Socio-Economic Effects Induced by Capitalistic to Socialistic Economic System

Paper Type:  Research paper
Pages:  6
Wordcount:  1536 Words
Date:  2021-05-26

Socialism and capitalism are two economic systems characterised by opposing views on how to reach economic end goals. While capitalism is primarily centred on privatisation and competition, socialism mainly focuses on social equality (Hoppe, 3). Both have negative and positive aspects. In essence, while capitalism concentrates on competitive economics, it downplays the idea of social reform. On the other hand, while socialism elicits the realisation of social equality in an economic system, it does not allow for rational economic decision making. For this reason, each of these economic systems has their strengths and weaknesses, but importantly, good intentions always fuel both of these systems. However, good intentions are subsequently lost when the policy makers fail to see the economic direction imposed by each of the systems, which can subsequently lead to an inability to include proper control and freedom. The U.S. being mainly a capitalist economy, moving to a socialistic economic system can have tremendous socio-economic effects.

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One of the major goals for any economic system, including capitalism and socialism is achieving fairness. Fairness is considered an equalising clause that can subsequently bring people together, as well as spur them into action in both of these economic systems. As such, both socialism and capitalism are grounded by the idea of embracing fairness, and it is their focus to achieve fairness among its people. However, these two economic systems achieve it using various means, making both inherently different. Essentially, while capitalism is grounded on the assertion that fairness is achieved through the freedom of competitive pricing, production and manufacture of goods and services, and subsequently, their distribution, socialism achieves fairness through the equal allocation of opportunities and wealth, usually via a collective means (Hoppe, 22). As such, capitalism highlights the importance of private decision making in the corporate world, and thus, supports the idea of private ownership of property. On the other hand, in the socialist paradigm, the government owns and manages economic precincts, including the production and the distribution of goods and services. For this reason, the government allows a steady work for every citizen and aims at achieving a society where everyone has equal lifestyles. As such, the socialist economic realm does not encourage competition among people while capitalism rewards individuals who provide the labour force with possibilities of property, power, and wealth. However, these aspects are not present in a socialism economic system. Therefore, socialism offers social justice via an equal care, pay, and opportunity while capitalism achieves this by ensuring that the level of labour input is directly proportional to the pay, exposure to opportunities, and power (Hall and Robert, 7). For instance, CEOs have more authority in the organisational context of a capitalist economy, and this is directly proportional to their pay as they are highly paid compared to the other employees as you move down the organisational structure and hierarchy.

Also, in both of these economic systems, there is a similarity in that no ideal can become a reality unless is embraced by the members of the economic system. However, the ideals in each of these economic systems are different. For instance, in capitalism, the labour force believes in hard work, education, patience, as well as the fact that connections can subsequently lead to wealth and prestige for everyone. In essence, both economic systems are driven by strong ideals. While the capitalistic view looks to competitive economics to enable workers to provide for themselves and achieve any levels of success based on their input of effort, the socialistic economic system believes in the willingness to relinquish prestige and wealth for the good of its people results in a strong society and economy. In addition, within the capitalist context, any negative issues that can arise from the combination of competition and human nature are considered as simply a small price to pay for the many opportunities that are offered by the economic system. However, socialism expects the opposite from the labour force as socialist have a strong belief that the natural human needs to care for each other are mainly built into a concept that allows for collective control (Teulon, 5). The workers in a socialist economic system accept and embrace their loss of control to the government in exchange for a better society. As such, for both of these systems the control, or freedom of the worker is what makes the policies in these economic systems successful. However, since the capitalism supports competition and privatisation, the advantages far outweigh the disadvantages, making it a better system among the two.

On the other hand, the level of social care is different from a capitalist and socialist perspective. Socialism often builds every part of the system around the various needs of its people. For this reason, when the U.S. moves to a socialistic economic system, the America government will subsequently impose high tax rates to pay for social programs, including medical care. On the other hand, it is better for the U.S. to remain in the capitalistic economic system because it is focused on individual achievements, and thus, it tends to handle the social issues in most instances as a second thought, and thus, the various programs are funded by the government through the transfer of wealth. As such, the capitalistic model exerts a competitive drive among its people, and thus, it demands that every person should choose to work hard for what they need.

Based on these differences, when American converts from a capitalistic economic system to a socialistic one, there would be adverse socio-economic effects. In essence, socialism only benefits a few at the expense of the many as it only offers security. In essence, because it does not encourage competition, many Americans will become lazy as it favours the lazy primarily because one cannot live very poorly as the system does not encourage that, rather equality (Hoppe, 246). It would be unfair for the hardworking as they foot the bill for the lazy in the society so that every individual becomes equal to the other. Also, entrepreneurship in America will adversely be affected as socialism discourages it. Since socialism encourages equality of results, it does not take into account of the labour input. For this reason, it only encourages a lack of an entrepreneurship spirit because even when an individual does not work, he is guaranteed that the government will feed him regardless. As such, socialism will adversely affect the U.S. as it works against the human nature as even when a person does not work, they are fed. In essence, it is the American dream, where the direct input of an individual determines their success. As such, in a socialist society, the direct input does not matter, one can just stay idle, which consequently leads to a lack of innovation. It also suffocates the economy because when people are not hardworking, the economic growth will be halted, and in consequence, it will lead to economic shrinkage. Socialism is very slow and difficult to adapt to changes in the economy because the government is spending peoples money, and thus, it does not get concerned when it is losing money.

Besides, in a socialistic society, the government along with its politicians and bureaucrats will always make the decisions about thousands of different industries, of which they may not have enough knowledge in the various fields. According to Cudahy (41), adopting socialism will lead to a persistent shortage of consumer goods in the domestic channels of distribution, and this is in part related to manufacturing inadequacies, as well as the failure of prices to reflect demand.As such, if the U.S. changes to socialism, many industries are deemed to fail, which negatively affects the economy of the country. Besides, socialism is wasteful as the more capital that is taken out of the economy and distributed; there is a high likelihood that it will be wasted. Also, even when the government is poorly performing, it will receive a huge budget every year. As such, adopting socialism in the U.S. will be detrimental to the economy. The fact that it brings, impoverishment, not wealth is clear that it, when implemented in the U.S., will lead to poor socio-economic effects.

As such, it is preferable that the U.S. maintain the capitalistic economic system. In my opinion, capitalism encourages competition as individuals are awarded by their input. As such, this will encourage innovation and an entrepreneurship spirit that will allow the economy to grow optimally. Besides, everyone will actively be involved in contributing to economic growth as people will not lazy around. As Teulon (5) notes, the genius of capitalism lies in the fact that it adapts extremely well to selfish private interests. It does not require moral justification to exist, or even to succeed. Therefore, I would prefer a capitalistic economic system compared to socialistic one.

Works Cited

Cudahy, Richard D. "From Socialism to Capitalism: a winding road." Chi. J. Int'l L. 11 (2010): 39-65. Print.

Hall, Joshua C., and Robert A. Lawson. "Economic freedom of the world: an accounting of the literature." Contemporary Economic Policy 32.1 (2014): 1-19. Print

Hoppe, Hans-Hermann. A theory of socialism and capitalism: economics, politics, and ethics. Springer Science & Business Media, (2013): 1-259. Print.

Teulon, Frederic. Ethics, moral philosophy and Economics. No. 2014-288. (2014): 1-10. Print.

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Socio-Economic Effects Induced by Capitalistic to Socialistic Economic System. (2021, May 26). Retrieved from

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