Communism ,Capitalism and Socialism -GS paper 1 – UPSC

This is just a compilation from various sources and I do not own it.


“ A political theory favouring collective ownership in a classless society “


“A theory or system of social organization based on the holding of all property in common, with actual ownership ascribed to the community or state”


  • It is a socio-economic scaffold that assists in supporting the establishment of a classless, stateless society based on common ownership of the means of production.
  • It boosts the formation of a democratic state in order to overcome the class structures and alienation of labour that characterize capitalistic societies and their inheritance of imperialism and nationalism.
  • According to the principle of communism, the main process of resolving problems of classless and other favouritism in society for the working class is to replace the prosperous ruling class, through radical action, in order to establish a diplomatic, free society, without classes or government.
  • Communism, basically, is the idea of a free society with no division or estrangement, where humankind is free from oppression and insufficiency, and where there is no need for governments or countries and no class divisions.
  • It imagines a world in which each person gives according to their abilities, and receives according to their needs.

3.Evolution of Communism:

  • In the era of late 19th Century, major philosophical terms like socialism and communism were often used simultaneously.
  • Communism was considered as an economic-political philosophy which was evolved by famous philosophers Karl Marx and Friedrich Engels during this period.
  • Marx and Engels wrote and published “The Communist Manifesto” in 1848.
  • They had a wish to stop thinking a capitalism feeling that it was the social class system which led to the mistreatment of labours.
  • The workers that were treated badly had developed class awareness and it resulted in a fundamental process of class conflict.
  • In this conflict, the public may rise up against the bourgeoisie and establish a communist society.
  • Marx and Engels supposed of the proletariat as the individuals with labour power, and the bourgeoisie as those who own the means of production in a capitalist society.
  • The state would pass through a phase, often thought of as socialism, and ultimately developed a pure communist society.
  • In a communist society, all private ownership would be obliterated, and the ways of production would belong to the whole community.
  • In the communist movement, a popular motto was that everyone contributes according to their competence and received according to their requirements.
  • Therefore, the needs of a society would be put above and beyond the specific needs of an individual.
  • It was argued by many philosophers that radical activity by the working classes was required to bring about these changes.
  • It was documented in historical records that initially, Communist philosophy was the history of Socialism.

4.History of Communism:

  • In its modern version, Communism evolved of the Socialist movements of 19th Century Europe and the critics of Capitalism during the Industrial Rebellion.
  • Main critics were the German philosopher Karl Marx and his associate Friedrich Engels
  • (1820 – 1895), and their pioneering “Communist Manifesto” of 1848, the defining document of the movement, presented a novel explanation of Communism and promoted the phrase communism.
  • The practice of the terms “communism” and “socialism” changed after the Russian Revolution of 1917, when the admittedly Marxist Bolshevik Party in Russia changed their name to the Communist Party and formed a single party regime that was dedicated to the implementation of socialist policies under Vladimir Ilyich Lenin (1870 – 1924).
  • Other communism movement related to Lenin’s New Economic Policy (NEP) which was lasted until 1928, when Joseph Stalin (1878 – 1953) party leader under the banner of “socialism in one country” and proceeded down the way of isolationism and Totalitarianism with the first of many Five Year Plans.
  • Remarkably Leon Trotsky (1879 – 1940) Marxist critics of the Soviet Union, referred to the Soviet system as a “degenerated” or “deformed” workers’ state, argued that it fell far short of Marx’s communist model, and claimed that the working class was politically expelled.
  • Post World War II, the Warsaw Pact saw Albania, Bulgaria, Czechoslovakia, East Germany, Poland, Hungary and Romania joined the Soviet Union in an economic and military coalition under firm Soviet Control.
  • However, relations were very tough, and the Soviet Union was forced into military interventions to suppress popular rebellions in Hungary (1956) and Czechoslovakia (1968), and Albania withdrew from the Pact in 1968 due to philosophical dissimilarities.
  • In the decade of 1070s, although never officially unified as a single political entity, almost one-third of the world’s populace lived in Communist states, including the People’s Republic of China, the Soviet Union and the Warsaw Pact countries of Eastern Europe, as well Cuba, North Korea, Vietnam, Laos, Cambodia, Angola, and Mozambique.
  • However, the Warsaw Pact countries had all abandoned Communist rule by 1990, and in 1991 the Soviet Union itself dissolved, leaving China, Cuba and some isolated states in Asia and Africa as the remaining bastions of Communism. In most cases significantly dampened down and changed from its original philosophy.

