Cooperation and other economic systems- Capitalism, socialism and communism

I - Cooperation and other economic systems- Capitalism, socialism and communism

Capitalism

Capitalism is a system wherein the entire means of production and distribution of goods and services are vested in the hands of the private individuals.

 Capitalism is a system of economic organization in which business and industries are organized and carried on for profit by private individuals and enterprise with a minimum of Government interference.

Features of Capitalism:

 1. Private ownership of means of production or factors.

2. Management of means of production for private gain

3. Freedom of contract and enterprise

4. Class conflict between labour and capital

5. Non-intervention of government in the economic matters

6. Exploitation of man, by man

7. Class conflict and resultant Class struggle

8. Competition in the market as the regulator of price and business activities

9. Wide gap  between ‘haves’ and ‘have not’s’

Thus capitalism as a system depends for its existence on certain fundamental points such as:

1. Right of inheritance

2. Right of free enterprise

3. Right of contract

4. Right of private gain and personal freedom

5. Free competition and guaranteed privileges.

Advantages of Capitalism:

a. The reward is apportioned on merits.

b. The individual initiative and personal freedom is the best motivation for advancement of business.

c. As production is carried on according to the wishes of Consumers, the consumers are happy.

d. Capitalism has survived many crisis and it is flexible in the sense that it is easy to adapt to changing economic conditions.

e. It is also open to a certain amount of regulation by the State

Disadvantages of Capitalism:

a. Permitting private individuals to exploit every situation.

b. Capitalism fosters too much of individualistic outlook and operates without any definite plans as to production, resulting in mal adjustments of supply and demand.

c. Individuals or the capitalists obtain all private gain at the cost of the community to its great detriment. d. The centralization of power in a few hands in regard to production of goods leads to accumulation of power with few elite people.

e. In capitalism there is unfair, unequal distribution of income and wealth.

f. There exists cut throat competition which result in waste of resources and manpower resulting in overproduction of certain classes of goods. Sometimes there is underproduction to create artificial scarcity and increase price and profit. g. Human values and ethics are not at all taken care of.

h. The workers are merely treated as a part of factor of production.

 i. Capitalism leads to a division of society into working class and the capitalist.

DIFFERENCE BETWEEN CAPITALISM AND CO-OPERATION

1. In capitalism capital has a pivotal role to play in the business whereas in co-operation, it has a secondary role.

2. The capitalistic economy is dominated by profit motive whereas service is the motto of co-operatives. 3. In capitalism there is union of capital and in co-operatives there is union of persons.

4. Share capital determines the voting rights in capitalism whereas in co-operation, one man has one vote irrespective of their capital contribution.

5. Capital owns men in a capitalistic economy while in a co-operative society, men own capital.

6. In capitalistic system business tends to concentrate wealth in the hands of a few capitalist whereas in the co-operative system wealth is decentralized.

7. In capitalism there is cut throat competition whereas there is no such competition in co-operation.

SOCIALISM

Socialism is a system wherein all means of production and distribution is owned and controlled by the state. It is a socio economic system in which material means of production are owned by public authority or the community and operates not for profit but for the services of the community at large. Socialists are of different types and they are Marxism socialism or scientific socialism State socialism Guild socialism; and Evolutionary and revolutionary socialism The principles common to all socialist are substitution of collective ownership for private property in all instruments of production which permit exploitation of labour and the substitution of a central authority controlling production in place of the present competitive environment.

FEATURES OF A SOCIALISTIC ECONOMY

1. State alone has the power to organize and conduct production.

2. Nationalization of all the means or instruments of production ie., land, factories, mines, railways and their ownership to be transferred to the state.

3. Controlling Boards would be established in each industry and the state would pay wages fixed by such boards.

4. State would provide work for everyone.

5. The state itself would be capitalist, the landlord and the organizer of industry and thus interest and rent would disappear.

6. Remuneration for work would vary according to one’s ability and everybody is assured of an equal opportunity to rise in life, irrespective of rank.

7. The state would undertake production and distribution and pay costs of production and annex profits as well. Profits arising out of production would be spent by the state on education, medical relief, recreation and entertainment of the poor.

8. Private property in capital goods like residential house, furniture and fixtures and other consumer goods would be allowed.

9. Private ownership of means of production is prohibited.

10. Each individual is assured of fixed income.

11. The entire surplus or profits belongs to the state.

12. There is no class difference or class struggle; and

13. Balanced Economic development

MERITS OF SOCIALISM

 1. As the State runs the entire operations, considerable fund is accumulated with the State which can be used for amenities like education, medical facilities, free milk for children and for entertainments.

2. The productive resources are utilized in an effective manner.

3. Jobs neglected by people would be given to machinery and they would be free to pursue higher aims in life.

4. As equality of opportunity is afforded to all to rise to higher positions in life, considerable uplift of uplift of the masses is brought under a socialistic state

SIMILARITIES BETWEEN CO-OPERATION AND SOCIALISM

1.      Both aim at the abolition of class struggle, profit economy and poverty in the midst of plenty, which militate against the norms of a welfare state.

2.       Both maintain economic equality and offer no opportunity for the development of glaring inequalities of income and wealth.

3.       In both the forms, actions are directed towards the elimination of competitive forces and their substitution by the principles of co-operation.

4.      Both aims at the welfare of the community and the promotion of social justice and progress.

5.       Both oppose individualism and seek to replace it by collective ownership and collective action.

6.       Both lay emphasis on distribution of wealth.

7.      The aims of both are rendering of service rather than earning profit.

8.      Both the systems are based on moral foundation and believe in human brotherhood.

9.      Both try for eliminating the evil effects of competition.

DIFFERENCE BETWEEN SOCIALISM AND CO-OPERATION

1.      System

Socialism is a system of government which seeks to move towards its objectives by changing the prevalent economic order. But co-operation is a system of thought which is compatible with all forms of economic and political systems. A better philosophy is enunciated within the system itself to help the common man to gain strength.

2.      Type of Remedy

 Socialism is a political remedy for economic evils and it is effective through the active involvement of the Government. On the other hand, co-operation is a non-political alternative to the economic problems.

3.      Supremacy

Under socialism, the state is supreme for it participates in and exercises control over production and distribution. The state interferes in all matters and the individual freedom cannot be exercised. Under co-operation, the individual is supreme, he enjoys freedom of action. The members direct the activities of the organization.

4.       Capital

Socialism is against the idea of the accumulation of capital by individuals. The co- operatives do not discourage accumulation of capital by its members. But in co- operation takes care to ensure that they are not controlled by it.

5.       Role of the State

 Socialism operates under state domination, which is both the deciding authority and the directing agency. But co-operatives seek to avoid state control

6.      Type of Property

Socialism is associated with State Ownership. All the means are owned collectively by the community. On the other hand, co-operation is characterized by, the co-existence of private and collective ownership.

7.      Politics

Politics in socialism, finds a top place in socialism, but the creed of co-operation is free from politics or it is politically neutral.

8.       Control

 In socialism, economy is controlled by the State while co-operative organizations are managed democratically.

9.       Surplus

 In socialist economy the surplus goes to the state. But in co-operatives it goes to the members on the basis of patronage dividend.

10.  Object

 The objective of socialist economy is to protect the welfare of the people where as in co-operation the basic objective is service to members.

COMMUNISM

Communism is mainly the product of Marxian philosophy contained in the book Communist Manifesto, which was published in 1848 in collaboration with Engles.

Communism is a term which is used “to denote a system of social organization based upon common property, or an equal distribution of income and wealth”.

Communism as a form of socialism in which, the evils of capitalism are mitigated by resorting to revolutionary methods.