Capitalism and socialism are two alternative system that
can be followed by a society or a country. In capitalism or capitalistic system all the
means of production are owned and controlled by private individuals. These private firms
decide what to produce, how much to produce, and what resources and technologies to be
used. The firms pay for the input they use on the basis of prices decided by the market
forces. Similarly the process they can charge for the goods they produce is also
influenced substantially by the market mechanism. The firms take all the economic
decisions including the process charged for the goods manufactured and supplied by them
with the objective of maximizing their profits.
In
socialism, or socialistic system, the means of production are owned and controlled by
the people. IN practice this boils down to the means of production being controlled by
the government. While increasing the total welfare of the people, remains an important
objective of the socialistic system, another important objective becomes fair or equal
distribution of the economic benefits among all the population. Thus the economic
decision are not based on consideration of profit but on what is considered to be most
desirable and feasible in the interest of the people. However, in practice the
centralized the decision making in the socialist system becomes to complicated. This
results in delays and wrong decisions. In addition people in-charge of managing the
economy centrally may frequently deviate from the objective of public good to serve
their own selfish interests.
In practice neither pure
capitalist nor pure socialist system exist. Also neither of the system is free of
faults. The system best suited for a country or society may differ from country to
country. However in all cases the best system is likely to be a mix of the
two.
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