Shely

S. Wyatt Shely
Ms. Caruso
UWRT 1103-037
6 October 2015
Using Socialism and Capitalism to Reduce Poverty
Poverty is an issue that affects humanity on every continent of the globe. It is an
international problem that strips people of their dignity, deprives them of basic necessities, and
cripples their ability to flourish in society. Even in the twenty-first century "poverty remains a
global problem of huge proportions. Of the worlds 6 billion people, 2.8 billion live on less than
$2 a day, and 1.2 billion on less than $1 a day" (Wolfensohn VI). Although it would be ideal to
totally eradicate povertys existence, the first step is to identify the most effective and efficient
ways it can be reduced. Scandinavian countries such as Finland, Denmark, and Sweden are
examples of nations effectively reducing poverty through the employment of capitalist and
socialist principles within their economic and political system. In fact, they are noted for some
of the lowest poverty rates in the world (Miller par.1). In order to cause a considerable reduction
of impoverished populations, there needs to be a complementary utilization of capitalist and
socialist principles.
The majority of countries in todays society contain a combination of political and
economic systems: In the modern era, a solely capitalist or socialist nation does not exist. The
United States, thought to be a capitalist nation, has socialist aspects such as welfare, a publicly
governed military, and the Federal Drug Administration. Alternatively, predominately socialist
nations, such as Denmark and Finland, have transitioned their tax policies with more capitalist
tendencies. The primary distinction between these two political and economic systems is the

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ownership of the production and distribution of goods and services. Capitalism is based on the
private ownership of capital and production inputs, and on the production of goods and services
for profit (Definition of Capitalism). A capitalist society develops entrepreneurs and breeds
innovation. Theory on Capitalism furthers Definition of Capitalism by specifying that
capitalism is open to new ideas, new firms and new owners (Theory on Capitalism).
Socialism is antonymic to capitalism. Rather than promoting competition, socialism promotes
communal equality through a system of collective or government ownership and management
of the means of production and distribution of goods (Socialist Ideologies). Socialist society
stresses the need for free education, free universal healthcare, and other programs that help meet
the needs of the people in society (Maass par. 2). Capitalism runs through private ownership and
action, while socialism runs through governmental ownership and action. These two contrasting
political and economic systems develop opposing ideals of how to approach the issue of reducing
poverty within their societies.
When assessing strategies to decrease poverty, capitalists do not believe that it is
effective to distribute money as handouts to those in need, hence their critical attitude toward
top-down government funding as a strategy (Shirima 2). John Stossel has witnessed proof of
Dr. Shirimas claim that government funding is ineffective. Stossel remembers when President
Johnson was in office, there was an incredible amount of money being spent on government
programs aiding the poor, and the poor stayed poor (Stossel par. 3). Perhaps a more successful
method would be to utilize privately owned charities that are locally based. The privately owned
charities are more acquainted with the problems connected to poverty in their specific regions,
and therefore, will be able to address the problems more productively.

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In a capitalist society, economic growth is created from the private sector through the
formation of new businesses that provide jobs and stimulate the economy. In an experiment to
determine the relationship between the increase in entrepreneurship and the decrease in poverty,
Dr. Shirima concluded that policy efforts should be directed towards promoting innovation and
entrepreneurship (Shirima 10). When people feel as though they can create businesses, the urge
to work and climb out of poverty is stimulated. Two missionaries, Marc and Craig Kielburger,
have experienced Dr. Shirimas conclusion on many visits to developing countries. One
experience in particular involved meeting an impoverished 13-year-old boy on a visit to India.
The boy was asking for money to purchase a carom board (similar to an air hockey table), in
order to create a business where renting the table to people. This was his plan to escape the
shackles of poverty. This boy knew he had to take initiative to rescue himself from poverty
instead of begging on the streets for the rest of his life. Contrary to the non-profit sectors belief,
entrepreneurship is a key player in ending global poverty by reversing the cycle of dependency
with a cycle of self-sufficiency and employment (M. Kielburger, C. Kielburger 13). This
entrepreneurial notion aligns with what an old Chinese Proverb says, Give a man a fish and you
feed him for a day; teach a man to fish and you feed him for a lifetime. Entrepreneurs that
create businesses, enhance economic growth by generating incomes, creating employment
opportunities, paying state taxes and making available varieties of goods and services at
competitive prices (Shirima 3). Capitalists believe that entrepreneurial economies are vital for
the reduction of poverty. The constant filtration of non-beneficial businesses along with the birth
of new innovative businesses adds a sense of competition to pro entrepreneurial economies
(Oghojafor 8). The capitalist strategy for minimizing poverty is to promote entrepreneurial
efforts that create positive economic activity such as creating jobs, and to keep the government