5.Types of Communism:

  • Marxism is the main theoretical-practical structure on which dogmas of Socialism and Communism are based.

Marxism: Marxism is a perspective that involves a number of differing “sub-perspectives” that is, whilst there tends to be a general agreement about the need to construct a critique of Capitalist society, there are major differences between theorists working within this viewpoint.

Main Marxist ideas can be explained in the following terms:

  • Marxism stresses the notion that social life is based on “conflicts of interest”.
  • Most significant and basic conflict is that between the Bourgeoisie, those who own and control the means of production in society and the Proletariat, those who simply sell their labour power in the marketplace of Capitalism.
  • Class conflict signifies a process whereby change comes about through the opposition of social classes as they follow what they see to be their (different and opposed) collective interests in society.
  • Marxism is a political philosophy whose main concern is to expose the political and economic contradictions in-built in Capitalism such as the fact that while people co-operate to produce goods, a Capitalist class appropriates these goods for its private profit and to point the way towards the establishment of a future Communist society.

Marxism-Leninism is the Communist philosophical field that emerged as the conventional tendency amongst Communist parties in the 1920’s as it was accepted as the conceptual foundation of the Communist International during the era of Joseph Stalin (1878 – 1953), with whom it is mainly associated.

  • Philosophy of Leninism was built upon and extended the ideas of Marxism, and served as the theoretical foundation for the ideology of Soviet Communism after the Russian Revolution of 1917 and the establishment of the Soviet Union
  • the controlled organization generally called “democratic centralism” (whereby decisions are made with internal democracy but then all party members must externally support and actively promote that decision).
  • It maintains that Capitalism can only be conquered by innovatory ways and any attempts to improve Capitalism from within are destined to fail.
  • The objective of a Leninist party is to coordinate the overthrow of the existing government by force and grab power on behalf of the proletariat, and then implement an autocracy of the proletariat, a kind of direct equality in which workers hold political power through local councils known as soviets. (Labor councils – Soviets)

Stalinism is a more judgemental phrase for Joseph Stalin’s vision of Communism.

  • Supporters of this ideology argue that it includes widespread use of publicity to establish a personality cult around an absolute ruler, as well as extensive use of a secret police to maintain social proposal and silence political opposition, all of which are trappings of Totalitarianism.

Trotskyism is the philosophical model of Marxism that was supported by Leon Trotsky (1879 – 1940), who considered himself a conformist Marxist and Bolshevik-Leninist and squabbled for the establishment of a frontline party.


  • Thoughts of Maoism are different of Communism derived from the teachings of the Chinese leader Mao Zedong and practised in the People’s Republic of China after the Chinese Revolution of 1949.
  • Maoism evolved from the Marxism-Leninism of Stalin, but introduced new ideas such as Social-Imperialism (Mao accused the Soviet Union of dominating and exploiting the smaller countries in its scope to the point of organising their economies around Soviet, not domestic, needs), the Mass Line (a method of leadership that seeks to learn from the masses and immerse the political headship in the concerns and conditions of the masses – “from the masses, to the masses”), people’s war and new democracy. Having as a central idea of permanent revolution and stressing the importance of the peasantry, small-scale industry, and agricultural collectivization.

Left Communism is a range of Communist perspectives held by the Communist Left, which asserts to be more truly Marxist and proletarian than the views of Leninism and its successors.

