Socialism is an economic system characterised by social ownership of the means of production and co-

operative management of the economy.

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What are the TOP 5 Characteristics of Socialism?
Five Characteristics of Socialism are as follows:
1. Government ownership of productive resources:
The role of private property is to be lessened as key industries are nationalised.
2. Planning:
Socialist economy is a planned economy. Instead of permitting the free play of profit motives in a
laissez-faire market economy, co-ordinate planning is introduced.
Sometimes the programme of production for use rather than profit is advocated, advertising
expenditure on gadgets is reduced, workers and professional people are to develop instincts of
craftsmanship and social service so that they will be guided by other motives than those of acquisitive
society.
3. Redistribution of income:
Inherited wealth and swollen incomes are to be reduced by militant use of government taxing powers.
Social security benefits, free medical care, and cradle to the grave welfare services provided by the
collective purse are to increase the well-being of the less privileged classes and guarantee minimum
standards of living. Equitable distribution of incomes is central to socialism.
4. Social welfare rather than private profit characterises a socialist societys goals.
5. Peaceful and democratic revolution:
Socialism, as distinct from Communism, often advocates the peaceful and gradual extension of
government ownership revolution by ballot rather than by bullet. This aim is often more than a
technical move, rather a deep philosophical tenet of faith.
Democratic socialism, which is a milder form of socialism, shares with capitalism existence of private
sector, inequality of incomes, freedom of consumers and producers (subject to demands of central
planning) and existence of price mechanism.
Socialism ensures full employment, a high rate of growth, dignity of labour and absence of exploitation
of labour, relatively equitable distribution of income and wealth and absence of wastages associated
with capitalistic system of production.
As against these merits, the system leads to loss of efficiency and enterprise and incentives for hard
work and initiative are missing.
Since consumers have no means at their disposal for indicating their preferences for different types of
goods and have to consume what has been produced as a result of central decision, the first casualty of
the socialist system is the consumers sovereignty.
If some freedom of choice is allowed, there may be some goods which nobody will care to buy and other
goods for which the demand may be in excess of the supply. Adjusting supply to demand may, in the
absence of a free market mechanism, pose a rather intractable problem to the socialist planners.
Another defect of socialism is that it suffers from too much bureaucratic control. Power is concentrated
in the hands of the State which takes all decisions regarding investment, production, distribution and
consumption.
This leads to bureaucratization, red tape and a very cumbersome and expensive system of
administration which cannot deliver the goods.
Resource allocation is arbitrary as there is no rational price system which generally guides allocation
decisions. In the absence of competition, production is inefficient and costly and quite often there are
shortages particularly of consumer goods.
Soviet experiments with socialism over a period of 70 years have miserably failed. But it was hailed by
Sydney Leboa as new civilization. These points to the fact that Marxism has practically no future.

Advantages and Disadvantages of Socialism
Socialism as the name suggests is something which is for the benefit of all the people rather than small
group of individuals. Under socialism economic system it is the government which possess majority of
the factors of production and rest lies with private sector or capitalist as we call it, given below are some
of the advantages and disadvantages of socialism
Advantages of Socialism
1. Under socialism since it is the government which owns majority of factors of production the
chances of consumer being charged more is reduced as government will add minimum margin
of profit on the produce unlike private companies.
2. Chances of monopoly by few producers or people is next to nil under this system as government
holds majority of resources, people are not in position to take control of resources and created
monopoly like situation.
3. The gap between poor and rich is there but it is not that gigantic as in the case of capitalist
economic system.
Disadvantages of Socialism
1. Imagine if in the race if there is no competition than you would not run with full speed but
rather slowly in the same way under socialism economic system there is lack of competition
which hampers the growth of the country.
2. There is no incentive for people to develop entrepreneurship skill as they know its of no use,
and we all know that entrepreneurs are essential if country wants to grow and compete with
other countries of the world.
3. It also suffers from delay in decision making on the part of government and bureaucratic
attitude of government employees.

