Differences Between Capitalism and socialism
Differences Between Capitalism and socialism

Most time, you may be confused about what is the similarities between Capitalism and socialism and What is the difference between capitalism and socialism?

The main differences between Capitalism and Socialism revolve around the role of property, government, and the economy.


While capitalism advocates a lesser state, socialism is based on the joint exploitation of goods, which must be controlled by the government and the profit distributed among the members of society.

Understand this and other differences between the two systems:

DefinitionCapitalism is a theory or system of social organization based on free market, private property and its operations are for profit. In the system, the property belongs to individuals or companies.

This system defends the freedom of choice of the consumer.
Socialism is a theory or system of social organization based on the exploitation of the goods in common, where the property is attributed to the workers and, ultimately, to the State.

In socialism, the state controls the economy and is responsible for planning the exploitation and distribution of goods produced.
IdealsThere are two main currents in capitalism. One argues that the state should intervene directly in the economy as one more investor. On the other hand, there are those who argue that government intervention in the economy should be minimal because it believes that the free market produces a better economic result for society.

In any case, both currents emphasize individual profit rather than workers, which will benefit society as a whole. This is one of the main points criticized among the skeptics of this economic system.
In socialism, private property would cease to exist. Large-scale industries must be collective goods, and therefore the return of these bodies must benefit the whole society.

It seeks the transformation of society through the balanced distribution of property and wealth, thus reducing the gap between rich and poor.

In addition, all individuals should have access to basic consumer items.
Key theoretical advocatesAdam Smith, Friedrich Hayek, Karl Polanyi, Richard Cantillon, Emile Durkheim, Alfred Marshall, etc.Karl Marx, Vladimir Lenin, Friedrich Engels, Charles Fourier, Robert Owen, etc.
Political systemCapitalism can coexist with a variety of political systems, including dictatorship, representative democracy, parliamentary republic or monarchy, and so on.It can also coexist with different political systems, but most socialists advocate participatory democracy, which guarantees the possibility of direct interference of citizens in state decision-making processes.
Social structureClasses exist according to their relation to capital. The capitalists have the means of production, receiving the profits from it, and the working class depends on wages.Class distinctions are diminished. Thus, status derives more from political distinctions than from class distinctions.
ReligionDefends freedom of religion.He argues that religion is a private matter. In this sense, each individual would be free to profess any religion, but this would have no subsidy from the state and would be totally eliminated from the regime.
Private propertyWith the protection of the state, all property is transformed into capital, which can be used in various ways. Property rights operate within a formal property system, in which all properties and operations must be registered.Ownership is public (or collective), including the means of production, which belong to the state, but are controlled by the workers.
Free choiceAll individuals make their own decisions and must live with the consequences of their actions. This is not to say that they are not bombarded with consumer messages that can curtail their freedom of choice.

Freedom of choice would allow consumers to boost the economy.
The individual has his freedom conditioned by the ideology of the state.
Economic CoordinationIt is the market that determines the decisions of investment, production and distribution.

To a lesser extent, the state can also decide where the capital goes.
Socialism depends on state-directed planning to determine production and how investments will be made.
ExamplesMuch of the modern world economy operates according to the principles of capitalism, but the United States of America is widely considered the prime example.Socialist countries are those whose constitutions have declared private property extinct. Examples include China (although in recent years it has undergone considerable changes), North Korea, Cuba, etc.
Property structureThe means of production are privately owned, being operated and traded to generate profits for the owners.

Companies may be owned by individuals, workers' cooperatives or shareholders.
The means of production are socially owned, with the profit being distributed between society (in cases of public ownership), or to all employees of the company (in models of cooperative ownership).
Political movementsClassical liberalism;
Social liberalism;
Social-modern democracy.
Democratic socialism;
Libertarian socialism;
Social anarchism;
First remnantsThe ideas of trading, buying and selling, have existed since the beginning of civilization.

Already free-market capitalism ( laissez-faire ) was brought into the world during the 18th century by John Locke and Adam Smith as an alternative to mercantilism.
In 1516, Thomas More wrote about a society based on the common property of goods, in his book called " Utopia ."

