Dumindu Katuwala De Silva [Type the document subtitle]Viraj | Dumindu Dumith Katuwala Andrea Vanderstraaten

Capitalist Economic System

Capitalism is an economic system that is based on the private ownership of capital goods, or the means of production, and the creation of goods and services for profit. Elements central to Capitalism include capital accumulation, competitive markets, and a price system. There are multiple variants of capitalism, including laissez-faire, welfare capitalism and state capitalism. Capitalism is considered to have been applied in a variety of historical cases, varying in time, geography, politics, and culture. There is general agreement that capitalism became dominant in the Western world following the demise of feudalism. The term capitalism gradually spread throughout the Western world in the 19th and 20th centuries largely through the writings of Karl Marx.

Economic elements
There are a number of different elements in the capitalist socio-economic system. Capitalism is defined as a social and economic system where capital assets are mainly owned and controlled by private persons, where labor is purchased for money wages, capital gains accrue to private owners, and the price mechanism is utilized to allocate capital goods between uses. The extent to which the price mechanism is used, the degree of competitiveness, and government intervention in markets distinguish exact forms of capitalism. Capitalism and capitalist economics is generally considered to be the opposite of socialism, which contrasts with all forms of capitalism in the following ways: social ownership of the means of production, where returns on the means of production accrue to society at large, and goods and services are produced directly for their utility (as opposed to being produced by profitseeking businesses). Factors of production A product is any good produced for exchange on a market. A commodity refers to any good exchanged in a market, but more recently refers solely to standard products such as raw materials.

There are two types of products:

capital goods (or the means of production including intermediate goods) consumer goods capital goods (i.e., raw materials, tools, industrial machines, vehicles, and factories) are used to produce consumer goods (e.g., televisions, cars, computers, houses) to be sold to others.

The three inputs required for production are:

labor (including human capital) land (i.e., natural resources, which exist prior to human beings) and capital goods

Capitalism entails the private ownership of the latter two natural resources and capital goods by a class of owners called capitalists, either individually, collectively or through a state apparatus that operates to maximize profits or that serves the interests of capital owners. Money, capital, and accumulation Money was primarily a standardized medium of exchange, and final means of payment, that serves to measure the value of all goods and commodities in a standard of value. It is an abstraction of economic value and medium of exchange that eliminates the cumbersome system of barter by separating the transactions involved in the exchange of products, thus greatly facilitating specialization and trade through encouraging the exchange of commodities. Capitalism involves the further abstraction of money into other exchangeable assets and the accumulation of money through ownership, exchange, interest and various other financial instruments. Capital in this sense refers to money used to buy something only in order to sell it again to realize a financial profit. The accumulation of capital refers to the process of "making money", or growing an initial sum of money through investment in production. Capitalism is based around the accumulation of capital, whereby financial capital is invested in order to realize a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called thelaw of value.

Capital and financial markets

The defining feature of capitalist markets, in contrast to markets and exchange in pre-capitalist societies like feudalism, is the existence of a market for capital goods (the means of production), meaning exchange-relations (business relationships) exist within the production process. Additionally, capitalism features a market for labor. This distinguishes the capitalist market from pre-capitalist societies which generally only contained market exchange for final goods and secondary goods. The "market" in capitalism refers tocapital markets and financial markets. Capitalism is the system of raising, conserving and spending a set monetary value in a specified market. There are three main markets in a basic capitalistic economy: labor, goods and services, and financial. Labor markets (people) make products and get paid for work by the goods and services market (companies, firms, or corporations, etc.) which then sells the products back to the laborers. However, both of the first two markets pay into and receive benefits from the financial market, which handles and regulates the actual money in the economic system. This includes banks, credit-unions, stock exchanges, etc. From a monetary standpoint, governments control just how much money is in circulation worldwide, which plays an immense role on how money is spent in one's own country. Wage labor and class structure Wage labor refers to the class-structure of capitalism, whereby workers receive either a wage or a salary, and owners receive the profits generated by the factors of production employed in the production of economic value. Individuals who possess and supply financial capital to productive ventures become owners, either jointly (as shareholders) or individually. These owners of the means of production and suppliers of capital are generally called capitalists. "Workers" includes those who expend both manual and mental (or creative) labor in production, where production does not simply mean physical production but refers to the production of both tangible and intangible economic value. "Capitalists" are individuals who derive income from investments.

Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making products or services by applying labor power to the means of production. Macroeconomics Macroeconomics keeps its eyes on things such as inflation: the rate at which money loses its value over time; growth: how much money a government has and how quickly it accrues money; unemployment, and rates of trade between other countries. Whereas microeconomics deals with individual firms, people, and other institutions that work within a set frame work of rules to balance prices and the workings of a singular government. Both micro and macroeconomics work together to form a single set of evolving rules and regulations. Governments (the macroeconomic side) set both national and international regulations that keep track of prices and corporations' (microeconomics) growth rates, set prices, and trade, while the corporations influence what federal laws are set.

Features of Capitalist Economy

Main features of a capitalist economy are as follows: (i) It is an economic system in which each individual in his capacity as a consumer, producer and resource owner is engaged in economic activity with a great degree of economic freedom. (ii) The factors of production are privately owned and managed by individuals. (iii) The main motive behind the working of the capitalist system is the profit motive. The entrepreneurs initiate production with a view to maximize profits. (iv) Income is received in monetary form through the sale of services of the factors of production and fro: profits of private enterprise. (v) Capitalist economy is not planned, controlled or regulated by the government. In this system, economic decisions and activities are guided by price mechanism which operates automatically without any direction and control by the central authorities.

(vi) Competition is the most important feature of the capitalist economy. It means the existence of large number of buyers and sellers in the market who are motivated by their self-interest but cannot influence market decisions by their individual actions.

Types of capitalism
There are many variants of capitalism in existence that differ according to country and region. They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominately market-based allocation of resources, and they are structured upon the accumulation of capital. The major forms of capitalism are listed below: Mercantilism Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to stateinterest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. Free-market capitalism Free-market capitalism refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly-competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market capitalism where the role of the state is limited to protecting property rights. Social-market economy A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rights through national collective bargaining arrangements. This model is prominent in Western and Northern European countries, albeit in slightly different configurations. The vast majority of enterprises are privately-owned in this economic model.

State capitalism State capitalism consists of state ownership of the means of production within a state. The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth. According to Aldo Musacchio, a professor at Harvard Business School, it is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy, through either direct ownership or various subsidies. Corporate capitalism Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit. Statemonopoly capitalism was originally a Marxist concept referring to a form of corporate capitalism in which state policy is utilized to benefit and promote the interests of dominant or established corporations by shielding them from competitive pressures or by providing them with subsidies. Mixed economy A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low.

History
Economic trade for profit has existed since the second millennium BC. However, capitalism in its modern form is usually traced to the Mercantilism of the 16th18th Centuries. The history of capitalism can be traced back to early forms of merchant capitalism practiced in Western Europe during the Middle Ages, though many economic historians consider the Netherlands as the first thoroughly capitalist country. In Early modern Europe it featured the wealthiest trading city (Amsterdam) and the first full-time stock exchange. The inventiveness of the traders led to insurance and retirement funds, along with much less benign phenomena as well, such as the boom-bust cycle, the world's first asset-inflation bubble, the tulip mania of 16361637, and according to Murray Sayle, the world's first bear raider Isaac le Maire, who in 1607 forced prices down by dumping stock and then buying it back at a discount.

Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth. Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms, its condemnation and rejection, particularly by socialists, and its defense, mainly by conservatives and liberals.

