North America has been referred to as a “land of opportunity” in the past; with the strong economies that both the United States and Canada have as well as the every growing industries in each country, it is no wonder that they have gained this reputation. But this begs the question, why are other countries not referenced in this way, particularly developed countries like Sweden? The answer quite simply boils down to economic freedom. “Economic freedom is the key to greater opportunity and an improved quality of life” (Economic Freedom). It is the way that each society operates and shows the differences between a capitalistic society (America) versus a socialistic society (Sweden). In further expanding on some of the various …show more content…
pillars of economic freedom-business freedom, fiscal freedom and property rights- the advantages/ disadvantages of each of the two perspectives will be realized.
Firstly it is important to know exactly what socialism and capitalism are along with their basic premises. Socialism, according to the British Dictionary is, “an economic theory or system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state. It is characterized by production for use rather than profit, by equality of individual wealth, by the absence of competitive economic activity, and, usually, by government determination of investment, prices, and production levels.” The main ideas behind socialism is not based on the benefits of individuals solely, rather on the advancement of the masses. In promoting economic equality, social classes are erased in order to promote and create social equality. This promotes the idea of equal opportunity along with equal wealth for all that exist within the society. Capitalism, on the other hand, is “an economic system based on the private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions” (heritage.org). This is the system that is concerned with strong economies and large industry. Capitalism believes that wealth is the result of hard work from the individual therefore social classes are ever prevalent. In this way of thinking, the outcome of one’s life is proportional to the work and successes that he/she has achieved. A major concept with this system is that in order to better thrive in this society, one must have sufficient funds thus are more motivated when it comes to school, work, etc. Money and monetary gains are at the center of this society and this drives the society to new economic heights.
To truly compare and contrast socialism and capitalism, pillars of economic freedom must be expanded upon from each of the aforementioned perspectives.
The first subsection of economic freedom to be examined is business freedom. According to the Index of Economic Freedom, business freedom is, “a quantitative measure of the ability to start, operate, and close a business that represents the overall burden of regulation as well as the efficiency of government in the regulatory process.” Simply put, it is one’s ability to own and/or operate a business of their own freely. By freely, it means without too many constricting laws and rules enforced by the government. In a socialist society, this simply is not possible. Socialism emphasizes equality among all therefore it would be impossible for everyone to be equal if few owned large industries within the society. This is not to say that socialist societies live without businesses, rather the individuals living within this type of community cannot freely own a business. The responsibility falls to the government in order to keep the country economically stable while still not being driven by monetary gains. Because of this individuals businesses tend to be difficult to establish and even more challenging to close these enterprises. Contrarily, capitalist communities are extraordinarily free- in the business sense. This is because a capitalist society promotes hard work and innovations in order to create a stronger economy. It would be impossible for a capitalist society to survive without a plethora of businesses. This is because in a capitalistic society, businesses are not largely owned by the government therefore without an abundance of individual businesses the economy would weaken dramatically. As such, entrepreneurship is an ever growing field in which people are free to promote and share their ideas and products with the world. Organizations in these societies are easier to institute and, because of the abundance
of businesses, are relatively easy to close.
Another division of economic freedom is fiscal freedom. This essentially is the taxes that the government imposes on a society. This includes, “direct taxes, in terms of the top marginal tax rates on individual and corporate incomes, and overall taxes, including all forms of direct and indirect taxation at all levels of government, as a percentage of GDP” (heritage.org). Socialist societies tend to rank fairly poor in this category as, although everyone is taxed virtually equally because everyone earns virtually the same income, all major industries and expenditures are dealt with by the government meaning that taxes can become fairly daunting if one is not accustomed to them. This is not to say that the taxed money is going straight to the government, rather it supports the various opportunities that socialism allows. One such unique opportunity is free post-secondary education. In this way it can be seen that the tax dollars largely go back into the economy thus it sort of all balances out in the long run. Capitalist societies tend to have different taxation methods. Individual taxation varies depending on income, economic status as well as living situations. It must also be noted that because the majority of large businesses and corporations are not controlled by the government, the government makes little revenue off of them. To make up for this taxes are imposed on businesses. In this way government influence on the country is vastly different as instead of controlling the exact products that the large markets provide the government is left to control laws and parameters for industries.
The last pillar of economic freedom to be examined is property rights. Property rights is, “an assessment of the ability of individuals to accumulate private property, secured by clear laws that are fully enforced by the state” (heritage.org). Essentially it is one’s ability to own private property securely under the laws laid out by the government. Socialist societies tend to rank low in this category as the government controls the majority of the wealth and assets of the country; this includes land ownership. Owning private property adds to one’s individual wealth, which does not sit well with the concept of equality. In a socialist society, the government controls everything and distributes it as evenly as possible with all people in the society. Land, especially privately owned, is not something that can be shared with and/or benefit the community therefore it is exponentially more difficult to obtain property in a socialist society. Moreover, one’s private property is not heavily protected by the government and as a result it becomes challenging to maintain ownership. At the other end of the spectrum, capitalism is highly ranked for property rights. This is because land is a valuable thing on which a number of opportunities lie. Because capitalism is centered on individuality, it would not make sense for the government to possess all of the land rights. In capitalistic societies, people are encouraged to invest in their own property in order to strengthen economy as well as add to the progression of the people. The government in this type of society, is also keen on protecting private property. With the implementation of certain laws, people are able to safely possess land without fear of losing their investment.
In conclusion, various societies worldwide allow for unique and differing opportunities for all people existing within them. Whether the community is socialist or capitalist, there are an array of advantages and disadvantages prevalent within each. To review- capitalism is essentially a money driven society that is focused on the successes of individuals whereas socialism is a people-based society where everyone is completely equal and revolves around the progression of the masses. In further examining the pillars of economic freedom, business freedom, fiscal freedom, and ________ through a socialist and capitalist point of view, it is made clear that these system both have their advantages while providing similar yet different ways of life. “The inherent vice of capitalism is unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” –Winston Churchill
References
“Socialism”. Dictionary.com Unabridged. Random House, Inc. 29 Oct. 2015. .
Econlib.org,. 'Economic Freedom: The Concise Encyclopedia Of Economics | Library Of Economics And Liberty'. N.p., 2015. Web. 29 Oct. 2015.
Economic Freedom,. 'What Is Economic Freedom?'. N.p., 2015. Web. 29 Oct. 2015.
Heritage.org,. 'Index Of Economic Freedom: Promoting Economic Opportunity And Prosperity By Country'. N.p., 2015. Web. 29 Oct. 2015.
Thangavelu, Poonkulali. 'Pros And Cons Of Capitalist Vs Socialist Economies'. Investopedia. N.p., 2015. Web. 30 Oct. 2015.