Socialist economics are the economic theories and practices of hypothetical and existing socialist economic systems

8/7/2019 Socialist economics are the economic theories and practices of hypothetical and existing socialist economic systems

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Socialist economics are the economic theories and practices of hypothetical and existingsocialisteconomic systems.

A socialist economy is based on public ownership orindependent cooperative ownership of the

means of production, wherein production is carried out to directly produce use-value, usually,

but not always, coordinated through economic planning and a system of accounting based oncalculation-in-kind orlabor-time.[1][2]

The term socialist economics may also be applied to analysis of former and existing economicsystems that call themselves "socialist", such as the works of Hungarian economist Jnos

Kornai.[3]

Socialist economics have been associated with different schools of economic thought, most

notably Marxian economics, Institutional economics and Evolutionary economics. Earlysocialism, like Ricardian socialism, was based on Classical economics, and some forms of

market socialism are based on the Neoclassical school of economics.

A socialist economy is a system of production where goods and services are produced directlyfor use, in contrast to a capitalist economic system, where goods and services are produced to

generate profit.[4]

Goods and services would be produced for their physical utility and use-value,eliminating the need for market-induced needs to ensure a sufficient amount of demand for

products to be sold at a profit. Production in a socialist economy is therefore "planned" or"coordinated", and does not suffer from the business cycle inherent to capitalism. In most

socialist theories, economic planning only applies to the factors of production and not to theallocation of goods and services produced for consumption, which would be distributed through

a market. Karl Marx stated that "lower-stage communism" would consist of compensation basedon the amount of labor one performs.

[5]

The ownership of the means of production varies in different socialist theories. It can either be

based on public ownership by a state apparatus; direct ownership by the users of the productiveproperty through worker cooperative; orcommonly owned by all of society with management

and control delegated to those who operate/use the means of production.

Management and control over the activities of enterprises is based on self-management and self-

governance, with equal power-relations in the workplace to maximize occupational autonomy. Asocialist form of organization would eliminate controlling hierarchies so that only a hierarchy

based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy

objectives. The policies/goals would be carried out by the technical specialists that form thecoordinating hierarchy of the firm, who would establish plans or directives for the work

community to accomplish these goals.[6]

However, the economies of the formerSocialist states, excluding SFR Yugoslavia, were basedon bureaucratic, top-down administration of economic directives and micromanagement of the

worker in the workplace inspired by capitalist models ofscientific management. As a result,socialists have argued that they were not socialist due to the lack of equal power-relations in the


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workplace, the presence of a new "elite", and because of the commodity production that tookplace in these economies. These economic and social systems have been classified as being

eitherBureaucratic collectivist, Coordinatorist, State capitalistorDeformedworkers' states, theexact nature of the USSRet alremains unresolved within the socialist movement

Economic planning is a mechanism for the allocation of economic inputs and decision-makingbased on direct allocation, in contrast to the market mechanism, which is based on indirectallocation.

[8]An economy based on economic planning appropriates its resources as needed, so

that allocation comes in the form of internal transfers rather than market transactions involvingthe purchasing of assets by one government agency or firm by another. Decision-making is

carried out by workers and consumers on the enterprise-level.

Economic planning is not synonymous with the concept of a commandeconomy, which existedin the Soviet Union, and was based on a highly bureaucratic administration of the entire

economy in accordance to a comprehensive plan formulated by a central planning agency, whichspecified output requirements for productive units and tried to micromanage the decisions and

policies of enterprises. The command economy is based on the organizational model of acapitalist firm, but applies it to the entire economy.[9]

Various advocates of economic planning have been staunch critics of command economies andcentralized planning. For example, Leon Trotsky believed that central planners, regardless of

their intellectual capacity, operated without the input and participation of the millions of peoplewho participate in the economy and understand the local conditions and rapid changes in the

economy. Therefore, central planners would be unable to effectively coordinate all economicactivity because they lacked this informal information.[10]

Economic planning in socialism takes a different form than economic planning in capitalist

mixed economies (such as Dirigisme, Central banking and Indicative planning); in the formercase planning refers to production of use-value directly (planning of production), while in the

latter case planning refers to the planning of capital accumulation in order to stabilize or increasethe efficiency of this process.

