Comparative Analysis of Capitalism and Socialism

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Both the political and economic worlds have always been dependent on each other, neither can survive without the other and the modern world is incapable of functioning without them both. Countries have been competing in finding the best economic and political combination that brings their countries into the power they need to lead the world for a prolonged period of time. Initially, Europe had always conquered the world utilizing the power of the church to limit freedoms for the people, and to bring cause to their strong militant forces. As the two world wars ended, however, the political landscape began to rapidly change. Europe lost its place as the number one world power, and new ideologies started to show. The United States of America began its own path into becoming a world power, and Russia adopted the communist approach of the world, and began collecting countries under their union. Capitalism evolved and quickly became adopted by the United States.

During their Cold War and the fight to show which political economic theory is better, capitalism won the first round, and the USSR was utterly destroyed. Capitalism had taken the world by storm for nearly 20 years, and after believing for so long that the world had finally discovered the perfect political economy theory, Capitalism collapsed in 2008. This showed the world how vulnerable the theory of capitalism truly was, while simultaneously promoting the theories of economists who had always predicted the collapse of the financial system and the world economy. This catalyzed the collapse of the political economic theories, and thus reopened the debate of where to go both politically, and economically in order to maintain the spot of leading nation.

Bruce R. Scott defines capitalism in two ways. The first as “a system of indirect governance for economic relationships, where all markets exist within institutional frameworks that are provided by political authorities”. While the second perspective is described a “three level system much like any organized sports. Markets occupy the first level, where the competition takes place; the institutional foundations that underpin those markets are the second; and the political authority that administers the system is the third. While markets do indeed coordinate supply and demand with the help of the invisible hand in a short term, quasi-static perspective, government coordinates the modernization of market frameworks in accord with changing circumstances, including changing perceptions of societal costs and benefits”.

In this broader line of vision, the government’s job is then to meant mobilize political power to bring about modernizations in the given infrastructure, and fit them as societal priorities change in order to enforce the existing institutional. Since the Great Recession of 2008, however, it can be argued that capitalism has consisted of a free market system with small government intervention in the market, laborers are fit to work as much as possible to come up with the optimum production, wages are distributed in accordance to the demand and supply of the labor itself, and capital is accumulated and saved.

Socialism, however is a planned market economy, where the means of production lays in the hands of the government. Workers are suppressed, and therefore need to retaliate on the means of production owners through revolutions that would demolish the capitalist system and replace it with an inherently communist system. Technology itself, in a general, socialist perspective, is a crucial source of economic development, as it works to facilitate the production process on labor and is more productive and efficient. It is also argued that technology is the reason for the economic development in the capitalist systems.

In theory, the socialist approach is meant to annihilate capitalism. From a market standpoint, however, the strongest case for socialism is from the desire to cripple modern monopolies by turning them undoubtably bureaucratic. If the businesses are run by the state, then there will be a surplus of innovation and a newfound restoration in the business cycle itself (Shliefer and Vishny). However, with the power of the market entirely trusted into an increasingly centralized power’s hands, there’s little if no room for anything ‘personal’, as everything goes back to the state.

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Led by such considerations, the discussion again returns to the (little left behind notion) of economic importance. In order for a world to morally and economically make the drastic switch into a socialist nation, they must be devoted to an analysis of how a social system based on a private property ethics would come to grips with the problem of monopoly and the production of so-called ‘public goods’. Contrary to the frequent and persistent writings in the economics literature on monopoly and public goods, the issues simply are nonexistent, and if they did exist, they would continue to be insufficient of any notable sense to prove any economic deficiency in a pure market system. A capitalist order always, essentially without exception and necessarily so, provides in the most efficient way for the most urgent wants of voluntary consumers. This includes the areas of police and the courts. With this constructive task completed, the argument will have been brought full circle, and the demolition of the intellectual credibility of socialism, morally and economically, should be complete.

The important issue of whether effectiveness should only be understood in terms of maximizing production of material consumption goods is also pertinent. If certain things are taken into account capitalism can also be criticized as inefficient on account of its tendency to negate the availability of free time in trade for their free market. This carries limitation of people’s access to the various goods that leisure provides, including political participation (as seen in the frequently when assessing the issues regarding voter turnout.)

Nevertheless, a large motivating force in the capitalist society is of course, undoubtedly, the profit margin. Capitalism thereby narrows the realistic options of its constituent economic agents—both firms and individuals. Firms would lose their competitive edge and risk bankruptcy if they did not pursue profits ahead of the broader interests of their workers (as their products would likely be more expensive). And it is typically hard for workers to find jobs that pay reasonable salaries for fewer hours of work. People who remain concerned with expanding free time—and also with environmental risks continue to because persuaded into a socialist agenda under concerning circumstances.

With socialism, there is no free-market approach and while capitalism creates a world in which one can do what is possible for themselves, a socialist world is reliant on what one can to best for their nation. Again, in spite of its bad public reputation, it is capitalism, a social system based solely on the recognition of private property and of contractual relations between owners of private property, that continues to appear the most logical. Whoever argues in favor of anything, and in particular in favor of certain normality’s as being fair, must, implicitly at least, assume the value of the normality’s that remain inherent in capitalism. To deny their truth as norms of universal acceptability and argue in favor of socialism is therefore self-contradictory.

To keep it brief, capitalism is centered around a free market. The process involves little government intervention in the economic processes, and workers must depend on only themselves and their actions in order to get hired and maintain a stable income to cycle back into the economy. Workers are free to do any business, and buy and sell in the market. The free business system catalyzes an extremely competitive market which enhances price inclination, leaving the society overall in a much better position. More importantly, private ownership and private property is a societal norm for all the people. They capable of owning anything they pay for. Moreover, business is dealt with according to supply and demand, which pushes the prices to increase or decrease, and the highly competitive market works to keep prices relatively honest.

From a dissimilar perspective, the socialist system is based on government owning all factors of production. The government sets a standard price for goods and services, distributing wealth and wages to all employees, and is responsible for finding employment for everyone in the society, focusing more on how blatantly and irrevocably equal citizens should be. Instead of instigating competition and rivalry, all property is owned by the nation, and business is based on the state’s wellbeing. This poses the more important questions of whether anyone or any nation that considers socialism is thinking more so for the benefit of the government than the people themselves.


  1. Gilabert, Pablo, and Martin O'Neill. “Socialism.” Stanford Encyclopedia of Philosophy, Stanford University, 15 July 2019,
  2. Scott, Bruce R. “The Political Economy of Capitalism”. 2006.
  3. Shleifer, Andrei, and Robert W. Vishny. “The Politics of Market Socialism.” 1994.
  4. Zygmont, Zenon X. “Debating the Socialist Calculation Debate: A Classroom Exercise.” The Journal of Economic Education, vol. 37, no. 2, 2006, pp. 229–235., doi:10.3200/jece.37.2.229-235.
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