Capitalism, Communism,

and Socialism

NISAR AHMED
 So what is an economic system?
• An economic system is a system of production
and exchange of goods and services as well as
allocation of resources in a society.
• Three major economic systems during the
Industrial Revolution:
– 1. Capitalism
– 2. Communism
– 3. Socialism
Capitalism, Communism,
and Socialism
 What is capitalism?
• Economic system.
• Believes in individual ownership and
competition.
• Theory: When everyone is selfish and
concerned with personal profit, everyone
will benefit.
• Adam Smith = “the” capitalist
– Wrote Wealth of Nations: felt capitalism good for
society = THE BEST ECONOMIC SYSTEM!
 What’s good about capitalism?
• Freedom, choice.
• You can work wherever, buy whatever, and
pretty much do whatever.
• If you’re successful, you can be very successful
(Think Bill Gates)
• “Survival of the fittest”  only the strong
survive in capitalism!
 What’s bad about capitalism?

• No “safety net.”
– If you fail, you FAIL! The government is not going
to save you.
• If you’re unsuccessful, you can be very
unsuccessful. Think about the poor.
• Big gap between rich and poor.
 What is communism?
• Economic system.
• Believes in collective (group) ownership and a
planned economy (government makes decisions).
• Theory: Everyone pools their resources and labor to
evenly distribute everything.
– Everyone gets an EQUAL amount of everything, regardless
of how hard you work or don’t work!
• Karl Marx = “the” communist
– Wrote The Communist Manifesto with Engels – about class
struggle, problems of capitalism
– Wrote Das Kapital: 1867, critique of capitalism
– Both written with Engels
 A Closer Look at the Communist
Manifesto:
• MAIN FOCUS: Class struggle (between the haves and
have-nots)
• Class struggle leads to the dictatorship of the
proletariat (middle class)
• Dictatorship of the proletariat = requires the
transition to the abolition (ending) of all classes, the
creation of a classless society
• Supported:
– Abolition of property, heavy taxes, central banking
– State-controlled communication, transportation, and
education of children
 What’s good about communism?

• Security, basic needs met.

• Everyone would have a job, house, health
care, etc.
– NO SURVIVAL OF THE FITTEST PROBLEM HERE

• Who would support this idea?

 What’s bad about communism?

• Lack of choice
• No reward for being a better worker, slackers
get no punishment (lack of incentives and
consequences).
• Everyone expected to be the same (lack of
focus on individual growth).
 Marxism
Marx and Engels
studied the history
of the world’s Socialism Communism!!!
economies
Capitalism
They believed
Feudalism
they discovered
an inevitable
Basic pattern
Communism
 Communist Manifesto 1848
Focus: Class Struggle (bourgeois-middle class & proletariat- lower class)
Problems within capitalism

• Abolition of property
• Heavy, progressive taxes
• Abolition of inheritance
• Confiscation of property of all
emigrants and rebels
• Central banking
• State-controlled communication and transportation
• State-controlled education of the children
 Communism/Socialism: What’s the difference?

• Socialism is the stage between Capitalism

and Communism.
• Nationalizes the means of production (i.e.
corporations, banks, raw materials, etc.) =
gives control of them to the government
• BUT: NOT all are equal!
– People are paid wages based on several factors
(social need, difficulty of job, amount of schooling
required, etc.), so not everyone will make the
same wage.
 How’s this related to the Industrial
Revolution?
• Adam Smith’s capitalism dominated the IR-
Led to bad working conditions.
• Karl Marx wrote about communism as
solution to capitalism’s problems.
– Marx said the workers would get fed up and
overthrow their governments and start
communism.
Communism vs. Socialism

Attribute Communism Socialism

Basic Philosophy From each according to his ability, to eachFrom each according to his ability, to each
according to his needs. according to his contribution.

Economy Planned By Central government Central government

Ownership of Economic Resources All economic resources are publicly owned andIndividuals own personal property but all
controlled by the government. Individuals holdindustrial and production capacity is
no personal property or assets. communally owned and managed by a
democratically elected government.

Distribution of Economic Production Production is intended to meet all basic humanProduction is intended to meet individual and
needs and is distributed to the people at nosocietal needs and distributed according to
charge. individual ability and contribution.

Class Distinction Class is abolished. The ability to earn more than Classes exist but differences are diminished. It
other workers is almost nonexistent. is possible for some people to earn more than
others.

Religion Religion is effectively abolished. Freedom of religion is allowed.