Economic Systems in the

World

Socialism and Communism

http://www.diffen.com/difference/Communism_vs_Socialism#
 Summary of Previous Lecture
• Economic systems in the world

• Capitalism and its different forms

• Advantages and disadvantages of capitalism

• Comparison of capitalism with Islamic economic

system.
 Learning outcomes
After this lecture you should be able to
• Understand the characteristics of
socialism and communism
• Analyze and evaluate which economic
system is superior among the major
economic systems in the world, i.e.
Capitalism, Socialism, Communism, and
Islamic economic system.
 Characteristics of Socialism and
Communism
1. Definition
2. Ideas
3. Philosophy
4. Religion
5. Economic Coordination
6. Economic System
7. Key Elements
 Characteristics of Socialism and
Communism
8. Political Structure
9. Social Structure
10.Free Choices
11.Way of Change
12.Private Property
13.Ownership Structure
14.Discrimination
15.Means of Control
 Definition
Communism Socialism
A theory or system of social A theory or system of social
organization based on the organization based on the
holding of all property in holding of most property in
common, with actual common, with actual
ownership ascribed to the ownership ascribed to the
community or state. workers.
 Ideas
Communism Socialism
Human societies have All people should be given
always been divided into an equal opportunity to
warring classes. The succeed. Workers should
Industrial Revolution has have most say in their
enriched the wealthy and factory's management. The
impoverished the poor. The free market suffers from
workers must overthrow the problems like tragedy of the
bourgeois. commons. Government
regulation is necessary.
 Philosophy
Communism
From each according to his
ability, to each according to
his needs. Free-access to
the articles of consumption
is made possible by
advances in technology that
allow for super-abundance.
Socialism
From each according to his
ability, to each according to
his contribution. Emphasis
on profit being distributed
among the society or
workforce in addition to
receiving a wage
 Religion
Communism Socialism

Abolished Freedom of religion

 Economic Coordination
Communism Socialism
Government controls all Planned-Socialism relies
business, as well as principally on planning to
business decisions. determine investment and
production decisions.
Planning may be centralized
or decentralized. Market-
socialism relies on markets
for allocating capital to
different socially-owned
enterprises.
 Economic System
Communism
Wealth redistributed so that
everyone in society is given
equal shares of the benefits
derived from labor. All
means of production are
controlled by the state.
Socialism
Wealth redistributed so that
everyone in society is given
somewhat equal shares of
the benefits derived from
labor, but people can earn
more if they work harder.
Means of production are
controlled by the workers
themselves.
 Key Elements
Communism Socialism
An enhanced form of the Economic activity and
principle of “Production for production especially are
use”. adjusted to meet human
needs and economic
demands. "Production for
use": useful goods and
services are produced
specifically for their
usefulness.
 Political System
Communism Socialism

No leader, directed directly Multiple parties, but the

by the people. This has ruling party usually goes by
never been actually the name "Socialist“.
practiced, and has just used
a one-party system.
 Social Structure
Communism Socialism

All class distinctions are Class distinctions are

eliminated. diminished
 Free Choice
Communism
In real communism, where a
leader does not exist,
everything is chosen freely.
In those that have been
practiced though, all
choices, including
education, religion,
employment and marriage,
are controlled by the state.
Socialism
All choices, including
education, religion,
employment and marriage,
are up to the individual. All
health care and education is
provided fre.e to everybody
 Way of Change
Communism
Government in a
Communist-state is the
agent of change rather than
any market or desire on the
part of consumers. Change
by government can be swift
or slow, depending on
change in ideology or even
desire.
Socialism
Workers in a Socialist-state
are the agent of change
rather than any market or
desire on the part of
consumers. Change by the
workers can be swift or
slow, depending on change
in ideology or even whim.
 Private Property
Communism Socialism
Abolished Two kinds of property,
private property, such as
land, houses, clothing, etc.
owned by the individual.
Public property, factories,
and means of production
owned by the state but with
worker control.
 Ownership Structure
Communism
The means of production
are commonly-owned,
meaning no entity or
individual owns productive
property. Importance is
ascribed to "usership" over
"ownership".
Socialism
The means of production
are socially-owned with the
surplus value produced
accruing to either all of
society (in Public-ownership
models) or to all the
employee-members of the
enterprise (in Cooperative-
ownership models).
 Discrimination
Communism Socialism

In theory, all members of The people are considered

the state are considered equal, laws are made when
equal. necessary to protect people
from discrimination.
 Means of Control
Communism Socialism

