Newell-Fonda High School
Newell, Iowa
Teacher: Connie Doonan
Capitalism vs. Socialism in the United States
By Mike Movall
12th grade
Dating back to the Cold War, the debate has been which is better, Democracy and capitalism or communism and socialism? These terms have often been grouped together but are not necessarily the same. Democracy and communism are types of governments while capitalism and socialism are economic systems within a nation. Capitalism is a system in which private companies determine production through employing labor for a wage or salary and the investment of capital and the production and the distribution of goods and services are determined in the free market. Economists describe capitalism as “laissez faire” French for let do, or let the people decide how the economy fucntions instead of the government. A capitalist economy decides what [to] produce and how much to produce by using supply and demand. If a good is in high demad, more will [be] produced…to satisfy peoples’ needs. Socialism is almost [the] opposite of capitalism. The means of production and distribution…in a socialist economy are owned collectively or by a central government that often plans and controls the economy. Although it’s nearly impossible to have a pure capitalist [country], the U.S. [practices] capitalism far more than socialism.
Our government has instituted many rules and regulations to control our economy, making it more like socialism. There are many examples of this such as setting a minimum wage and laws to control monopolies. …In a pure capitalis[tic state], businesses would be able to grow to any size and expand as much as they wanted. Another example that the United States is a socialist [country] is our system of public schooling. In the U.S., schools are government property and are controlled by the government. [People] are forced to go to school [and] do not have a choice of what [courses] they want until they get to college. Our schools teach everyone in the nation things our government wants them to learn just like a socialist school system would.
Some people might suggest that the United States is socialist because of our government’s tax system. Our tax system includes many aspects that are designed to help out other people and make us equally wealthy such as a socialist economy would. By having to pay taxes for such things as welfare, social security, and Medicare, the people of the United States are paying the money they earned to the government so that the government can then pay it to those in need of the money. In a pure capitalist economy, people would make only what they earn and be able to keep what they made for themselves. There would be a larger difference in people’s income if these taxes were not in place. Another example would be if a person where to take in a large amount of income in a year, the government then comes in and takes a portion of it. Income tax is another issue that suggests that the U.S. is socialist. Income tax is a direct payment to the government on what people earn.
Socialist economies, however, are all operated by the central government or dictator. The United States is all about private ownership and small businesses. Private ownership is what runs the United States economy, not the government. The government may regulate the economy, but it does not control what is manufactured and sold. In socialism everyone has a fixed income and everything is controlled and owned by the government. This is completely opposite of how the United States is today. Every person has the freedom and choice to be what they want to be and to work as hard as necessary to reach their goals. Not everyone has the same talents so not everyone can do the same things. Some people are born leaders and are capable of running a billion dollar company while others are suitable to be doctors, teachers, or store clerks. Capitalism in the United States allows people to be what they are best suited for and puts a person’s income mostly in their own hands, not the governments. The government may force people to learn certain things, but it depends on what a person takes out of school and applies to real life situations that determine success. A not-so-good student can make it big in the United States and nearly all people In the U.S. have the opportunity to be successful in life. Everyone earns a different amount of money, therefore, unlike socialism, everyone is far from equal. Some people are just better at certain things than others and a capitalist economy takes advantage of this by letting the people decide what to do with there lives instead of delegating it to the government or a dictator.
Although there are some good arguments for the socialist view, overall the United States resembles capitalism much more than socialism. The United States economy is controlled by the people and there is a relatively low amount of government intervention. For many Americans, after the downfall of the Soviet Union, the answer to the question "which is better?" has been answered for them.
Answers To Questions Prompted By The Required Reading
Q1. What does Mr. Reed mean when he says “Equal people are not free.”?
If everyone is equal and earns the same, they are not free to improve their lives or do better than anyone else. If they were free, they could have choices and make what they deserve and be what they want to be.
Q2. What is the deadly trade-off to reliance upon government, according to Reed?
Equality among everyone but no economic freedom. Everyone will earn the same and have the same ownership in things so then they aren’t free to improve there lives.
Q3. Why did the Founding Fathers assure that the United States became a republic rather than a pure democracy?
A pure democracy is unshackled majority rule, everyone votes on everything. That wouldn’t work because some people might have no information on some issues and some issues wouldn’t affect them at all.
Q4. What is the saving grace of democracy according to Lawrence Reed?
The saving grave is not that it ensues either good or limited government; it is nothing more than that system allows for political change without violence – whether the change a majority favors is right or wrong, good or evil.
Q5. Richard Haas gives two unusual reasons for advocating democracy. What are they?
They aren’t always peaceful and democracy is hard to spread.
Q6. Give two reasons you personally would promote democracy.
You have choices to elect who you want, you aren’t controlled by the government
Democracies tend to be better off and more advanced than countries with dictators or kings.
Q7. Comment (at any length) on President Bush’s foreign policy.
He wants all countries to adopt a government just like ours because it works for us. Some countries just won’t be able to adopt it or be successful with it in place. H should adapt to the way the world is now instead of changing the world to adapt to us.
Q8. How did you interpret each of the four different hats (“officials with fine hats”)?
Each of the four hats represents leaders and role models in our country. Such as the crown represents our government leaders, the graduation hat represents the people you educated, one top hat represents business men and the other top hat represents average people.
Q9. How did you interpret the megaphone, baby, knife/gun (“No matter how officials are selected”)?
These represent all of the ways leaders can come into power.
Megaphone – The leader campaigns and spreads his/her ideas to get elected and gets people to follow them.
Baby – The leader comes into power by being born into royalty.
Knife – The leader used violence to force his/her way into office.
Q10. Browse the “Favorite Links” of the Economic Freedom Network and share one of your favorite discoveries with us. Make sure you copy the URL. Tell us why you chose it.
I chose Cato.org. It has many articles on things that effect the economy. It provides many links to interesting articles.
Q11. Once again go to www.freetheworld.com and this time note the question asked near the top of the page: “How much economic freedom exists in your country?” and randomly choose five countries. List the name of each and their highest and lowest year for economic freedom.
Belize – High in 2002 Low in 1985
China – High in 2003 Low in 1980
Israel – High in 2002 Low in 1980
Rwanda – High in 1980/2002 Low - was NR in 1970 and 1985, 4.1 in 1975
United Kingdom – High in 200/2001 Low in 1970/1975
Q12. Which of your five countries had the greatest degree of economic freedom according to this exercise?
United Kingdom
Q13. What was the summary rating and rank in the year it achieved the degree of economic freedom?
In 2000/2001 the rating was 8.2, 6th out of 123 in 2000 and 4th out of
123 in 2001