Capitalism is better than socialism

Jun 22, 2016 Letters

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Dear Editor,

This is to follow up Cde. Hydar Ali letter publish in your June 18th  issue publication caption “There is a fundamental difference between capitalism and socialism as models of economic development.”
The simple answer is’ yes’ but the answers are not simple but major and many and also varied Guyana with a capitalist economic system should fare far better than Venezuela which currently has a socialist economic system despite we have not found oil, yet!
Capitalism is characterized by private ownership of all non-labor factors of production.
Co-ordination under capitalist economies has a market mechanism in which market forces of demand and supply are allowed to work in order to determine prices and output in the economy. The forces of supply and demand push prices upward or downward in response to the decisions of individual buyers and sellers.
As a result of the self-interest of many economic agents, within this economic system, the market is propelled by material incentives. There is no central decision-making mechanism of/in capitalism. Market forces direct the actions of decentralized decision makers. The capitalist’s information structure is decentralized because horizontal channels of information exists where information and decision-making is spread across the various agents in the economy who are on the same level.
The free market economy works by means of the invisible hand that states that within a free market enterprise, products are exchanged at a price solely determined by the mutual consent of buyers and sellers. Demands by consumers for products direct the allocation of resources to achieve consumers’ utility maximization. Profit is financial (material) incentive to produce goods. This economic system ensures that shortages and surpluses do not last for long. When there is excess demand (shortage) prices in the market are likely to rise, as each buyer would now be willing to outbid the other for the scarce good demanded by many. At higher prices, suppliers are likely to increase their supply and thus equilibrium will be achieved in the market. Situations may also exist in the market where there is surplus. The tendency here is for prices to fall as each supplier will attempt to win over customers from their rival firms. At these lower prices, consumers are likely to demand more. Therefore, equilibrium in the market is restored.
These features are associated with a capitalist economy. The means of production are owned only by the few people (capitalists) who can pay for them. Marx refers to this group as the bourgeois. There is a working class, the people who generate wealth for the owner class by producing goods and services and, in return, are paid wages by the Capitalists. This group has no ownership of the factors of production and Marx refers to this group as the proletarians.
Firms rationally aim to maximize profit and this is an incentive for production of these goods and services: The capitalists try to judge the market and adjust production accordingly in order to realize the greatest possible profit. In a pure capitalist economy, there is no state intervention which often means that the economy is free to make all economic decisions and adjust itself when necessary to remain in equilibrium. This is in contrast to the socialist economy of  Venezuelan currently.
Being efficient is being able to accomplish a task with minimum expenditure on as many levels as possible. This performance criterion looks at how well the economy is able to allocate its resources to best maximize its production on goods and services while taking the welfare of individuals into consideration.  A capitalist economy is efficient as it yields high levels of GDP, innovation is encouraged, and one is allowed to exercise freedom of choice. Most or almost all socialist economy are inefficient because of non incentive encouragement.
Unemployment rate, inflation rate and real economic growth are some of the economic indicators used to determine economic stability within a capitalist economy in contrast to a socialist one.
Capitalism renders unequal distribution of income in the economy. Income is distributed in accordance to the skills and qualifications an individual possesses. Those possessing the skills, qualifications as well as capital resources valued by the market will receive high incomes, whereas lower incomes will be allocated to persons without such skills and resources. In some socialist, sycophants and non qualified comrades friends are favored for jobs
Economic growth can be measured as the increase in real GDP. Productivity is the key component, i.e. producing more at a lesser operational cost.. With a steady rise in real GDP the economy is assuredly growing well. However, where there are fluctuations in the business cycle this may cause economic growth to be unstable suggesting that the economy maybe in or going through a recession.
Capitalism, as we are aware, is an economy where resources and firms are privately owned in free markets. (whereas in a socialist economy the state owns all.) Normally, this usually involves some government intervention to regulate certain aspects of the economy and protect private property. Several advantages are included within a capitalist economy.
Foremost as Government intervention is kept at a limited level several issues that generally arise with government intervention including corruption, lack of a self-interest push force and poor circulation of information within the market is prevented allowing individual incentives to work as hard as possible to achieve as much as possible. As the capitalist economy is dependent on the push factor of individuals, there is no limit to the level of wealth an individual can accumulate through progression within the economy.
Capitalism allows individuals choice both in commodity purchase and employment opportunities. It allows resources to be distributed according to consumer choice rearing the market in a more productive consumer friendly range. Through capitalism firms are inclined to produce with greater efficiency, by cutting cost and improving efficiency becomes an aim to prevent losses in an industry where competition is high bettering the economy as a whole. In such industries company effectively respond to changes in consumer desires better the economy and improving efficiency. In attempts to ensure the highest possible level of productivity, financial incentives are provided to employees by companies so as to better improve self interest in company proficiency. This is beneficial on a global level as these countries generally become exemplary innovative fronts for improvement in technology and implications of productive changes.
As company proficiency improves so does the ability for people to move through social class as an increase in wealth is available. This pushes individuals to work harder in the interest of self-preservation to achieve more. Profit increase within the economy and personal industry, allows an expansion in wealth and company resources, resources that will be used so as to best benefit the company and in turn the economy by promoting foreign investment.
Individuals possess a freedom of choice to purchase and engage in virtually any and all economic activities with little restraint. Promoting trade among nations and individuals that will mutually profit and the economy itself. Profit maximization is a main priority within the capitalist’s state; . This causes large suppliers of goods and services that are similar diversification in brands allow for customer distinction and individuality, catering for the necessary changes in desire for certain goods among the lower and higher income classes.
As Margaret Thatcher the erstwhile British Prime Minister said, ‘The problem with socialism is that you eventually run out of other people’s money.’ Guyana would fair far better with a benign capitalist economy than our western Spanish neighbor who is relentlessly perusing an economic system that worth relegating to the footnotes of history and start with words and end with no tangible reality: the only result is riots and street demonstration plus more poverty for its citizen.
Rooplall Dudhnath

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