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Economic System - Mixed Economy, Socialism, Capitalism | Merits & Demerits

Supporters of capitalism have given many arguments in favor of capitalist system. They say that the society gets many benefits from capitalism, due to which the capitalist system is better than other types of economic systems. Generally the following arguments are given in favor of capitalist system.

Economic System - Mixed Economy, Socialism, Capitalism | Merits & Demerits

Flexibility

It is said on the basis of experience that American capitalism has been changing itself according to the circumstances. He can adapt himself to the conditions of war and peace. In addition, it adapted itself with first rapid and then slow technological progress. It has been able to adapt itself from time to time even with the abundance and rarity of resources. The origin and development of mixed capital companies is a clear proof of the fact that the capitalist system has the power to adapt itself to the changing circumstances. Mixed capital companies were developed to solve the problem of pooling a large amount of capital in one management. Similarly capitalism could adapt itself to increasing government control. The existence of such elasticity in capitalism has been able to keep it alive so far.

Economic System
Economic System Merits Demerits

Victory Of The Fittest

Competition is found everywhere under capitalism. In this free competition, only the fittest producers are able to survive. The unskilled producers are not able to survive in the competition for long and they cease to exist. As a result, consumers are freed from unskilled producers.

Promoting More Production & Capital Formation

Under capitalism, the right to private property inspires people to work harder and produce more so that they can earn more money and wealth. Due to the right of inheritance, people save more, this encourages capital formation in the country.

Maximum Satisfaction

In the capitalist economic system goods are produced according to the interest of the consumers. This gives them maximum satisfaction.

Personal Care

In a capitalist economy, production is done for the purpose of private profit. Therefore, each producer does his production work very efficiently and with personal care, so that maximum profit can be obtained.

Full Exploitation Of Natural Resources

The proponents of capitalism claim that in a free economy, where every individual works for maximum profit, it is possible to fully exploit all kinds of resources. By making possible the full exploitation of its natural and human resources, American capitalism has brought that country to the zenith of economic development. In a capitalist economy, every individual tries to maximize his profit in the event of competition, for which he makes the best use of maximum resources. There is no long-term tendency for resources to remain idle, except during a recession, when machines and labor have been largely idle. Even with technological progress, unemployment has not increased there.

More Personal Freedom

A very big argument is given in favor of capitalism that in this type of system the individual has more freedom. Individualism is the basis of capitalism and is largely responsible for its success. Capitalist economic membership can be granted. It is not possible to give so much individual freedom in socialism, so capitalism and democracy and socialism and dictatorship are considered to be similar to each other.

Arguments/Flaws In Opposition To Capitalism

The arguments against capitalism are as strong as the arguments in favor of it. With the development of capitalism in England and America, many economic and social defects have arisen on the basis of which capitalism is mainly criticized. Some of the important arguments given in opposition to capitalism are as follows:

Economic Inequalities

The biggest basis for criticism of the capitalist system has been that it unequal the distribution of income and income in the society. Economic inequalities create social and political inequalities, due to which the situation of class struggle in society remains constant. Economic inequalities in capitalism arise because of some of its basic institutions. The free market system, which is an integral part of capitalism, is primarily responsible for creating inequalities of income.

Inequality of Distribution Income

There is a great restriction on the productive power of capitalism, due to which maximum production of wealth is not possible in capitalist society. In a capitalist society, due to the exploitation of workers, the income of most of the people remains low, as a result of which there is a lack of demand in the society. Under capitalism, workers get very less share of their produce, due to which there is a lack of demand in the society, due to increase in savings and investment, there is a tendency to increase production, but the consumption of workers is not with that speed. able to grow. This lack of demand becomes a major obstacle in the way of the development of the productive power of the capitalist economy.