Location
Capitalism is an economic system and not a political system. Countries thus do not (typically) enshrine capitalism as a part of their constitutional framework, nor do they typically limit policy choices to capitalism. However, the vast majority of countries (almost all liberal democracies and most authoritarian systems) in the world use capitalism as their dominant economic system, including the United States, Canada and Mexico, all of the 27 countries of the European Union (Ireland, UK, France, Portugal, Spain, Belgium, The Netherlands, Louxembourg, Germany, Italy, Sweden, Finland, Denmark, Malta, Cyprus, Austria, The Czech Republic, Slovakia, Poland, Hungary, Slovenia, Romania, Bulgaria, Latvia, Lithuania, Estonia and Greece), as well as many, many other countries (such as Australia, Japan, India, Egypt, Tunisia, Indonesia, New Zealand, South Africa, Switzerland, Botswana, Brazil, Colombia, Chile, Peru, Russia, Turkey etc. etc.). Even some countries which in-name follow different economic systems (such as China, claiming to have a "communist economy with Chinese characteristics") are capitalist (i.e. have most of the output coming from industries in private property trading and setting prices on a free market by the laws of supply and demand, and have a legal framework geared to protecting and encouraging such a system of production). It is actually easier to count countries that are not capitalist (such as North Korea, Cuba or most of Vietnam), or still have some way to go until ancient economic structures make way for capitalism (such as in Bhutan or in significant parts of Sub-Saharan Africa). World trade overall, and the international economy is capitalist overall (international prices and company values are established in stock and mercantile exchanges such as NYSE or NYMEX with international overseeing from institutions such as the WTO)

Strengths and weaknesses

Capitalism prefers private methods of production and distribution. It favors free and informed exchanges in largely unregulated markets that act in harmony with the laws of supply and demand. It opposes systems of public ownership, centralized planning, and coordinated economic endeavors. Its mantra is competition, not collaboration. From a Christian ethical point of view, capitalism has much going for it. Rather than depending upon widespread conversions from egoism to altruism, it takes people as they are and on this unpromising basis it fosters a way of life that works. Capitalism is productive and efficient beyond compare. It rightly rewards those who take risks or develop needed skills, services, and products. It is dynamic and diverse, forever coming up with new things and experiences. It is almost color blind, the only hue that it ultimately cares about being the tint of currencies and coins. It champions liberty and it knows that without enough money to share ones views freedom of thought and speech are truncated rights. From a Christian perspective, capitalism is also ethically troubling. It not only recognizes greed, it baptizes and catechizes it, too. Gordon Gekko in Oliver Stones 1987 movie, Wall Street, said it best: Greed is good! In capitalism, entrepreneurs pay producers as little as possible and charge consumers as much as they can. Over time, the rich get richer and the poor get poorer. Eventually, neither can afford to buy or sell and the economy crashes and burns. From a capitalist point of view, this is a good thing. Like forest fires that consume the dead and weak, recessions and depressions eliminate sick businesses that should have disappeared much earlier. But these economic downturns also burn people. Another big problem is that capitalism depends upon a constantly growing economy, which requires an accelerating and unsustainable consumption of the worlds natural resources: oil, minerals, water, plants and animals, water. Many say that this is capitalisms greatest ethical challenge. I agree.

The kind of capitalism we have known for the last several decades is a thing of the past. Like many other nations all over the world, the United States is now investing hundreds of billions of dollars in loans and other arrangements to rescue failing businesses. This is only the beginning. Hundreds of billions of more dollars will yet be spent. Our much-vaunted global economy is crashing and burning and millions of people are getting burned. This difficulty is that the eighteenth-century Scottish father of modern capitalism seems to say different things. On the one hand, he maintains that self-interest is the engine of the economy that, as though led by an invisible hand, unintentionally benefits everyone. On the other hand, he has much to say about human sympathy. Perhaps more akin to what we call empathy, this is the almost irremovable tendency of normal people to identify with the feelings of others.

Brief Overview
Communism in simple words could be discussed as the combination of both an economic and a political system. Communism is a revolutionary socialist movement to create a classless, moneyless and stateless social order. It is structured upon common ownership of the means of production, as well as a social, political and economic ideology that aims at the establishment of this social order. The main aim is not to generate a profit, but to ensure that everyone has the same kind of access to education, employment and health provision. Historical Background and Historical Figures Communism was founded by Karl Marx and Friedrich Engels in the second half of the 19th century. Marx and Engels met in 1844, and it wasn't that hard for them to figure out that they had similar principals. In 1848 both of them were able to produce The Communist Manifesto. It was thought to be one of the worlds most influential political manuscripts. Both of them desired to

