Friday, December 2, 2011

Communism and Socialism as Economic Systems

Posted by Benjamin Atuma at 10:30 PM
Previously, capitalism as an economic system in which private individuals with comparative freedom from external restraints are allowed to own all or most of the means of production and distribution (e.g. land, factories, railroads, and shops) was explained. 

Today, let's dig into communism, then socialism....


Communism is an economic system proposed by 19th century German political philosopher Karl Marx.  He saw the inequality in wealth between the capitalists and the labourers in the 1800s, and advocated for a system of government whereby ownership of all economic resources of a country will be among a community of people (or government), hence the term communism.  In 1848, Marx wrote “The Communist Manifesto”, wherein he outlined the process.  As a result, Marx became known as the father of communism.

Essentially, communist government or state makes all economic decisions, and owns all the major forms of production.  In Marx’s mind, government ownership of resources was to be only temporal until a society is matured, however, communism in practice was different or far from Marx theory.  Communism involves permanent government control of resources; there is no passing back of ownership to the people.  

The former Soviet Union was the first nation to adopt a communist government.  Other examples of countries that have adopted communism include Cuba, People’s Republic of China, Vietnam, and Eastern European Countries (Poland, Hungary, and others).

Under this economic system, a central planning committee decides what to be produced, and this decision does not usually reflect the many and varied wants or demands of the populations.  For example, if a communist government concentrates resources on the production of defence equipment and de-emphasize consumer goods such as food, clothing and radio, most people are compelled to go without these consumer goods even if they want them.  As a result, there is a problem of imbalance due to unmatched supply and demand. 

Communist countries typically emphasize capital equipment and military hardware.  Consequently, consumer goods are in short supply.  Communism, in practise, is no longer a major economic system in the world today.  For example, the People Republic of China has liberalized its economy such that in recent times the Chinese government is embracing the market system.

Beyond capitalism and communism.  We have socialism.


Under this economic system, there is government ownership of primary or top industries, while less crucial businesses are left to private individuals.  Socialist governments looked favourably on capitalism because of the wealth it helps creates, but see the government as the central agency that can create a more even distribution of wealth.  As a result, private businesses and individuals pay extremely high taxes so that the government can enhance public welfare or promote social programmes.

Most socialist governments often provide many services including retirement benefits, unemployment benefits, health care, transportation, housing and utilities.

In socialist economies the government may control institutions such as communication, transportation, banking, and heavy industries such as steel, oil and gas.  Under this system, the government employs a large percentage of the population mainly on political patronage or consideration.  As a result, many government concerns are usually inefficient.  Because of this inefficiency, socialist countries such as Sweden, Holland, France, and the United Kingdom have liberalized and deregulated their economies.  For example, Great Britain has privatised its hitherto state-owned utilities-- Power Gen and British Telecom.

Over the years, the experience of the world has been that none of these three basic economic systems has offered optimum economic conditions.  Consequently, the basic economic systems have been merging, such that globally pure forms no longer really exist.  There is a mix of government ownership and private enterprise – mixed economy.

If you liked this article, you might also like this Factors Affecting Economic Systems.

If you enjoyed this post and wish to be informed whenever a new post is published, then make sure you subscribe to my regular Email Updates. Subscribe Now!

Thanks For Making This Possible! Kindly Bookmark and Share it:

Technorati Digg This Stumble Facebook Twitter Delicious


Anonymous said...

I appreciate your style of writing. Hope to recommend your blog to my college mates.

God bless,


Post a Comment


About Me

My Photo
Benjamin Atuma
I am a writer, teacher, web consultant, and an entrepreneur.  Enjoy blogging, business networking, traveling, and preaching the Gospel of Jesus.

For more information you can visit this link Doing Online Business
View my complete profile

Join Us

| Contemporary Business © 2013. All Rights Reserved |