Lack Of Hormony Betweet Production & Human Needs

According to socialists, the drawback of capitalism is that production is not done according to the needs of the society. The capitalist production system is unable to coordinate itself with the basic needs of man. In the conditions of capitalism, production is done for the purpose of profit and it is directed by values. It is said that the prevailing prices in the market do not represent a true measure of the needs and wants of the people. Due to inequalities in the distribution of income, the intensity of people's needs cannot be measured accurately by prices. The needs of the poor people may not reach the market even though they are acute. Because they cannot demand them due to less income. On the other hand, rich people also have less urgent needs. For these reasons, in capitalist systems, the production machine is engaged in producing the goods of necessity for the rich people, while the goods of necessity for the poor people are also not produced.

Monopolistic Tendencies Are Found In Capitalism

The monopolistic tendencies are very strong in capitalism economy which does not allow full development of the productive forces of the society. In this type of system, producers reduce the production of goods to get maximum profit so that profit can be increased by selling them at higher price. Thus, the capitalist system gives strong incentives to limit supply by reducing output. This artificial scarcity of goods increases the profits of capitalist producers. But it reduces the production for the society.

Defect of Unemployment

The great weakness of capitalism is that it is unable to give full employment to the means. The conditions of widespread unemployment prevail in the capitalist economy, due to which there is confusion, wastage of capital and natural resources and national income remains less than the maximum. In capitalism, sometimes and only for a very short time, conditions of full employment arise and for most of the time there are conditions of unemployment in this type of system.

Social Cost of Capitalism

Capitalist economy is not only faulty from the economic point of view, but its social costs are also very high. Leaving industries to private operation incurs great burdens on society, which can be called social costs. Unemployment, business cycle, dirty industrial settlements, polluted environment, many diseases due to industries are some of these social costs. While evaluating capitalism we cannot forget these social costs of it. There may be some achievements of capitalism in the economic field, but the social cost of this type of economy remains very high. Pro. Pigou called these social costs the bankruptcy of capitalism.

Capitalism Generates Class-Conflict In Society

A task is also given in opposition to capitalist economy that it maintains social tension by generating class-struggle, which causes great damage to the production system of the society. In a capitalist economy, society is essentially divided into two definite classes with wealth and no assets. On the one hand, there is a class that owns the means of production and the government also decides how much distribution of goods and services will be done in which area.

Properties of Socialism

Best use of economic resources

Under socialism, the best use of economic resources is done. The reason for this is that in a socialist economy, economic activities are conducted and controlled by the central authority or planning board. The planning board estimates the economic resources of the country and prepares plans for their use. The means of production are then used to achieve predetermined production goals. Thus, in socialism, resources are used with great care in a planned manner, due to which the wastage is very less.

More equitable distribution

Socialists also claim that wealth is distributed more satisfactorily in liberal socialism. The government spends the available economic resources on public welfare schemes in such a way that maximum welfare of the people can be achieved. In this type of system the inequalities of distribution of wealth are greatly reduced, due to which it is possible to establish a society based on justice. Socialism gives equal opportunity to all the people in the choice of education and profession. In this type of system, the unearned income of individual people is completely eliminated. Due to these reasons the distribution of wealth in society tends to be more equitable.

End of Social Parasitism

In a socialist economy, no individual can depend on the income earned by another person. Each person has to work on his own to fulfill his needs. No person can acquire wealth without hard work because the rules of succession do not apply in a socialist economy.

End of Economic Exploitation

Where in capitalist economy one class exploits another class economically, in socialism the individual is not exploited by the individual. The reason for this is that the state has the right over all the economic resources of the country and the state provides remuneration to every person as per his requirement.

End of Unemployment

There is no problem of unemployment in socialist economies where other economies of the world are suffering greatly from the problem of unemployment. Through economic planning, the government provides employment to every person according to his ability, in a socialist economy, it is the responsibility of the government to make arrangements for livelihood for the people, so no person becomes unemployed.