  • Left Communists advocated the Russian Revolution, but did not agree to the methods of the Bolsheviks.
  • The Russian, Dutch-German and the Italian traditions of Left Communism all share an opposition to nationalism, all kinds of national liberation movements, front parliamentary systems.

Religious Communism is a type of Communism that focus centred on religious attitudes, such as Christian, Taoist, Jain, Hindu or Buddhist. It usually denotes to a number of classless and utopian religious societies practising the voluntary dissolution of private property, so that society’s benefits are distributed according to a person’s needs, and every person performs labour according to their abilities.


6.The benefit of communism:

  • Communism philosophy upkeeps extensive universal social welfare, such as enhancements in public health and education.
  • Its theoretical dogmas are beneficial to build equality and strong social communities
  • Communist ideology promotes universal education with a focus on developing the proletariat with knowledge, class realisation, and historical understanding.
  • Communism also supports the liberation of women and to end their exploitation.
  • Communist philosophy emphasizes the development of a “New Man”a class-conscious, knowledgeable, daring, democratic person dedicated to working and social consistency in contrast to the antithetic “bourgeois individualist” related with cultural backwardness and social atomisation.

7.Criticisms of Communism:

  • There are numerous criticisms of Communism.
  • Many philosophers have argued that Communism offers an idea of unattainable perfect future, and keeps its subjects in thrall to it by devaluing the past and the present.
  • It asserts to represent a universal truth which explains everything and can cure every ill and any apparent deviations or under-performance are explained away by casuistry and emotional appeals.
  • Philosophy of communism is incomplete. Marx and Engels never devoted much work to show how exactly a Communist economy would function in practice, leaving Socialism a “negative ideology”.
  • Some Communists, such as Trotsky, devalues humanity and the importance of the lives and rights of human beings.
  • being too authoritarian.
  • Some opponents have argued that Marx’s concept of freedom is really just a defence of dictatorship and oppression and not an expansion of liberties as he claimed.
  • Other critics disapproved the ideology of Marxist class and argued that class is not the most important inequality in history, and that thorough analysis of many historical periods fails to find support for class or social development as used by Marxists.
  • Some critics have argued that the growing spread of liberal democracy around the world, and the apparent lack of major revolutionary movements developing in them, suggest that Capitalism or social democracy is likely to be the effective form of human government instead of Marxism, which claims to be an “end of history” philosophy.

Effect of communism on society:

  • The main objective of Communism is to develop the society without rulers, a society where the people oversee themselves.
  • But until this is accomplished, a superior government has absolute power.
  • The people do not have any private belongings and all assets belong to the government.
  • Therefore it has some disastrous effect on society.
  • Cruel ruler, Hitler was a communist dictator. Under his instructions, the Holocaust began.
  • Communists consider their goal, their party, and the state more vital than the rights and autonomy of the individual.
  • In communist nations, there are usually huge gaps between official claims of freedom and conditions in which they actually exist.



“An economic system based on private ownership of capital”
  • Capitalism is a type of social system that follows the belief of individual rights.
  • From the political perspective, capitalism is the system of laissez-faire (freedom). Lawfully, it is a system of objective laws that is rule of law, in contrast, to rule of man.
  • In financial terms, when such freedom is applied to the domain of production its result is the free-market.
  • Capitalism is commonly elucidated as an economic system where private actors are permitted to own and control the use of property according to their own interests, and where the invisible hand of the pricing mechanism coordinates supply and demand in markets in a way that is automatically in the best interests of civilisation.
  • In this system, Government is responsible for peace, justice, and tolerable taxes.
  • Capitalism is a private ownership based on the ways of production and distribution of goods categorised by a free competitive market and incentive by profit.
  • It can be said that it is an economic system based on survival of the fittest.
  • Historical review of Capitalism:

