SOCIALISM & CAPITALISM

Socialism refers to a broad set of economic theories of social organization advocating collective ownership and administration of the means of production and distribution of goods, and a society characterized by equality for all individuals, with an egalitarian method of compensation. Modern socialism originated in the late 19th-century intellectual and working class political movement that criticized the effects of industrialization and private ownership on society. Karl Marx posited that socialism (the disappearance of class and therefore state) would be achieved via class struggle and a proletarian revolution after a transitional stage from capitalism called the Dictatorship of the proletariat.

The utopian socialists, including Robert Owen, tried to found socialist factories and other structures within a capitalist society. Henri de Saint Simon, the first individual to coin the term socialism, was the originator of technocracy and industrial planning. The first socialists predicted a world improved by harnessing technology and combining it with better social organization, and many contemporary socialists share this belief. Early socialist thinkers tended to favor more authentic meritocracy, while many modern socialists have a more egalitarian approach.

Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital, creates an unequal society, and does not provide equal opportunities for everyone in society. Therefore socialists advocate the creation of a society in which wealth and power are distributed more evenly based on the amount of work expended in production, although there is considerable disagreement among socialists over how and to what extent this could be achieved.

Socialism is not a concrete philosophy of fixed doctrine and program; its branches advocate a degree of social interventionism and economic rationalization, sometimes opposing each other. Another dividing feature of the socialist movement is the split between reformists and the revolutionaries on how a socialist economy should be established. Some socialists advocate complete nationalization of the means of production, distribution, and exchange; others advocate state control of capital within the framework of a market economy. Socialists inspired by the Soviet model of economic development have advocated the creation of centrally planned economies directed by a state that owns all the means of production. Others, including Yugoslavian, Hungarian, German and Chinese Communists in the 1970s and 1980s, instituted various forms of market socialism, combining co-operative and state ownership models with the free market exchange and free price system (but not prices for the means of production).

Social democrats propose selective nationalization of key national industries in mixed economies, with private ownership of property and of profit-making small business. Social Democrats also promote tax-funded welfare programs and the regulation of markets. Libertarian socialism (including social anarchism and libertarian Marxism) rejects state control and ownership of the economy altogether and advocates direct collective ownership of the means of production via co-operative workers' councils and workplace democracy.

Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned. Through capitalism, the land, labor, and capital are owned, operated, and traded for the purpose of generating profits, without force or fraud, by private individuals either singly or jointly, and investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decision in a market economy. A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers. In a "capitalist state", private rights and property relations are protected by the rule of law of a limited regulatory framework. In the modern capitalist state, legislative action is confined to defining and enforcing the basic rules of the market, though the state may provide some public goods and infrastructure.

Some consider laissez-faire to be "pure capitalism“ Laissez-faire (French, "leave to do (by itself)"), signifies minimizing or eliminating state interference in economic affairs and the competitive process, allowing the free play of "supply and demand." Laissez-faire capitalism has never existed in practice. Because all large economies today have a mixture of private and public ownership and control, some feel that the term "mixed economies" more precisely describes most contemporary economies. In the "capitalist mixed economy", the state intervenes in market activity and provides many services.

During the last century, capitalism has often been contrasted with centrally planned economies. The central axiom of capitalism is that the best allocation of resources is achieved through consumers having free choice, and producers responding accordingly to meet aggregate and individual consumer demand. This contrasts with planned economies in which the state directs what shall be produced. A consequence is the belief that privatization of previously state-provided services will tend to achieve a more efficient delivery thereof. Further implications are usually in favor of free trade, and abolition of subsidies. Although individuals and groups must act rationally in any society for their own good, the consequences of both rational and irrational actions are said to be more readily apparent in a capitalist society.

Capitalistic economic practices incrementally became institutionalized in England between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages. Capitalism has been dominant in the Western world since the end of feudalism. From Britain, it gradually spread throughout Europe, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world.