SOCIALISM Europe during the timeframe of the late 18th

century and early 19th century. At the time,

what is socialism? Socialism (social democracy)
Europe was undergoing the events of the
refers to a socio-economic and political system
Industrial Revolution which was spurred on by
in which the government regulates the
the economic prosperity created by laissez-faire
ownership of natural resources and the
capitalism.
production of goods connected to societal
needs. The goal of socialism is to achieve *ROBERT OWEN
equality between social-economic classes and
*CHARLES FOURIER
welfare state. Socialism supports central
economic planning and the corresponding
allocation of cash. Social democracy allows for
the free exercise of religion, private property
ownership, and private companies by
individuals, as well as demand and supply
factors. In this approach, the government owns Karl Marx (1818-1883) was a philosopher,
and manages all production and services author, social theorist, and economist. He is
connected to education, healthcare, energy, famous for his theories about capitalism,
and housing socialism, and communism.

Friedrich Engels was a German philosopher,

writer, and social
Characteristics: 1. Public Enterprises To ensure scientistduringthe19thcentury. Known for his
equity in the distribution of essential collaboration with Karl Marx, Friedrich Engels
commodities and services, the government helped define modern communism.
controls its production aspects in areas like
health, energy, education, agriculture, and In1848, Marx and fellow German thinker
market pricing. Friedrich Engels published “The Communist
Manifesto, ” which introduced their concept of
2. Centrally Planned Economy Economic socialism as a natural result of the conflicts
activities and planning are done centrally. inherent in the capitalist system.
Accordingly, the funds are allocated to facilitate
the sensible and fair growth of resources for the
benefit of all. PROS
3. Societal Classes Class differentiation like M o r e e qu a l s o c ie t y
high, medium or low does not exist in society
R e duc t i o n of p o ve r t y
4. State-Sponsored Basic Amenities for the
Public Food, shelter, clothes, electricity, R e g u la t e s ex c e s s e s of fr e e - m ar k e t -
healthcare, and education, which are ex t e r n a li t ie s, monopoly, and monopso ny
fundamental to a good existence, are provided
U n ive r s a l he a lt hcar e imp r o ve s liv in g s t
by the government.
andar ds and lab o r p r o duc t iv i t y
5. Equal Opportunities The government
P r o m o t e s c o mm o n g o o d and s o c i a l
provides every citizen equal employment,
we lfar e r a t he r t han s e lfi s h a im s
education, healthcare, wealth, and personal
achievement opportunities. M o r e e qu a l s o c ie t y incr e a s e s s o c i a l
c o he s i o n
6. Minimal Competition As the government
controls the majority of manufacturing of C an p r o m o t e t he p r o t ecti o n of t he e nv
essential items connected to basic comforts of ir o nme n t
life, there is relatively little competition among
the small number of private firms.
CONS
7. Price Mechanism The government
administers and manages the two types of price H i g he r t ax r e duc e s inc e n t ive s t o inve s t
mechanisms— market price and accounting and w o r k
price — for products and services
E n t r ep r e ne ur s m ay p r efe r t o m o ve t o
t ax havens abroad
Utopian Socialism is often considered to be the W e lfar e s t a t e c an cr e a t e di s inc e n t ive
earliest form of socialism and developed in stowork
G o ve r nme n t fa i lur e in r e g u la t i o n and made possible the shift from public to
o wne r s hip of indu s t r y private initiative.

E x c e s s lab o r m ar k e t r e g u la t i o n c an le
ad t o le s s e mp lo yme n t and s t r uc t ur a l e
Characteristics of Capitalism
mp lo yme n t
 In a capitalist economy, capital assets—
P o we rfu l un i o n s ca u s e an t a g o n i s m b
such as factories, mines, and railroads—
e t we e n w o r k e r s and o wne r s
can be privately owned and controlled,
labor is purchased for money wages,
capital gains accrue to private owners,
and prices allocate capital and labor
between competing uses.

Great Thinkers of Capitalism

CAPITALISM Louis Blanc

In 1850, the term capitalism was coined by

French socialist Louis Blanc in the ninth
What is Capitalism? edition of his book The Organization of
 Capitalism is an economic system in Labor: “What I would call capitalism … [is]
which private individuals or businesses the appropriation of capital by the few, to
own capital goods. At the same time, the exclusion of the many.” “Capitalism,”
business owners (capitalists) employ he continues, is “the mortal enemy” of
workers (labor) who only receive those who would make capital – “the hen
wages; labor does not own the means that lays the golden egg” – accessible to
of production but only uses them on the masses.
behalf of the owners of capital.

History of Capitalism Adam Smith

 The development of capitalism was Adam Smith was the 'forefather' of
spearheaded by the growth of the capitalist thinking. His assumption was
English cloth industry during the 16th, that humans were self serving by nature
17th, and 18th centuries. The feature of but that as long as every individual were to
this development that distinguished seek the fulfillment of her/his own self
capitalism from previous systems was interest, the material needs of the whole
the use of accumulated capital to society would be met.
enlarge productive capacity rather than
to invest in economically unproductive
enterprises, such as pyramids and
cathedrals. This characteristic was
encouraged by several historical events. Karl Marx

 Another contributing factor was the Although Karl Marx did not create the
increase in Europe’s supply of precious word, it was after his work “Das Kapital”
metals and the resulting inflation in (1867) when the term “capitalism” began
prices. Wages did not rise as fast as to be widely used to describe an economic
prices in this period, and the main system based on private property as the
beneficiaries of the inflation were the means of production. Marx remains the
capitalists. The early capitalists (1500– great labeler: “capital,” “the capitalist” and
1750) also enjoyed the benefits of the “the capitalist system of production”
rise of strong national states during the appear repeatedly in his writings.
mercantilist era. The policies of national
power followed by these states
succeeded in providing the basic social
conditions, such as uniform monetary
systems and legal codes, necessary for
economic development and eventually