Capitalism Is Superior to Socialism

BUSINESS ETHICS EASSY PHI2043F
STUDENT NAME : Xiaoyun Fan
STUDENT NO: FNXXIA002
TUTOR: Gabriele James

Why Capitalism is superior to Socialism
Introduction : Difference between the two economic system
Capitalism is an political and economic system in which individuals own the major portion of economic resources and create the goods and service for profit. All the production, distribution and exchange of wealth are made by the individuals or companies without the interference of government. There is no central governing institution which set the production goals for the individuals, the private owners decide what and how much amount to produce by themselves according to the market demand. Everything is operating in the free market system. However socialism is on the opposite side of capitalism. Under socialism ,the individuals are not able to have their own capital and properties, everything is governed and planned by the government and all the productive equipment and resources belongs to the public. Socialism emphasized on distributing wealth so that everyone would receive the equal amount of income.

Mixed Economies
In the real world , there are only few countries belong to pure socialism or capitalism. Most of countries apply the mixed economic system. For example , United States is considered to be a capitalist, but the Social Support System which help the people who are not able to work is the socialist. However we can see from the fact that the European countries and USA which apply the capitalism as the major economic system are more developed than the countries which are the socialist like North Korea. Capitalism is a better economic system than socialism.

Moral justification of capitalism
The moral justification for the capitalism is that it’s the only system that provide for and protect the individual and his right to exist for own sake. Capitalism provide the equal opportunity to everyone and there is no discrimination in such society. The economic value of a man’s work is determined, people get their return and payment depend on the work they did and the value they have created. Capitalism respects individual rights by respecting the concept of property right which provide the incentive for each individual to pursue his own goal. Capitalism allows the individual to decide what product or service is most valuable and through the free-market system, it creates the mechanism of competition which makes the producer to provide the goods with good quality and lower price in order to survive in the society. Capitalism provides the reward to all the parties in market :producer, consumer and service provider, it promotes the whole living standard in the society and result the economic efficiency which maximize the happiness.

Failure of socialism
As I have mentioned above that the capitalism provide the incentive for the individuals to pursue their own interests and goals. More rewards will be received when you put in more effort to create value in the market. These kind of incentives guide the economic behavior and ensure the economic system operating efficiently. However under socialism, incentives only play a minimal role or have been ignored. An planned economy system without profit or loss and market price, where the property is owned by the public, lacks the an effective incentive mechanism which is able to guide the operation of economic system in a correct way.

In 1949, The People’s Republic of China was formally established, at the beginning of the development of China. The Chinese government governed the country on the basis of socialism and they believed that is the best way to achieve the ideal society, but the truth is that socialism negatively affected the development of China. Under socialism in China, all the property(for example: factory, vehicle, house, productive equipment, land and so on) is owned by state. All the students graduated from the high school will be able to allocated to different factories, most of the students could get the jobs, therefore the unemployment rate was very low in that circumstance, that might be the only advantage of socialism in China. It’s not necessary for the students to get higher and better education, because a university graduate normally received the same income as a high school graduate. Socialism emphasized on the distribution of wealth, it provided the equal payment to individuals not the opportunity. No matter how much work you have done or how much knowledge or skill you learned, you would get the same return as the rest of people. The profit or loss of the companies has nothing to do with the employees, because they are owned by the country and not related to the individuals’ benefit. Without the private ownership and benefit, people could not be motivated to work hard and efficiently and eventually slow down development of China. Socialism is inconsistent with the human nature (self-interest). Until the Economic reform in 1978, the new Chinese President Xiaoping Den realized the defect of socialism and started the economic reform, he decentralized the government control in industry sector and encouraged the individuals to start their own business. Den moved Chinese economic system from pure socialism to mixed economy which is an significant step in Chinese development history.

Advantages of Capitalism
It’s very obvious that the economic development under the economic system with major capitalism is much faster than under socialism. Capitalism ensure the firms operate under a competitive, profit-and-loss system of accounting . The profit-and-loss system is a monitoring mechanism which evaluate the financial performance of the enterprises, only the companies that are the most successful at satisfy the public interest would be rewarded with profits. The companies that operate inefficiently and are not able to meet the market demand would experience the loss. Competition forces the enterprises to do the best and stimulates the growth rate of economy.

Under socialism, central planning becomes the way to govern the economic system. There is no profit-and-loss system to measure the success or failure of the company. Without such monitoring mechanism and competitive circumstance , the frims do not have the incentive to coordinate economic activity therefore it’s impossible for them to operate efficiently under central planning.

If the assets are publicly owned, there are no incentives in place to encourage wise stewardship. While the private property create the incentive to maintain and responsible use of property. Public properties normally result the waste and mismanagement, because if something does not belong to you, you will not use it carefully. Nobody will take care of something which does not belong to him. Capitalism emphasized on the private property rights which help the people to allocate and use the resource efficiently , reduce the wastes and impairment of the resource.

Capitalism rewards merit, socialism rewards mediocrity. Under capitalism, only the people who produce get the payment. More contribution you made to the market and society, more rewards you would received. Capitalism encourages people to make the best use of their knowledge and skill. Under socialism, the rewards are provided to everyone without any condition , it’s not necessary for people to work hard, therefore the whole production of the market reduced which resulted more poverty.

With capitalism, more choices are available in our normal life, we could eat low-fat food, organic food and a plenty of diet easily accessible, advanced medical services are available around us and maintain our health. Fast development in IT sector make the communication and information transferring more quickly and easily. At school you selected your favorite subjects and could study them as much as you wanted, followed by applying to a job you chose from the widest variety ever seen in history. This is what capitalism able to provided to you: freedom to live your life the way you want. All of these contributes to the extreme fit society with a significant influrnce of capitalism.

Conclusion
I have made the argument above and Capitalism has all the advantages of socialism and none of its defect,

Bibliography
CAPITALISM REMAINS OUR FUTURE By Allan H. Meltzer