Socialist economic theories base the value of a good or service on its use value, rather than its

cost of production (labor theory of value) or its exchange value (Marginal Utility).[12]

Other socialist theories, such as mutualism and market socialism, attempt to apply the labor

theory of value to socialism, so that the price of a good or service is adjusted to equal the amountof labor time expended in its production. The labor-time expended by each worker would

correspond to labor credits, which would be used as a currency to acquire goods and services.

Market socialists that base their models on neoclassical economics, and thus marginal utility,such as Oskar Lange and Abba Lerner, have proposed that publicly-owned enterprises set their

price to equal marginal cost, thereby achieving pareto efficiency.

Socialist economies in theory


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Robin Hahnel and Michael Albert identify five economic models within the rubric of socialisteconomics:

[14]

y Public Enterprise Centrally Planned Economy in which all property is owned by theState and all key economic decisions are made centrally by the State, e.g. the former

Soviet Union.y Public Enterprise State-Managed Market Economy, one form ofmarket socialism

which attempts to use the price mechanism to increase economic efficiency, while all

decisive productive assets remain in the ownership of the state, e.g. socialist marketeconomy in China after reform.

y A mixed economy, where public and private ownership are mixed, and where industrialplanning is ultimately subordinate to market allocation, the model generally adopted by

social democrats e.g. in twentieth century Sweden.y Public Enterprise Employee Managed Market Economies, another form ofmarket

socialism in which publicly owned, employee-managed production units engage in freemarket exchange of goods and services with one another as well as with final consumers,

e.g. mid twentieth century Yugoslavia, Two more theoretical models are Prabhat RanjanSarkar's Progressive Utilization Theory and Economic democracy.

y Public Enterprise Participatory Planning, an economy featuring social ownership ofthe means of production with allocation based on an integration of decentralized

democratic planning, e.g. stateless communism, libertarian socialism. An incipienthistorical forebear is that of Catalonia during the Spanish revolution. More developed

theoretical models include those ofKarl Polanyi, Participatory Economics and thenegotiated coordination model ofPat Devine, as well as in Cornelius Castoriadis's

pamphlet "Workers' Councils and the Economics of a Self-Managed Society"[15]

Additionally, Janos Kornai identifies five distinct classifications for socialism:

y Classical / Marxist conception, where socialism is a stage of economic development inwhich wage labour, private property in the means of production and monetary relationshave been made redundant through the development of the productive forces, so that

capital accumulation has been superseded by economic planning. Economic planning inthis definition means conscious allocation of economic inputs and the means of

production by the associated producers to directly maximise use-values as opposed toexchange-values, in contrast to the "anarchy of production" of capitalism.

y Walrasian / Market Socialist which defines socialism as public-ownership orcooperative-enterprises in a market economy, with prices for producer goods set through

a trial-and-error method by a central planning board. In this view, socialism is defined interms of de jure public property rights over major enterprises.

y Leninist conception, which includes a form of political organisation based on control ofthe means of production and government by a single political party apparatus that claims

to act in the interest of the working class, and an ideology hostile toward markets andpolitical dissent, with coordination of economic activity through centralised economic

planning (a "command economy").y Social Democratic concept, based on the capitalist mode of production, which defines

socialism as a set of values rather than a specific type of social and economic


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organisation. It includes unconditional support for parliamentary democracy, gradual andreformist attempts to establish socialism, and support for socially progressive causes.

Social democrats are not opposed to the market or private property; instead they try toameliorate the effects of capitalism through a welfare state, which relies on the market as

the fundamental coordinating entity in the economy and a degree of public

ownership/public provision of public goods in an economy otherwise dominated byprivate enterprise.y East Asian model, orsocialist market economy, based on a largely free-market, capital

accumulation for profit and substantial private ownership along with state-ownership ofstrategic industries monopolised by a single political party. Janos Kornai ultimately

leaves the classification of this model (as either socialist or capitalist) to the reader.[16]

[edit] Socialist economies in practice

Although a number of economic systems have existed with various socialist attributes, or have

been deemed socialist by their proponents, almost all of the economic systems listed below have

largely retained elements of capitalism such as wage laborand commodity production.

