Economic Systems: Similarities Between Capitalism And Socialism

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In all parts of the world, many institutions hold responsibilities for society to function properly. One of these intuitions that contain a significant amount of liability is the economy. The economy is an institutionalized system for producing and distributing goods (Brinkerhoff et al., 2014). Within the economy, there are two modern types of economic systems: capitalism and socialism. Although capitalism and socialism are both modern economic systems, there are similarities and differences between these two systems.
According to Brinkerhoff et al. (2014), capitalism is a market-based economic system based on competition that consists of buyers and sellers. In a capitalist economic system, most wealth is considered private property and use
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However, the idea of capitalism narrows to voluntary exchange, private property, competition and profit incentive. “Boundless” (2015) explained that voluntary exchange is the act of buyers and sellers freely and willingly engaging in market transactions. Moreover, transactions within a capitalist economy are in such a way that both the buyer and the seller are better off after the exchange than before it occurred (“Boundless”, 2015). The second idea of capitalism is the concept of private property. Sean Ross argued due to the fact capitalism built on the free exchange of goods and services between different parties; it is illegal for someone to trade property they do not own. Private property rights are central to a capitalist economy. The third idea of capitalism is competition. According to (2015), competition is the freedom to trade one's product, for one’s self-interest to gain the most profit. Lastly, profit incentive is to earn a profit of ones suitable for personal use. Brinkerhoff et al. (2014) continued to explain, unlike capitalism, socialism is a marked-based economic system in which the means of production individually owned, and use by society. In a socialist economic system, social resources can benefit all of the society, rather than those with wealth and power, by distributing resources more …show more content…
The benefits of capitalism are that individuals choose what to consume leading to more competition and better products and services. Goods and services produced based on demand create incentives to cut cost and avoid waste. In addition, capitalism leads to economic growth and expansion. However, capitalism can also be non-beneficial because it offers a chance to a monopoly power, inequality leading to social division and recession and unemployment. The benefits of socialism would be the absence of monopolistic practices, greater economic efficiency, higher social welfare, and absence of business fluctuations. The non-beneficial aspect of socialism would be the lack of incentive (Brinkerhoff et al., 2014). Socialist economy tends to be more equitable but not as productive. The article “The Capitalist Countries of the World” (2012), informed that Germany was an example of a country that benefits from a capitalist economy is Germany. Germany succeeds in a capitalist economy because they train individuals to achieve in different institutions such as banking and education. An example of a country that benefits from a socialist economy would be Australia. Sean (2015) reported, Australia has very low tariffs and secure private property rights. The government provides businesses with lots of flexibility and does not constrict them with

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