The socialism economy involves the abandonment of free voice to the individual at any rate as fundamental liberty, consumption, and production must fit into the central planning. The demerits present in the capitalism economy lead to the growth of the socialism economy.
Different economists have defined socialism in different ways according to load Jawed socialism is compared to a hat whose shape has changed since it is worn by many people.
An essential feature of the law of socialism accumulations is that its operations are accompanied by the development and consolidation of social prosperity and a steady rise in the well being of the people.
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Advantages or Pros of Socialism Economy
Deficiencies of capitalism economy are overcome by the benefits of the socialism planned economy.
Thus, the upliftment of socialism economy is done.
Socialism economy has following pros or advantages:
1. Optimum Utilisation of Economic Resources
Central planning is done for making the best utilization of natural and human resources for the betterment of the economy.
Global development can take place only by the best utilization of factor of production.
2. Economic Stability
Economic laws of socialism are present.
The balance between the demand and supply is maintained so that neither maximum production nor minimum production is done.
Related: 21 Pros and Cons of Capitalism Economy (With Examples).
3. Elimination of Economic Inequality
Equitable distribution of income and government ownership helps in removing economic inequality.
Thus, elimination of economic inequality is fruit for socialist economy rather than capitalist economy for socialist economy.
4. Absence of Exploitation
Exploitation comes to an end where the private motive is sacrificed.
Ownership is taken up by the govt.
So economic exploitation of resources is limited.
5. Elimination of Unemployment
Central planning authority on behalf of government gives the boost to employment.
It ensures that among all the factors of production, labour is the most important as it activates the other factors of production.
Related: 13 Advantages and Disadvantages of a Mixed Economy.
6. No Class Struggle
There is collective ownership of different factors of production which ensures the best utilization available resources of an economy and equal distribution. So there is no gap between having and have-nots.
Social parasitism comes to an end as the contribution of each individual is a must.
Read also: 13 Characteristics of Socialism Economy (With Examples).
7. Maximum Social Prosperity
Unemployment and exploitation come to an end when the best possible utilization of resources is done.
Social security is available to every class-leading to social prosperity.
8. Economic Equality
Equitable distribution of income and wealth is done in the social economy whereas the unequal distribution of income and wealth is done in the capitalist economy.
9. Social Security
In socialism, social security is available to each individual against unemployment, hunger, accident, poverty, and Death.
Whereas in the capitalism economy the social security structures are very weak.
Thus, Socialism is considered to be the best but many times people disclaim by saying that it leads to bureaucracy, red tape, and concentration of economic power in the hands of the state.
10. Elimination of Unemployment
Human resource is the essential factor of production, Thus the best possible utilization may lead to an increase in national income whereas in the capitalism economy corruption and unemployment have become a chronic disease.
Related: 5 Main Types of Disequilibrium in Balance of Payments (BOP).
Disadvantages or Cons of Socialism Economy
The Following are cons or disadvantages of socialism economy:
1. Unequal Distribution of Factors of Production
In the socialism economic, the planning authorities decide the basket of commodities to be produced.
Thus, The market mechanism operates in a free market economy is conspicuous by its absence in this economics.
In the socialism economy, the absence of pricing policy leads to unequal distribution of factors of production.
2. Bureaucratization
The owners of private Enterprises take interest in their work in capitalist economy.
But in socialism, the government gets the work done through their people who do not take so much interest and lack enthusiasm.
Related: 20 Importance of The Study of Business Environment.
3. Absence of Individual Incentives and Initiatives
In the capitalism economy, private ownership and profit motive are the two factors leading to initiation of the work carried out by the individual whereas in the socialist economy incentives and initiation is lacking.
4. Efficiency Not Properly Rewarded
Profit maximization leads to the best utilization of resources in capitalism.
In socialism, neither the proper distribution of factors of production is done and the absence of profit motive gives a serious drawback to it.
5. Concentration of Economic Power in Hands of State
The power gets concentrated in the hands of government or the state and Thus government may not work according to the desires and preferences of the consumers.
Related: Top 10 Difficulties or Limitations of Planning (With Examples).
Economic freedom and democratic rights of people are endangered because of the danger of authorization.
Examples of Socialist Countries
- China
- Denmark
- Finland
- Netherlands
- Canada
- Sweden
- Norway
- Ireland
- New Zealand
- Belgium
Conclusion
Many economists have given viewpoints in favor of capitalism and dislike socialism. When the comparison between socialism and capitalism is done there are serious drawbacks to it and Thus make life impossible.
The planners in socialism give importance to govt. Ownership of resources and made them available at proper time and place.
Many of the socialist countries are making an effort these days to overcome this lacuna by giving the market mechanism its due place in their economies.
Bonus: 15 Characteristics of Capitalism Economy (With Examples).
Under socialism, the system the workers of industry, agriculture, transport, and other sectors of the economy themselves become the joint owners of the means and result in production.
Lastly, decentralization, fixing ownership and feeling of development are the center points of socialism.
Thus, now you understand the pros and cons of socialism economy.
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