Advantages and Disadvantages of Socialism
Following are the merits and demerits, advantages and disadvantages of socialism.
Advantages of Socialism
Following are the benefits or advantages of socialism
Greater Efficiency
Economic efficiency under socialism is greater than under capitalism, the means of production are not
left in the market forces rather they are controlled and regulated by the central planning authority
towards chosen end. The central planning authority makes an exhaustive survey of resources and
utilizes them in the most efficient manner.
Greater Welfare
In a social economy, there is less inequality of income as compared to capitalist economy because of the
absence of private ownership of means of production. In socialist economic system every one works
hard and paid as per his skills & ability.
Absence of monopolistic practices
One of the benefits of socialism is that it is free from monopolistic practices to be found in a capitalist
society. Since under socialism all means of production are owned by the state, the exploitations by the
monopolist are absent. Instead of private monopoly, there is state monopoly over the productive
system but this is operated for the welfare of the people.
Absence of business fluctuations
A socialist economy is also superior to a capitalist economy that is free from business fluctuation.
Generally planned economy co-ordinates the action of various producing units, prevents discrimination
between saving and investment and make full use of available resources. It is able to control over
production and avoid general deflationary trend.
Economic Growth
I will consider economic growth as an important advantage of socialism because it adopts economic
planning as a means of promoting rapid economic growth. A planned socialist economy functions right
according to the plan in a systematic and orderly manners and marches rapidly on the road to economic
progress.
Disadvantages of Socialism
Following are the demerits or disadvantages of socialism.
Elimination of Individualism
There are many disadvantages of socialism but first come in my mind is the lack of economic freedom. In
socialist economic system everything is controlled by a centralized body. Individuals are not allowed to
own any assets, everything belongs to the state. Workers are assigned specific jobs and are not allowed
to change them without consent from the planning authority.
Red-Tapism and Inefficiency
In socialism there is a lot of involvement of bureaucracy and are the drivers of all economic machinery.
The work civil servants are not comparable with the private entrepreneurs. Civil servants merely do the
jobs because it is their duty and they will get paid whatever the consequences. Thus inefficiency arises
and in the long run the economy suffers.
An Artificial System
As a socialist economy is a planned economy, every aspect of the economy is to be determined by the
government. Forces of demand and supply do not apply which is one of the disadvantages of socialism.
Thus in the long run the economy becomes state rather than wasted, whereas these make an economy
prosper.
Consumers Suffer
In the final analysis it is the consumer who loses out. Sovereignty of consumer does not apply in a
socialist economy. Consumers do not enjoy the status of a consumer as in a capitalist economy. Choices
of goods and services are able to maximize their total satisfaction.
Economic Equality
Socialists claim more equal distribution of wealth but practically it is proven that complete economic
equality is virtually impossible. There is a distinction between the rich and poor. Moreover since it is a
planned economy the poor suffer even more.
Non-existence of economic and political freedom
Freedom of enterprise, freedom in choice of occupation and many other essential freedoms for an
economy to prosper are out-rooted from society. The true spirit of democracy dies away. The basic
needs Although it has been agreed that the six basic needs in life are met within a socialist economy but
all this is obtained at the expense of economic and political freedom.
Non-existence of Competition
It is due to competition that an economy becomes prosperous. The competition between producers and
consumers leads to the production of a good quality product which may even be relatively cheap here it
is one the disadvantages of socialism. Thus talents and initiatives of mankind develop and in the
ultimate analysis the country incurs rapid growth.

Problems of Capitalism include:
Irrational Behaviour
E.g. People ignore economic fundamentals but get caught up in speculative bubbles. Stock market boom
and bust of 1920s is a classic example. American housing market in 2000s is another
Inequality
The benefits of Capitalism are rarely equitably distributed. Wealth tend to accrue to a small % of the
population. This means that demand for luxury goods is often limited to a small % of the workforce
Monopoly Behaviour
A free market allows firms to gain monopoly power and exploit customers, through charging higher
prices. Firms often gain monopsony power and pay lower wages to workers. For example, in the
nineteenth century American rail-roads often exploited their monopoly power in setting higher prices.
Immobilities
In a free market, factors of production are supposed to be able to easily move from an unprofitable
sector to a new profitable industry. However, in practice this is much more difficult. E.g. a farm worker
who is made unemployed cannot just fly off to a big city and find a new job. He has geographical ties to
his birthplace; he may not have the right skills for the job. Therefore, in capitalist societies we often see
long periods of unemployment and recession.