Comparison between Capitalism, Socialism and Mixed Economy
Capitalism, socialism and mixed economy are the four major types of economic systems. Capitalism is also known as the market economy, socialism is known as the planned economy while mixed economy is a mixture of socialism and capitalism.
This is a political and economic system where individuals own the industry and resources. This kind of economy encourages resources competition as the most reliable technique of increasing capital and developing success on a personal level. It is dependent on a system of balances and checks which are brought about by competition. There are different kinds of capitalism such as corporate, state-lead, free market, social market or social democratic capitalism.
It relies on the planning of the government instead of the market place for the distribution of resources. Individuals who live in a socialist economy can own business or offers their services to consumers directly however, they get taxed on the profits made heavily.
Citizens are required to work though the government is the one responsible for provision of services like healthcare, public transport and education at low costs or for free. There are different types of economic theories that govern socialism and they include:
- Self managed economies in which specific groups make decisions.
- State directed or state socialism
- Market socialism
- Planned economy
Refers to an economy where public and private owned enterprises exist side by side and decisions are made through market mechanisms. It provides clear boundaries demarcation of private and public sector so there can be core and strategic planning.
The government in this kind of economy can intervene to prevent any undue economic power concentration, restrictive trade and monopolistic practices. In a mixed economy, the rights of individuals are not only protected but respected as well in line with public order, law and morality requirements.
- In terms of resource ownership, in a socialist economy property is state owned while in the capitalist economy it is privately owned.
- Capitalism believes that competition is what brings out the best in people while socialism believes that cooperation boosts coexistence.
- In capitalism, there is a level playing field while in socialism there is protection for private enterprises.
- In socialism the government is fully involved while in capitalism, the government only interferes when the law is broken.
Because capitalism and socialism have merits they work better when combined and that is why mixed economy is the most preferred form of economy. It combines the merits of socialism and capitalism. Capitalism ensures there is a better economic growth perception while socialism ensures equal income distribution and the welfare of all.
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