Nonetheless, various elements of a socialist economy have been implemented or experimented

Main article: Economy of India

After gaining independence from Britain, India adopted a broadly socialist-inspired approach toeconomic growth. Like other countries with a democratic transition to a mixed economy, it didnot abolish private property in capital. India proceeded by nationalizing various large privately-

run firms, creating state-owned enterprises and redistributing income through progressivetaxation in a manner similar to social democratic Western European nations than to planned

economies such as the USSR or China. Today India is often characterized as having a free-

market economy that combines economic planning with the free-market. It did however adopt avery firm focus on national planning with a series of broad Five-Year Plans.

with in various economies throughout history

Union of Soviet Socialist Republics

Main article: Economy of the Soviet Union

See also: Ministry of Finance (Soviet Union), Gosplan, andFive-YearPlans for the NationalEconomy of the Soviet Union

The Soviet Union and some of its European satellites aimed for a fully centrally planned

economy. They dispensed almost entirely with private ownership of capital. Workers were still,however, effectively paid a wage for their labour. Some believe that according to Marxist theory

this should have been a step towards a genuine workers' state. However, some Marxists considerthis a misunderstanding of Marx's views ofhistorical materialism, and his views of the process

of socialization.

The characteristics of this model of economy were:


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y Production quotas for every productive unit. A farm, mine or factory was judged on thebasis of whether its production met the quota. It would be provided with a quota of the

inputs it needed to start production, and then its quota of output would be taken away andgiven to downstream production units or distributed to consumers. Critics[who?] of both

left and right persuasions have argued that the economy was plagued by incentive-related

problems;

[citation needed]

claiming, for instance, that the system incentivized enterprisemanagers to underreport their unit's productive capacities so that their quotas would beeasier to achieve, especially since the manager's bonuses were linked to the fulfillment of

quotas.

y Allocation through political control. In contrast with systems where prices determinedallocation of resources, in the Soviet Union, allocation, particularly of means of

production was determined by the bureaucracy. The prices that were constructed weredone so after the formulation of the economy plan, and such prices did not factor into

choices about what was produced and how it was produced in the first place.y Full employment. Every worker was ensured employment. However workers were

generally not directed to jobs. The central planning administration adjusted relativewages rates to influence job choice in accordance with the outlines of the current plan.

y Clearing goods by planning : if a surplus of a product was accumulated, then the centralplanning authority would either reduce the quota for its production or increase the quota

for its use.y Five Year Plans for the long-term development of key industries.y Main article: Economy of Singaporey Singapore pursued a state-led model of economic development under the People's Action

Party, which initially adopted a Leninist approach to politics and a broad socialist modelof economic development.

[30]The PAP was initially a member of the Socialist

International. Singapore's economy is dominated by state-owned enterprises andgovernment-linked companies through Temasek Holdings, which generate 60% of

Singapore's GDP.[31]y The state also provides substantial public housing, free education, health and recreational

services, as well as comprehensive public transportation.[32]

Today Singapore is oftencharacterized as having a state capitalist economy that combines economic planning with

the free-market.[33]

While government-linked companies generate a majority ofSingapore's GDP, moderate state planning in the economy has been reduced in recent

decades.

y Socialist Federal Republic of Yugoslaviay Main article: Economy of SFR Yugoslaviay Yugoslavia pursued a socialist economy based on autogestion or worker-self

management. Rather than implementing a centrally-planned economy, Yugoslaviadeveloped a market socialist system where enterprises and firms were socially owned

rather than publicly-owned by the state. In these organizations, the management waselected by directly by the workers in each firm, and were later organized according to

Edvard Kardelj's theory of associated labory Criticism of socialist economics comes from market economists, including the classicals,

neoclassicals and Austrians, as well as from some anarchist economists. Besides this,some socialist economic theories are criticized by other socialists. Libertarian socialist,


