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Knowledge Base

Socialism vs. Capitalism with Peter Berkowitz

What are natural rights?

Natural rights are considered pre-political rights, meaning the rights people have in the state of nature. Natural rights are not dependent on the laws, customs, or beliefs of any particular culture or government, and are therefore universal and inalienable. In other words, these rights cannot be repealed or restrained by any laws. They are usually defined in opposition to legal rights, or those bestowed on a person by a given legal system.

What is capitalism?

Capitalism is an economic system in which ownership of property and industry are put in the hands of individuals rather than the government.

What is socialism?

Socialism is an economic system in which the government runs the economy, sets wages and prices, and decides who can work and where.

Who benefits from socialism?

Historically, the only people who have benefitted in socialist or communist countries are those who control the political system. Living standards fall or stagnate, personal liberties are curtailed, and economic opportunities shrink for most of the population, especially when compared to countries that embrace capitalism. The Soviet Union, Cuba, and modern-day Venezuela are clear examples.

Who benefits from capitalism?

History in the twentieth century demonstrates what happens when countries reject state-controlled economies and embrace capitalist economies. Incomes rise and people are lifted out of poverty. Critics of capitalism often contend that the rich gain but the poor don’t. The truth is that both gain, especially when compared to socialist alternatives.

What is the role of government in a capitalist economy?

The government always has a role to play in even the most capitalist economies. It acts to enforce contracts and uphold the rule of law. Since free-market capitalism is predicated on voluntary agreements, the government provides assurance that any injuries done to another in the form of violence or breaking of contracts is punished with just compensation.

What is the role of government in a socialist economy?

The government centrally plans the economy in a socialist economy. Individuals must obtain permission from the government in order to work, change occupations, and even purchase scarce goods.

How are prices determined in a socialist economy and in a capitalist economy?

In a socialist economy, the government determines both level of output and acceptable prices for labor, goods, and services. In a capitalist economy, however, supply and demand determine prices. If consumers and producers can agree on a price for a sale, that is how much the price will be, even if some people think it is unfair.

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