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out of the private sector including privately owned charities in order to support the more
effective private sector.
According to the Socialist Labor Party of America, socialist society promotes freedom
and opportunity to everyone, through the collective ownership of factories and production
(SocialismIts Meaning and Promise sec. 6 par. 1). This allows for everyone in society to
share the benefits of production, rather than the private owners of industry in a capitalist society
reaping the profits (SocialismIts Meaning and Promise sec. 5 par. 4). Nations that are
predominately socialist in todays society do not mandate collective ownership of factories and
production to the extent at which socialism is usually defined. Socialist leaning nations apply the
principle of communal sharing of the benefits of production by constituting higher taxation rates
that pay for socialist services. These services include free healthcare, free education, and
substantial welfare systems for all citizens (Peerform sec. 4-7). There is evidence of many
countries utilizing these socialist principles to improve the standard of living of their people,
while also having a profitable economy. For example, Norway provides free healthcare to all its
citizens, but also maintains a prosperous economy (Gilbert 2-3). To go along with this previous
example, Christopher Helman noted that many of the most prosperous countries in the world are
Scandinavian countries (Norway, Denmark, Finland, and Sweden) with socialist style
governments that focus on generous welfare benefits and lots of redistribution of wealth, yet
they maintain civil liberties (Helman sec. 2 par. 9). People have two polarizing points of view
regarding which political and economic system is the best for reducing poverty. Socialist
supporters give a large amount of faith and control over to the government, while capitalist
supporters have little faith in the governments effectiveness.

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The reduction of poverty in socialist leaning Scandinavian countries, noted by Helman

and Gilbert, contradicts Dr. Shirimas and John Stossels notion that government funding is
ineffective. Through the point of view of Shirima and Stossel, it seems as though the
government is siphoning money out of the private sector through taxes, which can slow
entrepreneurship and innovation. Marc and Craig Kielburger concur with this idea having
witnessed the relationship between entrepreneurial motive and poverty. So how are these
Scandinavian countries reducing poverty with the provision of socialist services, and without a
reduction of entrepreneurship?
The Scandinavian countries (Finland, Denmark, Sweden, and Norway), with the lowest
poverty rates in the world, have combined the best of capitalism and socialism in order to
reduce poverty to a record low (Miller par. 5). The use of socialist principles is exemplified
through the governments provision of all the components needed to flourish in society such as
equal rights and access to healthcare, social services, education and culture (Miller par. 3).
Capitalism is symbolized by the Scandinavian countries motive to promote entrepreneurial
efforts through education and policy changes. The common denominator of all countries with
low poverty rates is their proficiency of fostering entrepreneurship and opportunity (Helman
sec. 3 par. 9). The best method to reduce poverty is to use the capitalist principle of promoting
entrepreneurship and innovation into society to strengthen economic development, while
simultaneously providing socialist principles such as free healthcare, free education, and a strong
welfare system, in order to provide for citizens basic needs. This creates a sense of security and
inspiration within a society that promotes growth and decreases poverty.

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Works Cited
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Stossel, John. "Capitalism Does Much More for Poor People Than Government Playing Santa
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