Question

What would you differentiate between a capitalist and socialist economy?

Answer 1

Answer:

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Explanation:

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CAPITALISM

In a capitalist economy, property and businesses are owned and controlled by individuals. The production and prices of goods and services are determined by how in-demand they are and how difficult they are to produce. Theoretically, this dynamic drives companies to make the best products they can as cheaply as they can, meaning that consumers can choose the best and cheapest products. Business owners should be driven to find more efficient ways of producing quality goods quickly and cheaply.

This emphasis on efficiency takes priority over equality, which is of little concern to the capitalist system. The argument is that inequality is the driving force that encourages innovation, which then pushes economic development. In a capitalist economy, the state does not directly employ the workforce. This can lead to unemployment during times of economic recessions.

SOCIALISM

In a socialist economy, the state owns and controls the major means of production. In some socialist economic models, worker cooperatives have primacy over production. Other socialist economic models allow individual ownership of enterprise and property, albeit with high taxes and stringent government controls.

The primary concern of the socialist model, in contrast, is an equitable redistribution of wealth and resources from the rich to the poor, out of fairness and to ensure "an even playing field" in opportunity and outcome. To achieve this, the state intervenes in the labor market. In fact, in a socialist economy, the state is the primary employer. During times of economic hardship, the socialist state can order hiring, so there is full employment even if workers are not performing tasks that are particularly in demand from the market.