The Capitalist Economy
The capitalist system is built on privately owned institutions that are primarily profit driven or profit oriented. It is an economy that is driven by the private sector.
The Socialist Economy
On the other side, the socialist economy displays the exact opposite of the traits and attributes of the capitalist economy. The socialist economy is state-based, meaning that the government owns and runs all major institutions. The provision of services to the people is its main tenet (Kornai, 2000).
Productivity Comparison
It is important to note that, as compared to the socialist economy, the capitalist economy generally tends to have higher overall productivity. The capitalist economic is profit driven hence the need to produce more to earn more profit. Socialist is service driven hence it produces just enough to meet the needs of the society, (Kornai, 2000).
Economic Inequality
The level of economic inequality tends to be higher in the capitalist economy. However, in the socialist economy, the reverse is the case. The capitalist economy is characterized by extremely wealthy and extremely poor people .i.e. higher class and the lower class. However based on government regulations and interventions the economic inequality among the citizen of a socialist economy is consistently regulated. Hence there is a limited economic gap in a socialist economy, (Kornai, 2000).
Political Freedom
The socialist economy seems to have lesser political freedom when compared with the capitalist economy. The socialist economy is based on government regulation of every sector and politics is also included under governmental control. However, in the capitalist economic, political institutions less regulated by the government hence the possibility of more political freedom compared to what is obtainable in the socialist economy, (Kornai, 2000).
Welfare Capitalism
Welfare capitalism is the process by which the benefits associated with capitalism and socialism is combined and offered to the citizens of a country. Welfare capitalism has been referred to in recent times as a mixed economy system. Welfare capitalism ensures that the private ownership of resources is practiced with an economy. However, it also welcomes government interventions to regulate economic activities by implementing policies to reduce inequality gaps in the society as well the implementation of policies to provide essential social amenities to members of the society, (Arts and Gelissen, 2002).
References
Arts, W., & Gelissen, J. (2002). Three worlds of welfare capitalism or more? A state-of-the-art
report. Journal of European social policy, 12(2), 137-158.
Kornai, J. (2000). What the change of system from socialism to capitalism does and does not
mean. The journal of Economic perspectives, 14(1), 27-42.