In place of 'profit motive', 'social welfare objective'

In a capitalist economy, everyone has the right to own property, which they use for personal gain. This makes the rich get richer and the poor get poorer. In contrast, in a socialist economy, all the means of production are owned by the government, which it uses only for social benefits, the government conducts economic activities not with the aim of earning profit but with the aim of increasing the welfare of the people. Public services, such as education, health, etc., are provided free of cost to the public. The government increases social welfare through schemes like social security, pension, assistance to the destitute etc.

Economic Freedom

In a liberal socialist economy it is possible to give necessary economic freedom to the people. Although it is said that individuals get freedom in capitalism, but the reality is that capitalists intervene in every field and the poor are exploited economically, whereas in socialist economy all persons are treated equally and They don't care about livelihood

End of Business Cycles

The sum of one bullish period and one bearish period is called a business cycle. In capitalism, prices sometimes increase and sometimes decrease due to the action of business cycles. Due to this fluctuation of prices, there is always the fear of economic instability in the capitalist economy. But in a socialist economy, economic stability is established and maintained by eliminating business cycles. Thus economic stability is a great feature of socialism.

Disadvantages/Defects of Socialism

Violation of The Sovereignty of Consumers

Under the capitalist economy, the status of the consumer is like a king. He is free to use whatever he wants. This is called consumer's universality. In a socialist economy the consumer does not enjoy such sovereignty. Consumers cannot use goods of their choice. In society, the consumer has to consume only those goods, whose production is decided by the Central Planning Board. This violates the universality of the consumer in socialism.

Lack of Elasticity

One of the drawbacks of socialist economy is that it lacks elasticity. Once the goals are set, it is very difficult to change them.

Abuse of economic power

In a socialist economic system, power is concentrated in the hands of a few. These people take arbitrary decisions regarding production and distribution, ignoring the interests of the common people, when they start abusing economic power by autocratic behavior, then their behavior is like dictators.

The economy is run on the basis of bureaucracy 

Under socialism, the economy of the country is operated and controlled by the government employees, due to which economic decisions are taken very late which reduces the efficiency of the economy. Government employees do not have any personal interest like the employees of private industries, so they are careless about their work. They get fixed pay, their promotion is also not on the basis of skill only, so they do not get any incentive to do good and quick work. Due to all these reasons it is not possible to run the economy more efficiently.

Promotion of Corruption

It is also alleged against socialism that it encourages corruption in the assembly. The socialist economy would have been entirely in the hands of government employees. and they can abuse this right. On the contrary, the supporters of socialism claim that the control of private property and succession by the government reduces the opportunities for corruption. They say that large size There is more corruption in private businesses than in government businesses and by eliminating them, the amount of corruption in the society can be reduced.

Lack of Economic Incentives

The lack of economic incentives in the socialist economy has been a matter of special concern to the socialists. It is often said that in socialism, due to the disappearance of personal property and personal profit, there is no special incentive for the economic progress of the people, due to which people have less desire to work and save. In fact, no such problem is likely to arise in socialism, because modern socialism is in favor of maintaining a difference in the rates of wages and wages, which acts as an economic incentive for the people. Additionally, social. People can also be encouraged to progress through recognition. In fact, socialists want to eliminate the importance of economic incentives and develop other types of incentives.

Advantages/Properties of Mixed Economy

Due to the arrangement between capitalism and socialism, groups of both are found in mixed economy, hence it becomes superior to both. Following are some of the major benefits of mixed economy

Full opportunity to achieve the objective of private interest and profit

In this economy people have the right to keep private 'property' and to maintain competition in economic life. The necessary dynamism remains in the economy due to private enterprise and running industries with the hope of profit. Due to the competition in the industries, their level of efficiency remains high. The distribution of resources in the society is allowed to be influenced by the price instrument. As a result, judicious distribution of economic resources becomes possible.

