ECONOMIC SYSTEMS

Macroeconomics

 

TWO BIG ECONOMIC SYSTEMS

Capitalism and Communism

In the world there are many economic systems exists among the countries such as:

1. Socialism
   
2. Communism
   
3. Capitalism
   
4. Islamic Economic System
   
5. Mixed Economy Systems
   

 

There are also many other economic systems developed by human society like Stalinism, Maoism and Feudalism but 'Capitalism' and 'Communism' are the most important from all of them. Both have exactly opposite economical, social and political chrematistics.

COMMUNISM

Communism is an economic system that stands for total public ownership and rejects private property and personal profit. Its main idea of communism had been taken from socialism, thus these has many common characteristics. It enforces the equality of common people in their wealth and power. It can be said as:

"A system of government in which the state plans and controls the economy and a single, often authoritarian party holds power, claiming to make progress toward a higher social order in which all goods are equally shared by the people."

 

About

Karl Marx became the prophet and teacher of socialism whose writings transformed socialist thinking all over the world. Marx was a philosopher and an idealist who studied history and was greatly influenced by the writings of Georg Hegel, the famous German philosopher. In 1848 Karl Marx published, with the help of his long-time friend and collaborator Friedrich Engels, "Manifest der Kommunistischen Partei," more commonly known as "The Communist Manifesto". The Communist Manifesto was a summary of his entire social and political philosophy. The publication of this book occurred at a most propitious time. The book appeared on the eve of the 1848 revolution in France and less than one year before an attempted revolution in Germany. After the failure of the 1848 revolution in Germany he was expelled from his country of origin and moved to London. He later published "das Kapital" or Capital, an analysis of the economics of capitalism. Marxism, a doctrine developed by Marx and to a lesser extent by Engels, consists fundamentally of two interrelated ideas: a philosophical view of man and a theory of history.

 

Countries

Following countries are the leading as communist countries:

• China
  
• Cuba
  
• Laos
  
• North Korea
  
• Russia
  
• Vietnam
  

 

CAPITALISM

Capitalism is a political system in which all the property and factors of productions are owned privately in order to create profit for the owner. Prices of goods and services fluctuate depending on the desire of the desire of consumer and availability of goods and services. There will be significant difference of wealth and power between those who have capital and those who don't have it. Hence its definition can be:

"An economic system in which all or most of the means of production are privately owned and operated, and where investment and the production, distribution and prices of goods and services are determined privately by producers, rather than by the state. The means of production are usually operated in pursuit of profit".

About

No one can say when capitalism first began. Clearly the development of capitalism was not revolutionary like that of communism. Instead it emerged gradually without anyone making a plan of what it should become.

In 1776 Adam Smith, a Scottish university professor, produced a book which described the workings of a capitalist society. He believed that a country's wealth depends on all people pursuing their own interests. If a person promotes his own interest he or she is unintentionally promoting his country's interest. Smith thought that governments should promote free trade and not interfere by protecting certain industries from competition. The only duty of governments, Smith wrote, was to provide services that couldn't be profitable like the building of roads, schools and churches.

Countries

These countries are the capitalist in all terms:

• United Kingdom
  
• Finland
  
• Canada
  
• Norway
  
• United States of America
  

 

CAPITALISM VS COMMUNISM

Gross Domestic Production (GDP)

For the Year 2005 (in billions $US)
Communist Countries		Capitalist Countries
Country Name	GDP	Country Name	GDP
China	1843.12	United Kingdom	2295.04
Cuba	125.71	Finland	204.38
Laos	2.66	Canada	1098.45
North Korea	720.77	Norway	285.60
Russia	755.44	United States	12438.87
Vietnam	47.11

Reference: IMF World Economic Outlook (WEO)

 

The above chart shows that overall capitalist countries are creating high GDP rates.

 

Characteristics

The following are the comparative characteristics of these systems based on criticism and favors on them:

Capitalism

• Only private sector operates all business.
  
• People can have their own properties and factors of productions.
  

 

• Each business has been operated to have personal profits.
  
• Those who have capital, they have more wealth and power than others who doesn't have.
  
• There is great competition among private businesses.
  
• Investors take risks in investments as the self-organization.
  
• The existence of markets (including the labor market.
  

 

 

 

Communism

• Communist party holds as Government to operate all kinds of businesses.
  
• There is no concept of private property and all the means of productions are owned by Government.
  
• People work for common welfare and grades not for personal profit.
  
• All the peoples are same in power and wealth.
  

 

• No competition exists. Only Government is the monopolist in all businesses.
  
• No entrepreneurship exists.
  

 

• There are no markets.

 

WHAT I SHOULD SAY

As being a Muslim I must say that Islamic Economic System is the best from all of these economic systems. It enforces a total interest free economy, but it has not been applied successfully in any country across the globe. In Pakistan we are facing a mixed economy system. All the major businesses are owned by Government or had been owned by Government and it didn't have any competitor in these businesses. Pakistan Tele Vision (PTV), Pakistan Railways, Pakistan Tele Communications Ltd. (PTCL), Pakistan International Airlines (PIA), WAPDA, Water and Sewerage Authority (WASA), Sui Northern Gas Pvt. Ltd. and State Bank of Pakistan are the kind of business those had been monopolist under the Government authorization. Now a day only some of them have been privatized or have been facing competitors and other of them are still monopolist and these are still owned by Government.

 

Communism, as it exists in the world today, and capitalism are the same things. True communism doesn't, and can't, exist. True communism depends on human nature being basically altruistic. For communism to work, the members of the society either need to be altruistic enough to want to work for the benefit of their neighbors, or they need to be forward thinking enough to see that what benefits the whole benefits themselves. They must be very far-sighted indeed, because large-scale social benefits tend to be more abstract in nature, and more difficult to recognize. Communism was a major cause in break down of Russia.

 

Capitalism encourages non-contributing, support structure industry. Many organizations make fortunes simply by shifting money back and forth, from one place to another. While this is all very integral to our economy, it only exists as a side effect -- it doesn't actually produce anything.

Capitalism allows people to starve. However, unlike communism, capitalism also allows people to better themselves and their situation. Capitalism also allows people to ensure a better future for their offspring, should they have any, and to contribute surplus resources to organizations that they believe in. To quote the old hack, it may not be a perfect system, but it is the best one we have.