Capitalism versus Communism Term Paper

Introduction

Historically capitalism and communism have been at odds with each since each ascribes to a particular methodology that is on completely opposite ends of the spectrum as compared to the other.

Communism advocates for social equality through the implementation of common ownership of the means of production while capitalism ascribes more towards a free market system wherein private individuals and corporations should be allowed to make a profit. While both methods have their own merits in terms of what benefit each provides for the state in which they are implemented each has a far more pronounced weakness.

In the case of capitalism this comes in the form of the widening gap between the rich and the poor while in the case of communism this comes in the form of economic stagnation due to the lack of entrepreneurship, business innovation and limited consumer spending. It is based on this that this paper will examine the positive and negative aspects of both systems and determine which system would be the most appropriate for a country in its infancy.

What is Communism?

Arising from the Marxist theory in international studies the initial concept of communism was the creation of a classless and division less society wherein people are free from the “evils” that have plagued them since the earliest points in human history which are oppression and scarcity (Rose, 161- 170). In this iteration of society there is no government and human society isn’t separated into varying countries or class divisions.

Instead of the prevailing concept of separate societies which advocate the right of individuals to privatism which is the inherent right to own business enterprises and derive the benefits of such ownership for themselves alone, ownership under the initial concept of communism is based on common ownership of the means of production which supposedly is the solution for poverty and scarcity in the modern day era since the benefits accrued from the business enterprise are distributed among the people (Rose, 161- 170).

What must be understood is that communism presents itself as a “solution” so to speak to the problem of developing a society wherein all individuals have food and shelter and where concepts related to racism to sexism are nonexistent.

It does this by presenting the notion that the division of society into classes (poor, middle and rich) and the concentration of wealth among the rich is the primary reason behind the current problems of poverty, destitution and scarcity that a majority of individuals experience today (Lawler, 24 – 30).

As such, by redistributing the wealth of the upper class and bringing them down to the level of the middle class the lower class is subsequently uplifted resulting in a more “fair” system with all individuals having equal opportunities.

Implementing Communism

One of the phases necessary in developing a communist society, as described by Marx’s concept of communism, was seen in the case of China and the Soviet Union during the Cold War era wherein a central government that controls all means of production within the state was instituted.

It is assumed that if no one is able to own their own business or make their own goods for personal profit then no single individual can be considered above the other and the state of equality continues to persist with the distribution of goods and services primarily being the responsibility of the government.

Problems with Communism

This means that aspects related to education, labor, transportation, and agriculture are all centrally controlled with no form of privatization in place that would create any deviation from every single citizen having equal access to goods and services. Furthermore, private property would be non-existent in a communist state with all individuals having to utilize a centralized banking system and having to pay high income taxes.

In a sense a communist state would have all individuals ascribe to varying degrees of equality, having little deviation aside from their chosen profession and that concepts related to ownership, business innovation and the establishment of unique business practices are thus completely abolished (Lawler, 24 – 30).

What is Capitalism?

The basis of the capitalist system is profit; goods and services are not sold on the basis of satisfying the needs of people but rather for providing a profit for the owners of the company (Ricketts, 1892).

One widely accepted definition of capitalism is to consider it as an economic system wherein subsequent ownership and investment into varying means of production, distribution and the exchange of wealth is actually limited to corporations or private individuals.

This differs greatly from the communist model in that instead of common ownership private ownership is dominant. In such a case, money and wealth are increasingly isolated to only a small group of individuals while the rest of the population must sell their services in order to obtain money to buy goods and basic necessities.

Positive and Negative Aspects of Capitalism

From a certain perspective it can be seen that the capitalist system overwhelming favors only a select segment of the population yet in exchange capitalism has helped to drive the economies of several countries towards impressive economic gains.

Through capitalism the production of goods and services has thus become more efficient and thus cheaper, there are more jobs available for people that want them, it encourages innovation and entrepreneurship which further helps local economies and at the same time it helps to ensure that the economy of any country continues to be productive due to its profit based orientation.

On the other hand it must be noted that capitalism has been accused as being the primary reason behind increasingly large gap between the rich and the poor and the fact remains that its utilization in any country’s economic system will not facilitate any level of social equality in the foreseeable future.

Why Communism Would be Terrible for a Country in its Infancy

One of the best ways to present an argument against the implementation of communism in a country in its infancy is to examine the case of the Soviet Union and China during the Cold War era. While initially the communist doctrine does seem appealing to members of the lower class the inherent problem is not in its implementation but rather in maintaining and improving upon the system that was created.