Three periods of Capitalism such as early, middle and late periods,

  • Earlier, capitalism was originated in the fourteenth-century emergency, a conflict that developed between the land-owning aristocracy (the lords) and the agricultural producers (the serfs).
  • Feudalism subdued the development of capitalism in numerous ways.
  • The serfs were forced to produce sufficient food for the lords as a result of this the lords had no interest in the advancement of technology, but rather expanded their power and wealth through military means.
  • There was no competitive pressure for them to revolutionize because they were not producing to sell on the market.
  • The changeover from feudalism to capitalism was mainly driven by the mechanic of war and not by the politics of prosperity and production methods.
  • Conversely, in current period, modern capitalism ascended in the early middle ages, between the 16th and 18th century, when mercantilism was established.
  • Mercantilism is described as a distribution of goods that are bought at a certain price and sold at a higher price in order to generate profits. No Value addition.
  • It provided the basic principles of capitalism in that it was the “large-scale realization of a profit by acquiring goods for lower prices than to the sell them”.
  • During the period of 18th century, mercantilism weakened when a group of economic theorists led by Adam Smith challenged mercantilist principles.
  • They supposed that a state could only escalate its wealth at the expense of another state’s wealth while the amount of the world’s wealth remained constant.
  • After the decline in mercantilism, Industrial capitalism emerged in the mid-18th century due to the huge accretion of capital under the period of merchant capitalism and its investment in machinery.
  • Industrial capitalism marked the development of manufacturing factory system and led to the global supremacy of capitalist mode of production
  • In the 19th century, capitalism allowed the great increase in efficiency
  • It generated great social changes, which remained in place during the twentieth century where it was established as the world’s most predominant financial model after the failure of the USSR.
  • In the twenty-first century, capitalism had become an extensively universal economic system at global scale.


  • It is commonly visualized that capitalism broadly corresponds to that developed by the classical economists and by Marx.
  • In this view, capitalism is an economic system in which control of production and the allocation of real and financial resources are based on private ownership of the means of production.
  • Capitalism is an indirect system of governance based on a multifarious and continually evolving political bargain in which private actors are endowed by a political authority to own and control the use of property for private gain under definite laws and regulations.
  • Workforces are free to work for incomes, capital is free to earn a return, and both labour and capital are allowed to enter and exit from various business.(Choice for both labor and capitalists)
  • Capitalism depends upon the pricing mechanism to balance supply and demand in market.
  • It relies on the profit maximization to assign opportunities and resources among contending suppliers and it relies upon a political authority to establish the rules and regulations so that they include all applicable societal costs and benefits. (FDI and FPI)
  • Government and its representatives are responsible to deliver physical security for persons and property as well as the laws and regulations.
  • Capitalist development is built from investment in advanced technologies that enable to enhance productivity
  • To develop capitalism, government must have to perform many roles such as administrative role, in which providing and maintaining the institutions that support capitalism.
  • Capitalism contrasts with previous economic systems characterized by forced labour, self-sufficiency, barter, and/or reciprocal relationships based upon family, tribe, or locally known relationships. (inefficient)
  • It is also dissimilar with modern systems where governments have acted directly through ownership and/or central planning to control of the use of resources. (Rigid)
  • Government’s approach of intervention in a capitalist system is mainly indirectly.
  • It creates, legitimates, administers and intermittently updates the various market frameworks that elucidate the conditions in which the economic actors may obtain and employ capital and labour to produce, distribute, and sell goods and services.
  • Consequently, economic players receive the right to use their power in competition with others, subject to predominant laws and regulations.
  • The market structures can have quite dissimilar policy priorities, from protecting the status quo to the advancement of growth and development, from protecting consumers to protecting producers, and from protecting labour to protecting capital.
  • Governments identify the responsibilities of the various participants in these transactions such as for the safety and serviceability of the products, as well as the conditions under which they are produced and distributed.
  • While positive capitalism depends upon the granting of power to private companies to enter, compete in, and exit from markets, it also depends upon the state’s power to confine the private actors so that they do not abuse these powers.
  • To be authentic as well as productive, private economic actors must be bound by the rule of law, and this rule of law must be backed by the coercive powers of the state.
  • if need be, to settle clashes
  • State’s responsibility: Capitalist systems typically rely on the state to make direct provision of certain public goods, such as highways, schools and law enforcement, as well as to refrain from the temptation to own, operate, or directly control the economic actors.
  • If the state does become a direct economic player, it becomes a player as well as a referee.
  • This puts state agents in roles that conflict for example, as a regulator and as player that need not be subject to the discipline of the markets.
  • Capitalism is planned to uphold the industrious use of public resources in order fulfil consumer needs in the short period and to enhance living style of people through time.
  • As a result, its supervisory frameworks give priority to promoting productivity instead of equalizing competitive resources on a given day or during a given season.