end capitalism feeling that it was the social class system that led to the exploitation of workers. (Rhle) Karl Heinrich Marx is considered the father of communism. He was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist who lived from 1818 to 1883. He was considered to be one of the greatest economists in history. His ideas played a significant role in the establishment of the social sciences and the development of communism as a social movement. (Rhle) Vladimir Lenin was another important figure who became the first leader of the Russian Soviet Union after leading the Russian Revolution in 1917. As an intellectual, his extensive theoretic and philosophical developments of Marxism produced Leninism. Leninism is a pragmatic Russian application of Marxism that emphasizes the critical role played by a committed and disciplined political vanguard in the revolutionary process. (Service) Joseph Stalin (1878 953) was the de facto leader of the Soviet Union from the mid-1920s until his death in 1953. Initially appointed as the General Secretary of the party's Central Committee in 1922, Stalin managed to consolidate power following the 1924 death of Vladimir Lenin through expanding the functions of the role. (Ulam) Mao Zedong (1893 1976), was a Chinese communist revolutionary, political theorist and politician. He was the founding father of the People's Republic of China from its establishment in 1949; he governed the country as Chairman of the Communist Party of China until his death. (Davin) Fidel Castro is a Cuban communist revolutionary and politician who was Prime Minister of Cuba from 1959 to 1976, and President from 1976 to 2008. He also served as the Commander in Chief of the country's armed forces from 1959 and as the First Secretary of the Communist Party of Cuba from 1961 until 2011. (Ramonet)

Theoretical base behind communism

A communist economy is normally based on a controlled or a planned economy. A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency. Basic principles behind communism 1. Abolition of Private Property Private ownership of property is abolished and all property ends up in the control of the state. 2. Heavy Progressive Income Tax A Progressive Tax seizes wealth from the achievers, eliminating achievement and dragging down the general prosperity of a society. By making the society more and more poor, they create dependency on Government. It is a way to eliminate the 'bourgeois', the business owner who might achieve sufficient wealth to be financially independent from government handouts. 3. Abolition of Rights of Inheritance The ruling elite take over your wealth after your death without transferring it to your children.

4. Confiscation of the property of all emigrants and rebels If someone tries to leave the nation, the Socialists take all their belongings. If someone speaks out against government, government can take all their belongings. 5. Central Bank The centralization of credit will be handled by the state by means of a national bank with state capital and an exclusive monopoly. 6. Government Ownership of Communication and Transportation Transportation and Communication is handled by the ruling party. They are able to censor certain information from the public in this way. 7. Government Ownership of Factories and Agriculture

Factories and instruments of production are owned by the state. The cultivation of waste lands and the improvement of the soil is also part of the plan. This would allow them to produce what they want, when they want and also in what quantities. 8. Government Control of Labor State controls labor where it could tell workers what to produce. 9. Corporate Farms and Regional Planning Combination of agriculture with manufacturing industries where there is a gradual abolition of the distinction between town and country, by a more equitable distribution of the population over the country. 10. Government Control of Education Free but controlled education where the teachers teach only what the government asks them to teach and nothing more.

Communism today
The world today is moving towards a more free market economy thus the current number of countries ruled by communist parties is just a handful. Following is the list of the countries ruled by communist parties. (Central Intelligence Agency) China Communist Party of China leads the United Front, current leader is Xi Jinping general secretary. Cuba Communist Party of Cuba, current leader is Ral Castro first secretary.

Laos Lao People's Revolutionary Party leads the Lao Front for National Construction, current leader is Choummaly Sayasone general secretary. Vietnam Communist Party of Vietnam leads the Vietnamese Fatherland Front, current leader is Nguyn Ph Trng general secretary. North Korea The Worker's Party of Korea, the ruling party of North Korea, has historically been communist and is still sometimes considered communist today, but officially it has replaced communism with Juche. Ukraine Communist Party of Ukraine participates in the ruling coalition Uruguay Communist Party of Uruguay participates in the ruling coalition Venezuela Communist Party of Venezuela participates in the ruling coalition

Present day leaders China - Xi Jinping is the General Secretary of the Communist Party of China. He is slowly taking over office from Hu Jintao. He is expected to become President, China's head of state, in March 2013. (Central Intelligence Agency) Cuba Ral Castro is the President of the Council of State of Cuba. He was one of the most important figures in the new regime, serving as Minister of the Armed Forces from 1959 to 2008; when his brother Fidel Castro was the president. (Central Intelligence Agency) Laos Choummaly Sayasone is General Secretary of the Lao People's Revolutionary Party and President of the Lao People's Democratic Republic. He was elected as Party General Secretary on 21 March 2006, succeeding Khamtai Siphandon. (Central Intelligence Agency)

Evaluation of Advantages and Disadvantages

Advantages of Communism Communism encourages a more controlled economy creating a more equal society. Therefore it would reduce poverty and income disparity in the system. Almost every citizen can keep a job.

