MBA 1st Year Socialism or Socialist Economy Study Material Notes
MBA 1st Year Socialism or Socialist Economy Study Material Notes: In this post, we will learn about MBA 1st Year Socialism or Socialist Economy Study Material Notes. In MBA 1st Year there is one of the most important questions comes from Economic System. You will learn about MBA 1st Year Socialism or Socialist Economy Study Material Notes. MBA is a process of development.
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Socialism or Socialist Economy
Socialism is an economic system where the means of production are either owned or controlled by the state and the resource allocation, investment pattern, consumption, income distribution, etc. are directed and regulated by the state. Socialism is quite distinct from capitalism, which is based on the institutions of private property and private enterprise.
In a socialist state, there is no place for private property and private enterprise. In the socialist state, production is controlled by the state itself, which decides what to produce, how to produce, and how to distribute the total product among the population. Since there is no private capital, land, or enterprise, there is no necessity to pay interest, rent, or profit. The entire national income is distributed as wages among the workers. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
Historically, socialist or command economies were found in communist countries where collective goals were given priority over individual goals. Since the demise of communism in the late 1980s, the essence number of command economies has fallen dramatically. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
Some of socialism lies in the elements of a command economy were also evident in a number of democratic nations led by socialist-inclined governments. absence of exploitation of any France and India both experimented with extensive government individuals in the society. planning and state ownership, although government planning has fallen into disfavor in both countries. has fallen into disfavor in both countries. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
While the objective of a command economy is to mobilize economic resources for the public good, the opposite seems to have occurred. In a socialist economy, state-owned enterprises have little
incentives to control costs and be efficient, because they cannot go out of business. Also, the abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs; hence dynamism and innovation are absent from command economies. Instead of growing and becoming more prosperous, such economies tend to be characterized by stagnation.
‘Socialism is an economic organization of society in which the material means of production are owned by the whole community and operated by organs representative and responsible to the community according to a general economic plan, all members of the community being entitled to benefit from the results of such socialized production on the basis of equal rights
Characteristics of Socialism
Following are the characteristics of socialism:
- Government Ownership. The major means of production are either owned by the government or their use is controlled by the government. The government directs and regulates investment allocation and production patterns in accordance with national priorities. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- Distribution of Income: Socialist system aims at an equitable distribution of income. But this does not refer to perfect equity. Wage differentials are there, depending on the nature and requirements of the job.
- Restriction on Occupation: The freedom to choose any occupation is absent or restricted. Individuals are restricted to choose the occupation he is qualified for. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- Central Authority: Central authorities like the central planning agency are there to formulate the national plan for development and to direct resource mobilization, allocation and investment to achieve the plan targets. Socialist economies are also called command economies or planned economies for the same reason.
- Restriction on Consumption: No consumer sovereignty is there because the state decides what may be made available to consumers, unlike the market economies where the consumers have the freedom to choose from a wide variety.
- Social Welfare: A socialist economy has a welfare motive in contrast to the profit motive of the market economy.
- Peaceful and Democratic Evaluation Socialism, as distinct from communism, often advocates the peaceful and gradual extension of government ownership-revolution by ballet rather than the bullet.
- Absence of Competition: Since the state owns all the major means of production, there is no competition between the different production units. These units are made to supplement each other.
- Equality of Opportunity: Every member of society is given equal opportunity to rise in life. Education and training facilities are made available to all. The state provides health care and educational facilities to those who cannot afford these.
- Classless Society: Socialism is based on a classless society. There are no classes of capitalists and labor due to the absence of the institution of private property. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
Differences between Capitalism and Socialism
The following are the major differences between capitalism and socialism:
- The economic system, in which trade and industry are owned and controlled by private individuals is known as capitalism. Socialism, on the other hand, is also an economic system, where the economic activities are owned and regulated by the state itself. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- The basis of capitalism is the principle of individual rights, whereas socialism is based on the principle of equality.
- Capitalism encourages innovation and individual goals while socialism promotes equality and fairness in society.
- In the socialist economy, the resources are state-owned but in the case of the capitalist economy, the means of production are privately owned. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- In capitalism, the prices are determined by the market forces and therefore, the firms can exercise monopoly power, by charging higher prices, Conversely, in a socialist economy government decides the rates of any article which leads to shortages or surfeits.
- In capitalism, the competition between firms is very close whereas, in socialism, there is no marginal competition because the government controls the market. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- In capitalism, there is a large gap between the rich class and the poor class because of unequal distribution of wealth as opposed to socialism where there is no such gap because of equal distribution of income.
- In capitalism, every individual works for his own capital accumulation, but in socialism, the wealth is shared by all the people equally. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- In capitalism, every person has the right to freedom of religion which also exists in socialism but socialism gives more emphasis on secularism. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- In capitalism, the efficiency is higher as compared to socialism because of the profit the incentive that encourages the firm to produce such products that are highly demanded by the customers while in a socialist economy, there is a lack of motivation to earn money, which leads to inefficiency. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)
- In capitalism, there is no marginal government interference which is just the opposite in the case of socialism.
Thus, capitalism and socialism are different political, economic, and social systems in use by countries around the world. The United States, for instance, is usually considered a prime example of a capitalist country, and Sweden is often considered a strong example of a socialist society. Sweden is not socialist, however, in the true sense of the word. In practice, most countries have mixed economies with economic elements of both capitalism and socialism. (MBA 1st Year Socialism or Socialist Economy Study Material Notes)