Capitalism as a three-level system:

  • On the first level, the markets, firms compete to secure their labour and capital as well as to serve their customers.
  • In second level, there is basic institutional foundations, including physical and social infrastructure; physical infrastructure includes, among other things, transportation and communications, and social infrastructure includes the educational, public health, and legal systems.
  • Additionally, the second level consists of the agents of the state who enforce the rules and regulations, including specialized regulators who oversee behaviour in certain industries, such as those that deal with food and drugs or transportation, and those who protect societal resources such as the physical environment or safety in the workplace.
  • The third level comprises of a political authority typically one with specialized functions such as executive, legislative, and judicial branches.
  • In turn, a set of political institutions connect the political authority to the political markets and ultimately to civil society, to which such an authority is finally responsible.


Types of capitalism:

The major types of capitalism are mentioned below.

1. Mercantilism:

  • Mercantilism is a nationalist system of initial capitalism that was practiced in the later phase of 16th century. It is characterized by the interweaving of national business interests to state-interest and imperialism, and subsequently, the state apparatus is utilized to improve national business interests abroad.
  • Mercantilism was determined by the conviction that the prosperity of a nation is increased through a positive balance of trade with other nations.
  • It relates to the phase of capitalist development and sometimes called the Primitive accumulation of capital.
  • Mercantilist capitalism involves more cooperation and coordination between government and economic entities including large cooperation and sometimes whole sectors of economy

2.Free-market economy:

  • Free-market economy is described as a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without interference by government plan.
  • It characteristically involves in support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.

3.A social-market economy

  • is a supposedly free-market system where government involvement in price formation is kept to a minimum but the state provides substantial services in the area of social security, unemployment benefits and recognition of labour rights through national collective bargaining arrangements.
  • The social market economy forms an essential part of free and open society, which is also characterised by solidarity.
  • It has proven itself as an economic system that allows for prosperity and full employment whilst also providing welfare and promoting a strong social system.
  • This model is conspicuous in Western and Northern European countries, and Japan, although in slightly different configurations. The huge majority of enterprises are privately owned in this economic model
  • It is described as the modern model of capitalism and adaptation of the social market model that exists in continental Western Europe today.

4.State capitalism:


  • State capitalism includes state ownership of the means of production within a state, and the organization of state enterprises as commercial, profit-seeking businesses. The argument between proponents of private versus state capitalism is focused on issues of managerial efficacy, productive efficiency, and fair distribution of wealth.

5.Corporate capitalism:

  • Corporate capitalism refers to a free or mixed-market economy categorised by the supremacy of hierarchical, bureaucratic corporations.

6.Mixed economy:

  • Mixed economy is a mainly market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low.
  • The degree of involvement in markets differs among different countries. Some mixed economies, such as France under dirigisme, also featured a degree of indirect economic planning over a largely capitalist-based economy. Contemporary capitalist economies are described as “mixed economies”.

