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World economic Systems 355

The occupants are ready to move in—all five of them—a husband and wife and their
three children. From their elegant perch, they will be able to view the teeming mass of desti-
tute people below.

The primary criticism leveled against capitalism is that it leads to social inequality. Capi- Watch on MySocLab
talism, say its critics, produces a tiny top layer of wealthy people who exploit an immense Video: UN World Inequality
bottom layer of poorly paid workers. Another criticism is that the tiny top layer wields
vast political power. Those few who own the means of production reap huge profits,
accrue power, and get legislation passed that goes against the public good.
The first criticism leveled against socialism is that it does not respect individual rights.
Others (in the form of some government agency) control people’s lives. They decide
where people will live, work, and go to school. In China, government officials even
determine how many children women may bear (Mosher 1983, 2006). Critics make a
second point—that central planning is grossly inefficient and that socialism is not capa-
ble of producing much wealth. They say that its greater equality really amounts to giving
almost everyone an equal chance to be poor.
The Convergence of Capitalism and Socialism

Regardless of the validity of these mutual criticisms, as nations industrialize they come to
resemble one another. They urbanize, encourage higher education, and produce similar
divisions of labor (such as professionals and skilled technicians; factory workers and fac-
tory managers). Similar values also emerge (Kerr 1983). By itself, this tendency would
make capitalist and socialist nations grow more alike, but another factor also brings them
closer to one another (Form 1979): Despite their incompatible ideologies, both capital-
ist and socialist systems have adopted features from the other.
That capitalism and socialism are growing similar is known as convergence theory.
Fundamental changes in socialist countries give evidence for this coming hybrid, or
mixed, economy. For example, Russians suffered from shoddy goods and shortages, and
their standard of living lagged severely behind that of the West. To try to catch up, in the
1980s and 1990s the rulers of Russia made the private ownership of property legal and
abandoned communism. Making a profit—which had been a crime—was encouraged.
China joined the change, but kept a communist government. In its converged form
of “capunism,” capitalists joined the Communist party. The convergence is so great that
when the Western governments instituted stimulus plans to counter the economic cri-
sis, China joined in with a huge stimulus plan of its own (Batson 2009). Even Western
banks are now welcome in China. Among other things, they provide specialized services
to China’s 960,000 new millionaires (Yenfang 2011)—and, of course, to China’s 117
new billionaires (Harris 2012b). The change is so remarkable that some textbooks in
China now give more space to Bill Gates than to Mao (Guthrie 2008). The Cultural
Diversity box on the next page provides a glimpse of the new capitalism in China.
Changes in capitalism also support this theory. The United States has adopted many social-
ist practices. One of the most obvious is that the government collects money from some
individuals to pay for benefits given to others. It had none of these when the country was
founded: unemployment compensation (taxes paid by workers are distributed to those who
no longer produce a profit); subsidized housing, food, and medical care (paid for by the many
and given to the poor and elderly with no motive of profit); welfare (taxes from the many are
distributed to the needy); a minimum wage (the government, not the employer, determines
the minimum that workers are paid); and Social Security (the retired do not receive what they
paid into the system but, rather, money that the government collects from current workers).
In Sum: Convergence is unfolding before our very eyes. On the one hand, capitalists
have assumed, reluctantly, that their system should provide workers with at least minimal
support during unemployment, extended illness, and old age. In 2008, when Wall Street convergence theory the view that
and auto firms started to buckle, the U.S. government stepped in to shore up these busi- as capitalist and socialist economic
nesses. In some cases, the government even bought the companies, fired CEOs, and set systems each adopt features of the
salary limits. On the other hand, socialist leaders have admitted, also reluctantly, that other, a hybrid (or mixed) economic
profit and private ownership do motivate people to work harder. system will emerge