Communism is an internally stable economic system, in that those that participate benefit and those that don't are rejected - creating an incentive to participate. Communism requires common goals and agreed upon rules/laws to allocate responsibilities and resources. If successful, this leads to a spirit of sharing - which builds stronger social communities, creating a more stable economy.

Due to their sense of cooperation, healthy communistic systems are very efficient at distributing resources within their localized areas - particularly in times of need. Better social services (free health care, earlier and better pension, very good marriage loan, etc.)

Disadvantages of Communism Consumers cannot choose and only those goods and services are produced which are decided by the government. Low incentive to work as everyone is making the same wages whatever profession you are of. Most all businesses are owned and controlled by the government. Entrepreneurship is killed as people would not gain profit out of it. Whatever you do, you get the same income as everyone else. Lack of profit motive may lead to firms being inefficient.

Strengths of Communism discussed further with evidence

Every individual can keep a job In a Communist system, people are entitled to have jobs. Because the government owns all the means of production; the government can provide jobs for at least a majority of the people. For example the communist state of Cuba has a very small unemployment rate of 1.60% when compared with USAs (capitalist country) unemployment rate of 9.30% (Central Intelligence Agency).

Health Care

Communist countries normally have free health care. Even though China is starting to show characteristics of Capitalism in its economy, you could still notice that public expenditure on health is at a minimum. Per capita public and private health expenditures combined in China are $216 USD while the United States been a capitalist country spends $6,719 USD yearly. Thus a Chinese spends 96.79% less on health care than a person living in the United States of America. This is not just for health care but could be witnessed in other social services as well. Most of the public services provided in communist states are either free or incredibly cheap when compared with capitalist states (Central Intelligence Agency).

Equality Under communism you would have a very much equal society. The GINI coefficient could be used to compare the equal distribution of income among the families. For example we could take Laos (a communist state) and United States (capitalist state) as an example. The GINI coefficient of Laos is 34.60 and the GINI coefficient of USA is 45.00; which shows that Laos experiences 23.11% less of class divide than the USA (Central Intelligence Agency).

How to overcome the main weaknesses of Communism

Communism as a whole has a lot of good aspects to it. However we havent seen as much success of communism practically as on paper. On paper as Karl Marx brought it forward it is simply a utopia; but as we humans are born with the need of growing our own share of wealth it will never be possible in the real world. However it is interesting how China is going about the way in which they are handling their own communist regime. They have basically pooled together certain ideas of capitalism with communism to ultimately produce a fast growing and successful economy. The entire communist theory is based on a planned economy, however China has been able to move away from that idea and gain out of it. The large amount of outsourcing that is done to China is good example of this. They have allowed other countries to

take advantage of the fact that they have cheap labor and improve their GDP and economy. Thus the simple idea of how to make communism work, given that we are humans, is to incorporate certain capitalist viewpoints; mostly the capitalist economic viewpoints. China today does not follow the exact principles of Communism. For example today there is a lot private ownership in China. China would have never come to where they are if they stuck with the principle of abolishing private ownership. China is going through a manufacture oriented economy and the government cannot simply do all the manufacturing as they are not just manufacturing for China but to the entire world. However even though China has changed its economy to a more or less capitalist economy, its political system is well and truly communist still. Having a communist political system is best for a country like China simply because of the population of China. To conclude it could be said that communism is not bad. It is way in which people use it; if it is done properly, it could be the best method. However it is evident that you could not point the best system. The best should be created by adding together all the good aspects from each system.

What is socialism?

