While capitalism starts strong but quickly loses traction, socialism is the opposite. It starts slowly, but keeps the growth long-term.
In the socialist school, the concept is the same. Students who are higher scorer gets free books. So the first few generations of students got on as they did. Until the 3rd Generation. Now, the school administration realized something was wrong. The ratio of EP after inflation is now:
By their calculation, the next generation would not be able start earning less than the previous generation, and they might lose their students. To correct this, they implement a rule where if a person has more than 10EP, they must give 1EP back to the school in a form of education ‘tax’.
This reduces the school’s operating cost. Instead of a 2x inflation, it is now 1.5x. The 4th Generation thus starts like this.
The lower class continues schooling. 5th Generation rolls in.
Now, the former ‘middle-class’ also have 10EP. Thus, they contribute into the education tax, reducing school operating cost inflation to 1.25x.
Like in the previous capitalism article, the turn of the century arrives, and people get more access to information (+1EP per generation).
The lower class joins the 10 EP club, and starts paying their education tax. Rate is now 1.125. The school decides that those with 20EP or more will now pay an extra 1EP in school tax. Rate is now 1.0625.
Another century turns. The middle-class pays more in. Rates drop to 1.03125.
As you can see in comparison to the capitalistic school, the cost of education is significantly lower, even though the demand and availability of students is always kept at maximum. This is because as more people earn more, more are paid back to keep the fees low. In fact, the cost for education is 3.28x lower than in the capitalistic school.
However, a major trade-off is that even the most educated of the socialist school is a ways away from the top of the capitalistic school (27:41). That’s because socialism, which focuses on stability, does not do much for growth.
But all that aside, socialism does not generally work in countries with weak labour forces…
Because more of the EP within the student body is ‘paid back’ into the school, there are actually less EP circulating within the students than capitalism, where none is given back.
There are very little states in the world with ‘true’ socialism as defined close to the original term of basically ‘equal distribution with wage’. Of those that are, only India and China are considered successful, which, you might have noticed, have the two highest population in the whole world.
It’s no coincidence, since having high population means more productivity, even if individual earnings are low compared to the national economy.
Most of these countries though have a huge wealth gap, because while the working class are being paid the national average, the capitalistic class (read: Bosses) are being paid the international average dollar as their earnings come from outside the country, which are higher than the countries they reside in.
Scandinavian countries are well-known for their Nordic model of democratic socialism, which can be seen as the more liberal side of the concept. Democratic socialism more closely resembles the structure I’ve built above.
Democratic socialism is a mixture of free market capitalism and welfare. In these cases, people are still capable of bettering themselves to earn more, and there are no real clause to stop people from becoming stupid rich. However, it is harder, as there will be policies in place to redistribute earnings to help the lower-income families based on one’s income.
But all that aside, socialism does not generally work in countries with weak labour forces, as the redistribution of wealth often leave little room or capital for start-ups, slowing down overall growth and production. This makes sustainability questionable in scale of the world economy, meaning that unless the whole world adopts a version of socialism, it’s highly unlikely that socialism will be able to compete in the global market.
Sure, socialism sounds nice, what with everyone being able to access basic human needs and all, but it has its flaws. For one, the fact that it requires a decent labour force to work is no small feat. Policies in socialistic countries requires a certain amount of money to execute.
Because of how the global market works, socialistic countries, which does not leave much for most businesses, are often discredited by corporations. When was the last time you heard the news say Apple decide to open it company in Iceland?
Economic growth is not a staple of socialistic country. Stability is. And to play on an international scale, unless the world is stable, it is hard to keep a single country’s economy on par with the rest of the developed planet.
What is Socialism?
Socialism in reality is often confused with communism. While the two shares some similarities in that their ultimate goal in equality, there are differences that sets them drastically apart. In a communistic society, everyone would be equal. They would all receive the same amount of education, no matter who they are or how well they study.
Socialism however sees that certain resources (in this case, education) are available to everyone. These are deemed by the society as basic human resources, like access to information and medical care. Socialist society will then go on to make these resources as affordable, or, in some cases, free, to the whole populace, as optimally as possible.
Basically, communism is value as a community (collective group), while socialism is value by a society (usually by morals).