Podoll 1

Jacob Podoll

Dr. Antonen

English 101, Essay 2

23 October 2009

Capitalism vs. Socialism

What are capitalism and socialism? Well the Webster-Online Dictionary defines

capitalism as “an economic system characterized by private or corporate ownership of capital

goods, by investments that are determined by private decision and by prices, production, and the

distribution of goods that are determined mainly by competition in a free market,” and Socialism

as “a system of society or group living in which there is no private property; a system or

condition of society in which the means of production are owned and controlled by the state.”

What does this mean though, and which is better? Capitalism, as will be seen, is the better

choice for everyone.

The best place to start would be from the beginning. Capitalism originally appears in

what is called “mercantilism” which originated in Rome, and the Middle East, in the early

Middle Ages (Hooker). “Mercantilism” says Hooker, could be defined as “the distribution of

goods in order to realize a profit.” This is as to say that a farmer would sell his grain to a

merchant who in turn sells that grain at a market for profit. He speaks of how Islamic merchants

greatly affected the European economy. “Mercantilism” gave many European countries the

“urge” to discover new lands and sources for cheaper products. Robert Hessen speaks about

“real competition,” an idea from early capitalists that also made products cheaper.

It would be inappropriate to discuss the history and aspects of capitalism without

discussing the history and aspects of socialism. “While a French revolutionary named François

Noël Babeuf is credited with the idea of doing away with private property to create equality and
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is often considered the first socialist, the concept wasn’t popularized until the late 1700s, when

the Industrial Revolution caused some drastic changes around the world” (Hoyt). She says the

reason is the shift from agricultural societies to modern industries. Even though there were many

small socialist communities, in large socialism remained an idea rather than reality (Hoyt). Then

in 1917 “Soviet dictator Vladimir Ilyich Lenin…put socialism to the test” (Hoyt).

After World War I socialism began to arise in many European countries. “Socialist

parties became active in the governments of Germany, Sweden, the Netherlands, Belgium and

Great Britain” (Hoyt). Then after World War II many of these countries, such as Germany, and

Great Britain reverted from socialism. Why? For what reasons have so many countries over the

years removed socialism from their countries and picked up other forms of government such as

capitalism? Think about it.

Companies are rivals under capitalism. This rivalry causes these companies to compete

for customers. This competition forces them to constantly develop better designs for their

products to “outdo the other companies.” As well as design, those competing companies must

always increase their performance to cut the cost of production to increase profit. For the

customers, the packaging needs to be made as appealing to the customer as possible. This means

that the packaging needs to be made to “catch” the customer’s eye, and also, the package must be

“convenient” for the customer (Hessen). Knowing that without a monopoly these companies

cannot set whatever price they want on their product, we can be at ease when we have not done

all our homework on what we are about to buy. With unbridled rivalry, companies feel

encouraged to offer assurances of security to un-informed consumers, such as money-back

guarantees or product warranties and offering brand names and reputations (Hessen).

Under these conditions a company can grow and expand, but just as easily it can be over

taken by the companies that grow faster. This can be connected to wages in a capitalist country.
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“‘Wages are much higher when more demand exists for labor and less if offered, and are lowered

accordingly when more labor is offered and less demanded…’ (Cours complet d’ economie

politique)” (Bakunin). When the demand exists for a product or a skilled labor that is not easily

accessible, the cost of the labor increases. This causes more people to seek this product or learn

this labor. After more and more have found this product or learned this labor it becomes more

accessible which causes the price of it to decrease. This can also go the opposite way making it

a never ending cycle.

So what are some of the benefits of a capitalist government? Why is capitalism better

than socialism? This table is a good representation as to the benefits of capitalism and why

capitalism is better.

