What Is Economic Ideology?

China's economy is often referred to as "market socialism."
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  • Written By: Susan Grindstaff
  • Edited By: Heather Bailey
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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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