Session 6: Capitalism versus Communism

Capitalism is an economic system characterized by private owner ship of firms and the distribution of goods is determined mainly by competition in a free market. Communism on the other hand is a system of social organization in which all economic and social activity is controlled by a totalitarian state dominated by a single and self-perpetuating political party.

Most states in today’s world follow the capitalist form of government which is usually directly aligned with democracy and its advantages, including control in the hands of citizens of the state. The United States, which is a capitalist regime and also a world super power, serves as an excellent example and advocates the effectiveness of Capitalism. Furthermore, Karl Marx’s ideology of a classless society has been refuted over time with the fall of communist states such as the Soviet Union which shows that the system cannot exist and be applicable in the modern economic system where protection of rights and freedom of enterprise are becoming a necessity.  However at the same time China, despite being a Communist state, is an emerging world power. The question then surfaces that could the benefits of Communism, as proposed by Marx, be reaped by an economy if the state handles it skillfully?

The crux of the argument here is that the existence of purely Capitalist or Communist systems is a theoretical concept. The role played by both the invisible hand, as proposed by Adam Smith to represent the forces of Demand and Supply, and the government are present in a system, albeit to varying extents. The epitome of Capitalism, United States, has many of its important functions (such as those of national defense) controlled by the government. Similarly China has shown trends of moving away from hard lined Communism. All said and done, it is an intricate balance between the two which can prove to be most effective.