Pros and cons of a socialist economy

Discussion 1 Classmate Response

Guided Response: Respond to at least two of your fellow students’ and to your instructor’s posts in a substantive manner and provide information or concepts that they may not have considered. Each response should have a minimum of 100 words and be respectful of others’ opinions and beliefs that differ from your own. Support your position by using information from the week’s readings. You are encouraged to post your required replies earlier in the week to promote more meaningful and interactive discourse in this discussion forum.

Below there are two of my classmate’s discussion that needs I need to response to their names are Jocelyn Harnett and Audris Hung

Jocelyn Harnett

Both capitalism and socialism are social, political, and economic philosophies. There are pros and cons of each approach and many countries have implemented a mixed level of each philosophy.

The economic system of capitalism creates a society in which private entities own all factors of production including the individual that own their labor. This type of system promotes competition and uses competition as a driving force of innovation. Competition occurs between owners of supply and this helps improve efficiencies as well as keep prices moderate. The incentive of capitalism is to maximize profit. In a capitalistic society goods and services are distributed based on supply and demand and the government intervenes only to maintain fairness and protect the free market. Advantages of capitalism include production of the best products at the best prices, and innovation. Disadvantages of capitalism include a lack of resources for the people in society who do not contribute such as the elderly, disables, and children, and also the philosophy fails to promote equality of opportunity. Hong Kong is an example of a capitalistic country based on several factors including "lack of corruption, low debt levels, and protection of property rights" (Amadeo, 2020, pp13).

Socialism is composed of social ownership of the means of production, distribution, and exchange, and also includes the political theories associated with these systems. This means everything is owned and regulated by the community as a whole and the intention is to create equality for everyone. "Socialists assume that the basic nature of people is cooperative. They believe that this basic nature hasn't yet emerged in full because capitalism has forced people to be competitive" (Amadeo, 2020, pp2). Socialism promotes a society in which everyone receives a share based on how much they have contributed and values the collective well-being of the entire population over individuals. Advantages associated with socialism include basic needs provided for the entire society, eliminates poverty, and natural resources are preserved. Disadvantages of socialism include the fact that the philosophy is based on human cooperation and ignores competition which means there is no reward for being entrepreneurial. An example of a country with a socialist system is Norway. "The state on behalf of the people, own a large percentage of the economy. It spends a large portion on education, housing, and public welfare. A large percentage of its works are unionized, granting them greater power" (Amadeo, 2020, pp19).

Capitalism and socialism are currently being spotlighted in U.S. politics because the economy has faced many challenges. For most of history Americans agreed that capitalism and a free market economy were the best system. However, new age Americans doubt this consensus. The U.S. government is not entirely capitalistic and there are many social systems in place such as social security, welfare, armed forces benefits, etc.

Capitalism creates wealth inequality inherently due to the focus on a free market that promotes competition. Wealth inequality limits diversity and thus the playing field is not level and this means minorities may not be accounted for or represented equally. This is not always a bad outcome, however many governments utilize both capitalism and socialism to generate a better balance and eliminate major inequalities.

References: Amadeo, K. (2020). Socialism and Its Characteristics, Pros, Cons, Examples, and Types. Retrieved from: https://www.thebalance.com/socialism-types-pros-cons-examples-3305592

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). Retrieved from https://www.cengage.com

Tamny, J. (2015). Popular economics: What the Rolling Stones, Downton Abbey, and LeBron James can teach you about economics. Retrieved from https://www.redshelf.com

Audris Hung
1. Define capitalism and socialism and provide examples of countries for both structures.

Capitalism is an economic system characterized by private ownership of the means of production, especially in the industrial sector. The creation of goods and services is based on supply and demand in the general market, known as a market economy, rather than through central planning known as a planned economy or command economy (Gwartney et al., 2018). Capitalism stands in contrast to a government-controlled economy, where the government controls the prices of the market and supply and demand. Examples of capitalist countries are United States, Canada, Switzerland, Germany, Denmark, and South Korea (Chappelow, 2020).

