Economics essay 1
Two main economic systems have been developed since the Industrial Revolution, these are Capitalism and Socialism. Both systems have advantages and disadvantages, this essay will explain these, and also give my proposals for a mixed system for the whole society of the United Kingdom.
Capitalism
Capitalism generally started as an economic system in the United Kingdom at the time of the Industrial Revolution. The basic explanation of Capitalism would be to say that
'the economy is left to its own devices with no Government intervention'.
A Capitalist economy is a market economy where all economic decision making is decentralised, and the Government will only supply national defence, administer justice and provide certain public works.
The goods that are provided in a Capitalist economy are decided by individuals who choose how to use their labour and spend their income. All resources are privately owned and will only be used for obtaining the highest profit.
Advantages of Capitalism
There are many advantages to a Capitalist economic system which could make it very appealing to society.
The system allows the powers of market forces to operate which in turn gives the consumer a wider range of goods and services. Also because producers are always seeking the highest profit they must try to please the consumer and win their custom. This leads to innovation and greater quality and variety.
The firms which produce the correct goods and services will win custom and make profit, those which don't will go out of business and therefore release their resources to the successful firms. This will lead to the expansion of the economy and greater prosperity.
In summing up the advantages, it is clear to see that the consumer has the power to dictate the goods in the economy.
Disadvantages of Capitalism
As discussed in the advantages of Capitalism the consumer has all the power in the economy. However individuals purchasing power is drastically unequal because of the inequality of wealth within the economy. This is due to the fact that some people will always be able to work harder, be more innovative and be more talented than others, and therefore be more profitable and promote themselves higher in the ...
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In summing up the advantages, it is clear to see that the consumer has the power to dictate the goods in the economy.
Disadvantages of Capitalism
As discussed in the advantages of Capitalism the consumer has all the power in the economy. However individuals purchasing power is drastically unequal because of the inequality of wealth within the economy. This is due to the fact that some people will always be able to work harder, be more innovative and be more talented than others, and therefore be more profitable and promote themselves higher in the economy whilst others will fail.
Because of the inequality of wealth in a truly Capitalist society with no Government welfare great poverty will occur. This will lead to homelessness, slums, disease, etc. Forced migration will also increase these problems in large cities and towns. The people who cannot make any money in the countryside will move to the towns and cities with the belief of finding work and making money. In reality they will just add to the ever growing population of the poor classes.
In a Capitalist society the rich get richer and the poor stay poor. In the end this will lead to great unrest and low morale in the society.
Socialism
Socialism or Communism is the result of a planned economy. In this type of economy all the resources are owned by the state, and wealth is divided equally.
The state will plan what is needed to be produced to cope with the societies demands, and how to distribute goods.
Socialism emerged in response to the great inequality produced through Capitalism during the 1800s, and there were three main theories which people believed would solve the Capitalist society's problems, they were:
Democratic Socialism - Socialism through peaceful reform.
Revolutionary Socialism - Revolting against the existing system to achieve Socialism. This theory was put forward by Karl Marx who said that the proletariat will take control of the factories. This means the down trodden working class in the Capitalist society will revolt against their employers and form a Communist state, where people will work for each other to provide equality.
Anarchists - This theory involves rejecting Government authority and living in small groups or communes with no Government influence.
In 1917 the first major Socialist revolution occurred, this was in Russia and led to the birth of the Soviet Union. Since then Socialism has spread to other countries, such as China and Cuba and in 1988 included about one third of the worlds population. However the Soviet Union has collapsed and split into independent states, which are all trying to move to a more Capitalist society, but other countries are still Socialist.
Advantages of Socialism
Theoretically wealth is distributed equally in a Socialist society and jobs are provided for everyone, even though some are not productive. This provides personal security.
Also because the economy is planned the amount of goods and services which are needed are forecast in advance, this should meet necessary demand.
Disadvantages of Socialism
Socialism is a very idealistic theory and, as proved in many examples, such as the Soviet Union, doesn't always follow all the rules of pure Socialism and therefore creates many disadvantages.
For a start wealth isn't always distributed equally, the rulers of the state will live in luxury while others will not. The economy will also suffer from excessive amounts of bureaucracy and will be slow and cumbersome. Also there will be a lack of innovation, and goods will be of a poor standard because effort will not be rewarded. A doctor could earn the same as a street cleaner, this wouldn't make seven years at medical school a very appealing option
Socialism oppresses many aspects of human nature which, however good or bad, make us the individuals that we are, these aspects could include; ambition, greed and generosity.
A Mixed System For Society
For both Capitalism and Socialism the disadvantages far outweigh the advantages but they are the basis of most economic systems in the world.
In the United Kingdom both theories have been used, Capitalism was about at the time of the Industrial Revolution as explained earlier, and aspects of Socialism could be seen at the time of the second world war. At this time all people worked for the state in one way or another, whether it was fighting at the front-line or working in a factory to produce arms. Goods and services could be seen to be distributed fairly, this was done using ration books. This form of socialism was successful because everyone believed in the same cause, and that was winning the war.
Since the war the Government has still kept a lot of control but the opportunity for entrepreneurship is available. The economy in the United Kingdom is, as far as I can see, the only way a society can flourish. The Government tax people but provide, health care, infrastructure, education and welfare as well as owning certain industries to keep some form of economic planning available to them. However recently the Government has sold off a lot of nationalised industries and this has allowed for more competition and moves the economy in to a more Capitalist state.
Conclusion
In a Capitalist society there is great suffering because of the great inequality but in a Socialist society it seems that, even though the idea of everyone living equally in harmony is appealing, the fact of the matter is that the only equality that people will share is the equality of no choice and oppression.
True Socialism can never work in any society because it is human nature to want mare than you have and to strive to achieve this. Countries that say they are socialist seem to me to be more of a dictatorship.
A true mix between the two must be achieved to sustain a healthy economy and a happy society.
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Razi Khan