When comparing the economies of the U.S. and U.S.S.R from 1950 to 1980 it can be seen that the U.S. surpassed its global rival in leaps and bounds.

While this can be attributed to the rise of the baby boomer generation and the fact that Europe became a major market for American made goods and services the fact still remains that it was through the creation of new businesses, the invention of new gadgets and innovations in several industries as well as the proliferation of entrepreneurs and capital during this particular period of time that necessitated the subsequent boom that the American economy experienced.

The Soviet Union and China on the other hand felt the inherent limits of the communist based system of production during the same era as America’s “boom years”. Soviet and Chinese based industries continued to deteriorate with outdated and aging equipment continuing to be used with widespread hunger and poverty being the norm under this “equal system” (Irwin, 124 – 125).

Instead of a system where all citizens benefited what occurred was a subsequent decrease in industrial capability as no new innovations, no subsequent entrepreneurship and no new industries appeared within China and the Soviet Union. This system created an equal society under the banner of poverty and did nothing to fulfill the promises indicated by Marx.

This can largely be attributed to several factors, namely: the contentious relationship between America and the Soviet Union, the implementation of American policies which isolated the Soviet Union from Western Europe and finally the failure of the centralized communist production system which neglected to take into account industrial innovation and entrepreneurship as necessary facilitators of social wealth (Grimalda, Gianluca, David Barlow, and Elena Meschi, 379 – 387).

Focusing on the issue of industrial innovation and entrepreneurship, the subsequent decline of the economies of the U.S.S.R and China from the 1950s to the 1980s can primarily be attributed to the fact that in order for any economy to thrive it is necessary for certain factors to be in place: there must be a variety of small, medium and large enterprises, there must be competition between different producers and finally entrepreneurship and innovation must be encouraged in order to facilitate positive changes within a given industry.

What must be understood is that the proliferation of small, medium and large enterprises results in more jobs being present for people within particular communities. This results in more people having money to buy goods or utilize services and this in turn ramps up demand which necessitates further expansion thus providing more jobs and more money for people.

This current climate is also improved with the presence of entrepreneurship and innovation which facilitates new means of doing business which further improves the economic climate resulting in economic prosperity within a given country. All of these factors are what was lacking in the case of China and the Soviet Union since in effect their centralized means of production killed off the possibility of innovation, entrepreneurship and the development of more high paying jobs within their respective countries (Qianfan, 1 – 15).

This created severe stagnation within their economies which led to a subsequent decline in their industrial potential. Further evidence of how the communist centralized production system would be terrible for a state in its infancy can be seen in China’s turn around within the past 30 years.

It was only when China modified its communist policies to encourage the creation of businesses, the introduction of foreign investments, private ownership and a variety of other changes that made its current economic system a hybrid of communism and capitalism that it was able to become the second largest economy at the present.

For any infant state it is important to first establish a stable and thriving economy in order for its citizens to attain jobs and help contribute to making the country better. What must be understood is that consumer spending is the basis by which an economy either thrives or declines.

When consumers make purchases this drives the manufacturing processes of companies which results in expansion and more jobs. In cases where there is low consumer spending as seen in the past three years as a direct result of the 2008 financial crisis this causes an economic downturn.

An infant state needs to encourage consumer spending and the only way this is possible is for companies to hire more workers and one way of encouraging this to occur is to make an economic environment conducive towards entrepreneurship and business innovation. With the communist system distinctly lacking these particular aspects it can be stated that it would be a terrible system to implement in the case of a state in its infancy.

Works Cited

Grimalda, Gianluca, David Barlow, and Elena Meschi. “Varieties Of Capitalisms And Varieties Of Performances: Accounting For Inequality In Post-Soviet Union Transition Economies.” International Review Of Applied Economics 24.3 (2010): 379-403.

Irwin, Zachary T. “The End Of The Line: The Failure Of Communism In The Soviet Union And China (BOOK).” Library Journal 115.11 (1990): 124-125.

Lawler, Peter Augustine. “Communism Today.” Society 41.4 (2004): 24-30.

Qianfan, Zhang. “Evolution Without Democracy: Toward A Unified Framework For Understanding The Success And Failure Of Chinese Communism.” Journal Of Chinese Political Science 6.2 (2000): 1-42.

Ricketts, Martin. “Capitalism: A Treatise On Economics.” Economic Journal 108.451 (1998): 1892-1893.

Rose, Aknold M. “Marx’s Influence On American Thinking.” American Journal Of Economics & Sociology 10.2 (1951): 161-173.