Canadian Institute of Technology

Business Ethics
Worked by: Migena Mollosmani
Accepted: Dardan Mustafaj

Topic: According to some researchers “critics of capitalism note that the marketplace can
be unstable, presenting real dangers to the well-being of those who are not wealthy or who
are otherwise vulnerable… critics on socialism observe that heavy taxation to provide
equal social services for all citizens can discourage business owners from innovation and
excellence, given that the owner won't personally profit from his or her efforts…”
Compare and contrast the critics about both capitalism and socialism regarding economic
distribution.

In order to debate between Capitalism and Socialism, it is necessary to understand what the
differences, advantages, and disadvantages are of both systems. Basically, Capitalism advocates
private property, and that society does better when an individual can purchase and produce as
they see fit. Under Capitalism, individuals own and control land, capital, and production of
industry. If you have an idea for a new business or invention, you are free to pursue this without
government interference. Under this system you have the maximum number of choices in
life. This is the 'pursuit of happiness' from the Declaration of Independence.

Meanwhile Socialism, in essence, is the theory that property ownership should reside in the
hands of the government, and that the government can do more with the assets than individuals
can.

The difference between Capitalism and Socialism can be summed up by their definitions. They
are based upon completely opposite philosophies. Capitalism is a political and economic system
in which factories, companies, land, etc. are owned privately in order to create profit for the
owners. Prices of goods and services fluctuate depending on the desire of the consumer and the
availability of the goods (the law of supply and demand). In a capitalist society, there will be
significant differences in wealth and power between those who have capital (machines, factories,
ships, land, etc.) and those who do not. Capitalism is the only politico-economic system based on
the doctrine of individual rights. This means that capitalism recognizes that each and every
person is the owner of his own life, and has the right to live his life in any manner he chooses as
long as he does not violate the rights of others.
Below I will try to bring a modern example of Capitalism which is about Apple computers;

Steve Jobs, and Steve Wozniak, built the first Apple Computer out of their garage. They were
just young men with an idea that people would like to own their own affordable
computers. They didn't have enough money to start a company, so they sought out money from
a capitalist. This could have been a bank or a rich individual. In their case it was multi-
millionaire Mike Mark Kula, who provided essential business expertise and funding of
$250,000. Jobs and Wozniak were right, people did want to own home computers and sales took
off. Today Apple, employs over 48,000 employees worldwide, and has annual sales over 65
billion dollars. As of September 2011, Apple is the largest publicly traded company in the world
by market capitalization and the largest technology company in the world by revenue and
profit.

Capitalism allowed these two men the freedom to buy parts for the first prototype computer. The
freedom to seek out funds to set up a new company, develop production and distribution to
customers, is the American Enterprise of Invention which we call Capitalism. They ended
up creating great wealth for themselves, their employees, and their stock holders. They did not
steal money from anybody!
Steve Jobs was not born rich. He became rich by following his dream and hard work. In doing
so, he created new products, he created a new company and new jobs. This all worked to create
more wealth for many people. He did not steal his money from the poor like some progressive
liberals would have you believe. He created his money. So should he, and all other rich people,
have to give their money away until everyone in America has an equal amount? This is the
mentality of liberals; they sold the money from the poor, and they must give it back.

Socialism is a political and economic system which advocates collective or governmental

ownership and the administration of the means of production and distribution of goods. In a
socialist society, there is no private property and, at least theoretically, everyone cares for those
less fortunate. In this form of government everyone has generally the same amount of money,
which means the rich person’s money goes to the poor so that everyone can be middle class.
America's first experiment with Socialism:

After the Pilgrims landed in 1620, they decided that they would plant a community garden and
share the fruits and vegetables equally at the end of the season. The idea was that all would work
together and share equally at the end of the season. However, no one wanted to work in the
gardens. Most were reluctant to do the planting and weed a garden that was not theirs. That first
year, the gardens were not well kept and they had poor crops, which led to hunger the next
winter. Under this system, by 1623 the colony was facing starvation. It was decided that a new
system be used the following year. Each family was given a plot of land to garden in proportion
to its size. They would be allowed to keep the fruits and vegetables for themselves.

This had very good success, for it made all hands industrious, so as much more corn was planted
than otherwise would have been by any means the Governor or any other could use, and saved
him a great deal of trouble, and gave far better content. The women now went willingly into the
field, and took their little ones with them to set corn; which before would allege weakness and
inability; whom to have compelled would have been thought great tyranny and oppression.

One can not only consider the positive benefits or negative consequences of a particular system
to appraise it. The positive derivatives of socialism are many: A space program, the pride of the
entire world, achieved landing men on the moon and exploring distant planets. Deadly diseases
have been eradicated. Advances in science and technology were made in areas not profitable to
corporations. Preventing starvation and homelessness to the poorest. Providing medical care to
the needy. It sounds noble to advocate the equality of everyone, and supply national retirement
and health care systems to make ordinary people better off. Theoretically, under Socialism, there
should be no unemployment, no inflation, and no disparity of wealth, status, or power. However,
in actuality, the under-privileged in most socialist countries have problems that are expensive,
substandard and hard to obtain.

