SOCIALISM

Socialism is an economic system where the means of production are either owned or controlled by state . The resource allocation, investment pattern, consumption and income distribution are directed and regulated by the state. It aims at a form of classless society which is achieved by transferring private property to social ownership and replacing profit oriented private enterprise by centralized state planning.

Salient Features of Socialism

Government ownership/Control: In a socialist economy, all the means of production including landed property are in the hands of the government. There is a total absence of private property in such economy. In some of the socialist countries, private sector also plays a very important role. But in these countries, the government directs and regulates investment allocation and production pattern in accordance with the national priorities. In some countries, some of the basic sectors like finance are controlled by the government so that investment pattern of the private sector can be regulated.

 Central Planning Authority: Economic development in socialist economies is carried out through centralized planning. This central planning authority formulates the national plan for development and directs resource mobilization, allocation and investment to achieve the plan targets. These economies are sometimes called command economies because the central planning authority commands the pattern of resource utiliation and development.

 Restriction on consumption: There is no consumer sovereignty because the state decides what is to be made available to the consumers. Restriction on Occupation: The freedom of occupation is restricted and an individual may not have the freedom of choosing his occupation.

 Fixation of Wages and Prices: The wage rates and prices are fixed by the government and not by the market forces. Distribution of Income: Socialism advocates that the state should initiate steps to reduce economic inequalities of income and wealth. This does not mean that socialism guarantees perfect equality of income, it only emphasizes that there should be no glaring inequality in income distribution. The object of equitable distribution may be achieved by fixing the wage rate or by fiscal means and other appropriate measures.

 Classless Society: The aim of socialism is to create a classless society wherein there would be no distinction between the rich and the poor. It does not allow the existence of divisions of society as classes of labour or owners.

Merits of Socialism
1. Social Justice: This is one of the basic objectives of Socialism. The state attempts to reduce the inequalities of income to the barest minimum and distribute national income more evenly and equitably. Man is not allowed to exploit another man and nobody is permitted to amass wealth.

 2. Rapid Development: Planned economic development helps to achieve faster and quicker development. Planning helps to prevent exploitation of national resources for the benefit of a few.

 3. Avoids Pitfalls of Capitalism: It helps in the avoidance of the major pitfalls of capitalism like inflation, unemployment and inequalities of income. 4. Better allocation of Resources: Planned development and system of prioritization in socialism ensures better allocation of national resources

 5. Improvement in Productive efficiency: In socialism since the state has huge resources at its disposal, it invests heavily in improved techniques of production and scientific research which lead to improved productive efficiencies.

Demerits of Socialism
1. Extensive centralization and bureaucratization: Socialist economies are run by bureaucrats who are not known to be efficient in administration and management skills. They do not have the stake and personal interest as a private entrepreneur. Since decision making is highly centralized, very often it takes a long time to take a decision thereby reducing effectiveness.

 2. Equality of opportunity and equal distribution is a myth: However hard it may be tried, socialism has never been able to remove the inequalities in income distribution.

 3. Civil liberties are suppressed: Socialism by its very nature , denies personal freedom. People are neither given freedom nor choice. 4. It kills private initiative and enterprise: It offers no incentive to hardworking, inventive, imaginative and enterprising people.

 5. Lacks consumer sovereignty: Socialism does not give choice of consumption to the consumer. Hence there is no human satisfaction and therefore people are not happy. 6. Absence of choice of occupation: As there is no freedom of choice of occupation, there is wastage of talent because lot of people end up doing things which they are not expert at. This leads to inefficiencies.