The theory and practice of Socialism: Pitfalls in Economic Thinking

The ascendence of socialism was a search for an alternative to capitalism. The socialists vowed to create a new social order characterized by greater equality and opportunities for all. It however failed to achieve its cherished goals because it got the economics wrong. Economics is a science of possibilities and trade-offs. The economic failure of socialism can be attributed to the inability of its practitioners to fully grasp the importance of market mechanism, economic growth and foreign trade in accelerating the process of sustained economic change. China and India are two large economies that have achieved fast economic transformation by following capitalist economic policies. Capitalism works better than socialism because of its inherent capacity to reinvent itself through the process of creative destruction and innovation crucial for sustaining long-term economic growth and prosperity.