Comparative Economic Systems

(Part 2)




Socialism is an economic philosophy based on the idea that the benefits of economic activity -wealth-should be equitably distributed throughout society. Socialism rejects the concept of private ownership, individualism, and competitions for profit that lie at the heart of capitalistic thought and practice.

Present-day socialism developed in a large part as a reaction to the poverty and other miseries that accompanied the Industrial Revolution. Karl Marx, the father of modern-day socialism, was the most significant critic of capitalism to emerge in the nineteenth century. He believed that capitalism was fatally flawed.

Socialism has won a large following in developing countries. One reason for socialism appeal is that most developing countries are starting from scratch. It also appeals to leaders who want to mobilize an entire nation behind a program of industrial growth. Critics say socialist countries have a tendency to develop too many layers of bureaucracy. Another criticism is that socialism deprives people of the freedom to decide for them how to use their income. In response, socialist point to the inequalities of wealth and power that exist under capitalism.




Communism as it is known in today’s world was born in Europe in the middle of the last century. Communism is often called a collective ideology, for the collective, or state, ownership of all land and other productive property.

In November 1917, Lenin and his followers seized power in Russia, established a communist government, and began at once their attempt to create their vision of a communist society. Lenin realized that the attempt to create an instant communist society had failed, and in 1921 he introduced the New Economic Policy, which was a clear compromise between socialist principles and capitalism that was intended to revive agricultural production and promote manufacturing.

After Lenin’s death Josef Stalin gained complete control of the Communist party and the government of the Soviet Union by 1928. Stalin hoped to end the nation’s economic backwardness and reduce its military vulnerability.

When Mikhail Gorbachev gained power in the Soviet Union in 1985, he inherited an economic system largely unchanged from the one built by Stalin. He proposed instead a program that covered not only the period of the next plan, but also the two that followed until the year 2000. Gorbachev was still in power, but his foundation was weak. The Communist party was then split into factions. One faction, the liberals, wanted the immediate shift to free market capitalism. The other group, the conservatives, wanted a slower transition.

Communism is a system founded upon Marx’s prediction of the inevitably of a workers’ revolution against capitalism. The collapse of the Soviet communism, however, has proven, instead, the power and inevitability of the forces of political and economic freedom.



Comparative Economic Systems