{"id":99,"date":"2014-09-04T03:51:41","date_gmt":"2014-09-04T03:51:41","guid":{"rendered":"https:\/\/courses.candelalearning.com\/internationalbusiness1xmaster\/?post_type=chapter&p=99"},"modified":"2015-02-17T19:39:24","modified_gmt":"2015-02-17T19:39:24","slug":"reading-the-disadvantages-of-socialism","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-internationalbusiness\/chapter\/reading-the-disadvantages-of-socialism\/","title":{"raw":"Reading: The Disadvantages of Socialism","rendered":"Reading: The Disadvantages of Socialism"},"content":{"raw":"

Despite the theoretical benefits of socialist economic systems, there are also disadvantages that may arise in application.<\/h2>\r\n
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KEY\u00a0Points<\/h3>\r\n
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  • Disadvantages of socialism include slow economic growth, less entrepreneurial opportunity and competition, and a potential lack of\u00a0motivation\u00a0by individuals due to lesser rewards.<\/li>\r\n\t
  • Critics of socialism claims that it creates distorted or absent price signals, results in reduced\u00a0incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects.<\/li>\r\n\t
  • Economic liberals and pro-capitalist libertarians see private ownership of the means of production and the\u00a0market\u00a0exchange as natural entities or moralrights, which are central to their conceptions of freedom and liberty.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/section><\/div>\r\n

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    Terms<\/strong><\/h4>\r\n<\/div>\r\n
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    • Economy:\u00a0<\/em> The\u00a0system\u00a0of production and distribution and consumption. The overall measure of a currency system.<\/li>\r\n\t
    • Socialism:\u00a0<\/em> Any of various economic and political philosophies that support social equality, collective decision-making, distribution of income based on contribution and public ownership of productive\u00a0capital\u00a0and natural\u00a0resources, as advocated by socialists.<\/li>\r\n<\/ul>\r\n
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      Examples<\/strong><\/h4>\r\n
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      • Austrian school economists, such as Friedrich Hayek and 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 that would be found in market\u00a0economies. Without the price\u00a0signals of the market, they state that it is impossible to calculate rationally how to allocate resources.<\/li>\r\n<\/ul>\r\n<\/div>\r\n
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        The Disadvantages of\u00a0Socialism<\/strong><\/h4>\r\nEconomic liberals and pro-capitalist libertarians see private ownership of the means of production and the market exchange as natural entities or moral rights which are central to their conceptions of freedom and liberty. They, therefore, perceive public ownership of the means of production,\u00a0cooperatives\u00a0and economic planning\u00a0as infringements upon liberty. Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals, results in reduced incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects.\r\n\r\nCritics from the neoclassical school of economics criticize state-ownership and centralization of capital on the grounds that there is a lack of incentive in state institutions to act on information as efficiently as capitalist firms because they lack hard\u00a0budget\u00a0constraints, resulting in reduced overall economic welfare for society. Economists of the Austrian school argue that socialist systems based on economic planning are unfeasible because they lack the information to perform economic calculations in the first place, due to a lack of price signals and a free-price system, which they argue are required for rational economic calculation.\r\n\r\nThus, Socialism can have several disadvantages:\r\n\r\n
        \"\"<\/figure>
        Socialism
        Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals, results in reduced incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects.<\/figcaption><\/figure><\/div>\r\n
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        • The national economy develops relatively slowly;<\/li>\r\n\t
        • There is an inability to obtain the upmost\u00a0profit\u00a0from the use of resources, labors and land;<\/li>\r\n\t
        • Places that have a geographical advantage lose chances to develop better and people who have intelligence and wealth lose chances to make their businesses become bigger and more powerful;<\/li>\r\n\t
        • People lose initiative to work and enthusiasm to study as doing more isn't rewarded.<\/li>\r\n<\/ul>\r\n<\/div>\r\n
          <\/div>\r\n<\/div>\r\n<\/div>\r\n
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          GLOSSARY<\/h3>\r\n
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          \r\n\r\nBenefit<\/strong>\r\n\r\nAn advantage, help or aid from something. Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nBudget<\/strong>\r\n\r\nAn itemized summary of intended expenditure; usually coupled with expected revenue.\u00a0The amount of money or resources earmarked for a particular institution, activity, or time-frame.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nCapital<\/strong>\r\n\r\nMoney and wealth. The means to acquire goods and services, especially in a non-barter system. Already-produced durable goods available for use as a factor of production, such as steam shovels (equipment) and office buildings (structures).\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nCentralization<\/strong>\r\n\r\nThe act or process of centralizing, or the state of being centralized; the act or process of combining or reducing several parts into a whole like the centralization of power in the general government or the centralization of commerce in a city.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nCooperative<\/strong>\r\n\r\nA type of company that is owned partially or wholly by its employees, customers, or tenants. Abbreviation: co-op.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nEconomic System<\/strong>\r\n\r\nAn economic system is the combination of the various agencies, entities (or even sectors as described by some authors) that provide the economic structure that defines the social community.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nIncentive<\/strong>\r\n\r\nSomething that motivates, rouses, or encourages.\u00a0It is used to motivate individuals (often, employees) for better performance by providing financial or other types of rewards.\u00a0An anticipated reward or aversive event available in the environment.\u00a0Something that motivates an individual to perform an action.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nMarket<\/strong>\r\n\r\nA group of potential customers for one's product.\u00a0One of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nMotivation<\/strong>\r\n\r\nWillingness of action, especially in behavior.\u00a0An incentive or reason for doing something.\u00a0The psychological feature that arouses an organism to action toward a desired goal and elicits, controls, and sustains certain goal directed behaviors.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nPlanning<\/strong>\r\n\r\nThe act of formulating a course of action, or of drawing up plans.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nPotential<\/strong>\r\n\r\nCurrently unrealized ability. A curve describing the situation where the difference in the potential energies of an object in two different positions depends only on those positions.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nPrice<\/strong>\r\n\r\nThe price is the amount a customer pays for the product.\u00a0The quantity of payment or compensation given by one party to another in return for goods or services.\u00a0The cost required to gain possession of something.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nProfits<\/strong>\r\n\r\nCollective form of profit.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nResource<\/strong>\r\n\r\nSomething that one uses to achieve an objective, e.g. raw materials or personnel.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nRight<\/strong>\r\n\r\nA legal or moral entitlement.\r\n
          <\/div>\r\n<\/div>\r\n
          \r\n\r\nSystem<\/strong>\r\n\r\nA whole composed of relationships among the members.\u00a0The part of the universe being studied, arbitrarily defined to any size desired.\r\n
          <\/div>\r\n<\/div>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/div>","rendered":"

          Despite the theoretical benefits of socialist economic systems, there are also disadvantages that may arise in application.<\/h2>\n
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          KEY\u00a0Points<\/h3>\n
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