The negative consequences of taking away money from someone to give to another is as
infinitely varied as those who give, who now have less of their money for their own needs and
ambitions. Less money might mean less education or healthcare for their families, less
consuming which means less manufacturing and less jobs, less investment which depresses the
economy. But even if the economic effect in total was a zero net sum, meaning money taken here
is spent over there equally, the main negative consequence is one of a polluted moral
environment.

Although Marx, the Father of Modern Socialism predicted that Capitalism would fail, actually
Socialism has been the greater failure historically. Since the socialist state holds a universal
monopoly on labor and production, no economic incentive exists for the socialist state to provide
anything more than minimum physical subsistence for the workers. Exploitation is inherent to
the nature of socialism because individuals cannot live for their own sake, rather, they exist
merely as means to whatever ends the socialist rulers may have in mind.

There are advantages under capitalism. The individual's pursuits of his own economic self-
interest simultaneously benefits the economic self-interests of all others in the society. In
allowing each individual to act unhampered by government regulations, capitalism causes wealth
to be created in the most efficient manner possible which ultimately raises the standard of living,
increases the economic opportunities, and makes available a growing supply of products for
everyone. The free-market operates in such a way so that as one man creates more wealth for
himself, he simultaneously creates more wealth and opportunities for everyone else, which
means that as the rich become richer, the even poor become richer. Capitalism serves the
economic self-interests of everyone, including non-capitalists in the society. Accelerated
economic growth, prosperity and rapid progress in science and technology are all benefits of
Capitalism.

Capitalism naturally divides into certain strata, but they will be much less authoritative than in a
centralized government as under Socialism. More people will have access to wealth which means
more power. Capitalism does not command people how to use their power or wealth

. What gives capitalism its potential as a moral system is this aspect of fair trade, of a voluntary
transaction where both parties agree and both freely trade a value for a value. The benefits of
such transactions, such as creating wealth, freeing up commerce and providing incentives for
technological advancement and human achievement, are in great example and undisputed.

Capitalism has its disadvantages as well: high unemployment, the boom-slump cycle, poverty
and crime. Despite those disadvantages, capitalist societies, historically, have done remarkably
well in improving the human condition as a whole over the long run, while strict socialist
societies have had severe declines in economic welfare.

However, examples of capitalism’s corrupting influence on social interactions also exist in great
number. A product might be sold to satisfy a certain need under false pretenses, such as the milk
manufacturers in China that used toxic waste to expand the product resulting in many deaths to
small children. This extreme example is not atypical in a capitalistic system, where the
acquisition of money becomes of paramount importance over personal and social responsibility.
Understand: When the quest for profit becomes more important than doing what is right,
capitalism, as a social system, fails.

As such, capitalism mirrors human nature: It shines when the individuals involved are moral,
aware of their actions, intent on being fair, treating the other as they would like to be treated; and
on the flip-side Greed: the desire for the unearned, drives individuals to trick, deceive, coerce,
extort, and basically rip-off the unsuspecting consumer or robbed victim.

There can be little disagreement on this reality: For every example of a positive benefit from
capitalism, there can be found another with a negative outcome. A manufacturer moves an
operation overseas to take advantage of lower wages, while eliminating jobs and hurting families
here, he creates opportunity and a higher standard of living for the new workers, but at a high
cost to them as well – they work in substandard, dangerous and unhealthy working conditions for
long hours, and without a strong government to enforce environmental regulations, the
corporation dumps toxic waste into the drinking and bathing water resulting in cancer outbreaks
long after they have moved to the next poor country to exploit.
Capitalism’s greatest virtue is fair trade, its greatest failing is putting profit before people.

In conclusion, it has been proven by history that a free-market economy (Capitalism) increases
the living standards of most people more than an economy controlled by the command of the
state (Socialism). An excellent natural example of this is East and West Germany. During the
middle of this century, West Germany was a capitalistic free society, while East Germany was
controlled by a socialistic government. Living conditions in East Germany were deplorable and
East Germans routinely tried to escape to West Germany. The Berlin Wall was erected by the
East German government to keep their own people from defecting. However, eventually, the
socialistic East German government and the Berlin Wall both failed and Capitalism and freedom
prevailed.

References
Walter, Andrew. "Capitalism vs. Socialism: An Overview." Points of View: Capitalism vs.
Socialism (2009): 1. Points of View Reference Center. Web. 2 May 2

Nozick, R. Anarchy, State and Utopia. New York, 1974.

Demsetz, H. “Toward a Theory of Property Rights.” American Economic Review, 1967. ____. “The
Exchange and Enforcement of Property Rights.” Journal of Law and Economics, 1964.