Discuss the concept of an economic system and the role of factors of production in its operation.

             In theory, at least, there are three basic economic systems' socialism, communism, and capitalism. In modern reality, however the distinctions between these alternative systems have become blurred. It is safe to say that no pure system exists today. The U.S. capitalist economy exhibits certain socialist characteristics and the Soviet Union's and China's communist economies are being restructured to include a number of capitalist practices. To prepare for what lies ahead, each basic type of economic system requires a closer look.

             Socialism.

             Described by Karl Marx (1818 - 1883) as a forerunner of communism, socialism is an economic system in which the state owns the principal means of production but private property of some sort still exists. What distinguishes communism from socialism is the disappearance of private property in the later stage, communism.

             Marx's view of the process from socialism to communism by means of the class struggle was neither universally accepted in his own time nor today. In fact, many saw non-revolutionary socialism as an end in itself. These so-called utopian socialists dreamed of ideal societies in which all worked according to their abilities and received what they needed. Today, in countries like Sweden, France, and Britain, Marxist and utopian socialists coexist. Their coexistence with parties advocating free enterprise has produced mixed economic systems. Between World War 11 and the late 1970s, these countries and others nationalised such major industries as airlines, steel, coal mining, and banking. Heavy taxation of profits usually accompanied the more serious efforts at socialist economies. These taxes were used to pay for government services, such as health care, that free-enterprise systems leave largely to the private sector.

             Beginning in 1980, however, the pendulum began to swing the other way as a wave of privatisation, the selling of government-controlled companies and industries to private investors, swept the mixed economies.