What is Socialism
In socialist economic system means of production are owned and managed by the State. Ownership of means of production is not allowed. In socialism economic activities are carried on mainly for social gains and personal interest is of less significance. In this economic system the anti social activities like smuggling and hoarding find no place. Economic activities are planned with the motive of social benefit by a central planning authority.
The individuals in socialistic society surrender their economic freedom in exchange of assurance of freedom from wants by the State. It is the responsibility of the State to provide food, lodging and clothing besides other requirements, by assigning a suitable job to each one of them.
Characteristics of Socialist Economic System
Following are the Characteristics
- In socialism means of production are owned by the State
- Economic activities are planned by the central planning authority
- Absence of competition
- Equal opportunities to all
- No economic freedom to the people
Advantages and Disadvantages of Socialism
Following are the merits and demerits, advantages and disadvantages of socialism.
Advantages of Socialism
Following are the benefits or advantages of socialism
Economic efficiency under socialism is greater than under capitalism, the means of production are not left in the market forces rather they are controlled and regulated by the central planning authority towards chosen end. The central planning authority makes an exhaustive survey of resources and utilizes them in the most efficient manner.
In a social economy, there is less inequality of income as compared to capitalist economy because of the absence of private ownership of means of production. In socialist economic system every one works hard and paid as per his skills & ability.
Absence of monopolistic practices
One of the benefits of socialism is that it is free from monopolistic practices to be found in a capitalist society. Since under socialism all means of production are owned by the state, the exploitations by the monopolist are absent. Instead of private monopoly, there is state monopoly over the productive system but this is operated for the welfare of the people.
Absence of business fluctuations
A socialist economy is also superior to a capitalist economy that is free from business fluctuation. Generally planned economy co-ordinates the action of various producing units, prevents discrimination between saving and investment and make full use of available resources. It is able to control over production and avoid general deflationary trend.
I will consider economic growth as an important advantage of socialism because it adopts economic planning as a means of promoting rapid economic growth. A planned socialist economy functions right according to the plan in a systematic and orderly manners and marches rapidly on the road to economic progress.
Disadvantages of Socialism
Following are the demerits or disadvantages of socialism.
Elimination of Individualism
There are many disadvantages of socialism but first come in my mind is the lack of economic freedom. In socialist economic system everything is controlled by a centralized body. Individuals are not allowed to own any assets, everything belongs to the state. Workers are assigned specific jobs and are not allowed to change them without consent from the planning authority.
Red-Tapism and Inefficiency
In socialism there is a lot of involvement of bureaucracy and are the drivers of all economic machinery. The work civil servants are not comparable with the private entrepreneurs. Civil servants merely do the jobs because it is their duty and they will get paid whatever the consequences. Thus inefficiency arises and in the long run the economy suffers.
An Artificial System
As a socialist economy is a planned economy, every aspect of the economy is to be determined by the government. Forces of demand and supply do not apply which is one of the disadvantages of socialism. Thus in the long run the economy becomes state rather than wasted, whereas these make an economy prosper.
In the final analysis it is the consumer who loses out. Sovereignty of consumer does not apply in a socialist economy. Consumers do not enjoy the status of a consumer as in a capitalist economy. Choices of goods and services are able to maximize their total satisfaction.
Socialists claim more equal distribution of wealth but practically it is proven that complete economic equality is virtually impossible. There is a distinction between the rich and poor. Moreover since it is a planned economy the poor suffer even more.
Non-existence of economic and political freedom
Freedom of enterprise, freedom in choice of occupation and many other essential freedoms for an economy to prosper are out‑rooted from society. The true spirit of democracy dies away. The basic needs Although it has been agreed that the six basic needs in life are met within a socialist economy but all this is obtained at the expense of economic and political freedom.
Non-existence of Competition
It is due to competition that an economy becomes prosperous. The competition between producers and consumers leads to the production of a good quality product which may even be relatively cheap here it is one the disadvantages of socialism. Thus talents and initiatives of mankind develop and in the ultimate analysis the country incurs rapid growth.