Socialism is a populist economic and political system based on public ownership (also known as collective or joint ownership) of the means of production. Those means include the machinery, tools, and factories used to produce goods that aim to directly satisfy human needs (Gwartney et al., 2018). In a purely socialist system, all legal production and distribution decisions are made by the government, and individuals rely on the state for everything from food to healthcare. The government determines the output and pricing levels of these goods and services. Examples of socialist countries are Venezuela, Cuba, Angola, and North Korea (Kenton, 2020).

2. Next, discuss why capitalism and socialism are currently being spotlighted in U.S. politics giving the pros and cons to each organizational structure. Be sure to be specific and provide supporting facts, not just opinions

There are two different views in the country at the moment, some belief in continuing capitalism, and some are bringing the ideas of socialism. Proponents of capitalism assure us we have only two choices: capitalism (big business) or socialism (big government). It seems like the country is divided between which one can be better. President Trump is the view as a capitalist, and Bernie Sanders from the democratic party classified himself as a "democratic socialist." The future elections for President are coming, and having two contrast views has created some controversy. Even though Bernie Sanders, a self-described "Democratic socialist," has generated strong support for his presidential campaign, Americans' image of socialism is no better now than it was six years ago. Thirty-five percent of Americans have a favorable view of the term socialism, similar to what was found in 2012 and 2010. The 60% who have a pleasant view of capitalism is also unchanged from six years ago. Americans retain very positive images of small business, entrepreneurs, and free enterprise. A little more than half have a favorable view of big business, and less than half have a positive view of the federal government (Newport, 2020).

Capitalism

Pros: Capitalism is a market-driven economy. The state does not intervene in the marketplace, leaving it up to market forces to shape society and life. Capitalism depends on the enforcement of private property rights, which provide incentives for investment in and productive use of productive capital (Chappelow, 2020).

Cons: the emphasis on efficiency takes priority over equality, which is of little concern to the capitalist system. The argument is that inequality is the driving force that encourages innovation, which then pushes economic development. In a capitalist economy, the state does not directly employ the workforce. This can lead to unemployment during times of economic recession (Momoh, 2020).

Socialism

Pros: Socialists contend that shared ownership of resources and central planning provides an equal distribution of goods and services and a more equitable society. Socialism offers a reduction of relative poverty, a welfare state which provides a minimum basic income for those who are unemployed, sick or unable to work, maintains a basic living standard for the poorest in society, and helps to reduce relative poverty (Kenton, 2020).

Cons: The primary concern of the socialist model, in contrast, is an equitable redistribution of wealth and resources from the rich to the poor, out of fairness, and to ensure "an even playing field" in opportunity and outcome. To achieve this, the state intervenes in the labor market. In fact, in a socialist economy, the country is the primary employer. During times of economic hardship, the socialist state can order hiring, so there is full employment even if workers are not performing tasks that are particularly in demand from the market (Momoh, 2020.

3. Finally, address the question: Does capitalism create wealth inequality, and is this necessarily an adverse outcome?

The capitalist economy is unconcerned about equitable arrangements. The argument is that inequality is the driving force that encourages innovation, which then pushes economic development. It is not an adverse outcome because it looks to promote healthy competition in the country (Chappelow, 2020). One argument against capitalism is that income and wealth inequality is that it allows the rich to dominate in the arena of positional goods. The primary concern of the socialist model is the redistribution of wealth and resources from the rich to the poor, out of fairness, and to ensure equality in opportunity and equality of outcome (Kling, 2020).

References

Chappelow, J. (2020, April 6). Capitalism Definition. Retrieved from https://www.investopedia.com/terms/c/capitalism.asp

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). https://www.cengage.com

Kenton, W. (2020, April 6). What Is Socialism? Retrieved from https://www.investopedia.com/terms/s/socialism.asp

Kling, A. (2020, April 6). Capitalism and Inequality. Retrieved from https://www.econlib.org/library/Columns/y2016/Klingcapitalism.html

Momoh, O. (2020, March 14). Capitalism vs. Socialism: What is the Difference? Retrieved from https://www.investopedia.com/ask/answers/020915/what-are-differences-between-capitalism-and-socialism.asp

Newport, F. (2020, January 6). Americans' Views of Socialism, Capitalism Are Little Changed. Retrieved from https://news.gallup.com/poll/191354/americans-views-socialism-capitalism-little-changed.aspx