Prolétariat engages in Proletariat engages in

violent rebellion. taking charge of the
factories and means of
production.
 Estimated number of victims
Since these systems are not compatible with the human
nature so there was a fierce resistance from the public
particularly the capitalists, entrepreneurs, and farmers. In
his book “The Black Book of Communism” Stéphane
Courtois claims that total death toll reaches 94 million
during its implementation. The breakdown of the number of
deaths given by Courtois is as follows:
•65 million in the People's Republic of China
•20 million in the Soviet Union
•2 million in Cambodia
•2 million in North Korea
•1.7 million in Africa
•1.5 million in Afghanistan
 Estimated number of victims
• 1 million in the Communist states of Eastern Europe
• 1 million in Vietnam
• 150,000 in Latin America (mainly Cuba)
• 10,000 deaths "resulting from actions of the international
Communist movement and Communist parties not in
power."
• Courtois claims that Communist regimes are responsible
for a greater number of deaths than any other political
ideal or movement, including Nazism. The statistics of
victims includes executions, famine, deaths resulting
from deportations, physical confinement, or
through forced labor.
 Major Differences among the Systems
1. Liberty to Earn
Capitalism is a voluntary economic system where people trade in
a free market and earn product of their labor and can trade it
against the product of others labor. Unbridled liberty leads to so
many immoral activities that cause the destruction of the health,
moral values and economic conditions of the nations.

In Communism and socialism (to a large extent) the product of

peoples labor is confiscated by the state to distribute it equally
among the public. People have to lose their earning in a coercive
environment, e.g. many Ukrainian farmers were killed because
they tried to conceal the grains of their sustenance.

Islamic economic system allows individuals to operate in a free

market but all the activities should be Sharia Compliant.
 Major Differences among the Systems
2. Liberty to own
Capitalism allows the people to own as much they can and
lust to accumulate more and more wealth leads towards
unfair means of earning and an imbalance is the
distribution of wealth.
Communism and socialism restrict the right of ownership,
in communism no individual has the right to own property.

Islam allows the people to own property as much they want

but with the unique concept that Allah is the owner of
everything; and holds the followers accountable regarding
the legality of property (Sharia compliance and also apply
obligatory taxes like Zakat and encourages Sadaqat).
 Major Differences among the Systems

3. Distribution of wealth
Capitalism leads to unfair distribution of wealth (as
discussed in the previous lecture) which creates so many
social problems.
Socialism and communism claim equal distribution of
wealth which is against the laws of nature, as it will limit the
desire to work.

Islam allows the people to earn using Halal means and get
rich, also Islam allows the people to be poor and rich but
not to the extent that it create classes in the society.
 Major Differences among the Systems

4. Reward of labor in Capitalism Socialism and

Islamic Economic System

Capitalism, Socialism and Islamic economic system

recognizes the hard work of the laborers by paying them
accordingly, where as communism doesn’t recognize it.
Recognition and sense of achievement makes people more
productive and innovative.
 Major Differences among the Systems

5. Innovativeness of the system

Freedom of production and marketing, sense of

achievement and recognition in Islamic economic system
and Capitalism result in more sophisticated, innovative and
useful products in the economy.

Socialism and Communism being controlled form of

economies where state determines what to produce, how
much to produce and for whom to produce, leads to
stagnation and low growth in the economy
 Major Differences among the Systems

6. Social Structure

Socialism and Communism diminishes and eliminate the

class distinctions; Islam also doesn’t believe in class
system rather sets the piety as the standard of being
respectable.

Capitalism on the other hand has created classes in the

societies based on the level of wealth people possess.
 Major Differences among the Systems

7. Ways of Change
In Socialism and Communism governments and workers
are the agents of change and the even control the
ideologies and desires of the people.

In Capitalism free market would determine the change in

production, while government only regulates the business
practices.

Islam allows change through the forces of the market

provided that it doesn’t go against the religious and moral
values of the society.
 Major Differences among the Systems

8. Religion

Capitalism, Socialism, and Islam give the people right to

follow the religion.

Communism bans the religion, which is against the human

nature. Majority of the people in the world do have a
religion or want to follow the religion.
 Summary of the Lecture
In today’s lecture we discussed the following
1.characteristics of Socialism and communism,
such as their definition, ideas, economic system,
social structure, freedom of choice, ownership of
private property, and means of control etc.
2.A comparison of the major economic systems in
the world, i.e. Capitalism, Socialism, Communism,
and Islamic economic system.