Communism vs. Capitalism. My Ideal Government System - Essay Example

? Topic: Lecturer: Presentation: Communism Communism is a form of government where the resources and the meansof production are controlled by the society and the government is headed by one party or the communist party. It was an idea developed by Karl Marx and supported by Stalin and others. For Marx, an ideal government was the one that ensured equality to all members of society without classes. Before then, the economy was controlled by the businessmen and factory owners commonly referred as bourgeoisies whose aim was to make profit at the expense of the poor farmers who were referred as the proletariat. They provided cheap labor to the bourgeoisies and worked under harsh conditions. The proletariats thus were encouraged by Marx to take over the state and cooperate to eliminate classes that brought about inequalities. Resources are thus shared equally depending on needs and abilities. All the property is owned by the state. Examples of communist states include; China, Cuba, North Korea and Vietnam (Grant, 5-8). Capitalism on the other hand, is characterized by existence of classes in the society. The means of production is controlled by private individuals who own private property and the government is democratic in nature. The market forces determine what is to be produced and who is to consume the products depending on the wealth of individuals. The private owners thus make huge profits and invest it in machinery and more business investments while the poor continue being poor as they can’t afford to buy goods. A wide gap therefore exists between the rich and the poor in the society (Grant & Vidler, 19-25). Communist government is thus preferred as it reduces inequalities and classes in the society and is effective in transforming backward economies. A capitalist system of government is a free market economy where price of products is determined by market forces. The market also allocates the resources to members of society depending on one’s income. The government does not intervene in controlling the prices. In this situation, the owners of property whose aim is to maximize profit may set high prices for products or make goods unavailable so as to control demand and in turn raise prices. The poor consumers are therefore forced to cut consumption of some goods as they cannot afford leaving them to the rich thus widening the gap between the rich and the poor. Inflation is inevitable due to rise and fall in prices of goods and services (Grant & Vidler, 22). On the other hand, a communist system of government is controlled by the state. It is a command economy where prices are determined by the government thus inflation is controlled. The state also distributes goods and services equally to the society (Schwartz, 292). The resources are distributed according to needs of each individual hence no chance of creating income and wealth inequalities in society; it exercises fairness and equality. The capitalist system is driven by self interest of the actors in the economy. Due to profit maximization objective by businessmen, they are not able to provide essential goods and services that do not make profit such as education and health (Grant, 6). On the other hand, the communist state is involved in provision of resources to all. It thus provides public and merit goods to the society among other goods hence individuals in a communist economy benefit from improved public transport, education, and health among others (Leslie, 223). The state also subsidizes basic foodstuffs thus making them affordable to all members of the society unlike in capitalist states where one’s income determines the bundle of goods to buy. Schwartz (292) argues that individuals in a communist state work according to ability. Thus, each individual who is of working age is given a job depending on the skills he/she possesses but the resources obtained are shared among the society according to the needs of each household. The economy hence operates at near or full employment, unemployment does not exist. This is not so in a capitalist state where an individual is responsible for his/her work and promotion is based on merit or hard work. There is a lot of competition for jobs in the market hence it operates at less than full employment (Anderton, 102). The wages are not fixed by the government like in communist states leading to a lot of competition between companies forcing the price of labor to move downwards thus low wages for workers. The communist government eliminates poor working conditions by fixing wages thus reducing exploitation of workers since a wage cannot be lower than the one set by government. Every government strives to control the money coming in and out of the country (balance of payment). If proper care is not exercised, the government may end up having a deficit in its balance of payment equation. A communist state is efficient in ensuring that a deficit in its BOP does not occur. This is because the government strictly controls inflow and outflow of money in the economy thus there is no chance of incurring a deficit. On the other hand, in a capitalist state inflow and outflow of money in the economy is not controlled by the state but by market forces. Imports may flow in the country in large amounts thus exceeding the volume of exports leading to a deficit in balance of trade and consequently balance of payments. This may arise due to liberalization of the economy by a capitalist state; no control of imports and exports. Control by the government is thus required to ensure a balanced balance of payments like in communism systems (Grant & Vidler, 22-23). According to Anderton (103), a free market economy may fail due to information failure. The owners of property or businesses aim at making profits without due regard to the effects of the products offered to consumers. Their advertising techniques are aimed at creating more demand for the products thus increased profits but information as to the consequences of consuming such products is not given. This leads to overconsumption of demerit goods such as cigarettes and alcohol at the expense of merit goods. A communist government however, ensures strict control of demerit goods and advertises merit goods or subsidizes them to enhance consumption. The communist government’s aim is to ensure goods produced are of maximum benefit to all members of the society (Schwartz, 292). A communist state is headed by one party which plans and controls the economy. Its decisions are thus centralized and whatever the government says holds. The government is thus able to control the economy and ensure economic growth is achieved without disruptions from several quarters (Grant, 7). Capitalism is run by individuals through market mechanism with little government intervention. The resources are owned and controlled by private individuals hence difficult to control the economy and steer it to growth (Grant & Vidler, 23). Various factors such as climate affect the market leading to uncertainty about the future. Conclusion Communism system of government is better than capitalism in that it ensures there are no income and wealth inequalities, balance of payments is controlled, the economy is at full employment, inflation is controlled, and public as well as merit goods are availed by the state. The level of education and health standards are thus high unlike in capitalism where education and health are neglected as they are not profitable. References Anderton, A. Economics. 3ed. London: Pearson Education, 2000. Grant, R. Systems of Government Communism. London: Evans Brothers, 2009. Grant, S., Vidler, C. Economics in Context. Oxford: Heinemann, 2000. Leslie, H. Communist and Post-communist Systems. IN Mary, H & Maurice, K. Encyclopedia of Government and Politics Volume, 1. London: Routledge, 2004. Schwartz, J. Master the GED 2011 (w/CD). New Jersey: Petersons, 2010. Read More