What is Socialism?
Socialism is a type of economic system where the means of production are owned and managed by the state or say public.
Socialism has also been known as a socialist economy. In socialism, the natural resources and the means of producing goods and services are collectively owned which means that the ownership of means of production is not allowed to private individuals or firms as happens in capitalism. The economic activities are carried on mainly for social welfare or gains and do not give importance to personal gains. Economic activities are planned with the motive of social benefit by the central planning authority.
In a socialist economy, it is the responsibility of the State to provide food, lodging, and clothing besides other requirements, by assigning a suitable job to each one of them. E.g. the economies of China and Russia after World War II are examples of socialism (i.e. socialist economy).
Basic Features of Socialism
Socialism is characterized in the following ways:
- It limits the rights to public property. The means of production (such as land and other resources) are owned by the state, and individuals are compensated based on the principle of individual contribution.
- There happens to be collective ownership in the mode of production.
- Right of what to produce, why to produce, for whom to produce, how to produce, etc. reside over the state.
- There is equal opportunity for all, as the large-scale industries are cooperative (owned by community), and so, the returns or benefits from these are distributed to the people equally.
- The economic activity, goal setting, and production are planned by the central planning authority of the state.
- Production of goods as well as services is oriented towards meeting the public needs rather than profit-making.
- Socialists believe economic inequality is bad for society, and the government is responsible for reducing it via programs that benefit the poor.
- Absence of competition.
- No economic freedom to the private individual or firms i.e. people is not free to produce, distribute goods and services.
- Assumed that entire inequalities between rich and poor ended.
- Class conflict is less likely to appear as more emphasis is given to social welfare and equality.
Pros and Cons of Socialism
Strengths/Advantages/Pros:
Following are the advantages of socialism;
Economic efficiency: Economic efficiency under socialism is greater than under capitalism, the means of production are not left in the market forces rather they are controlled and regulated by the central planning authority towards the chosen end. The central planning authority makes an exhaustive survey of resources and utilizes them most efficiently.
Social welfare: In a social economy, there is less inequality of income as compared to a capitalist economy because of the absence of private ownership of means of production. In a socialist economic system, everyone works hard and is paid as per his skills & ability.
Absence of monopoly: One of the advantages of socialism is that it is clear of monopolistic fashions to be found in a capitalist society. Considering under socialism all means of production are controlled by the state, the exploitations by the monopolist are absent. Instead of a private monopoly, there is a state monopoly over the productive system but this is operated for the welfare of the people.
Absence of business fluctuations: A socialist economy is also superior to a capitalist economy that is free from business fluctuations. Generally planned economy coordinates the action of various producing units, prevents discrimination between saving and investment, and makes full use of available resources. It can control overproduction and avoid general deflationary trends.
Economic growth: It considers economic growth as an important advantage of socialism because it adopts economic planning as a means of promoting rapid economic growth. A planned socialist economy functions right according to the plan in systematic and orderly manners and walks rapidly on the road to economic progress.
Limitations/Disadvantages/Weaknesses/Cons
Following are the disadvantages of socialism;
Lack of economic freedom: There is a lack of economic freedom. In a socialist economic system, everything is controlled by a centralized body. Individuals are not allowed to own any assets, everything belongs to the state. Workers are assigned specific jobs and are not allowed to change them without consent from the planning authority.
Inefficient services: In socialism, there is a lot of involvement of bureaucracy and are the drivers of all economic machinery. The work of civil servants is not comparable with the private entrepreneurs. Civil servants only do the jobs because it is their job and they will receive payment whatever the ends. Thus incompetence arises and in the long run, the economy suffers.
An artificial system: As a socialist economy is a planned economy, every aspect of the economy is to be determined by the government. Forces of demand and supply do not apply which is one of the disadvantages of socialism. Thus in the long run the economy becomes a state rather than wasted, whereas these make an economy prosper.
Consumers suffer: In the final analysis it is the consumer who loses out. The sovereignty of consumers does not apply in a socialist economy. Consumers do not enjoy the status of a consumer as in a capitalist economy. Choices of goods and services are able to maximize their total satisfaction.
Economic equality: Socialists claim more equal distribution of wealth but practically it is proven that complete economic equality is virtually impossible. There is a distinction between the rich and poor. Moreover, since it is a planned economy the poor suffer even more.
Non-existence of economic and political freedom: Freedom of enterprise, freedom in the choice of occupation, and many other essential freedoms for an economy to prosper are out-rooted from society. The true spirit of democracy dies away. Although it has been agreed that the six basic needs in life are met within a socialist economy but all this is obtained at the expense of economic and political freedom.
Non-existence of competition: It is due to the competition that an economy becomes prosperous. The competition between producers and consumers leads to the production of good quality products which may even be relatively cheap here it is one of the disadvantages of socialism. Thus talents and initiatives of mankind developed and in the ultimate analysis, the country incurs rapid growth.