Characteristics of Capitalism:

1.Private Ownership:

  • Private individuals are the owners of the means of production, which is, land, labour, capital, entrepreneurship (as opposed to state ownership and communist ownership)
  • These owners decide what to produce, in what quantities, how it is going to be produced, and the rewards of labour. It is demand and supply that determines the price of the finished good (s).

2.Decentralized Decision Making:

  • In a capitalist economy, the process of decision making takes the structure of devious decentralization.
  • Individuals, make the decision with their self-interest. However, the government controls these decisions by manipulating its respective environment that is, affecting prices, taxes, subsides.

3.Freedom of Choice:

  • Capitalism also referred to as a market economy, which highlights on the freedom of the individual, both as a consumer and as an owner of the factors of production.
  • Principally, an individual can work wherever he or she wants, while entrepreneurs are also free to set up enterprises of their own choice. Within a market economy, decisions or choices are mainly determined by material encouragements.
  • Capitalism is an economic system in which each individual in his capacity as a consumer, producer and resource owner is engaged in economic activity with a great degree of economic freedom.



  • Capitalist economy is not planned, controlled or regulated by the government.
  • In this system, economic decisions and activities are guided by price mechanism which operates automatically without any direction and control by the central authorities.
  • In capitalist economy, competition is the most important element.
  • It means the existence of large number of buyers and sellers in the market who are motivated by their self-interest but cannot influence market decisions by their individual actions.

Benefits of Capitalism:

  • This is an economic growth through open competitive market that provides individuals with far better opportunities of raising their own income.
  • Leading to firms producing only the best, and a capitalist economy is believed to encourage innovations in technology and industry.
  • Consumer choice where Individuals choose what to consume, and this choice leads to more competition and better products and services.
  • Efficiency of economics in which Goods and services produced based on demand creates incentives to cut costs and avoid waste.
  • Economic growth and expansion. Capitalistic economy increases the gross national product and leads to improved living standards.

General Drawbacks of Capitalism:

  • Besides numerous advantages, capitalistic economy has several disadvantages.
  • Inequality:
  • There tends to be a rise in disparity as benefits of capitalism are not fairly distributed. As wealth tends to redound to a small percentage of the population, the demand for luxury goods is often limited to a small percentage of the workforce, one of the main capitalism disadvantages.
  • Irrational Behaviour:
  • People tend to get caught up in hypothetical suds but disregard economic fundamentals, leading to illogical behaviour.
  • Monopoly Behaviour:
  • Other major drawback of capitalism is that companies gain monopoly over power in a free market allows and exploit customers by charging higher prices. They often pay lower salaries to labours.
  • Immobility:
  • Main issue of capitalism is that a free market is supposed to be able to easily move factors of from an unprofitable sector to a new profitable industry. However, this is much more difficult practically.
  • Unfair competition:
  • Employment rights are compensated with the aim of higher productivity and some believe that because of fierce competition in capitalist economies it can give rise to unfair competition.


Effect of capitalism on society:

  • High Standard of Living: Capitalism is the artefact of industrialization. Industrialization has amplified production.
  • Economic Progress: Capitalism encourages society to utilize the natural resources more and more. The people exert themselves maximum for earning money. This had led to many inventions in the field of industry, agriculture and business which have contributed to economic growth.
  • Exchange of Culture: Capitalism intends to encourage all people to partake in activities that appear beneficial to them. Capitalism facilitates international trade and exchange of know-how. People of different countries have come close to each other. The development of the means of transport and communication has facilitated contacts among the peoples of the world thus leading to exchange of ideas and culture.
  • Progress of Civilization: Capitalism is tool to explore new machines and increasing the production of material goods. Man is today more civilized than his ancestors.
  • Decreasing of Racial Differences: Capitalism has also led to diminish the differences based on race, doctrine, caste and nationality. Promotes purely merit based activities.


To summarize, the capitalist system is the reflection of the aspirations of human nature.




