Debate topic #43. Which is better, capitalism or socialism?
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In a previous video, I focused on explaining what socialism’s all about. You should check that video out. In this video, I’ll talk about the difference between socialism and capitalism.
Let’s get started.
Conversations today have increasingly been dominated by the term socialism and capitalism, given the recent elections and the COVID-19 global pandemic and other current events. The topic is certainly polarizing. However, there are a lot of people who don’t really understand what these economic systems involve.
So what are they really? What is capitalism?
Capitalism means low intervention. Governments don’t really get to decide what their industries produce, how to produce, when to produce it, and the like. This means that the cost of goods and services are determined by the people and by market forces. If company X says that the price of their products is Y, then no one can tell them otherwise. In the simplest of terms, businesses are private, owned by private individuals or companies, and not by the government. This type of economy breeds entrepreneurship and innovation. If there’s a gap in the market, then people rush in to fill it. More than that though, it’s dictated by the law of supply and demand. If consumers are demanding a certain item, then companies will increase their production to meet it, which in turn increases its price.
Perhaps the most contentious thing about a capitalistic economy is how unconcerned it is about equity. In fact, some even say that it encourages inequality, arguing that this is essential to innovation and development. According to the 2019 index of Economic Freedom World Rankings, the current top 10 most capitalist countries are the following:
Number one is Hong Kong. Number two is Singapore. Three is New Zealand. Four is Switzerland. Number five is Australia. Number six is Ireland. Number seven is United Kingdom. Number eight is Canada. Number nine is United Arab Emirates. And coming in at number 10 is Taiwan.
Increasingly the United States ranks 12th on the list due to its massive government spending and overall poor fiscal health. Its tax burden is also considered to be weak due to how it limits taxpayer freedom. However, its advantages include strong freedom when it comes to labor, business, and trade.
So what is socialism?
On the other hand, the government plays a huge role in a socialist type of economy. They control or even own the majority of the country’s resources, which means that they get to decide what is produced, how it’s produced, and when it’s produced. An approach that is often referred to as centralized planning.
The government is also the one who sets the prices of goods and services. Although this can sometimes lead to either extreme shortages or extreme surpluses.
Socialism is hinged on equality, which is why it redistributes resources to ensure that the rich and the poor both receive equal opportunities as well as equal outcomes. The focus on equality is perceived by many to be the primary advantage of socialism. For them, shared ownership of resources and the effect of social planning means a fair and more just society.
However, its critics argue that this actually leads to inefficiency since people lack the motivation to innovate and to cut costs. They often referred to a joke under Soviet Communism. They pretend to pay us, we pretend to work.
According to an article from The Balance, the following four countries proclaim themselves to be communist yet have aspects of socialism: Cuba, Laos, China, and Vietnam. The last two in particular have strong, free market economies, despite their governments being controlled by their respective communist party.
Well, what are your thoughts on the topic? Do you prefer one system over the other? Let’s talk about it in the comments below. Don’t forget to like the video and subscribe to the channel. And remember, what’s learned here, leaves here. Share something you learned about socialism versus capitalism with a friend. See you later.