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World Economy

In: Social Issues

Submitted By dvnsdd
Words 410
Pages 2
There are two main theories that dominate our world economy- capitalism and socialism. Reviewing the approaches these theories take to operating shows stark contrasts. While each system is founded on their own belief structure, they do borrow ideas from each other. Each party has been critical of the other for taking advantage of their own people.

Taken in simple terms there are three main ideas that are the foundation of each system- ownership, pricing, and profitability. In a capitalist economy businesses are owned by individual people, while in a socialist economy businesses are owned by the public, read government. Socialist economies determine the prices of goods and services through a central committee and capitalists believe that supply and demand should drive the market. Some might describe a primary difference of these systems as capitalism is a “for profit” venture while socialism is a “not for profit” concept.

Both economic theories have received criticism from their detractors. Capitalism is criticized for creating income inequalities that keep the poor, poor. In this system, the wealthiest individuals dominate the means of production and benefit exclusively from the profits of those ventures. Socialism limits people’s freedoms to choose where they live, work and even the way they are educated. With a system that is based on limited choices, and profitability seen as criminal, critics believe that socialists will find it difficult to keep up with the competition.

While these systems have grass root differences, they have started to understand that there are some positive parts of each system. This concept of borrowing ideas has been described as the convergence theory. Ownership and profitability have been mainstays of capitalist economies and are now being recognized by socialists as motivators. In the meantime, capitalists have seen that...

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