Capitalism and Socialism have always been 2 contrasting ideologies which have historically at odds to each other. But now we see that most of the modern day economies are a mixture of the two systems. In this video we have tried to explain both the systems in brief.
Capitalism is an economic system where private individuals or businesses own and control the factors of production.
Whereas, in Socialism all legal production and distribution decisions are made by the government, with individuals dependent on the state for food, employment, healthcare and everything else.
So what is better? I will try to explain the pros and cons of both the systems and at the end you can decide how you would like to answer this question.
First let us look at Capitalism.
The capitalist economic model relies on free market conditions for the creation of wealth; the production of goods and services is based on supply and demand in the general market.
Theoretically, this dynamic drives companies to make the best products they can for as cheaply as they can; capitalism is intended to drive business owners to find more efficient ways of producing quality goods. For consumers, this dynamic is intended to create a system wherein they have the freedom to choose the best and cheapest products.
So on paper it does look like capitalism provides a great environment for innovation and economic growth but one thing that needs to be highlighted is that it also creates huge disparity in distribution of wealth.
"The Rich gets richer and the poor gets poorer." This is somewhat true in a capitalist economy as efficiency takes priority over equality.
According to a statistic published by Oxfam, India's richest 1% owns more wealth than it's poorest 70%.
Another by-product of Capitalism that starts showing in times of economic recession is high rates of unemployment. As the state is not directly responsible for providing jobs and the demand in market falls, the production goes down and job losses set in.
So that was capitalism. Now let's shift our focus on to Socialism.
The primary concern of the socialist model of economics is an equitable distribution of wealth An equitable distribution of wealth is meant to ensure that all members of a society have an equal opportunity to attain certain economic outcomes. To achieve this, the state intervenes in the labor market. In a socialist economy, the state is one of the primary employers. During times of economic hardship, the socialist state can order hiring, so there is close to full employment even if workers are not performing tasks that are particularly in demand from the market.
So on paper, Socialism is the way to go if equality is your goal. But in reality, the theory is rarely practiced as it is preached. As the state owns the production, there is accumulation of power at the top and that leads to lack of resources for the general public and as private businesses are not allowed to function in a socialist system, the people are left with no alternatives.
Also in socialism, the economy follows a rigid pattern which dampens the motivation to strive for innovation thus creating a system that lacks efficiency and productivity.
Most modern economies are mixed economies. This means they exist somewhere on a continuum between pure capitalism and pure socialism, with the majority of countries practicing a mixed system of capitalism wherein the government regulates and owns some businesses and industries.
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