Difference Between Capitalism and Socialism

Capitalism and socialism are distinctly opposing ideas in economics. The relevant area within the socialism and capitalism argument centers on economic parity and the role of government. Socialists strongly believe that economic inequality is the primary source of societal problems, which can be reduced if government assumes the responsibility for decreasing inequality thru programs that benefit the marginalized and poor people (e.g., sponsored healthcare, progressive taxes, etc).

However, capitalists argue that governments rarely use economic resources as effectively as the private sector, and thus believe that society will fare better in open markets. The U.S. is broadly considered the stronghold of capitalism, and much of Western Europe and Scandinavia are regarded as socialist democracies. In reality, every advanced country has a few packages which might be socialist. Communism is an extreme form of socialism.

A primary argument in economics is the government’s role as a regulatory body for resource ownership. Capitalism is primarily grounded on private ownership of the means of manufacturing and the development of products or services for economic gain. Socialism embraces a public ownership approach towards manufacturing – this may include cooperative organizations, public enterprises, or self-sustaining country organizations. A Capitalist system is criticized for promoting exploitation and deepening inequality across social classes. In Das Kapital, one of the most well-known critiques of capitalism, Karl Marx and Friedrich Engels argued that capitalism concentrates wealth inside the palms of the few who use the labor of the many for their own gain.

Socialism critics mainly focus on three elements: the loss of freedom and rights of the individual, the incompetence of controlled or planned economies, and the lack of ability to establish the constructs socialism theorizes as best. Long-term trends have shown that planned or managed economies in traditional socialist societies have performed poorly.

 

Comparison Board

Capitalism
Socialism
Philosophy Emphasizes individual profits over society as a whole. Emphasizes profit distribution among the society to supplement individual wages/salaries.
Key Proponents Richard Cantillon, Fredrich A. Hayek, Adam Smith, Ludwig von Mises David Ricardo, etc. Karl Marx, Charles Hall, Louis Blanc, François-Noël Babeuf, Charles Fourier, etc.
Key Elements Competition to drive the economy, Profit driven production. Collective ownership, Equal opportunity, Economic democracy and planning, Internationalism.
Political System Compatible with dictatorships, anarchism, democratic republic and direct democracy. Compatible with dictatorships, participatory democracy, parliamentary democracy and Democratic centralism.”
Economic System The economy is market-based combined with private ownership of production means. The economy is state-based combined with public enterprises where wages are paid according to individual contribution.
Social Structure Classes exist according to citizens’ relationship to capital. Status resulting more from political distinctions.
Religion Religious freedom. Religious freedom but usually secular.
Private Property Private property (Capital and goods) is the central form of property. Private property is limited to ownership of clothing, houses, etc.
Free Choice Individuals make their own choices and are responsible for the repercussions. Education is compulsory, but marriage, jobs, and religion are a personal choice. Healthcare and education are state provided.
Examples The US, UK and Hong Kong are mainly capitalist. Singapore is a model of state-capitalism The USSR’s is often regarded as a version of centrally-planned socialism.
Discrimination Governments do not racially discriminate but class discrimination through policy may occur in state capitalism. Citizens are deemed equal and anti-discriminatory laws are set in some instances to ensure this.
Political Movements Libertarianism, Classical liberalism, anarcho-capitalism, social liberalism, neo-liberalism and modern social-democracy. Communism, Democratic socialism, syndicalism, libertarian socialism and social anarchism.
Way of Change Consumers drive change but Government can change business practices through regulation. Change is usually fast. The State drives change on behalf of workers. The change process can be either rapid or slow.
Variations Free-market capitalism (laissez-faire capitalism), State capitalism (neo-mercantilism). State socialism, communism, social anarchism and market socialism.

 

Venn Diagram