The hallmark of the cold war was capitalism vs communism originating from the United States and Russia respectively as the dominant economic system globally. Therefore, it is essential to understand what each of the economic systems represents and how they meet the populous needs. Capitalism is based on private ownership of capital and production, characterized by free and competitive markets, wage labour, and a price system.
The main concern in this capitalism economic system is how all the commodities will be availed if one lets any producer produce what they want. The price system is the invisible hand when the prices rise, attracting producers to the commodities that meet the people’s economic needs and fall when too many producers, in this case, get into the market. A communist economic system, on the other hand, is structured to fix the uncertainty and instability of the price system by centralizing the power and means of production to the government.
The communist economic system has not yet been successfully implemented since the collapse of the Soviet Union after the cold war. However, the Communist Republic of China has implemented a hybrid economic system that lures the benefits of Capitalism vs Communism, which often conflict due to their fundamental differences. In a Capitalist Economic System, the factors of production, including land labour, entrepreneurship, and capital, are left in the independent individuals’ hands to allocate them for their maximum or future benefits (Novokmet et al.).
On the other hand, the production factors are owned by the government in a communist economic system, and it decides the prices and amounts of goods and services available to the people. The production decisions are left in the hands of the people in a Capitalist Economic System, while these decisions are left in the government’s hands in a communism economic system (Bukowski et al.).
The success or failure of a given producer in the market determines the resource allocation in a capitalist economic system over time, while a communist government makes the resource allocation decision based on political and macroeconomic considerations.
Each of these economic systems has an array of advantages and disadvantages based on their feature and mode of implementation in various economies. The merits of the capitalist economic system include the fact the individual desire to emerge an immense amount of wealth tends to motivate them to engage in production, while the established firms are incentivized to be efficient by their desire to maximize their profits.
The consumers’ incentive to participate in the economic system is incentivized by their utility from consuming the goods produced (Bukowski et al.). The system has limitations as successful firms are likely to obtain monopoly power and exploit them for profits. Additionally, the sole incentive of profit encourages the firms to ignore some of the costs, such as waste disposal, thus damaging the environment and consequently exacerbating climate change.
The communist economic system evades the drag that comes with relying on the price system and thus is efficient in the short run by considering the commodities that meet the people’s welfare. Additionally, where there is a strong visionary leader, the economy’s productivity can improve significantly (Rockmore). Depending on the government in power, equality can be easily achieved in a communist economic system rather than a capitalist economic system. On the other hand, the government owns all the means of production, limiting the individuals’ rights that grant the government excess power over the individual.
Capitalism vs Communism Essay
In conclusion, it is clear that the capitalist economic system vs communist economic system counter each other and can barely coexist. Despite the inefficiencies of a capitalistic economic system, it tends to empower the individual to find their way of meeting their needs while these needs are taken care of by the government in a communist economic system, at the expense of the individual’s sovereignty (Żuk et al.).