Question

Compare the features of capitalism and socialism.

Answer 1

Features of Capitalistic Economy

1. Private Ownership of Property and Law of Inheritance:
   The basic feature of capitalism is that all resources namely, land, capital, machines, mines, etc. are owned by private individuals. The owner has the right to own, keep, sell or use these resources according to his will. The property can be transferred to heirs after death.
2. Freedom of Choice and Enterprise:
   Each individual is free to carry out any occupation or trade at any place and produce any commodity. Similarly, consumers are free to buy any commodity as
   per their choice.
3. Profit Motive:
   Profit is the driving force behind all economic activities in a capitalistic economy. Each individual organization produces only those goods which ensure high profit. Advance technology, division of labour, and specialisation are followed. The golden rule for a producer under capitalism is ‘to maximize profit.’
4. Free Competition:
   There is free competition in both the product and factor market. The government or any authority cannot prevent firms from buying or selling in the market. There is competition between buyers and sellers.
5. Price Mechanism:
   The price mechanism is the heart of any capitalistic economy. All economic activities are regulated through price mechanisms i.e., market forces of demand and supply.
6. Role of Government:
   As the price mechanism regulates economic activity, the government has a limited role in a capitalistic economy. The government provides basic services such as, defense, public health, education, etc.
7. Inequalities of Income:
   A capitalist society is divided into two classes – ‘haves’ that is those who own property and ‘have-nots’ who do not own property and work for their living. The outcome of this situation is that the rich become richer and the poor become poorer. Here, economic inequality goes on increasing.

Features of Socialism

1. Public Ownership of Means of Production:
   All resources are owned by the government. It means that all the factors of production are nationalized and managed by the public authority.
2. Central Planning:
   Planning is an integral part of a socialistic economy. In this system, all decisions are undertaken by the central planning authority.
3. Maximum Social Benefit:
   Social welfare is the guiding principle behind all economic activities. Investments are planned in such a way that the benefits are distributed to society at large.
4. Non – existence of Competition:
   Under the socialist economic system, there is the absence of competition in the market. The state has full control over the production and distribution of goods and services. The consumers will have a limited choice.
5. Absence of Price Mechanism:
   The pricing system works under the control and regulation of the central planning authority.
6. Equality of Income:
   Another essential feature of socialism is the removal and reduction of economic inequalities. Under socialism, private property and the law of inheritance do not exist.
7. Equality of Opportunity:
   Socialism provides equal opportunity for all through free health, education, and professional training.
8. Classless Society:
   Under socialism, there is a classless society and so no class conflicts. In a truly socialist society, everyone is equal as far as economic status is concerned.