Subsequently, in the creation of the bases of the socialist theories came Count of Saint-Simon, Charles Fourier, Louis Blanc and Robert Owen, considered "utopian socialists".

Main Characteristics of Capitalism

  • It is a market-based economy composed of buyers (people) and sellers (private or corporate);
  • The goods and services produced are intended to generate profit;
  • The government must protect the free market, as it determines investments, production, distribution of goods;
  • Government interference is only permitted when making and applying rules or policies governing the conduct of business;
  • There is a need for continuous production and purchasing for the capitalist economy to function efficiently;

Main Characteristics of Socialism

  • Public enterprises or cooperatives own the means of production, and individuals are compensated based on the principle of equality;
  • There is equal opportunity for all;
  • Large-scale industries are cooperative efforts, and thus the returns of these industries must be given back and benefit society as a whole;
  • The central project authority plans economic activity and production and based primarily on human consumption needs;
  • The traditional forms of capitalist society, such as private property, must be destroyed.

The Advantages of Capitalism

  • #1. Power of consumer choice

Individuals can choose what they will consume, and that choice drives competition to increase, and better products and services emerge.

  • #2. The efficiency of the economy

Demand-driven goods and services create incentives to reduce costs and avoid waste.

  • #3. Economic growth and expansion

The competition seeks to expand the market, increase the Gross National Product (GNP), and raise living standards.

The Advantages of Socialism

  • #1. Decreases inequality

In socialism, no individual can have more than the government owns the other and businesses. Money is not a factor of control in a socialist society.

  • #2. Needs met

Everyone's needs must be met.

This means that health care is a statutory, which means it is universal; education is free, access to housing, and other necessities for life are facilitated.

  • #3. Mobilization of goods

Disasters of various natures can occur at any time, and when they do, a considerable amount of services and products are needed to ensure that everyone is safe and cared for.

In socialism, the government has total control of these goods and can use them in the areas in which they need them most.

  • #4. Basic human rights guaranteed

Certain ideas of socialism are used in practically all countries, but this does not make these states socialist regimes.

These ideas are a way to ensure that basic and necessary rights and articles are provided to all people. Some examples of this are the public education system in Brazil and the universal health system in Canada.

The Disadvantages of Capitalism

  • #1. Power monopolies

Companies that are able to create monopolies on a particular market may abuse this position and may develop actions detrimental to society and charging higher prices for certain products.

With so much power over people's consumption, capitalism would rely on various forms of economic and cultural exploitation, repressing workers, and even promoting social alienation.

  • #2. Inequality

In capitalist societies, goods and wealth belonging to an individual are generally passed down from generation to generation. So if a small group of people owns all the wealth, which continues to be passed on to the same people, inequalities and social divisions tend to grow over time.

The concentration of wealth is one of the pillars of a capitalist society, and critics of the system maintain that this increases inequality, since people without capital need to sell their workforce to those they own.

  • #3. Recession and Unemployment

An economy based on the market of consumers and producers can have many oscillations because it depends on supply and demand. In this way, in the case of diminishing demand, companies close and unemployment increases, and if one enters a cycle of economic crisis.

The Disadvantages of Socialism

  • #1. The historical failure

Throughout the world, several countries have tested the idea of ​​socialism, and all have failed.

No matter how many different adjustments the government attempts to apply, historically, it has been proven that this system does not work in its entirety. However, several countries have incorporated certain measures considered socialist in their governments.

  • #2. Nothing is yours

It is forbidden to own private property in a socialist society. This makes the individual itself has nothing since the goods belong to "all" or to the government.

  • #3. Less innovation and growth

With socialism, basic needs must be met, so an individual would not be bothered to strive to have a property as a property.

That may sound good, but there are those who believe that people settle in. As a result, innovation, creativity, motivation, and other forms of societal advancement would be diminished.

  • #4. It's expensive

It costs a lot of money to guarantee the needs of all people, and that money must come from somewhere. So all the money generated by citizens is taxed in extreme percentages to cover all costs.

It is worth mentioning that capitalism can also be costly since many tributes are put into practice. Some pay more, others less, returning to the heart of inequality, much criticized by those who do not believe in capitalism.

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Conclusion On Capitalism And Socialism- All You Need To Know

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