ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Economic Philosophies: Socialism Demerits and Merits

  • During our discussion of Socialism
  • We examined its features and aims
  • These features give socialism its advantages and disadvantages

Advantages of socialism

  • It strives to create an equal and egalitarian society
  • There is an equal distribution of wealth
  • Unemployment levels are very low since the government/leaders of society ensure everyone has a job to do
  • Equal levels of pay or something as close to equality as possible
  • Essential goods and services are provided to those who need them
  • These are provided at fair prices that people in the society can afford
  • Production is based on need rather than greed and ability to pay this means resources are not wasted on non-essentials like ice sculptures
  • Balanced distribution throughout the country unlike with capitalism where economic hubs get all the benefits
  • Better chances of economic stability as economic cycles of boom and depression that characterises capitalism can be avoided
  • Ecological preservation can be carried out unlike with capitalism where the focus is on consumption which can lead to deforestation and pollution without cleaning up
  • There is social welfare to take care of the vulnerable, poor, children and elderly
  • There is no wastage of resources for example through duplication of effort

Disadvantages of socialism

  • Without the profit motive, a lot of things can go wrong, including the fact that there is no real incentive to motivate
  • Equal pay means that there is no real incentive for people to choose difficult careers that might delay them earning a wage for example medicine
  • The greatest flaw of socialism is that it relies on the goodwill of those in power/government, such goodwill is not guaranteed in fact
  • Socialist system inevitably results in corruption and red tape (bureaucracy)
  • Favouritism and corruption often means that an equal society (egality) is really never achieved as the rich amass great wealth and power at the expense of the greater society
  • Citizens’ choices are limited to what the state produces, for example, there is often just one telephone company in socialist countries
  • Administered prices are often not the most efficient when compared to those set by supply and demand
  • Creates state monopolies that are often large, take too long to respond to changes in demand and produce low-quality goods and services
  • Lack of economic freedom as people are not allowed to freely enter into an enterprise which is seen as the preserve of the state
  • Centrally planning everything is complex and in large countries such as China impossible

To access more topics go to the Advanced Level Business Studies/ Business Enterprise Skills page