Capitalism Socialism
Rights to produce and -People have the rights -The government owns all the

distribute products rights

Work atmosphere -Competitive, pushed to -Everyone receives the same

achieve personal success and benefits no matter how hard

requires responsibility they work

Private property -Can own property -Cannot own property
Production and -is led by the Law of supply -is controlled by the

supply of products and demand government

Adapted from Hoyt

As can be seen, in a socialistic government the government owns everything and controls

everything; there is no individuality. In a capitalistic government the citizens own that which

they control, and the government owns that which it controls. This means that the government

cannot take away half of a company’s products on a whim; it can buy them, but it cannot take

them away. Which is the opposite under a socialistic power; socialistic power can take what was

produced by a company or an individual and distribute it without any consent from the producer.
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Socialism stifles the imagination and innovation of the people. No matter how hard a person

works, their earnings remains the same. This makes people only work as hard as they need to.

As most can observe, when a person only has to put out enough energy to get a job done that’s

exactly what he does, instead of striving to better himself.

Another area in which capitalism shows its superiority is in ownership, as far as property

goes anyway. Within a capitalistic system citizens are allowed to own property. This gives the

owner a sense of responsibility towards their property, which in turn causes them to keep the

property in its best shape as long as they can. In a socialistic system citizens are not allowed to

own property, which gives the opposite view of the capitalist system towards the government

owned property. Then, as if it couldn’t get worse, the socialist system give the power of the

production of products to the government, where the capitalist system uses the law of supply and

demand to determine the production of products. The law of supply and demand is one of the

most basic principles of running anything that produces a product.

“The guiding hand of government is too strong in a socialist system; it means that change

is slow – which means that innovation is missed” (Deane). This is to say that even though the

government may be looking out for the better of “all,” it does not mean it is better for all. People

miss out on the most important part of advancement, the urge to advance. Socialism puts such a

burden on the people to be like everyone else that the people are not able to be themselves.

Deane says there is no “economic diversity” within socialism, which means when the

“government gets things wrong, everyone suffers.” Socialism is unable to keep the state in

enough order to keep running. It creates the necessity to force citizens to work in less than

adequate conditions (Deane).

What is property in a capitalistic economy? Well, for “the capitalist and the property

owner they mean the power and the right, guaranteed by the State, to live without working”
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(Bakunin). This makes sense in more than one way than one. Put another way, one could: a.)

work for a set number of years making the same wage the entire time under a socialistic

government, or b.) work really hard (or not for that matter) for only a few year to get rich and

retire early, or if they choose, to work where they want, how they want, and to what extent they

want under a capitalistic government.

Works Cited

Bakunin, Mikhail. “The Capitalist System.” The Political Philosophy of Bakunin. 1953. Web.

Flag.net. 22 Oct. 2009.

<http://flag.blackened.net/daver/anarchism/bakunin/capstate.html>.

Bax, E. Belfort. “In Defence of Socialism.” 1898. Marxists Internet Archive. Web. 21 Oct. 2009.

<http://www.marxists.org/archive/bax/1898/12/defsoc.htm>.

Deane, Alex. “Capitalism vs Socialism.” July 2006. International Debate Education Association.

Web. 25 Oct. 2009. <http://www.idebate.org/debatabase/topic_print.php?topicID=400>.

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Hessen, Robert. “Capitalism.” The Concise Encyclopedia of Economics. 2008. Library of

Economics and Liberty. Web. 21 Oct. 2009.

<http://www.econlib.org/library/Enc/Capitalism.html>.

Hooker, Richard. “Capitalism.” The European Enlightenment Glossary. 1999. Washington State

University. Web. 21 Oct. 2009.

<http://www.wsu.edu:8080/~dee/GLOSSARY/CAPITAL.HTM>.

Hoyt, Alia. “How Socialism Works.” 12 Mar. 2008. HowStuffWorks.com. 25 Oct. 2009.

<http://money.howstuffworks.com/socialism.htm>

Kotz, David M. “Socialism and Capitalism: Are They Qualitatively Different Socioeconomic

Systems?.” Homepage of David M. Kotz. 6-8 Dec. 2006. University of Massachusetts,

Web. 22 Oct 2009.

<http://people.umass.edu/dmkotz/Soc_and_Cap_Diff_Syst_06_12.pdf>.

Merriam-Webster Online Dictionary. 2009. Merriam-Webster Online. Web. 22 Oct. 2009.