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mutualist, and market socialist economists, for example, criticize centralized economicplanning and propose participatory economics and decentralized socialism.

y Market economists generally criticise socialism for eliminating the free market and itsprice signals, which they consider necessary for rational economic calculation. They also

consider that it causes lack of incentive. They believe that these problems lead to a slower

rate of technological advance and a slower rate of growth of GDP.y Austrian school economists, such as Friedrich Hayekand Ludwig Von Mises, have

argued that the elimination of private ownership of the means of production would

inevitably create worse economic conditions for the general populace than those thatwould be found in market economies. They argue that without the price signals of the

market, it is impossible to calculate rationally how to allocate resources. Mises called thisthe economic calculation problem. Mises called socialism "economic insanity". Polish

economist Oskar Lange and Abba Lerner attempted to rebut Mises' argument bydeveloping the Lange Model during the Economic calculation debate. The Lange model

states that an economy in which all production is performed by the state, where there is afunctioning price mechanism, has similar properties to a market economy under perfect

competition, in that it achieves Pareto efficiency.y The neoclassical view is that there is a lack of incentive, not a lack of information in a

planned economy. They argue that within a socialist planned economy there is a lack ofincentive to act on information. Therefore, the crucial missing element is not so much

information as the Austrian school argued, as it is the motivation to act on information.[59]

y In his work, Socialism, Ludwig Von Mises criticized socialism for its inability to

calculate rationally:y To suppose a socialist community could substitute calculation in kind for calculation in

terms of money is an illusion. In a community that does not practice exchange,calculations in kind can never cover more than consumption goods. They break down

entirely once goods of higher order are concerned. Every step that moves away fromprivate ownership of the means of production is a step away from rational economic

calculation[60]y Von Mises also pointed out socialism's tendency to consume capital, whose accumulation

is the source of economic progress:y In fact, socialism is not in the least what it pretends to be. It is not the pioneer of a better

world, but the spoiler of what thousands of years of civilization has created. It does notbuild; it destroys. Destruction is the essence of it. It produces nothing, and only consumes

what the private ownership of the means of production has created. Since a socialist orderof society cannot exist, unless it be a fragment of socialism within an economic order

resting otherwise on private property, each step leading towards socialism must exhaustitself in the destruction of what already exists.

[61]

y In conclusion, Von Mises warned his audience against the consequences of socialisteconomics.

y If the intellectual dominance of socialism remains unshaken, then in a short time thewhole cooperative system that Europe has built up for thousands of years will be

shattered. For a socialist order of society is unrealizable. All efforts to realize socialismleads only to the destruction of society. Factories, mines, and railways will come to a

standstill, while towns become deserted. The population of the industrial societies willdie out or migrate elsewhere. The farmer will return to the self-sufficiency of the closed,


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domestic economy. Without private ownership of the means of production there is, in thelong run, no production other than hand-to-mouth production for one's needs.

[62]

Mixed Economy

A mixed economy (orbalanced economy) is an economy that includes a variety of private andpublic control, reflecting characteristics of both capitalism and socialism.

[1]Most mixed

economies can be described as market economies with strong regulatory oversight, in addition tohaving a variety of government sponsored aspects. See (Elements of a mixed economy)

There is not one single definition for a mixed economy,[2]

but the definitions always involve a

degree of private economic freedom mixed with a degree of government regulation of markets.The relative strength or weakness of each component in the national economy can vary greatly

between countries. Economies ranging from the United States[3]

to Cuba[4]

have been termedmixed economies.

The economic freedom side includes privately owned industry for reasons including individualfreedom, economic efficiency (most especially the allocative efficiency provided by the invisiblehand of markets), and the incentive to innovate provided by competition. The government

regulation side addresses concerns that the private sector cannot be (or at least has never yetbeen) well equipped to address, such as environmental protection, maintenance ofemployment

standards, and maintenance of competition. In some mixed economies, it even includes variousdegrees ofcentralized economic planning, that is, state ownership of some of the means of

production for national or social objectives.[citation needed]

Mixed economies as an economic ideal are supported by people of various political persuasions,

typically centre-left and centre-right, such as social democrats[5]

orChristian democrats.

