Explain Socialist Economies And Inflation?

Socialism is a different type of economic system that is based on the ideology of central ownership of capital. In a socialist economy the central government regulates the magnitude of income that an individual can spend or consume, so in this way government tries to regulate the direction of flow of money in the country. Socialist governments also have a say in fixing or defining the needs of citizens. Purpose for this kind of regulative intervention is to ensure the social equality among everyone in the country. So, Socialistic economies favor the utopian societies, in which everyone is believed to be equal. In general, the ideology of socialist economies is termed as socialism. It’s true that different types of socialism exist; but on a generalized basis all of them balance in between the ideologies of capitalism and communism.

Despite of all efforts socialistic societies still have various internal classes of wealth, but unlike capitalistic societies this difference is extremely minute. Socialists always argue that in capitalistic societies only a small group of people gain wealth through the exploitation of those who are weak. Socialist countries claim to have a uniform distribution on money in society, so that no one is rich and no one is poor. In this way, socialist societies desire to have a graph of zero exploitation. It’s important to mention that like communistic societies socialist societies are not entirely regulated by the central government. However, citizens in socialist economies still do not have all those freedoms that a citizen of capitalistic society enjoys.

Karl Marx
Karl Marx is known in the history for being the most popular supporter and analyst of socialism. He gave a powerful argument that all the economies of world sooner or later would fall under capitalism. Marx believed that in a socialist economy on a long run if too much freedom would be restricted from the consumers then a revolution of needs would occur, in which finally the regulative government would be dismissed. He also quoted that in a communistic society, both the economy and government would eventually fail, simply because individuals would not tolerate to be oppressed. So, overall theory of Marx supported the balance and equality versus the freedom and oppression. He is popular for his famous quotation that “from each according to his ability, to each according to his contribution.”

Socialism and inflation
It is an established fact that the increased money supply in an economy is primarily responsible for situation of inflation. So, countries try to deal with inflation like conditions by regulating the money supply in economy, this fact widen the role of socialist economies in regulating the inflation. Throughout the globe it has been observed that socialist countries have a much stronger hold on inflation as compared to capitalist economies.

This happen simply because socialist economies are “saving economies” on the other hand capitalist economies are “spending economies”. Socialist governments regulate the money supply in economy with much more intensity as compared to capitalist governments. Moreover socialist governments develop the internal manufacturing as compared to overseas businesses; as a result prices don’t inflate unless the situation of raw material scarcity arrives.

Many countries over the time claimed to have a socialistic approach. But, majority of these societies, in fact, practice(d) the communism (Cuba, the former USSR and Red China) instead of socialism. True socialistic economies of the world include countries like Canada and Sweden. In modern system, each democratic nation (where people have freedom to choose their government) has socialist parties (which follow socialistic approach).

Capitalism Vs Socialism
There are large no. of differences between the capitalistic societies and socialistic societies. One of the most important differences between a true socialistic society and a true capitalistic society is that of health care. This is a hot topic of discussion in the United States these days, because the President Barak Hussain Obama supports the socialistic reform of medicine and health care. It is important to note down that in capitalistic states, citizens have to manage their own means for health insurance, on the other hand in a socialistic society the government provide free health care to every citizen. Under capitalism a citizen, who needs a treatment or an operation, will have to simply wait for it until he can afford it; on the other hand under the socialistic approach, he will surely get the treatment or operation (aided by government), but he may have to wait years and years for his turn. On this note, Socialists argue that their system is better because at least the citizen will get the operation/treatment (that is considered as his basic right). But, the capitalists argue that their system is better because “there is no such thing as a free lunch.” Capitalists ask a rational question that Why should anyone receive health care for free of charges, if he/she is unwilling to contribute or work?

So, in conclusion we can compile the following points as important elements of socialism:
1. There is more regulation over the citizens by the central government
2. Compensations and Wages come out as central decisions.
3. Taxes are much higher because the government takes care about the needs of citizens.
4. The gap between classes is smaller as compared to the capitalistic societies.
5. The government regulation is only for the good of citizens and not for their exploitation.

Category: Economics

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