Advantages and Disadvantages of Capitalism and Socialism Research Paper

Advantages and Disadvantages of Capitalism and Socialism - Research Paper Example This essay declares that capitalism has slowly emerged to what it has become today, to an extent that it is the most common system of government especially in United States and Europe. Factor that characterize capitalism can be put under four groups of behavioral and institutional structures that are; goods production that is market oriented; production means that is privately owned; a great population that is non existent unless it sells its power to labor in the market; an economic system that displays individualism and need to acquire by most people. This paper stresses that every economic system has its strengths and weaknesses and capitalism is not an exception. Some of the pros of capitalism include economic freedom that spill over to become political freedom, when the means of production and price determination is in the governments hand, it gives the government a lot of power that leads to bureaucracy that may be evident in other parts of life as well. Capitalism experiences efficiency as firms are motivated to be efficient in producing goods according to demand. Such incentives encourage cost cutting and reduced wastage. State firms have a tendency of being inefficient as they lack the motivation for instance to reduce the surplus work force and venture into innovative methods of production. As individuals and companies encounter motivation to work hard, this leads to innovation and expansion of the economy, consequently this aids in increased actual growth of the GDP and improved standards of living.