Realization of the benefits of socialist central planning

  • Mixed economy is not an economy with closed eyes like capitalism. This economy is run like a predetermined plan. Therefore, most of the benefits of economic planning are achieved. Being a planned economy, the distribution of resources in all the sectors is more efficient and judicious. Since important industries are in the public domain, scarce resources are used for the benefit of the society. The public sector also disciplines the private sector and does not allow it to go beyond the limits of the plan. Apart from this, due to central planning, this type of economy is free from the cycles of business and progress takes place at a regular pace.
  • In mixed economy, the individual gets the necessary economic and political freedoms
  • One of the major advantages of mixed economy is that without reducing the essential freedoms of the individual, this economy makes possible central control and regulation. In the economic field, a person has the freedom to choose between consumption and occupation. They can take goods from the open market and consume them as per their wish. Apart from economic freedoms, the individual also gets the necessary political freedoms. For these reasons, a mixed economy is considered better than a communist system.

Social Justice

In a mixed economy, the government formulates economic, industrial and financial policies in such a way that the entire society can get maximum benefit from a broader perspective.

Reduction in labor-capital unions

In a mixed economy, on the one hand, the public sector plays the role of an ideal employer and on the other hand, the government makes provision of appropriate labor laws for the private sector. This is likely to reduce labor-capital conflicts.

Useful for Developing Countries

One of the major advantages of this economy is that it is the only useful economic system for developing nations, as these countries have limited managerial, technical and financial resources and economic activities are provided only by private or public sector. development needs cannot be met.

Access to Foreign Capital and Aid

In the present international situation, both capitalist and socialist countries of the countries with a passive economy and foreign investors have a lot of ease in getting foreign capital and aid.

For the reduction of economic inequalities

In a mixed economy, the income of rich people is limited by various types of direct and indirect taxes and on the other hand, efforts are made to improve the condition of the common man through policies bound by labor policy and social security. is .

Disadvantages Of Mixed Economy

Complete planning is not possible

One of the major drawbacks of mixed economy is that it is not possible to plan the economy completely due to the private sector and the freedom given to them, due to which many benefits of planned economy are not available. find. In this economy, a large part remains such, which is not effectively controlled by the government, in such a situation the success of the schemes becomes limited and sometimes the private sector becomes so powerful that it eliminates economic planning itself. Does. Therefore, the experience of many countries in this regard says that in a mixed economy the benefits of free trade are not realized.

Basis for maintaining capitalism

Criticizing mixed economy, some socialist thinkers say that this economy has been adopted to maintain capitalism and eliminate socialism. They say that the government which adopts this system is capitalist at heart and works only on the behest of the capitalists and nationalizes 10-20 industries to suppress the voice of the people. In their view, capitalists are very clever, they prove their selfishness by buying government officials and ministers. They try to make this system a failure and establish capitalism, by not investing their money in economic activities by unfair competition with state undertakings and by not giving necessary cooperation in the implementation of national plans.

Fear of Nationalization

In this economy, the private sector industries always have the fear of nationalization, so the expansion of old industries and the establishment of new industries in the private sector are encouraged. Critics say that when state enterprises do not run efficiently and private enterprises run successfully, the government nationalizes the private sector to hide its shortcomings.

Lack of stability in mixed economy

It is generally seen that mixed economy does not remain stable for a long time. The reason for this is that either the private sector becomes so powerful that it eliminates the socialist elements of this system or the public sector gets so expanded that it destroys the private sector. Due to both these reasons, mixed economy ends. Thus, on the basis of experience, it can be said that mixed economy either tends towards socialism or goes back to capitalism.

Decreased efficiency

It is often said in the criticism of mixed economy that in There is a lack of efficiency. Taking economic decisions in this economy is more difficult than in the capitalist and socialist system. In the capitalist system, economic decisions are taken with the help of price instruments and in socialism by the central authority. In the Egyptian economy, there is no effective method of making economic decisions, as a result of which the distribution of economic resources becomes excessive. Due to this, the operation of industries is also not done efficiently. Private sector industries are not able to run properly due to lack of adequate freedom and incentives and government interference also becomes a hindrance in their progress. Along with this, there is a shortage of qualified persons to run the public sector industries, due to which they are not able to operate efficiently.

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