Discussion.Capitalism vs. Socialism

Discussion
Name
Institution

Discussion
Socialism vs. Capitalism
Capitalism, according to Amadeo (2018), “is an economic system in which factors of production are owned and controlled by private entities.” Socialism, on the other hand, is an economy controlled by the state and organized by the central planning authority and all the factors of production are owned and controlled by the state. There is neither competition nor economic freedom for the households, and the central planning authority plans all the economic activities in socialism. However, in capitalism, there are customer sovereignty, freedom, commercial competition, and the social division of people. The people hold the right to own property and the means of production.
Some advantages of capitalism include enhancement of competition leading to better products, elimination of wastes and inefficiencies as products are produced on a demand basis, and the promotion of economic expansion. However, its limitations include instances of monopoly which may lead to increase of the price and economic inefficiencies. On the other hand, socialism promotes economic efficiency because economic planning is done by the state. There are reduced income inequality levels and freedom from monopolistic practices because of the lack of private ownership. Limitations which the socialism include are the lack of economic freedom and the presence of a lot of bureaucracies created by the government.
Free market capitalism can be considered more superior than socialism because it promotes a peaceful, voluntary exchange.

The system has been successful in the U.S., especially in eliminating traditional humankind problems, such as pestilence, hunger, diseases and gross poverty. Other countries embracing capitalism include Ireland, Australia, Hong Kong, and United Arabs Emirates among others.
Inflation and Deflation
Ordinarily, deflation is when prices fall, and inflation is when prices rise. Countries can use contractionary monetary policies by increasing the interest rates to reduce spending. For instance in the U.S., when the government increases the interest in Fed funds, the banks also increase their interest rates, resulting in a drop in borrowing and slowing down inflation. During the deflation, the Federal government reduces interest rates on banks to encourage lending and increase spending. Japan is a good example. In his article, Mukherjee (2018) connotes “Japan has experienced over 20 years of zero fund rates as an attempt to eliminate deflation”. In 2016, the Bank of Japan lowered the interest rates in the bank to 0.1% to encourage them to lend and ease the economy from deflation (Mukherjee, 2018).

References
Amadeo, K. (2018, July 18). Capitalism: America’s Best Defense. The Balance. Retrieved August 31, 2018, from https://www.thebalance.com/capitalism-characteristics-examples-pros-cons-3305588Mukherjee, A. (2018, August 05). How to end Japan’s deflation? Abolish cash. The Economic Times. RetrievedAugust 31, 2018, from https://economictimes.indiatimes.com/markets/stocks/news/how-to-end-japans-deflation-abolish-cash/articleshow/65277623.cms