“A politico-economic system advocating state ownership of capital and resources with a significant participation of private parties. “
  • Socialism is political philosophy considered by public ownership and centralized planning of all major industries which include manufacturing, services, and energy, banks and insurance companies, agribusiness, transportation, the media, and medical facilities.
  • In capitalism, these huge enterprises control the economy but are privately owned and operated to create wealth for their owners by extracting it from working people who are paid only a small fraction of what their labour produces.
  • Socialism turns this around so that the class that produces the wealth can jointly decide how it will be used for the benefit of all.
  • It is economic as well as political democracy
  • Real socialism is characterized as democratic.
  • Many capitalist countries claim of their democratic institutions, but this is a deception because all the political power is in control of officers who hold the wealth
  • Socialism prioritizes human needs and eliminates the profit motive that drives war, ecological destruction, and inequalities based on gender, race, nationality and sexuality.
  • Simply, socialism is social ownership of means of production, impartiality of income and opportunities for all members.
  • It is dependent upon the manner in which wealth is produced and distributed by those who form part of society at a given time.
  • Socialism initiated in the late 18th-century from a knowledgeable and working class political movement that disapproved the effects of industrialization and private ownership on civilisation


Features of Socialism: The main features of this system are described as under.

Public Ownership:

  • First prominent characteristic is socialist economy which is determined by public ownership of the means of production and distribution.
  • There is shared ownership whereby all mines, farms, factories, financial institutions, distributing agencies, means of transport and communications, are owned, controlled, and regulated by government departments and state corporations.
  • A small private sector also exists as small business units which are carried on in the villages by local artists for local consumption.

Central Planning:

  • Second feature of socialism is centrally planned which functions under the direction of a central planning authority.
  • It develops various objectives and targets to be realized during the plan period. Central economic planning means the making of major economic decisions what and how much is to be produced, how, when and where it is to be produced, and to whom it is to be allocated by the mindful decision of a determinate authority, on the basis of a comprehensive survey of the economic system as a whole.
  • The central planning authority organises and operates the financial resources by deliberate direction and control of the economy in order to accomplish certain objectives and targets laid down in the plan during a specified period of time.

Definite Objectives:

  • Another characteristic of socialism is that a socialist economy operates within definite socio-economic objectives.
  • These objectives may concern aggregate demand, full employment, and satisfaction of communal demand, allocation of factors of production, distribution of the national income, the amount of capital accumulation, economic development and so forth.

Freedom of Consumption:

  • In socialism system, consumer’s dominance infers that production in state owned industries is generally governed by the likings of consumers, and the available merchandises are distributed to the customers at fixed prices through the state-run department stores.
  • Consumer’s dominion under socialism is limited to the choice of socially beneficial commodities.
  • In a socialist system, there is great impartiality of income distribution in comparison a free market economy.

Equality of Income Distribution:

  • The removal of private ownership in the means of production, private capital accumulation, and profit motive under socialism avert the accrual of large wealth in the hands of a few wealthy persons.
  • The unearned incomes in the form of rent, interest and profit go to the state which utilises them in providing free education, public health facilities, and social security to the masses.

Planning and the Pricing Process:

  • Other feature of socialism is that the pricing process under socialism does not operate spontaneously but works under the control and regulation of the central planning authority
  • There are administered prices which are fixed by the central planning authority.

Merits of Socialism:

Greater Economic Efficiency:

  • socialism that include greater economic efficiency, welfare due to less inequality, absence of monopolistic practices and absence of business fluctuations.
  • The means of production are controlled and regulated by the central planning authority towards chosen ends. The central planning authority makes comprehensive survey of resources and utilises them in the most efficient manner.
  • Increased productivity is secured by avoiding the wastes of competition and by undertaking expensive research and production processes in a coordinated manner. Economic efficiency is also realized by utilising resources in producing socially useful goods and services which satisfy the basic wants of the people such as cheap food, cloth, and housing.

