Important Economic Features of Socialism
Important economic features of socialism
Case for Socialism for Under-developed Countries
An Under-developed country like India is characterized, among other things, by inefficiency in production in both agriculture and industry, the absence of social overheads like power, transport, technical skills, economic stagnation, and serious inequalities of income, wealth and economic power, and low rate of capital formation. Capitalism is obviously incapable of lining such an economy from its present depth. Socialism seems to be the only way out It can be advocated on the following grounds: —
1. Better Allocation of Resources. Under capitalism, there is misallocation of resources. Under socialism, the mal-allocation of (resources is minimized and the wastage of resources associated with the private ownership of means of production is reduced. The central planning authority is better equipped than a capitalist market in locating mistakes, price-output fluctuation and rectifying them sooner.
2. Rapid Economic Growth. While a free-market economy works in an erratic, irrational and haphazard manner, a socialist economy, with its central planning, functions in a systematic and coordinated way which is conducive to a rapid economic growth. Besides, under economic planning, rates of saving and investment which are so essential to rapid economic growth can be greatly stepped up.
3. More Efficient Use of Productive Resources. This will happen in several ways. Private entrepreneurs in a capitalist economy, especially those enjoying monopoly power, often restrict output to raise prices and profits. This will not happen under socialism. Similarly, under socialism, productive efficiency will improve because all wastes of competition will be eliminated. Nor will resources be wasted in producing too many varieties of goods. Moreover, productive efficiency, in a socialist economy, will also be increased because of the concentration of production in a few large productive units rather than in too many small ones and thus reap the economies of scale.
4. Economic Stability. Since the means of production are in the hands of the State, it is able to remove any imbalance between aggregate demand and aggregate supply and thus eliminate cyclical fluctuations, which .are a very unsatisfactory feature of capitalist economies.
5. Social Justice and Social Welfare. Socialism is to be advocated also on die ground that it removes the glaring inequalities of income, wealth and economic power and thus ensures social justice to all. It also ensures equality of opportunity to all to develop their talents. Besides, the State can provide comprehensive social security to the people and thus promote social welfare.