Question

1.  Compare and contrast the following economic systems. Be sure to discuss origins and major components. (25 Points)

            Capitalism

            Communism

            Socialism

Answer 1

Under capitalism, each individual or business works in its own interest and maximizes its own profits based on its decisions. The essential characteristics of capitalism are that the factors of production are privately owned, economic transactions take place in markets, where buyers and sellers interact, businesses and employess are free to pursue their own self-interest.
The definition of socialism varies widely, but it can be described as an economic system between capitalism and communism. Like communism, socialism seeks to redistribute the wealth more equitably by the communal ownership of the natural resources and major industries, such as banking and public utilities.Socialists also seek to nationalize monopolies, which greatly enrich their owners at the expense of the proletariat. However, unlike communism, most small or nonessential enterprises would remain privately owned and also most socialists do not advocate or force to achieve their economic system.
Communism, also known as a command system, is an economic system where the government owns most of the factors of production and decides the allocation of resources and what products and services will be provided.
Some of the capitalist countries- USA, Germany, the UK.
Communist form is a extreme version of socialism and is found in China, Russia.
Socialist countries can be also called mixed economy-e.g. India.
Communism and socialism give great power to few individuals who then become obsessed with retaining their power, even at the tremendous expense of the society. For instance Cuba and North Korea are extremely communistic and even after controlling the countries for years, the people are mired in abject poverty. the leaders are ignorant of the needs and wants of the citizens. Capitalism works better because it promotes competition and only the most efficient businesses survive. However, capitalism also has drawbacks - monopolies and externalities. In a mixed economy like India, the economic system is adopted according to the needs of the people. Here, capitalism would not work well for the people because there are many poor people in the country and it needs a welfare state that emphasizes on the development of infrastructures and meeting of the daily necessities. So the government controls some of the heavy industries and nationlised some financial institutiions.