Term Paper: Capitalism Socialism and Communism

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Capitalism, Socialism, And Communism

The economic function of a society comprises of functions associated with the production and utilization of goods and services. From the most primitive period, the principal activity of planned society has been economic in character. The other constituents of a civilized society i.e. architecture, literature, music et al. come to the picture only subsequent to the fulfillment of the material requirements of the society. Our daily activities are fundamentally economic in character. The economic issue appears, as our craving for goods and services outnumber our potential to manufacture those goods and services. The requirement for goods and services stems from human wants. The supply of goods and services is a result of the production process.

Production involves pooling of inputs and their integration to make goods and services. It is these inputs which are categorized into three "factors of production." Land is a resource gifted by nature. The payments for the exploitation of land are known as "rents" and "royalties" "Labor" is everything of human endeavor, physical as well as intellectual utilized in production. The remuneration for labor is known as "wages" and "salaries." Capital constitutes all the goods made use of for production of other goods and services. Capital is also known as "producer of durables." Capital is required to be generated, and in order to receive more capital, one ought to minimize the manufacture of consumer goods. The return for capital is "interest" for debt that is borrowed capital and "profits" for equity popularly called capital brought in by the owner. The production factors are flexible and might be pooled in varied degrees to manufacture the identical item.

The United States is capital rich and applies equipment exhaustively for agriculture. On the other hand, China has surplus labor and humans are rigorously used for agriculture. The factors of production have a significant feature. The various factors of production, during any period, are present in fixed and scare quantities, thereby putting an upper limit on the production of goods and services. Because of the scarcity of economic resources, optimum use of the same must be made. We desire to manufacture goods and services to the extent possible, and while making the same, manufacture the goods and services that is needed the maximum. Five functions are performed in an economic system while producing goods and services. These are (1) the quantity to be produced (2) the things to be produced (3) the manner in which to produce (4) Who are the persons to consume (5) Adaptability. Several societies have done these economic functions, and seek to attain technical and efficiency in allocation, in various methods. These methods can be categorized as different economic systems.

Industrial Revolution is regarded as the watershed event that initiated in Europe in the 1700's. Prior to that, we categorize every economy as traditional. The Industrial Revolution started to extend across the world, and with that carried new economic systems along with it. Capitalism was the first new economic system or also known as the market system. but, capitalism in its early states took its toll leaving a lot of people in poverty, whereas competitive markets crumbed into monopolies. In reaction to that, social reformers built different economic systems. Socialism tried to secure capitalism with a bout of government participation. Communism just looked forward to bring down capitalism. It was a combat between the "invisible hand" of free markets and the "visible hand" of the authority or planned economy. Resources when owned by the state under socialism and communism minimize the alternatives of production techniques.

Capitalism:

Capitalism, which is pervasive across almost every nation of the world, is a social system wherein the means for production and distribution of goods and services are concentrated in the hands of a few people. This is referred to as the select group of people who constitute the capitalist class. There is a working class, the bulk of whom must be able to sell their capability and potential to work in exchange for a wage or salary. The working class is paid for the production of goods and services that are subsequently sold for a profit. The profit is cornered by the capitalist segment as they are able to generate increased capital through selling what has been produced compared to the buying cost in the labor market. Within this meaning, the working class faces exploitation in the hands of the capitalist classes. The capitalists enjoy the profits generated from exploitation of the working class and at the same time reinvesting a portion of their profits for their additional accumulation of wealth.

Adam Smith is regarded as the Messiah of Capitalism. It was Smith's unique eye-opener that political freedom would be visible and continue under situations of economic freedom, what is presently known as capitalism. Modern capitalism therefore finds its origins to Adam Smith and his magnum opus Wealth of Nations, that has catered, seemingly far in excess of any other work on economics, as a path to the formulation of economic policies of nation. Theories propounded later have changed the contribution of governments in shaping the economic policy, especially the Keynesian concepts of the 20th century. Regardless of that, Smith and his concepts are relevant to this day and hold a vital place in the growth of economic thought.

Adam Smith possessed a vision of capitalism which was far advanced compared to contemporary neoclassical economists. Smith's model society would fulfill the ends of human nature as he found them out, and from this level Smith condemned flawed societies, admired good societies, and put forth an exhaustive reform program. His opinion on human prosperity was also far robust compared to what is perceived to be the situation. According to him, five explicit ends of nature are there like preservation of the self, reproduction of organism, harmony, well-being and exactness of the organism and an implied objective of liberty. In his opinion, the fulfillment of the ends of nature could exclusively happen in a specific category of wealthy, state of the art, commercial society where unhindered trade is carried out. Nevertheless, I will debate that Smith's six ends comprise a "thick" concept of the human welfare, which is not bourgeois.

Smith, in his publication Wealth of Nations, declared that "the wealth of a nation would be supported with extensively higher effectiveness through the 'apparent and effortless system of natural independence' than by national planning of the commercial type." Smith's theoretical importance on person as economic benefit optimizers whose total endeavor ushered higher average economic success was a very sweeping suggestion in its period. Among Smith's first hand observations was that production was augmented by delegating particular assignments to individual employees. The division of labor would optimize production by permitting worker to be expert in separate facets of the production process. Through the process of division of labor he was able to visualize expanding markets with almost infinite scope for the maximization of wealth through production and commerce. He also deliberated that capital earmarked for the production and distribution of wealth could function in the most efficient manner where there is no government intervention. This type of laissez-faire which implies "leave alone" or "allow to be" - strategy would, in his view, urge the most productive function of private and commercial establishments.

Smith was in favor of increased remuneration which is more advantageous to the employer as also the worker, and he supported the banning of slavery as the work delivered by free men turns out to be less costly in the ultimate analysis compared to that delivered by slaves. He assumed this take not because of the apprehension of rebellion, but due to the fact that normally handsomely paid employees would help in the building of assets in a society and augment the buying power for the inland economy. In a society where the bulk of the members are poverty stricken and dejected can never be wealthy and contented. It was Adam Smith's view that a society where the participation of the members are for their self benefits will consequence in a balanced, independent and more affluent society compared to a society disciplined and designed by the state. He regarded that economic growth is healthy and is attained by the increasingly expanding application of the division of labor that is controlled within the markets and governed by judicious interest of the individual. The countries that permit the market dynamics to produce such type of growth stand to be prosperous, in the opinion of Smith, compared to those that adhere to the commercial archetype of managed business.

This democratic opinion flew in the face of regal treasuries, rights of the aristocracy, privileges given to businessmen, peasants and working guilds. It is not accidental that such democratic, egalitarian opinions emanated concurrently with the American Revolution and just came before the French Revolution of 1789. It was Smith's opinion that the genuine prosperity of a nation was an outcome of the work of everybody and that the stream of goods and… [END OF PREVIEW]

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