Right now, debate rages across the United States between people who favor socialism and those who prefer a free market system of government and economics. The political left wing pushes for more government involvement in the lives of everyday Americans, while the right wing argues that a more powerful state can restrict freedom and become oppressive. But what is the difference between the two systems?
What Is the Free Market?
A free-market system – also known as capitalism – is the predominant economic system used in the United States. Under capitalism, people own their goods and services and the means of production. This means that an individual could start a business that makes products, like televisions or cars, and sell those items to the people who wish to buy them.
In a capitalist system, people can buy and sell as they please, and they are in control of their own economic wellbeing. In its purest form, this system does not involve government control, as the free market itself regulates the economy. The state is not allowed to tell the people what they can or cannot buy or sell. Furthermore, the government does not manufacture or sell products or assign prices.
A free-market system is one that thrives on competition. Companies must continually find more effective ways to create better products and sell them at lower prices. If a company fails to do this, it will lose customers and eventually – if it gets bad enough – go out of business.
What is Socialism?
Socialism is different from capitalism in that it involves a more pervasive government influence over the economy and society. A socialist system typically does not have free markets in which companies can compete with one another. Instead, the government regulates and controls the economy. The state is responsible for the manufacture and sale of products and services. It also sets the prices for each product.
Some prefer socialism because its objective is to lower or even eliminate costs. Moreover, instead of people owning private property, the government owns each good or service. In this way, it creates an equal society with nobody earning more money than another. The idea is to eliminate wealthy and poverty-stricken classes, and create a society in which everyone is the same.
In a socialist country, the government does not only control the means of production and the economy, but it also controls other areas of society as well.
When one lives under socialism, the direct cost of most goods and services are low or even nonexistent. But on the other hand, most of the money people earn goes straight to the government through extremely high taxes. The idea is that people living in socialist countries don’t have to worry about whether they can afford to buy something essential for their lives.
Which System Do We Use?
The United States currently has a system that is mostly capitalistic but includes elements of socialism. While the government does not completely control the health care system, it is involved through legislation like the Affordable Care Act, otherwise known as Obamacare.
Republicans and Democrats disagree on how involved the government should be in American society. Democrats push for the state to have a larger role in the economy because they believe it will help more people. Republicans usually push back against increasing the size of government because fully socialist countries like Venezuela and North Korea end up oppressing the people they are supposed to serve.
The debate between capitalists and socialists will continue into the near future, especially during the 2020 election.