Abstract
The paper reviews the two different types of government administration; capitalism and the socialism. The capitalism structure entails generation of wealth by private entities and people through investments. In this type of structure, wealth is owned by the individuals or organizations that generated the wealth. The socialism structure is almost similar to the capitalism structure. However, the significant difference is that in socialism structure, the government controls ownership of property. These two structures have differences and similarities. There are few similarities between the capitalism and socialism structures while there exists a large gap of differences between them. Socialism structure came into place with the aim of protecting workers employed in the private sector against exploration. The socialism structure was put into place to liberate employees in the 16th century. This proves the notion that capitalism is the mother of socialism. The paper reviews the historical background of these structures, their differences, and similarities.
A brief history of capitalism
Capitalism entails the use of wealth to generate more wealth. Capitalism is popular in the private sectors where firms are aiming to make profits by investing in the economy (Sachs, 1999). The simplest method of capitalism is lending money to debtors and charging some interest from the cash. Capitalism can be traced back to the 13th century, where it rose as a result of an increase in trade activities in the European nations (Sachs, 1999). The prosperity of these business activities also contributed to the development of capitalism. During this era, the capitalism had not evolved since businesspeople used to get their cash by investing in other nations. The 14th century shows a stronger kind of communism where banking activities are in place (Sachs, 1999). In the 16th and 17th centuries, communism grew at a high rate due to the formation of private stock companies and growth of private industries and factories (Sachs, 1999).
A Brief History of Socialism
Socialism grew as a result of the success of capitalism. Socialists believed that the working conditions for employees working for the capitalists would be improved if the production process control would be transferred to the state from the capitalists (Rueschemeyer & Stephen, 1992). Socialists wanted to replace the wealthy investors with the government but still maintaining the businesses. They had observed that employees working for the capitalists were being exploited even after generating large profits for them. During the industrial revolution in the world, socialism was very popular since it was used as a means of protecting the employees working in these industries. Socialism grew to become an effective way of government in the world in the 19th and 20th century (Rueschemeyer & Stephen, 1992). The founders of the socialist theory, which led to the growth of socialism, were Engels and Marx.
Similarities between Capitalism and Socialism
Socialism is a form of capitalism, which involves the government owning the states property rather than being privately owned. Every employee in both capitalism and socialism is rewarded by the efforts that he/she puts in work (O'Connor, 1989). In capitalism, employees are rewarded by their abilities to work as well as in socialism. The only difference in this is that the rewards in capitalism are owned privately by the employee while in socialism it is owned by the government. However, in both of them, the employees have the rights to enjoy their earnings.
In socialism and capitalism, the industries, other means of productions and the products are owned by entities (O'Connor, 1989). The only difference is that they belong to different entities. In capitalism, assets are owned by private entities. In socialism, people and other private firms can own their properties, but they are kept under close watch by the government to prevent exploitation of consumers and other citizens.
In both structures, labor and capital are regarded to be the cornerstones of any economy (O'Connor, 1989). However, both systems do not have a common interest on who should own the resources. Also, both systems regard wealth as the measure of the economy (O'Connor, 1989). The capitalists believe that the wealth should be left in the hands of the private firms for a fast economic growth while the socialists believe that the wealth should be left in the hands of the government to ensure that there is equality in the state and economic growth.
Differences between Socialism and Capitalism
Capitalism and socialism are two different economic structures. In capitalism, the private or corporate are given the mandate to own trade and the industry while in socialism the government has the control over economic activities in the state (Schumpeter, 2013). Socialism advocates equality and fairness in the society whereas capitalism advocates innovation of individual groups. The means of production are privately owned in a capitalist state while in a socialist state they are owned socially.
In capitalism structure, the prices are set and determined by the market force while in a socialist structure they are regulated and determined by the government (Schumpeter, 2013). In a capitalist structure, there is a high competition between the firms as they try to outdo each other (Boswell & Chase-Dunn, 2000). However, in a socialist structure competition between firms is weak and in some situations, there is no competition at all. In a socialist structure, there is much government interference unlike in capitalists structure (Boswell & Chase-Dunn, 2000). In a capitalist structure, every person works toward creating his/her wealth while in a socialist structure wealth is equally shared among all the citizens in the country. The capitalist structure is more efficient than a socialist structure.
Conclusion
Capitalism is a structure that allows individuals to work hard to get wealth while socialism is an economic organization that advocates that the government should regulate any wealth generated in a nation. Some of the differences exist on the nature of markets, the creation of wealth, ownership of the wealth and price setting (Schumpeter, 2013). Some of the similarities are that both regard capital and labor as the bases of any economy and wealth as a measure of the economy.
References
Boswell, T., & Chase-Dunn, C. K. (2000). The spiral of capitalism and socialism: Toward global democracy. Boulder, CO: Lynne Rienner Publishers.
O'Connor, J. (1989). Political economy of ecology of socialism and capitalism∗. Capitalism Nature Socialism, 1(3), 93-107.
Rueschemeyer, D., Stephens, E. H., & Stephens, J. D. (1992). Capitalist development and democracy. Cambridge, UK.
Sachs, J. D. (1999). Twentieth-century political economy: A brief history of global capitalism. Oxford Review of Economic Policy, 15(4), 90-101.
Schumpeter, J. A. (2013). (2013). Capitalism, socialism, and democracy. New York: Harper Perennial Modern Thought.
