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What is Economic Ideology?

By Susan Grindstaff
Updated Feb 23, 2024
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Capitalism and socialism are considered the two most common types of economic ideology. Capitalism is centered on the idea that governments should refrain from involvement in business and the economy. Capitalists believe that economic markets should be privately controlled and driven strictly by profits. Socialism follows an idea that government should regulate economic concerns and that all citizens should have an equal opportunity to share in the benefits. Other rarer types of economic ideology include anarchism and communism.

Most research seems to indicate that countries who embrace capitalism as an economic ideology usually have more employment opportunities for their citizens. In a capitalist environment, entrepreneurs are more likely to start new business ventures, which generally lead to more jobs. The lack of government restriction and intervention generally creates an environment that is attractive to business. They can avoid many wage and environmental restrictions that sometimes apply in socialist environments. In addition, capitalist societies usually levy lower taxes on businesses, which ideally leaves them with more money to spend on research and the development of new products, both of which generally lead to job creation.

One of the downsides to a capitalist economic ideology is the creation of an elite class. In an environment where business is unregulated, jobs sometimes are offered at the lowest possible wage and with few if any benefits. This makes it very difficult for workers to improve their financial standing. Poor people are often unable to climb out of poverty, and creation of a middle class of society sometimes becomes more difficult. In capitalist environments, the rich often become even richer, while the poor fail to advance.

Socialism generally covers a broad range of economic ideology. The core of the principal constitutes public ownership of all business interests. The goal of socialism is to ensure that all citizens be able to share in the total wealth of a country. Most countries that have socialist governments do not practice socialism in its purest form, but generally temper the ideology to some degree. According to most economists, socialism in the purest form fails to reward individual performance, and lack of these rewards sometimes stifles motivation.

Economic ideologies often form in response to social conditions that exist within a country. Countries that have many people in poverty often eventually gravitate toward a more socialistic economic ideology. This is often true in countries that have few natural resources, which are usually essential to creating jobs. Countries that are rich in natural resources often embrace capitalism, because the abundance of these resources generally creates more employment opportunities.

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Discussion Comments
By SteamLouis — On Feb 04, 2015

I think we need to stop pitting these various economic ideologies against one another because no one is following these ideologies to the T. Most of the nations of the world have a form of mixed economy which is basically capitalism with some socialist economic elements, like regulation. No one country is entirely capitalist or socialist or anything else anymore. We realized the imperfection of these ideologies a long time ago, so we have chosen the best characteristics of both.

By candyquilt — On Feb 03, 2015

@ddljohn-- I don't disagree with you that the gap between the wealthy and the poor in the US has been increasing. I'm just not sure if it's right to blame capitalist ideology for this entire issue. I don't think that we are seeing these problems in the US just because we have capitalism. It also has to do with the global economy, our debts, our weakening currency, cost of education and the rise of several other economies in the world.

Although socialist economies may sound very just and fair, they weren't exactly so. These economies and societies suffer from favoritism just as much as others. And like the article said, since people are allotted a certain amount of the wealth automatically, they have little reason or motivation to produce and contribute to innovation.

By ddljohn — On Feb 03, 2015

I really like how this article has explained the advantages and disadvantages of capitalism and socialism. Many of us regard capitalism as the best, most beneficial system, but the truth is that this economic ideology has negative consequences as well. The phenomenon described by the author, that capitalism leads to the wealthy becoming more wealthy, is true. It's also true that it's difficult for people to move up in social class.

I saw a study which was done in 2013 or 2014 and it was found that majority of the wealth in the US it controlled by the select wealthiest families. I don't remember the exact numbers but it was at least 70% of the wealth controlled by the wealthiest 10%. So that means that 90% of Americans have access to only about 30% of the wealth. The middle class has shrunk considerably since the 90s and there are more and more people living below the poverty line.

I think these numbers are enough evidence to support the idea that capitalism is by no means a perfect system. I think that more and more middle and lower class Americans are upset with their standard of living and inability to make better lives for themselves.

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