Introduction
Capitalisms implies a process that advocates for private ownership of ways of production, distribution patterns, exchange of goods and services and earning of profits. The process involves the determination of production and level of prices for all products and services by the market. The demand and supply of goods play an important role (Koen and Mason 2005).
Features of capitalism
Ownership is private which means anyone has the right to earn, acquire or even sell his/her property. The property could either be through inheritance from parents or through donation. Capitalism gives power to an individual to own lands, houses, sites, factories and establishes businesses. The whole idea is driven by profit motive, where the capitalist is to engage in economic activities meant to generate profit. They do partnership and joint stock companies to facilitate penetration to the market and create capital. Moreover, they enjoy freedom as they have the right to make contracts, consumption of resources, production and enterprise. Their level of competition is perfect a people in the economic field of production and distribution, the level of competition is between the sellers and producers of any given commodity, buyers will, in turn, compete to get goods, the local individual for employment making the fittest to survive. (Koen and Mason 200).
Capitalists finance their firms through markets as they make their information publicly known as to indicate chances of risks which is evidently valued price sharing. They remove costs to ensure profit generation in firms by making their employees hard as the market inexistence is deregulated, very flexible and influences externally. As employees fight in the firm to enable the law to protect the weak, “them” can be seen in ‘bread and roses.’ Furthermore, employees are viewed as expenses, making the firms not in any way invest in them (Coates 2005).
Communism, on the other hand, is a form of socialism, where society controls production, property, and resources available. Its basis relies on shared ownership. It aims at removing the gap that exists between the poor and the rich in society. The current system in place is that the government owns everything, making people work for a common goal and this is addressed by this model, to establish an equal ground for all in the economy.
Features of communism
Dauvé (1997) sates that, capitalism and communism Community ownership is the overall sense of understanding when we go back to those past days, however, in the current world, the property is private. The people/community are in charge of resources available, make relevant decisions to ensure that the public benefits and economy is stable to equate all communities. Also, the freedom of people is given to the community leadership which could be the government in this case. The government ensures that resources are distributed evenly to all persons regardless of their social life. Communism is anti-colonialism in nature as it prevails to ensure that the rich and the poor share the resources available to provide a stable society where there is no form of heterogeneity. The concept is unreal in the world as the idea is altered by the people and varies from one country to another depending on the laws enabled in any given region. The system is self-driven on one basic need for demand and supply, the ability lies in an individual capacity to take advantage of benefits to improve his lifestyle. With this ideology, there exist universal polarizations, where powers center is to govern and support when necessary. The nationalization of banks, land reformation, community actions and co-operative societies in place are communism and exists to eliminate classes of power and to promote the agricultural performance of any given nation. (Kluegel, Mason and Wegener 1995).
Comparison between communism and private ownership of firms
Stouffer (1955) explained that both must participate in international markets to improve technology or access to resources which are lacking within a region; firms are forced to advance their demands by way of complying with the existing dominant paradigm. The communist that’s fledging must build interaction with other firms across the border through favor mechanism to ensure free trade and availability of resources in their firms. Also, they use state/private property to facilitate the distribution of funds available; it could be that firms want to improve on their markets or expansion to cover a broader region, both will have to use land which is available in the area which could be owned by the individual or the state. Their existence is mutually related to the use of the property is the primary commodity.
Slaughter and Leslie (1997) referred both as using incredible amounts of force to outweigh their competitors and enforce their laws: for firms to remain relevant in the current economy whether communist or private ownership, fighting for their space is a practical vice. Capitalists have to make sure their continuity to produce and distribute is made available in the industry as they have the freedom to buy, sell or own any given commodity at any given time. The idea relies on the fact that they all have the freedom to operate and survive in the economy. In an excellent capitalist example is when the vast famine killed over 60 million in British and an estimate of about 7 million also died in the United States during the Soviet Union in 1932-33, farmers were also evicted and displaced through land repossession by the strong. With communist is predominant in communist countries where dictatorial leadership, anti-state communist groups are killed or systematically rooted out.
The contrast of property and community views on the firm
Factors of production: this includes land, labor, and capital. In communism economy, these factors are solely owned by the existing government in place to ensure equal distribution of these resources. The idea is the laws exist to govern and regulate these factors to determine and establish a good economy for all communities. The government is to be followed, as the leaders have a right to say how resources are shared as much as freedom exists. Capitalism, on the other hand, indicates that individuals own the factors. They have the authority to purchase firms, expand, repossess, and inherit them. The decision lies on an individual level on how to hold property. Production is influenced by free market forces which are supply and demand for goods, the availability of such in the market depends on the individual capacity to buy, sell, own or produce them (Bremmer, 2010).
