Humanities Essay

Capitalism vs. Socialism

Both capitalism and socialism are economic theories that are concern with the means of production and the allocation of wealth and resources. Although capitalism and socialism have their roots in earlier centuries, they became more developed and influential in the 19^th century.

In capitalism, the means of production are privately owned and the wealth that is produce is kept by the factory owners and investors. There is little or no government intervention. How the factory owners choose to use their resources is left up to them not the government. Capitalism is a product of the industrial revolution and replaced mercantilism as the main economic system of Europe in the second half of the 19^th century.

In socialism, the means of production are owned collectively by the workers. Wealth is distributed evenly among the workers and reinvested in the factory. The decision about how to use their resources is determined by all the workers through discussion and debate. Socialism has it roots in Christianity, but developed in the 19^th century as a direct response to capitalism.

Two famous economists from the Austrian School, Ludwig von Mises and Friedrich Hayek had strong criticisms of socialism. They argued that workers making collective decisions about what to manufacture could not achieve the most productive or efficient allocation of capital and the means of production. In their opinion, a market economy is essential to determine supply and demand.

Capitalism in the 19^th century was very different from capitalism today. Workers were commonly injured or killed due to terrible working conditions. They worked long hours for little pay. Even children could be found working in factories. Socialism criticized these inhumane working conditions and tried to find a better way to control the means of production and allocation of wealth and resources.