Describe your vision of a model economic system – is it capitalist, socialist, or somewhere in between?
In your answer be sure to compare and contrast the two major economic systems (capitalism and socialism).
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I do not see how anyone could seriously advocate a purely capitalist or purely socialist system.
A purely socialist system seems unlikely to work because it does not give people the motivation (profit) that seems necessary to make us selfish human beings work hard and be most productive.
A purely capitalist system would have too many of what are called "market failures" by economists. These include things like pollution caused by unregulated industries.
You need aspects of capitalism to get high productivity but you need aspects of socialism to mitigate the harsh effects of the greed that underlies capitalism.
Capitalism and socialism are two different models of organising the economic activities which may be considered as two directly opposing extreme models on a continuum of economic systems that combine the feature of these two systems in different proportions.
Capitalistic system is characterized by a means of production being owned and controlled privately and the economic decisions what is to be produced, how much, and how the the output of the economy is to be shared among different sections of society are the result of working of the market mechanism.
The other end of the continuum is socialistic system in which the means of production are owned and controlled jointly by the society, or rather by the government representing the people. Also the decision and what and how of production and of distribution of the products is decides by government policies and systems. This type of economies are also called command economies.
In real world neither of these two extreme or pure types of economies. It is not practically possible to have these pure type of economic systems. What does exist in reality are economise that are either predominantly capitalistic or predominantly socialistic. This indicates that the best system to have is a combination of capitalistic and socialist system.
Having agreed that a combination of capitalist and socialist system is the best, we are still left with the tricky question of how much of what system. The system that is appropriate for different countries may vary depending upon situation faced as well as effectiveness of implementation. For example, the experience of China with socialist economic system has been much more effective than many other countries.
Also a country may find it best to have one system to begin with and then to shift towards other system over a period. For example, India relied heavily on public sector for rapid development of heavy industries in India following its independence in 1947, but having achieved certain level of economic strength, it is now moving towards increasing reliance on private ownership. Another example is of countries like UK and USA. These countries are seen as hard core capitalist countries since beginning of industrial revolution. However over the years these countries are also gradually moving towards increasing government control of economic activities.
I would say that my vision would combine aspects of both forms of economy. I see the fundamental principles behind Smith's free market approach as preserving individual freedom and the pursuit of self interest. In the modern setting, I think that preserving this principle is of vital importance. At the same time, I think that the Marxist socialist approach of ensuring that all voices are heard and the largest who suffer under the burden of free market principles are provided for is of equally vital importance. The modern vision of a successful economic system in my mind is one that encourages individual freedom, but also provides a level of protection from business interests and the potential for oppression under free market economics.
Nations and societies struggle with this balance on a continual basis, but I think a hybrid of the two is the wisest course, especially when the socialized aspects of the economy have to do with public services such as the mail, mass transit, libraries, the fire department, police, and health care. To base any of these services on a profit capitalist model is to, at least in some cases, extort a population for what they need most and cannot refuse to purchase. If your house is on fire or you are diagnosed with HIV, I have a problem with profiting from those situations in any kind of just society.
But socialism in its pure form is obviously a failure. You cannot remove the profit and wealth incentives completely from a society or you stagnate in terms of production, spending and technology, not to mention in human capital. Capitalist systems with sensible regulations and some socialized services seem to produce the higher standards of living now found in the world.
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