Socialist Economic System

In today's world every economy is based upon a specific political philosophy and ideology. The three prominent ideologies, that are used by the government to orient and plan their economy are capitalism, mixed economy and socialism. There are several different arguments about the origin of socialism, some say that it is an age old concept that is derived form biological symbiosis, where two elements of plants and animals survive with the help of each other.

Thinkers such as Karl Marx and János Kornai, established some definite principles and theories of socialism, upon which a socialist economic system is based.

Socialist Economic System: Definition

A socialist economy is based upon the principle of welfare of the people. As opposed to capitalism, a socialist economic system is based upon the principle that economic activities should be undertaken so that people would be able to use goods produced there of, instead of employing the production for profit. Many economic philosophers had previously refused to believe in this system as a legitimate one, but countries with socialist economic system, have proved the importance and success of the element of socialism in the governance of any economy. This has eventually led to the evolution of mixed economies. The masterpiece of such a collaboration of socialism and capitalism are the progressive and fast growing economies of the third world nations, prominent ones among them being the ones of India and Brazil. More on what is socialism.

The following is a summary of the definition of a socialist economic system:

• Ownership by Government: The principal characteristic of a socialist economy is the governmental ownership and nationalization of key production sectors. Though in theory almost all firms and companies should be nationalized, in practice, such a transfer from private to public is almost impossible. Due to this governments are promoted to rely on some private establishments that are largely regulated and managed by governmental laws and officials. Organizations that are involved in production in many cases are co-operative organizations, instead of firms and companies.
• Progressive Taxation and Wealth Redistribution: Often considered to be a drawback of the socialist economy, taxation system, progressively taxes higher income with higher tax percentages. The collected mammoth tax is then redistributed with the help of several public welfare schemes and policies.
• Price Control: Another distinct feature of a socialist economy is the technique of price control. Prices of commodities are not fixed by demand and supply analysis, but are fixed by the government, with respect to the necessity and nature of the commodity.
• Nationalization and Centralization: A socialist economic system is basically operated by a central government. The nationalization and centralization of all avenues of production are handled by one centrally based government that also frames the fiscal policies. The success of a socialist economy is found in such a convention where fiscal policies so implemented are executed by regional and grass root level administration, with an absolute timing and discipline. The economy, as a whole, thus, becomes very, very successful. The GDP shoots up almost instantaneously and poverty is abolished.

Socialist Economic System in the Modern Era

The dominating red flag of socialism and communism was often wrongfully associated with negative consequences. However, there are several success stories of socialism that can be told. Vladimir Lenin's planning of the Soviet Economy and the people's Republic of China are two prominent success stories of socialism. Though socialism has indeed given rise to communism, there are several aspects of socialism that have proved to be successful in the past. The Soviet Union's Five Year Plans of economic planning is one of the best socialist policy that found success not only in the Soviet Union but is widely used by many other nations. I hope that you find the facts on socialist economic system resourceful.

Further readings by Karl Marx and Lenin will definitely shed more light on the topic. In order to understand more about the difference between Socialism and Communism, you may go through some interesting debates such as Communism vs Socialism. There are also some debates such as Socialism vs Fascism, that will shed more light on the topic of socialist economic system. I hope that you find the aforementioned facts resourceful and comprehensive.
By Scholasticus K


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