seen as negative forces. As defined by historian Greg Grandin and economist Immanuel Wallerstein, the destructive nature of capitalism moves beyond workers and communities to natural resources, where the pursuit of growth and profits tends to ignore or overwhelm environmental concerns. When linked to imperialism, as in the works of Vladimir Lenin, capitalism is also seen as a destroyer of cultural differences, spreading a message of 'sameness' across the globe that undermines or drowns out local traditions and mores.

Criticisms of Socialism

'Socialist policy is abhorrent to the British ideas of freedom. Socialism is inseparably interwoven with totalitarianism and the object worship of the state. It will prescribe for every one where they are to work, what they are to work at, where they may go and what they may say. Socialism is an attack on the right to breathe freely. No socialist system can be established without a political police. They would have to fall back on some form of Gestapo, no doubt very humanely directed in the first instance.' —British Prime Minister Winston Churchill in 1945

Critics of socialism tend to focus on three factors: the loss of individual freedom and rights, the inefficiency of planned or controlled economies, and the inability to establish the constructs socialism theorizes are ideal.

Based on long-term growth and prosperity, planned or controlled economies typical of socialist states have fared poorly. Austrian economist Friedrich Hayek noted that prices and production quotas would never be adequately supported by market information, since the market in the socialist system is basically non-reactive to prices or surpluses, only to shortages. This would lead to irrational and ultimately destructive economic decisions and policies. Ludwig von Mises, another Austrian economist, argued that rational pricing is not possible when an economy has only one owner of goods (the state), as this leads to imbalances in production and distribution.

Because socialism favors the community over the individual, the loss of freedoms and rights is deemed undemocratic at best and totalitarian at worst. Objectivist philosopher Ayn Rand stated that the right to private property is the fundamental right, for if one cannot own the fruits of one's labors, then the person is always subject to the state. A similar argument raised by supporters of capitalism, and therefore often by critics of socialism, is that competition (considered a basic human trait) cannot be legislated away without undermining the will to achieve more, and that without proper compensation for one's efforts, the incentive to do well and be productive (or more productive) is taken away.

Socialism is often criticized for tenets that are not socialist, but rather communist or a hybrid of the two economic systems. Critics point out that the 'most socialist' regimes have failed to deliver adequate results in terms of economic prosperity and growth. Examples cited range from the former U.S.S.R. to current regimes in China, North Korea, and Cuba, most of which were or are more on the communist end of the spectrum.

Based on historical evidence from communist governments, to date, extensive famine, severe poverty, and collapse are the end results of trying to control an economy based on '5-year plans' and assigning people to jobs and tasks as if the country were a machine rather than a society. A common observation about particularly restrictive socialist or communist economies is that they eventually develop 'classes' with government officials as 'the rich,' a fringe-like 'middle class,' and a large 'lower class' composed of workers, which supporters of capitalism are often quick to point out are the same structures socialism eschews as 'exploitative.'

Capitalism vs. Socialism Timeline

1776 - Adam Smith publishes The Wealth of Nations, establishing an economic point of view on history, sustainability, and progress.

1789 - The French Revolution espouses a philosophy of equality for all, building upon the tenets also included in the U.S. Declaration of Independence and the Constitution.

1848 - Karl Marx and Frederich Engels publish The Communist Manifesto, defining the social struggle between the moneyed classes and workers, the former exploiting the latter.

1864 - International Workingman's Association (IWA) is founded in London.

1866 - The U.S. National Labor Union is founded.

1869 - The Social Democratic Worker's Party forms in Germany. Socialism becomes increasingly linked to trade unions in the 1870s, particularly in France, Austria, and other countries in Europe.

1886 - The American Federation of Labor (AFL) is created. (It will later merge with the Congress of Industrial Organizations (CIO) in 1955.)

1890 - The Sherman Antitrust Act passes, with the aim of encouraging competition against large and powerful corporations.

1899 - The Australian Labor Party becomes the first elected socialist party.

1902 - The British Labour Party wins its first seats in the House of Commons.

1911 - John D. Rockefeller's Standard Oil is broken up under antitrust laws. After the breakup of Standard Oil, Rockefeller's wealth rises until he becomes the world's first billionaire.

1917 - The Russian Revolution overthrows the Tsarist regime and imposes a Communist government, led by Vladimir Lenin. Europe and the U.S. react to the takeover with concerns that Communism will sweep away democracy.

1918Pointer sisters contact remastered rare. - The German Revolution establishes the Weimar Republic with the Social Democratic Party nominally in charge, facing challenges by communist supporters and National Socialists.

1922 - Benito Mussolini assumes control of Italy, calling his blend of corporations and government power 'fascism.'

1924 - The British Labour Party forms its first government under Prime Minister Ramsay MacDonald.

1926-1928 - Joseph Stalin consolidates power in Russia, emerging as the leading force for communism around the world.

1929 - The Great Depression begins, plunging the world into an unprecedented economic slowdown. Capitalism is blamed for its excesses, and socialist parties of varying ideological stances emerge, primarily in Europe.

1944 - The Canadian province of Saskatchewan forms the first socialist government in North America.

1945 - The British Labour Party returns to power, ousting Prime Minister Winston Churchill.

1947 - China is taken over by a communist regime led by Mao Zedong.

1959 - Fidel Castro overthrows the Fulgencio Batista regime in Cuba, then surprisingly announces an alliance with the Communist Party of the U.S.S.R.

1960s - 1970s - Nordic countries, such as Norway, Denmark, Sweden, and Finland, increasingly blend socialism and capitalism to develop higher standards of living, with particular progress in education, health care, and employment.

1991 - The Soviet Union (U.S.S.R.,) collapses, and former Soviet republics attempt to throw off their communist past to explore democratic and capitalist systems, with limited success.

1995 - China begins capitalist practices under the Communist Party's auspices, launching the fastest-growing economy in history.

1998 - Hugo Chávez is elected President of Venezuela and embarks on a nationalization program, leading a social democratic movement in Latin America led by Bolivia, Brazil, Argentina, and others.

2000s - Corporate profits set record highs nearly every year, while real wages stagnate or decline from 1980 levels (in real dollars). French economist Thomas Piketty's Capital in the Twenty-First Century, which analyzes economic inequality under capitalism, becomes an international bestseller.