Supporters view mixed economies as a compromise between classic socialism and pure laissez-faire capitalism that is functionally superior to either one.

The term "mixed economy" arose in the context of political debate in the United Kingdom in thepostwar period, although the set of policies later associated with the term had been advocated

from at least the 1930s.[6]

Supporters of the mixed economy, including R. H. Tawney,[7]

AnthonyCrosland

[8]and Andrew Shonfield were mostly associated with the British Labour Party,

although similar views were expressed by Conservatives including Harold Macmillan.

Critics of the British mixed economy, including Ludwig von Mises and Friedrich von Hayek,argued that what is called a mixed economy is a move toward socialism and increasing the

influence of the state.

[

The term mixed economy is used to describe economic systems which stray from the ideals of

either the market, or various planned economies, and "mix" with elements of each other. As mostpolitical-economic ideologies are defined in an idealized sense, what is described rarely if ever

exists in practice. Most would not consider it unreasonable to label an economy that, while notbeing a perfect representation, very closely resembles an ideal by applying the rubric that

denominates that ideal. However, when a system in question diverges to a significant extent from


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an idealized economic model orideology, the task of identifying it can become problematic.Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a

perfectly even mix, mixed economies are usually noted as being skewed towards eitherprivateownership orpublic ownership, toward capitalism orsocialism, or toward a market economy or

command economy in varying degrees.[10]

There is not a consensus on which economies are capitalist, socialist, or mixed. It may be arguedthat the historical tendency of power holders in all times and places to limit the activities of

market actors combined with the natural impossibility of monitoring and constraining all marketactors has resulted in the fact that, as we understand a "mixed economy" being a combination of

governmental enterprise and free-enterprise, nearly every economy to develop in human historymeets this definition; though some systems may be so close to being completely one way or the

other that to call them mixed is redundant and it is more meaningful just to call them a freemarket economy or a command economy

The elements of a mixed economy typically[according to whom?]

include a variety offreedoms:

A TGV train in Marseille operated by the publicly owned SNCF. In many countries, the rail

networkis partly or completely, owned or controlled, by the state.

A mail truck. Restrictions are sometimes placed on private mail systems by mixed economy

governments. For example, in the U.S., the USPS enjoys a government monopoly on nonurgent

letter mail as described in the Private Express Statutes.


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This hospital run by the National Health Service in the United Kingdom. In most countries the

state plays some role in the provision ofhealth care.

y to possess means of production (farms, factories, stores, etc.)y to participate in managerial decisions (cooperative and participatory economics)y to travel (needed to transport all the items in commerce, to make deals in person, for

workers and owners to go to where needed)y to buy (items for personal use, for resale; buy whole enterprises to make the organization

that creates wealth a form of wealth itself)y to sell (same as buy)y to hire (to create organizations that create wealth)y to fire (to maintain organizations that create wealth)y to organize (private enterprise for profit, labor unions, workers' and professional

associations, non-profit groups, religions, etc.)

y to communicate (free speech, newspapers, books, advertisements, make deals, createbusiness partners, create markets)

y to protest peacefully (marches, petitions, sue the government, make laws friendly toprofit making and workers alike, remove pointless inefficiencies to maximize wealth

creation)

with tax-funded, subsidized, or state-owned factors of production, infrastructure, and

services:

y libraries and otherinformation servicesy roads and othertransportation servicesy schools and othereducation servicesy hospitals and otherhealth servicesy banks and otherfinancial servicesy telephone, mail and othercommunication servicesy electricity and otherenergy services (e.g. oil, gas)y water systems for drinking, agriculture, and waste disposaly subsidies to agriculture and other businessesy government-granted monopolies to otherwise private businessesy legal assistancey Government-funded or state-run research and development agencies


