Capitalism and Socialism


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Paper Outline

  1. Definition of capitalism and socialism
  2. Thesis statement
  • Differences and similarities of capitalism and socialism in health care
  1. Differences and similarities of capitalism and socialism in education
  2. Differences and similarities of capitalism and socialism in retirement pension
  1. Conclusion

Capitalism and Socialism

Capitalism is an economic system, where productive resources are owned or employed by individuals. Socialism on the other hand is an economic system characterized by state control of all productive resources in the country. Capitalism is far much superior in allocating resources and promoting development than socialism. This is because it promotes efficiency and does not put a limit to aspirations of individuals to advance economically unlike socialism. To support this statement further, we look at the social issues of healthcare, retirement pension and education.

Similarities and Differences of Capitalism and Socialism in Healthcare

In both systems there are provisions for health insurance cover for citizens. Differences arise in the provider and the efficiency of the overall management. Healthcare is privately managed in a capitalist system. The state is only concerned with developing standards or institutions of checks and balances. Cost of healthcare is covered by health insurance companies. These companies make arrangements with health institutions that treat their patients based on the type of cover purchased by the patient (customer to the health insurance company). Cover varies based on the purchasing fee and risk associated with the purchaser (National Endowment for Financial Education, p. 7-8). Health facilities are businesses and ensure that their revenues are above their costs. They also seek to provide the best cover so as to attract the most lucrative patients. This makes health institutions much more responsive to trends in patient needs. Patients unable to purchase a cover rely on government for subsidies, and even so, health insurance companies provide products suitable for all income groups.

In socialism there is only one public social health system run by the state that provides a standard cover for all healthcare cases. It is inefficient in managing resources and responding to changing trends. Looking at Hungary as an example, before the Second World War, insurance was compulsory and covered occupational social risks like invalidity and accidents. The Hungary ministry of health was in charge of the health policy and everything under it. Health care wasn’t considered as a citizen right. There was a lack of investments in facilities and manpower. In this system all insurance funds companies were illegalized and every health care institution was nationalized (Exter, pg. 133-134).

Similarities and Differences of Capitalism and Socialism in Education

In both systems education is valued for its importance of impacting necessary skills to citizens so that they are able to contribute substantially in economic development.

In socialist economies, all education institutions belong to the state. The state makes the education sector homogenous and directs it to a social whole. The hind belief of the move is that all areas of the society including the economy are plannable (Rueschemeyer, p 81).For example; the Cuban government uses education to increase output per capita while putting a greater emphasis is put on collectivism in place of achievement by the individual. It’s a common practice for students together with their teaching staff to work in farms as they study. In Cuba even baby care institutions like nurseries other than providing their function of releasing mothers for productive labor, also trained little babies on collective consciousness. Since the state controls the education fully, subjects offered in schools are influenced by its strategy. In the Cuban example, there was a decline in agriculture caused by a labor shortage due to rural urban migration. To remedy the situation the government shifted emphasis from industrial development in 1963-64 to that of agricultural development. During the period, enrollment to universities agricultural sciences increased. The increase was as a result of the shift in government strategy. Socialist education is used to suppress individualism at the earliest possible age as demonstrated by the baby care practice in Cuba where babies aren’t put in their own cots and are forced to share every play item (Dale, p 374). It should be noted that in the socialist system, education riddled with bureaucracy since they are centrally managed by governments made up by politicians who are prone to misallocate resources of public funds (Walberg & Joseph p. 322).

In capitalist economies education is mainly for the private gain of the individual and community gain is assumed from the collective individual pursuits. Institutions are private and are run with the aim of making a profit in the most efficient way. Schools are heterogeneous and are ranked based on the facilities they offer and the quality of individual education, such that exclusive schools with restricted enrollments are considered prestigious because of the teacher student ratio. The amount of capital an investor wills to put in a school differs as well as the motivation and types of subjects taught hence the heterogeneousness. Capitalist education is consistent with the ethos of individualism and personal liberty. Consumers will to pay a premium above market rate costs to productive schools and this drives competition among schools which in the long run leads to well developed and efficient schools. They minimize any waste in allocation of resources since individual schools are in charge of their own development (Walberg & Joseph p. 322-324).

Similarities and Differences of Capitalism and Socialism in Retirement Pension

Retirement pension is treated as social benefit in both systems it is controlled by the state. It is the state’s obligation to ensure that its senior citizen is able to enjoy the living standard they were used to while working.

The differences in the two systems arise when we consider the extent of the state’s involvement in managing retirement pension. In socialism all pension liabilities are held by the state and it is forced to honor retirees’ claims as they arise, year after year. This structure is prone to failure should there be an increase in claims to levels that tax revenue collected cannot compensate. The pension systems of socialist countries are therefore not consistent with the objective of acting as a sound safety net. The senior citizens of these countries heavily rely on the state for their upkeep and lack personal savings since private enterprise is shunned by the state. The governments also are unable to fully support all retirees because they have insufficient reserves, a situation caused by low taxation revenues mainly attributed to a lack of adequate private enterprise in the economies.

In the capitalist economies, the state has allocated management tasks of pensions to private companies and has also allowed individuals to contribute as much as they can to pension schemes licensed in the country. In addition to management, pension companies are required to meet the obligation of retirees including those who do so earlier than the required age. Therefore these companies invest their members’ contributions in several sectors of the economy like the stock market so as to build a solid reserve able to honor increasing pension demands as the cost of living rises. The state’s role is minimized to that of regulation and enactment of legislation to prevent fraud and greed that may result in mismanagement. The contributions held by pension companies provide a cheap reserve that the state can borrow into to finance its development plans. In whole the privatization of retirement pension is beneficial because it leads to an increase in capital availability for development. Citizens are not limited to a static pension rate, they can increase their contribution so that they enjoy high retirement incomes and lastly citizens are free to choose the most well managed and pensionable scheme to join in addition to those provided by company and government (Jenkins & LaMotte, p 2-10).

States that have adopted capitalism grow faster, because sectors of their economies are run efficiently and emphasis is put on continuous research and development to improve processes or come up with faster and easier processes. Socialism is inefficient because it rests allot of important and timely decisions on the state that may lack machinery to function effectively in all economic sectors.

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