A socialist economy constitutes various economic theories, practices as well as norms which are a part of the socialist economics systems that are already existing. Such an economy can be characterized by a social kind of ownership. The means of production in a socialist economy have the chances of taking the form of cooperatives that are autonomous in nature.
It’s association with various economic schools of thought which include the Marxian, Neoclassical and Evolutionary Economics can be justified on the basis that these economic units help to sustain a comprehensive model of the socialist economy.
Pros of Socialist Economy:
- No chances of labour exploitation-
A single class is known to be present in every socialist economy due to which there are no such situations where exploitation of labour might take place. This particular kind of economy does not believe in the concepts of strikes as well as lock-outs. People are seen to be working in a strongly-knit and unified kind of a family way.
- Effective Utilization of Resources-
A socialist economy is marked by all the natural resources being effectively utilized in the most sorted manner. The central objective of a economy is to ensure that all wide span of resources are used especially and only for the society’s welfare.
- No Unnecessary Advertisement-
Each segment in a socialist economy is virtually owned by the government. Therefore, almost every respective producers work as per the target oriented plans. Hence, there is no such competition that can be evidently found among the producers. This results in no unnecessary wastage of money on advertisements which are not quite useful in the long run.
- Organized Planning-
A long-term and effective economic planning is present in socialist economic systems which can act as the ultimate solution to various types of problems. It is basically with the help of such proper planning that a socialist economy can evolve itself as a balanced and well developed sector.
- Absence of Cyclical Fluctuations-
A socialist economy which is characterized by no such cyclical fluctuations, refers to an economy where no evident traces of depression, unemployment or over production can be found. A full term and effective economic stability is looked after by the government which is based on the target oriented economic planning.
- Social Welfare-
The ultimate goal of a socialist economy is to maintain as well as maximize all forms of social welfare concerning the society. By doing so, such an economy ensures employment opportunities for all which based on their individual abilities.
- Most Beneficial for the Developing Countries-
A socialist economy can serve itself to be extremely beneficial for fulfilling all the essential needs of the developing countries. This can be achieved because in this kind of an economic system, the various means of production system are controlled and managed effectively by the government.
- Frequent Economic Development-
The Central Authority is the main powerful head in a socialist economy. It carefully uses the physical as well as the natural resources so as to achieve maximum economic development of the particular country. It also ensures to maximize the path of highest profit so that it can ultimately benefit the people of the country to enjoy better living standards.
Cons of Socialist Economy:
- Suffering due to lack of Consumer Sovereignty-
In a socialist economy, a consumer is known to have no choice or will of his own. This is because he is supposed to serve himself as a slave by working under this particular system of government. It is the government who has the power to look after the production of necessary goods and services as per the requirements of the people.
- Lack of Democracy-
A socialist economy is marked by its lack of democratic nature which is solely due to the fact that it can enjoy no such aspects of freedom. It can be termed as a kind of government oriented dictatorship.
- No Automatic Nature of Functioning-
Under the system of a socialist economy, there is no such existence of an automatic nature of functioning system. It is basically driven by the Central Authority, who is the government in power and it is he who looks after the various aspects of the country as per it’s personal interest.
- Negative Impacts due to Bureaucracy-
In a socialist economy, the wide range of economic activities are governed by the Central Head. Therefore, this ultimately makes way to all kinds of negative effects of bureaucracy which include favouritism, delay, corruption and others.
- Rigid Working of the Economy-
A socialist economy is not quite flexible to adopting various changes as per the requirements. It is due to this reason that people become mechanical and never get to enjoy any kind of incentives in their work.
- Creating a Burden on the Government-
Since all the economic activities are looked after by the Central Head, it is for this very reason that sometimes it might get overloaded with daily economic practices. Hence, this results in the Central Government to be able to devote extremely little time to make a well planned structure for the economy oriented prosperity of the country.
- Extra Costing on Planning-
A socialist economy is characterized by a system that undergoes lengthy procedures of planning. This results in unnecessary wastage of money and therefore leading to an extra burden on the economy of the nation.
A socialist economy has been introduced for successfully bringing about an overall sense of equality that a country can enjoy along with the absence class distinctions which can benefit the nation in all ways. Like any other form of government, there are positive as well as negative sides of it.
An absolute sense of socialist economy might seem a little bit too much to be practiced in the daily lives, but at the same time, a democratic kind of socialism can effectively work. Therefore, the people of a country and its government should consider both the pros and cons of such an economy so that a careful judgement can be carried out based on the kind of impact they have had on other nations in the past times.
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