Price factor, the capitalist prices of goods and services in the market is determined by market competition in existence, they flow with the market though they fight hard to survive at any given economic crises, they compete with their opponents violently, take away the resources available to enable productivity continuity. Mostly, they should be powerful enough to kill their competition or else they will run out of the market. Communist, however, relies on government, they control goods and services available at a given time, to ensure a stable economy, availability of products at a fair price by offering an incentive to firms to function the equality concept of communism (Bremmer, 2010).
Also, allocation of resources in capitalist is determined by individuals and companies, making it unevenly distributed as the dominant/rich stands to gain whereas those poor continue suffering, the concept champions for power amongst individuals and companies to remain relevant or operational at any given period of their existence. A good example could be the power countries, in essence, European countries, if they fight the developing nations stand to lose a lot, regarding resources distribution. The independent theory rules who remain in the market and who do not, as the price is the primary motive behind every transaction made. Notably, communism operated under leadership/government in place, decisions are made based on macroeconomic or political considerations at that given period. The economy is under government command to ensure marginalized areas have priority, resources allocated and the rich and the poor are both the same, the penetration to the market and funds in place is leveled to favor every communist (Coates, 2005).
Types of scarcity: the state of communism commands economies at any given time but shortages occur, depending on factors of production mechanisms in place and the market. As much as the government strives to ensure that all communists have access to basic needs and wants, the latter is the truth as leadership decisions, and influence is times tampered. With capitalist economies, goods are available in the gutter but, the economy works to favor those with the power which translates to enough products but, enough for some, while the other goods are thrown to garbage. Nevertheless, they have different adaptations to change, the communism under state responds slow as they are resilient to change, they take time to analyze and decide way forward as the process is systematic. It makes its ability to adapt inflexible as specific rules are to be followed to affect any law at any given period. With capitalism, however, change is abrupt and fast as the individual and companies are in charge of operation, making them make those decisions based on their level of growth, relevance to remain in the industry and power. The main difference to this comes with flexibility benefits (Coates, 2005).
The system of government: in the capitalist democratic system of government is in operation; individuals reserve the power to engage in any activity, individuals are solely in charge of the economy, they distribute, buy, sell and own at their own accord without any restrictions from the government or any person. Here power is to individuals on what goods and services the firm can engage. With communism, a totalitarian government system is in place, where the government reserves the full right to control almost everything regarding what is available in the market, the price, who sells and buys and how much is available in the market. When the system is married to each other between banks and economy business as in the case of communism, it defends the country against outsiders making the system robust and ensured benefits to all people as all people are considered equal. That is why Lincoln said, “government from people, by people and for people,” laws are transparent to encourage democracy to enable by sharing of opinions, voting to different parties and equal fundamental rights (Rhodes and Van, 1997).
Profit factor, in communist profit, is shared among all people of the economy, the state takes charge of the economy any benefits incurred by the firms, institutions are divided evenly across the region. This is made possible through improving infrastructure, healthcare for all, availability of resources to every citizen to validate a common ground. Capitalist on the other shares no profit, but rather with himself as he is the owner of the enterprise (Coates, 2005).
Capitalist as the best model
Drakulic (1993) study indicated that, going through the miniature comparisons the world’s economic system has grown over the years with different countries placing more emphasis on unique priorities and objectives to know what to produce, ways of manufacturing and the market to whom to provide. Every economy has its pros and cons, like history, and sub-economies and tendencies. Economics is the most robust force that balances political power, mitigates war and ensures there is low/high quality of life to people under them. Economic systems under this model are usually decided based on political boundaries subject; this ensures that an idea for discussion is provided to effect such changes with regards to cultural diversity, environmental factors and the governmental institutional.
Moreover, history has it that communism and socialism lead to a retard in productivity of economies as there exists no competition amongst businesses and those in charge are leads politically appointed, who prefer to decide based on their social connections rather than the understanding of the business they are in charge. With capitalism, however, work is best as it promotes competitive advantage to engage businesses and ensure effective establish business survives. The issue of survival requires managers of the company to be wealthy in wisdom to improve, minimize costs for production of their services and understand what people want at any given season (Lin, 2011).
