Socialism vs. Capitalism

Capitalism (Free market economy) –

It is an economic system in which private individuals own all the material means of production & all economic activities are undertaken for purpose of profit.

Features of capitalism -

- Right to private property.- Right of inheritance.- Freedom of enterprise.- Freedom of choice for consumers.- Profit motive.- Competition.- Price mechanism on market forces.

- Less role of government.

Merits of capitalism -

- Efficient utilization of resources.- Rapid economic growth.- Capital formation.- Democratic nature.- Innovation.

Demerits of capitalism -

- Concentration of economic power.- Economic instability.- Lack of maximum social satisfaction at minimum social cost.- Social waste.- Rise of monopoly.- Social discrimination.- Loss of human values.

Socialism (controlled economy or communism) –

In this state owns & controls all means of production. Decisions pertaining to

production, distribution are made through central planning. The state dictates the consumption pattern. It is based on the

principle: “from each according to his ability to each according to his needs”.

Features of socialism -

- State ownership of means of production.- Central economic planning.- Social welfare.- Equality of opportunity.- classless society.- Absence of competition.

Merits of socialism -

- Social justice.- Economic stability.- Rational allocation of resources.- Higher economic growth.- Absence of class struggle.

Demerits of socialism -

- Concentration of economic power in the state.- Lack of incentive & initiative.- Loss of consumer sovereignty.- Loss of occupational freedom.- Inefficiency & low productivity.- Corruption.