Socialism is an economic system characterized by public ownership and centralized planning of all major industries (manufacturing, services, and energy), banks and insurance companies, agribusiness, transportation, the media, and medical facilities. Under capitalism, these giant enterprises dominate the economy but are privately owned and operated for the purpose of generating wealth for their owners by extracting it from working people who are paid only a small fraction of what their labor produces. Socialism turns this around so that the class that produces the wealth can collectively decide how it will be used for the benefit of all. As African American poet and communist Langston Hughes wrote in "Good Morning, Revolution": Real socialism is, by definition, democratic. It is economic as well as political democracy. Many capitalist countries boast of their democratic institutions, but this is an illusion because all the political power is in the hands of those who hold the wealth. Socialism prioritizes human needs and eliminates the profit motive that drives war, ecological destruction, and inequalities based on gender, race, nationality and sexuality.

Like capitalism, socialism must be international so that global resources can be shared. No country can be truly independent of the global economy because until capitalism is defeated internationally it will continue to sabotage efforts to build socialism. Achieving socialism in the United States, the wealthiest and most powerful country in the world, is necessary to any country being able to determine its own destiny.

Types of socialism
Most socialists identify themselves as Marxists in recognition of Karl Marx, who discovered the economic laws underlying capitalism. Marx and his lifelong collaborator Frederick Engels laid the foundation of Marxist economics, the philosophical concept of dialectical materialism, and the method of social analysis known as historical materialism. Leninism denotes the concepts of a disciplined, revolutionary party and the principled, intransigent vision of Vladimir Ilyich Lenin, key leader of the 1917 Russian Revolution. Lenin's works on imperialism, the nature of the state, and the rights of national minorities are essential components of the socialist tradition. Trotskyism is the continuation of the Marxist and Leninist current led by Leon Trotsky, coleader with Lenin of the Russian Revolution. When the Stalinist bureaucracy rose to power in the Soviet Union in the late 1920s, Trotsky rallied an international Left Opposition against the betrayal of the revolution's goals. Trotskyism stands for Permanent Revolution, internationalism, and the strategy of the united front against fascism. Trotsky was murdered by a Stalinist assassin in 1940. Socialist feminism was developed in the late 1960s and early 1970s by founders of the Freedom Socialist Party and Radical Women. It is a Marxist, Leninist, and Trotskyist tendency that acknowledges that the most oppressed sector of the modern working class is composed of women, particularly women of color, whose life experience of exploitation gives them the strength and determination to carry through a revolution against all forms of oppression. Socialist feminists recognize the revolutionary leadership of workingclass women, people of color, and queers, and others multiply afflicted by capitalism. Socialist feminists orient to grassroots, rankand-file women and men rather than to the predominantly white male aristocrats of labor who make up the union bureaucracy. Several currents that emerged from the socialist and communist movements have lost their revolutionary character and misstate the basic principles of socialism's founders. These include: social-democrats, socialist reformers who support mere electoral revision of the capitalist

system; Stalinists, who arose out of the Soviet bureaucracy as supporters of Stalin's brutal dictatorship and who advocate peaceful co-existence with capitalism and immersion in bourgeois parties; and Maoists, China-oriented Stalinists, who frequently describe themselves as MarxistLeninists.

Historical background

The history of socialism has its origins in the French Revolution of 1789 and the changes brought about by the Industrial Revolution, although it has precedents in earlier movements and ideas. The Communist Manifesto was written by Karl Marx and Friedrich Engels in 1848 just before the Revolutions of 1848 swept Europe, expressing what they termed 'scientific socialism'. In the last third of the 19th century in Europe social democratic parties arose in Europe drawing mainly from Marxism. The Australian Labor Party was the world's first elected socialist party when the party won the 1899 Queensland state election.

In the first half of the twentieth century the Soviet Union and the Communist parties of the Third International around the world mainly came to represent socialism in terms of the Soviet model of economic development, the creation of centrally planned economies directed by a state that owns all the means of production, although other Trends condemned what they saw as the lack of a democracy. In 1946 Eurasian Socialist Parties in power were considerably socialist. In the UK Herbert Morrison said "Socialism is what the Labour government does", whereas Aneurin Bevan argued that socialism requires that the "main streams of economic activity are brought under public direction", with an economic plan and workers' democracy. Some argued that capitalism had been abolished. Socialist governments established the 'mixed economy' with partial nationalisations and social welfare.

