Types of Economic Systems: Socialism
The third major type of economic system is socialism, which lies somewhere between capitalism and communism in the degree of economic freedom that it permits. Like communism, socialism involves a relatively high degree of government planning and some government ownership of land and capital resources (like buildings and equipment). Unlike communism, government involvement is limited to key industries considered vital to the common welfare, such as transportation, utilities, medicine, steel, and communications.
In these industries, the government owns or controls all the facilities and determines what will be produced and how the output with be distributed. Private ownership is permitted in industries that are not considered vital, and both businesses and individuals are allowed to benefit from their own efforts. However, taxes are high in socialist states because the government absorbs the costs of medical care, education, subsidized housing, and other social services. Varying degrees of socialism are practiced today in countries like Mexico and Sweden, but even this is changing.
Reference
In these industries, the government owns or controls all the facilities and determines what will be produced and how the output with be distributed. Private ownership is permitted in industries that are not considered vital, and both businesses and individuals are allowed to benefit from their own efforts. However, taxes are high in socialist states because the government absorbs the costs of medical care, education, subsidized housing, and other social services. Varying degrees of socialism are practiced today in countries like Mexico and Sweden, but even this is changing.
Reference
- Michael H. Mescon, Courtland L. Bovée, John V. Thill, Business Today, 9th edition, Prentice Hall, 1999
