Capitalism vs Socialism

Basic Definitions

Capitalism• an economic and political

system in which a country's trade and industry are controlled by private owners for profit, rather than by the state

Socialism• a political and economic

system in which the means of production, distribution, and exchange should be owned by the state.

• (and eventually by the community and become communism)

Is communism or capitalism natural?

Evolution of Capitalism• Before 1200 CE – takes money to make money– One person puts in all capital and takes all the risk

• After 1200 CE – can borrow money and start a business – More people able to become business owners– Risk still all on 1 person or family

• 1700 CE – Joint Stock Companies– Divides risk up among share holders• Stock – a piece of the company• Made for larger business ventures

Industrial Capitalism

• An economic system that relies on investments in machines and technology that are used to increase production of marketable goods

• During the industrial revolution farming techniques are developed which created food more efficiently and brought food prices down– Wages were high in Great Britain so people had

disposable income– Money to buy means more demand

• More productive farming led to less farmers and more labor for factories

• (this also means child labor)• Capitalism in also a cultural system, rooted in

the need of private investors to turn a profit

The Pros of Capitalism

• Innovation – New inventions to make more money

• Competition – drives better quality at lower prices

• Possibility for individuals to climb the economic and social ladder (get rich)

Problems with Capitalism in 19th Century

• Seeking profits means keeping costs down– Wages – (keep them as low as possible)– Lack of safety features (working conditions)– Environmental destruction– Income gap with many living in very poor living

conditionsAll of these will later be battled by the development of labor unions (except the environment)

Marxism/Socialism

The other reaction to Capitalism• Class struggle• People should rise up and overthrow the capitalist

industrialists• The people all own the means of production• Therefor everyone is equal and all help for the better of all• Everything is shared and supplied by all or the state

Problems with Socialism

• Why work harder?• No drive for innovation• No reason to make higher quality stuff• Only works if everyone in on board