By 1968 the prolonged Vietnam War (19591975), gave rise to the New Left, socialists who tended to be critical of the Soviet Union and social democracy. Anarcho syndicalists and some

elements of the New Left and others favored decentralized collective ownership in the form of cooperatives or workers' councils. At the turn of the 21st century, in Latin America Venezuelan President Hugo Chavez championed what he termed 'Socialism of the 21st Century', which included a policy of nationalisation of national assets such as oil, anti-imperialism, and termed himself a Trotskyism supporting 'permanent revolution'

Countries that currently using socialist economic system

Cuba: Cuba is one of the most Socialist nations, as it has a mostly state-run economy, universal healthcare, government-paid education at all levels, and a number of of social programs. It does not have a stock exchange. North Korea: The same is true of North Korea, which has an almost entirely state-run economy, as well as the same social programs mentioned for Cuba. Like Cuba, North Korea does not have a stock exchange. Venezuela: Economy has more private ownership, but the government social programs are quite extensive and the foreign policy is very left-wing. Cuban doctors and teachers have been brought to Venezuela to provide some medical and educational services. China: A substantial part of the economy is still state-run, although there are not as many social programs as there once were and universal healthcare has been eliminated. Still has a Socialisttype foreign policy, for the most part. Vietnam: A significant part of the economy is state-run. Close ties with Cuba, Venezuela, and Belarus. Syria: Although not commonly referred to as Socialist in the West, Syria has a mostly state-run economy and universal healthcare, along with a left-wing foreign policy. Belarus: Much of the Belarussian economy is state-run and some govt. social programs are available. Belarus has close ties with Venezuela, China, and other Socialist countries.

Laos: A large part of the economy is state-run, and the government has close ties with most other Socialist countries. Zambia: Some elements of the economy are state-run, including most of the media. Universal healthcare and primary education are available. Zambia has a left-wing foreign policy and is friendly with China and North Korea. Other countries which might be considered Socialist, depending upon the interpretation of different factors, include Norway, Libya, Algeria, and Namibia.

Socialist economies in theory

Robin Hahnel and Michael Albert identify five economic models within the rubric of socialist economics:[ Public Enterprise Centrally Planned Economy in which all property is owned by the State and all key economic decisions are made centrally by the State, e.g. the former Soviet Union. Public Enterprise State-Managed Market Economy, one form of market socialism which attempts to use the price mechanism to increase economic efficiency, while all decisive productive assets remain in the ownership of the state, e.g. socialist market economy in China after reform. A mixed economy, where public and private ownership are mixed, and where industrial planning is ultimately subordinate to market allocation, the model generally adopted by social democrats e.g. in twentieth century Sweden. Public Enterprise Employee Managed Market Economies, another form of market socialism in which publicly owned, employee-managed production units engage in free market exchange of goods and services with one another as well as with final consumers, e.g. mid twentieth century Yugoslavia, Two more theoretical models are Prabhat Ranjan Sarkar's Progressive Utilization Theory and Economic democracy. Public Enterprise Participatory Planning, an economy featuring social ownership of the means of production with allocation based on an integration of decentralized democratic

planning, e.g. stateless communism, libertarian socialism. An incipient historical forebear is that of Catalonia during the Spanish revolution. More developed theoretical models include those of Karl Polanyi, Participatory Economics and the negotiated coordination model of Pat Devine, as well as in Cornelius Castoriadis's pamphlet "Workers' Councils and the Economics of a SelfManaged Society".

Strengths
Efficient use of resources: The resources are utilized efficiently to produce socially useful goods without taking the profit margin into account. Production is increased by avoiding wastes of competition. Economic Stability: Economy is free from business fluctuations. Government plans well and everything is well coordinated to avoid over-production or unemployment. There is stability because the production and consumption of goods and services are well regulated. Maximization of Social Welfare: All citizens work for the welfare of the State. Everybody receives his or her remuneration. The State concentrates on the production of basic necessaries instead of luxury goods. The State provides free education, cheap and congenial housing, public health amenities and social security for the people. Absence of Monopoly: The elements of corporation and monopoly are eliminated since there is absence of private ownership. The state is a monopoly but produces quality goods at reasonable price. Basic needs are met: In socialist economies, basic human needs like water, education, health, social security, etc, are provided. Human development is more in socialist countries.

