Question

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 give supporting facts, not just opinions.

Answer 1

Capitalism and Socialism are two different political economic and social systems blended together by countries around the world. Most countries have mixed economies with economic elements of both Capitalism and Socialism.

Capitalism is an economic system where the means of production are owned by private individuals. Means of production refers to resources including money and other forms of capital. In a theoretical capitalist society companies that incorporate are treated by the same law as individuals. Corporations can sue and be sued. They can buy and sell property.

Socialism is a populist economic and political system based on public ownership which is also known as collective or common ownership of the means of production. These means include the machinery, tools and factories used to produce goods that aim to directly satisfy human needs.

The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism. A mixed economy system protects private property and allows a level of economic freedom in the use of capital but also allows governments to intervene in economic activities in order to achieve social aims and for the public wellness. The government role in a mixed economy also includes financial policies such as monetary and fiscal policies. The US government controls part of the economy with restriction and licensing requirements which includes involvement in such areas like education, courts, roads, hospital care and postal delivery.

Pros and Cons of Capitalism

Pros:

Efficiency – Capitalism based society face incentives to be efficient and produce goods which are in demand. The incentives create the pressure to cut costs and avoid wastes.

Innovation - Capitalism has a dynamic, where entrepreneurs and firms seeking to create and develop profitable products.

Economic growth - With firms and individuals facing incentives to be innovative and work hard and creates a climate of innovation and economic expansion.

Cons:

Monopoly power – Firms with monopoly can exploit their position to change higher prices.

Monopsony Power – Firms with monopsony power can pay lower wages to workers. In capitalist societies, there is often great inequality between the owner of capital and the workers.

Boom and bust cycles – Capitalist economies have a tendency to booms and busts with painful recessions and mass unemployment.

Pros and Cons of Socialism

Pros:

Reduction of relative poverty – A welfare state which provides a minimum basic income for those who unemployed, sick or unable to work can maintain a basic living standard.

Free healthcare – Free healthcare at the point of use, means everyone is entitled to basic healthcare. This increases the living standard of those who cannot afford to pay private hospitals.

A more equal society is more cohesive – A society which has equality in opportunity and limited inequality is likely to be more cohesive. Everyone feels they have a fair stake in society. It can create more harmonious society.

Cons:

Lack of Incentive – Socialism advocates for communal wellbeing over personal gain or self interest.

Government Failure – In an ideal world the government would be successful in regulating firms, labour markets and running public industries.

Rationing of Healthcare – In a publically funded healthcare system like the UK, doctors usually face greater financial constrains. For example, some non urgent operations will be rationed and there will be large waiting list than in a private system.