Greater Welfare due to Less Inequality of Income:

  • In a socialist economy, it is observed that there is less disparity of income as compared with a capitalist economy because of the absence of private ownership of the means of production, private capital accumulation, and private profit.
  • All inhabitants work for the wellbeing of the state and each is compensated his payment according to his capability, education and training.
  • All rents, interests and profits from various sources go to the state which spends them for public welfare in providing free education, cheap and congenial housing, free public health amenities, and social security to the people.

An absence of Monopolistic Practices:

  • Main benefit of socialism is that it is free from monopolistic practices which are to be found in a capitalist society. Since under socialism, all means of production are owned by the state, both competition and monopoly are eradicated. The misuse by the monopolistic is absent. Instead of private monopoly, there is the state monopoly of the productive system but this is operated for the welfare of the people. In the state-owned factories, socially useful commodities are produced which are of high quality and are also reasonably priced.

The absence of Business Fluctuations:


  • A socialist system is free from business variations. There is economic constancy because production and consumption of goods and services are controlled by the central planning authority according to the objectives, targets and priorities of the plan. Thus there is neither overproduction nor joblessness.

Demerits of Socialism: A socialist economy has several drawbacks:

Loss of Consumers’ Dominance:

  • Consumers do not have the liberty to buy whatever commodities they want. They can consume only those commodities which are available in department stores. Often the quantities which they can buy are fixed by the state.

No Freedom of Occupation:

  • It is also found that people do not have liberty of occupation in such a society. Every person is provided job by the state. But he cannot leave or change it. Even the place of work is allotted by the state. All occupational movements are sanctioned by the state.

Mal- allocation of Resources:

  • In socialist, there is random allocation of resources. The central planning authority often commits mistakes in resource allocation because the entire work is done on trial and error basis.


  • A socialist economy is considered as rigid economy. It is operated like a machine. Therefore, it does not provide the necessary initiative to the people to work hard. People work due to the fear of higher authorities and not for any personal gain or self-interest.


  • In current circumstances, socialism has become the most popular, economic philosophy. During the decades succeeding the Second World War, the worldwide progression of socialism has been quite theatrical and unparalleled.
  • Socialism is a standard of expediency which accommodates politicians of all hues. It incorporates all types of political system, dictatorship, democracies, republics and monarchies.
  • It holds such dissimilar systems as an Islamic socialism practiced by Libya and Algeria, democratic socialism of Norway or Sweden, the Baathist Socialism of Syria and Iraq, the ‘Ujamaa’ socialism of Tanzania.
  • It is observed that various nations around the world have adopted socialist philosophy in the light of their peculiar conditions.
  • Sometimes even within a country, different political parties interpreted the socialist philosophies to fit into their own political viewpoint.
  • Socialist ideas have considerably influenced the formulation of the means and objectives of Indian economic policies.
  • To summarize, Socialism is a thought that individuals should not have ownership of land, capital, or industry, but rather the whole community jointly owns and controls property, goods, and production.
  • Preferably, in this system, all share correspondingly in work and the results of their labour.


 All the best. This is just for your understanding. You can expand your knowledge by referring to various sources.

Help others to achieve their dream  and you will achieve yours – Les Brown

“Humanity is giving hands to others and let them not to fall into the same trap that you have risen up from. “

4 Responses to “Communism ,Capitalism and Socialism -GS paper 1 – UPSC”
  1. call me Steve says:

    that sounds like communism with extra steps

  2. Thanks a ton. It made my work so much easier to find the complete topic under one blog. Won’t have to hunt different websites to make notes. Thanks again!!!!!!

  3. Afzal says:

    Thank you guys,this helped a lot

Check out what others are saying...
  1. […] For political philosophies like Communism, Capitalism and Socialism etc…. (one question sure in GS or Essay on this – search on the internet and make your own detailed notes) – My notes – Communism, Capitalism and Socialism […]

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