It may be defined as a political and economic system in which all or a large part of the means of production and distribution are collectively owned and controlled by the state. Example of socialist states are China, Cuba and North Korea..
FEATURES / CHARACTERISTICS OF SOCIALISM
i) State or government ownership and control of all or large portion of the means of production and distribution.
ii) Absence of economic rivalry among producers and consumers.
iii) Goods and services are not produced to yield profits but to satisfy the needs of the citizens.
iv) No price competition involving sales promotions such as advertisement and promotions.
ADVANTAGES OF SOCIALISM
i) Socialism leads to equitable distribution of resources.
ii) Socialism caters for the interest of all citizens.
iii) It creates no room for hoarding.
iv) It acts as a unifying factor among those who participate in economic activities in a country.
v) It is democratic in nature.
DISADVANTAGES OF SOCIALISM
i) It is argued that socialism makes people lazy and unenterprising.
ii) It is not self-regulating and self-functioning.
iii) It doesn’t encourage faster economic development.
iv) Socialism leads to state monopoly which gives rise to inefficient and ineffective production and distribution of goods and services.
Capitalism may be defined as a political and economic system in which all or most means of production and distribution are owned and controlled by private individuals and in which the economic activity of the government is at a minimum. Being the most popular type of political economy system, examples are United State, England, Germany, and most developed economies.
FEATURES OR CHARACTERISTICS OF CAPITALISM
1) Private ownership and control of all or most means of production and distribution with government economic participation at a minimum.
2) It has Aristocratic structure characterized by few economic agents as compared with large number of persons participating in the economic life in a country.
3) There are many producers as well as many buyers.
4) It has highly developed occupational specialization.
5) Labour is regarded as a marketable commodity.
ADVANTAGES OF CAPITALISM
1) It is self-regulating, that is it requires no direction or guidance from the government
2) It guarantees maximum freedom of enterprise
3) It encourages hard work
4) It encourages faster economic development
5) Capitalism leads to specialization in production with its many advantages like increase in production skill, quality of goods and time saving.
DISADVANTAGES OF CAPITALISM
1) It encourages few rich individuals at the expense of the majority.
2) It leads to individual or private monopoly with its many disadvantages.
3) The system leads to increase in acquisitive tendencies.
4) It creates an atmosphere of job insecurity and unemployment.
5) Capitalism leads to man’s inhumanity to man.
DIFFERENCES BETWEEN CAPITALISM AND SOCIALISM
|1||Allows free enterprise and market economy directed by the forces of demand and supply||Has a centrally-planned economy|
|2||Breeds unequal distribution of wealth||Aims at reducing great inequalities of wealth and opportunity|
|3||The objective of capitalism is profit maximization||Objective of socialism is welfare of the people|
|4||Economic activities are duplicated. This leads to competition and waste||Economic activities are not duplicated because of central planning|