Contemporary Economic Model

The Contemporary economies of the world, in my opinion, can truly be examined by two abstract models: Capitalism and Socialism. In this essay I will outline the defining characteristics of each economic model, and compare and contrast these two economic models in terms of economic productivity, economic quality and personal freedom and liberty. To do this we must begin by defining these two economic models:

Capitalism may be defined as an economic system where the means of production are privately owned and operated, and where the investment of capital, and production, distribution, income, and prices are determined not by government (as in a planned economy) but through the operation of a market where all decisions regarding transfer of money,

In a socialist society, there is no private property and, at least theoretically, everyone cares for those less fortunate. In this form of government everyone has generally the same amount of money, which means the rich person’s money goes to the poor so that everyone can be middle class. In its ideal form, a socialist economy rejects the characteristics of capitalism in favor of the following features:

1. Collective ownership of property. A socialist economy limits rights to private property, especially property used to generate income. Government controls such property and makes housing and other goods available to all, not just to the people with the most money.

2. Pursuit of collective goals. The individualistic pursuit of profit goes against the collective orientation of socialism. What capitalism celebrates as the “entrepreneurial spirit,” socialism condemns as greed; individuals are expected to work for the common good of all.

3. Government control of the economy. Socialism rejects capitalism’s laissez-faire approach in favor of a centrally controlled or command economy operated by the government. Commercial advertising thus plays little role in socialist

Karl Marx and Friedrich Engels claim that capitalism centers profits and wealth in the hands of the few who use the labour of others to gain wealth, which leads to monopolies or oligopolies. Whereas, although Socialist societies have a lower GDP, it is equally distributed, and thus individuals share a common standard of living.

In comparing Socialism and Capitalism, we must also discuss economic equality. Economic equality is the concept or idea of fairness in economics, particularly in regard to taxation or welfare economics. Socialism’s primary focus is on equity, Socialism is concerned with redistributing resources from the rich to the poor. This is to ensure everyone has both equal opportunities and equal outcomes. Capitalism is unconcerned about equity. It is argued that inequality is essential to encourage innovation and economic development. A comparative study of Europe in the mid-1970s, when that region was split between mostly capitalist and mostly socialist countries, compared the earnings of the richest 5 percent of the population and the poorest 5 percent (Wiles, 1977). Societies with capitalist economies had an