Socialism is a command economy, where the central planning of all the activities and decisions are conducted by the state, and the rest of the occupants are expected to adhere to the directions given. On the other hand, capitalism is considered as a free economy, where the forces of demand determine the production decisions and investments in an economy (Karrar & Ahmad, 2015). In this type of economic system, there is minimum government intervention, which allows it to operate freely. Latin America has been running on a socialistic economy since its inception and has been opposing the idea of capitalism since 1994, and most recently they have shown their support to democratic socialism, citing aspects such as high-quality welfare services, fewer income inequalities, and better utilization of natural resources.
The Latin American administrations have favored mainly the socialist economic system due to its ability to reduce the income inequality. The centrally controlled economy utilizes income redistribution strategies, where the government heavily taxes the rich through a progressive tax system, thus ensuring that the poor are taxed less and the rich more thus redistributing wealth. Additionally, the system provides free access to public services and subsidized healthcare, water, electricity, and other social amenities, which enhances equality between the poor and the rich. Thus, the people in such states are welcoming the idea of maintaining the democratic socialism in the region.
Moreover, the system ensures that the residents have access to high quality welfare services. The government controls the decisions and all activities in such an economy. Therefore, the administration collects taxes from the rest of the population, which is in turn utilized in providing welfare services such as healthcare, education, infrastructure, and social benefit schemes. This process in the socialistic system since the government institutes mandatory deductions in the form of taxes and savings. The tax revenues are channeled to the provision of social services, while the savings serve as securities and insurance in case of illness. After retirement, the government employees are awarded retirement benefits, which they have been saving all along their career. Thus, the benefits granted to the citizens of such economies have motivated the government to promote and sustain it.
Additionally, the socialism system ensures that the natural resources are optimally utilized and also eliminate instances of over-utilization. The government controls the decisions and strategies in this form of an economy. Therefore, the policymakers institute plans that will ensure that the available natural resources such as land, human labor, and capital are utilized maximumly and eliminate any chances of wastage. This is centrally on the free market where the investors only use the profitable schemes, thus leaving the unprofitable resources unutilized. Additionally, the state ensures that the natural resources are not over-utilized by the unscrupulous investors who majorly aim at attaining maximum profits. Therefore, the balance and the optimal utilization of natural resources has motivated the administration in Latin America to promote socialism system.
The advocators of capitalism in the region cite the dictatorial production regulation by the administration as the major block towards promoting rapid economic growth. Such control eliminates trade since it reduces the profitability of the venture through price fixation. They argue that prices must be free and unregulated to promote business, and socialism has failed to achieve this principle.
In conclusion, the paper has examined the benefits of socialism such as high-quality welfare services, fewer income inequalities, and better utilization of natural resources, and the weaknesses such as the elimination of trade through regulated prices. However, the benefits of the system are superior to the residents, since they enhance equality in incomes, promote welfare services and also ensure that exploitation is eliminated. Such advantages overpower the weakness associated with price fixation. Therefore, socialism works best for the region in the long-run.
Karrar, H. H., & Ahmad, A. N. (2015). Capitalism Nature Socialism: Introduction. Capitalism, Nature, Socialism, 26(3), 44-47. https://doi.org/10.1080/10455752.2015.1067632
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