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and providing some autonomy over personal finances but including involuntary spending

and investments such as transfer payments and other cash benefits such as:

y welfare for the poory social security for the aged and infirmy

government subsidies to businessy mandatory insurance (example: automobile)

and restricted by various laws, regulations:

y environmental regulation (example: toxins in land, water, air)y laborregulation including minimum wage lawsy consumerregulation (example: product safety)y antitrust lawsy intellectual property lawsy incorporation lawsy

protectionismy import and export controls, such as tariffs and quotas

and taxes and fees written or enforced with manipulation of the economy in mind

The mixed economy is most commonly associated with social democratic forms ofgovernment

[citation needed]. However, given the broad range of economic systems that can be

described by the term, most forms of government are consistent with some form of mixedeconomy.

Authors John W. Houck and Oliver F. Williams of the University of Notre Dame have argued

that Catholic social teaching naturally leads to a mixed economy in terms of policy. Theyreferred back to Pope Paul VI's statement that government "should supply help to the membersof the social body, but may never destroy or absorb them". They wrote that a socially just mixed

economy involves labor, management, and the state working together through a pluralisticsystem that distributes economic power widely.

[

Capitalism

Capitalism is an economic system in which the means of production are privatelyowned andoperated forprofit. Income in a Capitalist system is split between the business owners and the

workers, with profit sent to the owners, in other words the Capitalists, who have invested money

in businesses, and wages are paid to workers.

There is no consensus on the precise definition of capitalism, nor how the term should be used as

an analytical category.[1] There is, however, little controversy that private ownership of themeans of production, creation of goods or services for profit in a market, and prices and wages

are elements of capitalism.[2]

There are a variety of historical cases to which the designation isapplied, varying in time, geography, politics and culture.

[3]Some define capitalism as where all

the means of production are privately owned, and some define it more loosely where merely


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"most" are in private hands while others refer to the latter as a mixed economy biased towardcapitalism. More fundamentally, others define capitalism as a system where production is carried

out to generate profit and governed subject to the laws ofcapital accumulation, regardless oflegal ownership titles. Private ownership in capitalism implies the right to control property,

including determining how it is used, who uses it, whether to sell or rent it, and the right to the

revenue generated by the property.

[4]

Economists, political economists and historians have taken different perspectives on the analysis

of capitalism. Economists usually emphasize the degree that government does not have controlover markets (laissez faire), and on property rights.[5][6] Most political economists emphasize

private property, powerrelations, wage laborand class.[7]

There is general agreement thatcapitalism encourages economic growth.

[8]The extent to which different markets are free, as

well as the rules defining private property, is a matter of politics and policy, and many stateshave what are termed mixed economies.

[7]

Capitalism, as a deliberate economic system, developed incrementally from the 16th century in

Europe,

[9]

although proto-capitalist organizations existed in the ancient world, and early aspectsofmerchant capitalism flourished during the Late Middle Ages.[10][11][12]

Capitalism became

dominant in the Western world following the demise of feudalism.[12] Capitalism graduallyspread throughout Europe, and in the 19th and 20th centuries, it provided the main means of

industrialization throughout much of the world.[3]

Today the capitalist system is the world's mostdominant form of economic model.

Capitalist economics developed out of the interactions of the following elements.

A product is any good produced for exchange on a market. "Commodities" refers to standardproducts, especially raw materials such as grains and metals, that are not associated with

particular producers or brands and trade on organized exchanges.

There are two types of products: capital goods and consumer goods. Capital goods (i.e., rawmaterials, tools, industrial machines, vehicles and factories) are used to produce consumer goods

(e.g., televisions, cars, computers, houses) to be sold to others. The three inputs required forproduction are labor, land (i.e., natural resources, which exist prior to human beings) and capital

goods. Capitalism entails the private ownership of the latter two natural resources and capitalgoods by a class of owners called capitalists, either individually, collectively or through a

state apparatus that operates for a profit or serves the interests of capital owners.

