With a goal to clarify the definitions of economic systems, the following definitions are provided:
Socialism, a socialist economy, is characterized by the government ownership of all means of production. They own the big factories, the transportation industry, the steel industry, and all other significant business. They (the government bureaucrats) decide what to produce, what size and shape, and how many. Then they set the non-negotiable price. And establish, set worker salaries and wages.
In capitalism, like in Denmark, Norway, Sweden, Germany and the U.S., the businesses are owned by private entities. They decide what to produce, what quantities, and what sizes. The price is determined in the open market place. If people don’t like the product, they don’t buy it and the company does something else or folds. Yes, many of these countries provide wide benefits to their citizens, paid for by their high rates of taxation. But this is NOT socialism. Listen to the words of the Danish Prime Minister at a Harvard Business School address: “I know that some people in the U.S. associate the Nordic model with some sort of socialism. Therefore, I want to make one thing clear: Denmark is far from a socialist planned economy. Denmark is a market economy.”
Communism, a paper system devised by Karl Marx, states one of the basis of communism is the complete abolition of private property. His major pronouncement was when communism existed the state would wither away. There would be no need for a state. This has never happened.
Milton Friedman, perhaps the greatest economist of the 20th century, stated that capitalism is the only system that has improved the lot of those in dire poverty. And, “there is no alternative way so far discovered to improve the lot ordinary people that can hold a candle to free enterprise.”
What is amazing is with the world’s largest experiment with socialism having failed —the Soviet Union—that anyone would advance it as a viable economic system.
1. Many confuse governmental systems with economic systems. A example of a form of government would be a democracy, republic (U.S.) a monarchy, or a dictatorship.
2. We have all heard these Nordic countries called socialist because of the many benefits they provide their citizens. This is simply income redistribution, with benefits provided to citizens of all economic classes. This is NOT the definition of socialism.