What are the pros and cons of socialism and capitalism?

Summary #

Capitalism and socialism are based on two different ideals. Capitalism’s core ideal is freedom. Socialism’s code ideal is justice. This difference in ideals creates the different pros and cons of the two systems.

Explanation #

Capitalism and socialism are two different types of government. A government exists to maintain peace in society. People are innately selfish. They distrust each other. They can’t resolve conflicts peacefully. They tend to self destruct. A government stops this. It acts as a parent of society. It creates and enforces rules for the behavior of people. These rules curb the selfish behavior of people and keep society peaceful.

Capitalism and socialism differ in the rules of economic behavior. People need goods and services to sustain themselves. Capitalism and socialism differ in how these goods and services are produced. In capitalism, goods/services are produced by individuals/businesses. The means of production (money, land, machinery, intellectual property, buildings, etc.) are owned by individuals. In socialism, goods/services are produced by the government. The means of production are owned by the government.

The difference in ownership of means of production creates numerous differences in the life of people in capitalist and socialist societies. The essence of these differences lies in freedom and justice. Freedom (liberty) is the ability of a person to act as he/she pleases. Justice is the right of a person to be treated fairly in society. There is a trade-off between freedom and justice in all forms of government. A society cannot have both high freedom and high justice. For example, in a free society, weak people will be abused by strong people. In a just society, speech will be censored to safeguard people from verbal abuse. In capitalism, freedom is given higher priority than justice. In socialism, justice is given higher priority than freedom.

The essential difference between capitalism and socialism #

All pros and cons of capitalism and socialism are derived from freedom and justice. The pros of capitalism come from freedom. Its cons come from its lack of justice. The pros of socialism come from its justice. Its cons come from its lack of freedom.

Pros of capitalism #

• Freedom of choice in goods and services
  • People cater to each other’s needs. A wide variety of products and services are produced. Competition among producers makes products better and cheaper.
• Self-determination
  • People have the option to work towards improving their lives.

Pros of socialism #

• Equality
  • Everyone gets goods and services to sustain themselves irrespective of their genetics (race, gender, mental abilities, etc.). There are no classes in society.
  • People get paid fairly for their labor. People cannot earn without labor (e.g., owning factories, living on rent of property, etc.)
• Society is disciplined and mature.
  • The government can prioritize important problems over un-important problems of society. For example, the government can work on long term problems like environmental preservation, human happiness over short-term problems like making better automobiles or home appliances.

Cons of capitalism #

• Inequality
  • Inequality arises due to differences in the genetics of people. People could become rich or poor, based on their genes. For example, an intelligent person is more valuable to a capitalistic society than an unintelligent person. So an intelligent person becomes wealthy while an unintelligent person will struggle to sustain himself.
  • Inequality arises due to ownership of capital and assets. The rich get richer, and the poor get poorer. It is easier for rich people to make money than poor people. This is because the rich make money through investments, and the poor make money through labor.
• Society suffers due to the immaturity of consumers and businesses
  • Consumers and businesses only think in the short-term. Consumers only think about better products/services. Businesses only think about making more money. The bigger problems of society like the environment and human happiness are ignored.
  • Consumers are constantly manipulated by businesses. They are tricked into buying unnecessary products through marketing. They are bombarded with addictive products like entertainment. They are manipulated into adopting new values and moral codes which are profitable for businesses. All these manipulations aim to make consumers mentally weak and indisciplined as it helps businesses make more money. In the long run, a mentally weak society becomes chronically unhappy and unstable.

Cons of socialism #

• Below par goods and services
  • The government produces only essential products and services for the sustenance of people. It won’t cater to the unique tastes or needs of people. There is no improvement in products and services over time as there is no incentive for it.
• High risk of corruption
  • A socialist government has a broader scope than other forms of government as it controls all economic activity. So it doesn’t have checks on abuse of power. In capitalism, the corruption of business owners is kept in check by the selfish interest of competitors. The success of socialism depends heavily on the quality of leadership. A good leader will be empathic about the needs of the people. He will stop the abuse of power at all levels of government. He will use empathy to influence people and not tyranny. He will keep the interest of people in all decisions. A socialistic society will prosper under such a leader. A bad leader, on the other hand, will create corruption from the top down. People will suffer, and the whole system will collapse due to public distrust of the government. A socialistic system is not conducive for the selection of good leaders. This is due to the high power difference between the people and the government. New leaders come to power through connections with old leaders and not using their leadership skills. Such leaders tend to be corrupt. The leaders who found a socialistic government tend to be good as they rise to power through their leadership skills. But the leaders who come later are not as good. This is why socialistic societies are stable in the beginning and slowly become unstable with the loss of founding leaders.