Albert (1993) argued that the comparison of capitalism and communism shows that existence and improvement of societies are determined by the production of goods and consumption by the consumers and producers. The two intermarry each other to co-exist and progress. Their existence is validated through how various markets operate, for example market production factors and goods and services market. They comprise of factors for production, goods and services, household, and the enterprises which joint as one within economic circular for income flow. The flow starts when products are supplied from producers to businesses where families provide investment, labor, and means for enterprise production. The enterprise will then absorb these factors to serve the creation of their business and concurrently, paid to the household in the form of salaries/income, rent, profit or interest. Factors of production received are therefore used to develop goods and services that are desired by society, based on demand factors, making the household purchase and recompense in the form of consumer expenditure. With time, the demand from society changes as there is an increase in both quantity demanded and quality. It promotes production technology and factors for firms to structure good feedback from needs and wants of society and emerging higher demands.
Reasons for capitalist preference (based economic system for firms)
The scarcity of resources makes society adopt on most productive thing during a given period for production of goods and services. The following sets exist in any given firms “what to produce, ways of manufacture and the target market. This led to the adoption of the next economic model, free market economy, planned market and mixed economy. Bremmer (2010), illustrated that a planned economy is controlled by all relevant decisions factoring production, distribution and goods consumption affected by the government (communism). The government will then through the agency involved deciding on what to produce, how and to whom production is manufactured. The Soviet Union post such a system as resources for this country was planned centrally by classes of social development employed by the government. In this case, the potential advantage exists in regard to the free market as the reliance on decision making of millions of citizens may not be of any interest to the public as a whole. The issues of high growth rates are addressed efficiently as the allocation of resources is directed into investment sector by the government, unemployment also can be mitigated whereby the government carefully allocated labor concerning production standards and labor skills. For this goal to be achieved at given social and economic goals, the economy ought to grow and be involved in generating g collection of errands and scrutinizing of information to improve planning. Another is the removal of the price system, or prices are set primarily by the state, this makes planning inefficient practice of resources. The relativity of inputs is an essential technique as value should exist. Thirdly, it makes it hard to assigned right incentives meant to improve workers and managers morale without equality reduction (Lin, 2011).
Baumol, Litan, and Schramm (2007) illustrated that market economy: this is an inevitable phase of development as every economy goes through to reach a higher variety of development realization. It ranges from communism, although in history it was socialism. Its growth is crucial as it generalized human history phases of growth, which makes it essential. As much as it had a single plan in the late twentieth century, it was turned into capitalism to guarantee a free market, social market, and socialist market economy. Mixed economy, on the other hand, involves a community where both the market and the state relate mutually to play an important role to resolve the underlying economic situation of society. The market dominates and leads decisions made for millions of producers and consumers. Both the state and market involved actively to deal with any economic issues in society. Food, clothing, cars, and factors of production and distribution are based on the exchange of market signals with basis on its relationship of professional dealings amongst buyers and sellers in a given market (Rhodes and Van Apeldoorn 1997).
Conclusion
Overall, a free-market economy buyers and sellers relate in a free market uncontrolled by any government as explained by Kornai (1992). Planned economy gives the government controls on the allocation of resources. The two theories are, however, criticized with a view that they can be achieved through argument. Society agrees that a mixed economy is the better lead as it goes beyond the two theories to ensure balance allocation and distribution of goods and services. It gives equal opportunity to society. To conclude, capitalism and communism’s views on firms are at large affected by different factors as explained above. Dimitrov (2013) argued that, as much as the community may prefer capitalism over communism, the above is not true as it both fails to adequately determine balance allocation of the resource to the firms in this case economies scale.
Resnick and Wolff (2013) recommend that the concept of the two needs further study to embrace the mixed economy of both communism and capitalism, where the government controls the allocation of resources where necessary. Use of relevant experts to validate sound judgment and a situation where market forces determine how goods and services in the market are produced to affect the high demand for products and services. For any firms or institutions, the following questions remain unanswered regardless of any form of the model used; what the type of economies of scale is, how it controls and by who and lastly is the country rich or poor. As pointed out by Lin (2011), a healthy economy must show acceleration of data economics and encourage a positive response to one’s social life, health, and education. It affects the overall development of a country; a good example is China communism, and United States a capitalist nation.
References
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