No extreme inequality: As social welfare is the ultimate goal, there is no concentration of wealth. Extreme inequality is prevented in socialist system.

Weaknesses
Bureaucratic Expansion: A socialist economy is operated under a centralized command and control system. People here work out of fear of higher authorities. It does not give any initiative for the people to work hard. No Freedom: There is no freedom of occupation. Allocation of factors of production is not done rationally. Jobs are provided by the State. Place of work is also provided by the State. The consumers choice is very limited. Absence of Technology: Work is monotonous and no freedom is given. Any change in the production process will alter the entire plan. Hence any innovation cannot be easily enforced. Everything is rigid and technological changes are limited. Absence of competition makes the system inefficient.

Statistics of countries
Country Cuba GDP (per capita) GDP Purchasing Power Parity $9,900 (2010 est.) 10.4% of GDP (2011 $112.4 billion (2009 country comparison to est.) est.) the world: 112 country comparison to $110.8 billion (2008 $9,800 (2009 est.) the world: 147 est.) $9,700 (2008 est.) note: data are in 2011 note: data are in 2011 US dollars US dollars $1,800 (2011 est.) country comparison to country comparison to the world: 100 the world: 197 $40 billion (2010 est.) $1,800 (2010 est.) $40 billion (2009 est.) $1,900 (2009 est.) note: data are in 2011 note: data are in 2011 US dollars; US dollars $8,400 (2011 est.) 46.2% of GDP (2011 country comparison to country comparison to est.) the world: 3 the world: 122 country comparison to $10.34 trillion (2010 Investment

North Korea

China

$7,700 (2010 est.) $7,000 (2009 est.) Vietnam

the world: 3

country comparison to 34.6% of GDP (2011 the world: 166 est.) $3,200 (2010 est.) country comparison to $3,000 (2009 est.) the world: 11

Syria

country comparison to 22.5% of GDP (2011 the world: 152 est.) $5,100 (2010 est.) country comparison to $5,000 (2009 est.) the world: 60

Sweden

country comparison to 18.4% of GDP (2011 the world: 22 est.) $39,300 (2010 est.) country comparison to $37,400 (2009 est.) the world: 115

est.) $9.366 trillion (2009 est.) country comparison to the world: 42 $283.3 billion (2010 est.) $265.3 billion (2009 est.) country comparison to the world: 69 $110.1 billion (2010 est.) $106.5 billion (2009 est.) country comparison to the world: 34 $370 billion (2010 est.) $349.4 billion (2009 est.)

Charles Fourier Franois Marie Charles Fourier (7 April 1772 10 October 1837) was a French utopian socialist and a philosopher. He is credited for originating the word feminism in 1837. In 1808 he had argued, in the Theory of the Four Movement that liberation of women leads to social progress. But he disdained any attachment to a discourse of equal rights. He inspired founding the communist party called le Reunion. Robert Owen Robert Owen suggested of transforming the society in to small local collectives. He was a mill owner from 1800-1825. He changed the life in the village of new Lanark with his ideas. Child labor and corpral punishment were abolished. Villagers were given decent houses, schools and evening classes, free healthcare. In 1825 he began an experiment with a socialist community in New Harmony, Indiana.

Pierre Joseph Proudhon He claimed that Poverty is theft and socialism was every aspiration towards the amelioration of society. He called himself an anarchist and said that free association of individuals should replace the state. Mikhail Bakunin He is the father of modern anarchism and was a liberation socialist. According to him, there would be equal means of subsistence, support, education, and opportunity for every child, boy or girl, until maturity, and equal resources and facilities in adulthood to create his own wellbeing by his own labor.

Suggestions to Improve Socialism Should eliminate the bureaucratic corruptions Some kind of encouragement and incentives should be given to workers to increase the production Should have programs to attract entrepreneurs Should encourage healthy competition

Reference
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