Mention the major features of capitalism and socialism.

The basic features of capitalism are as under:

Features

(i) Right of private property: Right of private property is an inherent part of capitalism. The right of private property includes three things:

(a) Every individual has the right to accumulate property,

(b) An individual is free to use his property according to his will and

(c) Right of inheritance, i.e., after death of an individual his property goes to his successors.

(ii) Price mechanism: Price mechanism means the free working of the forces of demand and supply to determine, prices in product market and factor market.

The government does not intervene in the working of market mechanism. Price mechanism brings equilibrium between demand and supply.

(iii) Profit motive: Profit is the soul of all the institutions of capitalist system. A capitalistic economy is individualistic because everyone is motivated by self-interest or private profit motive to undertake high risks.

(iv) Vital role of entrepreneur: Entrepreneur is the soul of capitalist economy. He organizes and combines the factors of production to produce goods. It is he who bears the risk of business and no production is possible without him.

(v) Competition and combination go together: A capitalist economy is based upon free competition. There is competition among buyers, producers, sellers and workers, but they cooperate among themselves to protect their interest by forming consumer’s association, employers association and trade unions.

(vi) Freedom of enterprise: There is freedom of enterprise in a capitalist economy. It means people are free to choose their occupation, profession or business according to their will.

People have freedom to contract. Freedom of enterprise is an important feature of capitalism. This is why it is also called a free enterprise economy.

(vii) Consumer's sovereignty: In a capitalist economy people have freedom of consumption. They can spend their income on consumption according to their choice.

Consumers reveal their preference for goods through prices and they pay high price for the goods liked most by them.

The producers produce those goods which are demanded by consumers. It means the whole production system works according to consumers directions. Therefore, in a capitalist economy consumers are like a sovereign king.

(viii) Role of government: In pure capitalism government does not interfere in economic activities. However, with passage of time government has began to play a connective role in a capitalist economy to achieve certain social objectives. In spite of government-intervention, private enterprises dominate a capitalist economy.

Main Features of Socialism:

A socialist economy has the following features:

(i) Socialism is Social or Collective Ownership of Resources: In such an economy, all the means of production are owned and operated by the state in the interest of society as a whole. This is to ensure equality of opportunity to all the citizens with regard to earning of income. This is also aimed at full and efficient utilization of the country’s resources.

(ii) It is a Fully Planned Economy: A socialist economy is necessarily a fully planned economy otherwise the economic system cannot run. There is a choice between centralized and decentralized planning. All socialist economics were fully planned economics.

(iii) It is the Responsibility of the Central Planning Authority: Planning is the responsibility of an authority at the centre. It may be known as the Planning Commission in India or the Gas plan in the U.S.S.R. The main task given to this body is to formulate long-term and short-term plans for the economy.

(iv) It has Definite Aims and Objectives: Socialist economy has specified aims or objectives, Generally they are included in the constitution itself but these are given specific shape by the planners. As far as possible the objectives are clearly and quantitatively defined. The competitiveness on complementary among these objectives is explicitly noted. This is meant to bring planning nearer to reality.

(v) Specific Long-Term Plans: The Central Planning authority is given the responsibility to chalk out specific long term plans for the country. These long-term plans are called "Perspective Plans". These may range from twenty to thirty years. These are in the nature of a blue-print of the path the economies have to follow in the near future. These perspective plans may be modified with changes in basic structure and objectives of the economy. This requires the use of input and output and activity analysis.

(vi) Central Control and Ownership: A fully planned economy is by implication a controlled economy. Government controls the main aspects of all economic activity. There are controls on production through licensing. Consumption is also controlled indirectly through controlled production. There are existing controls generally operated through the Central Bank of the economy.

Then there are controls on distribution. Government may have a public distribution system. It may have direct procurement and sale of essential commodities through fair price shops. However, the nature of controls and their Intensity shall depend upon the economic conditions in the economy.

(vii)  Much Less impedance of Price Mechanism: A socialist economy gives much less importance to market forces and therefore, the price mechanism is given a minor role in resource allocation. A specific plan based on social needs guides the process of resource allocation. Private profit is not allowed. Public interest is given more importance. The means of production are directed by the Government and are used in promoting the general welfare of the people.

(viii) People's Co-operation is Essential: A socialist economy is run with the active co-operation of the people in the fulfillment of plan targets. No plan can possibly succeed without people's participation. The plan is prepared and implemented by the Government but the main target's of the different activities in the plan are fixed by taking into account the resources which people will be able to mobilize.