Smith Stubbs

POLS 1100

Capitalism vs. Socialism

Today in the United States there is a discussion going on in regard to

whether the U.S. should continue with its traditional economic system,
capitalism, or adopt a more socialist economy. Much of this is due to the fact
that one of the candidates running for president is a self-proclaimed
democratic socialist. Which is why many questions arise such as, which
economic system is better? How does each affect the economy? Most
importantly, which economic system would work better in the United States?
Despite the rise in popularity of the idea of Socialism, in the U.S.
Socialism is still considered somewhat of a dirty word. This is largely due to
the fact that Socialism vs. Capitalism as an ideology has always been taken
from a basic moral perspective. To put it into an analogy, in socialism, if you
have two cows and your neighbor has zero, one of your cows is given to your
neighbor and now you each have one cow. In capitalism if you have two
cows and your neighbor has zero, it doesnt matter, you still have two cows

and your neighbor still has zero. The discussion of Socialism and Capitalism
in the U.S. has always been that basic concept of redistribution of wealth vs.
no redistribution of wealth. However that simple discussion has been rapidly
evolving to a more in depth look at both Socialism and Capitalism.
Outside of the basic moral analogies both economic systems have their
pros and cons, advocates of Socialism often point to how Socialism has the
potential to eliminate the different classes of wealth in society, guarantee
healthcare and college education to all, stabilize the economy and limit
corporate greed and corruption. Advocates of capitalism often point to the
importance of individual economic freedom that capitalism provides, as well
as the incentive and economic growth that capitalism creates. Of course
there many other points and counter arguments on both sides, as well as
historic examples of the failures and successes of each economic system. A
few of the current successful examples that socialist advocates look to are
the Scandinavian countries. While there is room for debate in regard to how
socialist each country is or whether theyre even that socialist at all. The
current candidate for president who is a self-proclaimed democratic socialist
still points to these countries as his idea of successful examples of socialism.
To do a quick side-by-side comparison of the statistics in regard to social
issues and the economy between the U.S., Denmark, Sweden, Norway,

Finland and Iceland this chart was compiled from information found in The
World Factbook on cia.gov:
GDP-Gross Domestic Product, value of all finished goods and services
produced within the boarders of a country.
GDP per Capita- GDP divided by the population
NA- not available
Country

% Of

GDP per

Global

Taxes &

population

Capita

ranking on

Government

below

economy size

Revenues as

poverty line.

(GDP)

a percent of

U.S.

15.1% (2010

$56,300

#3

GDP
18.1%

Denmark

est.)
13.4% (2011

$45,800

#59

55.6%

Sweden

est.)
14% (2011

$48,000

#42

51.8%

Finland
Norway
Iceland

est.)
NA%
NA%
NA%

$41,200
$68,400
$46,600

#63
#49
#153

57%
55.4%
41.3%

The statistic on economy size is to put in perspective the size

difference between the economies, it wouldnt be fair to compare the
Scandinavian countries to the U.S. without having in mind the size of the U.S.
economy and its economic diversity. As it can be seen on the chart the
Scandinavian governments have a relatively higher percentage of tax
revenues with lover poverty rates in Denmark and Sweden. All Scandinavian
countries but Norway have lower GDPs per capita than the U.S. With the
exception of Norway, the information shows that Socialism to some extent,
fulfills its purpose by lowering poverty rates, and lowering the GDP per capita
as well, thus partially closing the wealth inequality gap. The same goes for
Capitalism, it fulfills its purpose, the U.S. has a higher poverty rate, lower tax
revenue, but a higher GDP per capita than all the Scandinavian countries but
Norway. Thats not to say the U.S. is a perfect example of Free-Market
Capitalism or that all the Scandinavian countries are perfect examples of
Socialism, but it does give us a general idea of how each system affects the
economy.
One of the biggest reasons that socialism is a very talked about subject
in the U.S. at the moment is due to the extremely unequal distribution of
wealth in the United States. Only 5% of Americans control 74.2% of the
wealth in the U.S. (Klein 2013) this is the most unequal distribution of wealth

that the U.S. has had in its history. The question remains if Socialism is a
good solution for this problem? In theory it would work perfectly and create a
more equal distribution of wealth, in the examples given in Denmark,
Sweden, it has worked to some degree and created a lower poverty rate
while creating a lower GDP per capita as well, while Norway keeps a higher
GDP per capita than the U.S. Would Socialism work the same way in the U.S.
as it has in the Scandinavian countries? Despite the diversity and many
differences between the United States and Scandinavia its possible that
Socialism would work similarly in the U.S., but the biggest fear would be the
damage done to large companies with a higher tax rate as well as damage
done to the GDP per capita in the U.S.
There are a number of other historical examples of more ideal forms of
socialism and countries that have gradually changed their ideology to
capitalism such as China, or examples of failed socialism in Russia, or
Venezuela that we could compare to the U.S. but in the end, the United
States and capitalism have typically outlasted them ideology wise, and
outdone most of them in creating higher incomes as well as a bigger and
better economy. In todays world the U.S. with its large population, economic
diversity, large corporations, and an ideology built up around capitalism,
probably would not do well under a Socialist government. Todays Socialism

seems to work well in Scandinavian countries where there is much less

economic diversity, and a lower population.
There are many other ways to measure the success of socialism and
capitalism such as taking a look at the Health care and education success
under each system, the innovations created, the overall standard of living,
and quality of life that the population has under each economic system. In
the end it still comes down to the two cows and the same basic moral
argument. Should the good of the whole outweigh the rights of the
individual? And does our society value freedom or equality more? The
American ideology has typically valued freedom much more than equality,
but that could be changing very quickly. The only way to know for sure how
well an ideology and economic system like Socialism would work in the
United States today, would be to try it. At the moment its a risk that most
Americans arent willing to take.

Sources for Capitalism Vs. Socialism

Central Intelligence Agency, The World Fact Book, cia.gov

GDP per Capita

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

Percentage of population Below Poverty line

https://www.cia.gov/library/publications/the-world-factbook/fields/2046.html

Economy Size (GDP)

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html

Government Taxes and Revenues as a Percentage of GDP

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2221rank.html

Klein Ezra This viral video is right: We need to worry about wealth inequality Washington
Post 3/6/2013, 5/2/16
https://www.washingtonpost.com/news/wonk/wp/2013/03/06/this-viral-video-is-rightwe-need-to-worry-about-wealth-inequality/