Money was primarily a standardized medium of exchange, and final means of payment, that

serves to measure the value all goods and commodities in a standard of value. It eliminates thecumbersome system ofbarterby separating the transactions involved in the exchange of

products, thus greatly facilitating specialization and trade through encouraging the exchange ofcommodities. Capitalism involves the further abstraction of money into other exchangeable

assets and the accumulation of money through ownership, exchange, interest and various otherfinancial instruments. However, besides serving as a medium of exchange for labour, goods and

services, money is also a store of value, similar to precious metals.


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Labourincludes all physical and mental human resources, including entrepreneurial capacity andmanagement skills, which are needed to produce products and services. Production is the act of

making products or services by applying labour powerto the means of production.[

The market

The price (P) of a product is determined by a balance between production at each price (supply,

S) and the desires of those with purchasing powerat each price (demand, D). This results in amarket equilibrium, with a given quantity (Q) sold of the product. A rise in demand from D1 to

D2 would result in an increase in price from P1 to P2 and an increase in output from Q1 to Q2.

In a capitalist economy, the prices of goods and services are controlled mainly through supply

and demand and competition. Supply is the amount of a good or service produced by a firm and

which is available for sale. Demand is the amount that people are willing to buy at a specificprice. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In

theory, the market is able to coordinate itself when a new equilibrium price and quantity isreached.

Competition arises when more than one producer is trying to sell the same or similar products tothe same buyers. In capitalist theory, competition leads to innovation and more affordable prices.

Without competition, a monopoly orcartel may develop. A monopoly occurs when a firmsupplies the total output in the market; the firm can therefore limit output and raise prices

because it has no fear of competition. A cartel is a group of firms that act together in amonopolistic manner to control output and raise prices.

Role of government

Further information: Competition regulator, Consumerprotection, andCompetition law

In a capitalist system, the government does not prohibit private property or prevent individuals

from working where they please. The government does not prevent firms from determining what


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wages they will pay and what prices they will charge for their products. Many countries,however, have minimum wage laws and minimum safety standards.

Under some versions of capitalism, the government carries out a number of economic functions,

such as issuing money, supervising public utilities and enforcing private contracts. Many

countries have competition laws that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms cantemporarily drop prices and accept losses to prevent competition from entering the market, and

then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g.electricity, heating fuel, communications) are able to operate as a monopoly under government

regulation, due to high economies of scale.

Government agencies regulate the standards of service in many industries, such as airlines andbroadcasting, as well as financing a wide range of programs. In addition, the government

regulates the flow of capital and uses financial tools such as the interest rate to control factorssuch as inflation and unemployment.[50]

Critics of capitalism associate it with: unfairdistribution of wealth and power; a tendency towardmarket monopoly oroligopoly (and government by oligarchy); imperialism, counter-

revolutionary wars and various forms of economic and cultural exploitation; repression ofworkers and trade unionists; social alienation; economic inequality; unemployment; and

economic instability.

Notable critics of capitalism have included: socialists, anarchists, communists, social democrats,technocrats, some types ofconservatives, Luddites, Narodniks, Shakers and some types of

nationalists.

Marxists have advocated a revolutionary overthrow of capitalism that would lead to socialism,before eventually transforming into communism. Many socialists consider capitalism to be

irrational, in that production and the direction of the economy are unplanned, creating manyinconsistencies and internal contradictions.

[72]Labor historians and scholars such as Immanuel

Wallerstein have argued that unfree labor by slaves, indentured servants, prisoners, and othercoerced persons is compatible with capitalist relations.

[73]

Many aspects of capitalism have come under attack from the anti-globalization movement,which is primarily opposed to corporate capitalism. Environmentalists have argued that

capitalism requires continual economic growth, and that it will inevitably deplete the finitenatural resources of the Earth.

[74]

Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism,

Christianity, and Islam forbid lending money at interest, although alternative methods of bankinghave been developed. Some Christians have criticized capitalism for its materialist aspects.[75]

Indian philosopherP.R. Sarkar, founder of the Ananda Marga movement, developed the Law ofSocial Cycle to identify the problems of capitalism.

[76][77]

Documents

Socialist economics are the economic theories and practices of hypothetical and existing socialist economic systems