Capitalism and socialism

The main differences between capitalism and socialism revolve around the role of the government and the equality of the economy .

Here are the main differences:

DefinitionA theory or system of social organization based on the free market and privatization, where ownership is attributed to individual persons.
The capitalist system defends economic freedom , consumer choice, and economic growth.
A theory or system of social organization based on the exploration of the majority of the common goods, with property attributed to the workers.
Under socialism, the state controls the economy , and is responsible for reducing social inequality, through programs that benefit the poor.
PhilosophyThe means of production are privately owned, operated and negotiated to generate profits for private owners or shareholders.
It has an emphasis on individual profit and not on workers or society as a whole.
Idea of ​​transformation of society through the balanced distribution of property and wealth, reducing the difference between rich and poor.
Profits are distributed among society to supplement wages.
IdeasCapitalism opposes government intervention in the economy, because capitalists believe that it introduces inefficiencies.
A free market produces the best economic result for society.
All individuals should have access to basic consumer goods and public goods.
Large-scale industries are collective goods, and therefore the return of those industries must benefit society as a whole.
Main defendersRichard Cantillon, Adam Smith.Karl Marx, Friedrich Engels, Lenin.
Political systemIt can coexist with a variety of political systems, including dictatorship, democratic republic, anarchism, and direct democracy.
Most capitalists defend a democratic republic .
It can coexist with different political systems.
Most socialists defend participatory democracy .
Economic systemMarket-based economy with private or corporate ownership of the means of production.
Goods and services are produced for profit and that profit is reinvested in the economy to fuel economic growth.
The means of production are owned by public companies or cooperatives, and individuals are compensated based on the principle of individual contribution.
Production can be coordinated through economic or market planning.
Social structureClasses exist according to their relation to capital: capitalists own part of the means of production and earn their income in this way, while the working class depends on wages.Class differences are diminished. Status derives from political distinctions rather than class distinctions.
ReligionFreedom of religion.Freedom of religion.
Private propertyPrivate ownership of capital and other goods is the dominant form of property.
Public property and state property play a secondary role, and there may also be some collective property in the economy.
There are two types of property: personal property (houses, clothing, etc.) and public property, which includes factories and means of production owned by the state, but under the control of the workers.
Free choiceAll individuals make decisions for themselves, and must live with the consequences of their actions.
Freedom of choice allows consumers to drive the economy.
Religion, employment, and marriage depend on the individual. Education is compulsory.
Economic coordinationThe market determines investment, production and distribution decisions.
Markets can be free markets, regulated markets, or they can be combined with a degree of state-led economic planning within private companies.
Socialism depends on planning to determine investment and production decisions.
Planning can be centralized or decentralized.
ExamplesThe modern world economy operates largely in accordance with the principles of capitalism.
The United States is widely considered the bastion of capitalism, yet every developed country has some programs that are socialist.
Socialist countries are those whose constitutions include declarations on the protection of the working class, such as Cuba, North Korea, China, Laos and Vietnam
Ownership structureThe means of production are privately owned and operated for private profit. This encourages producers to get involved in economic activities.
Companies can be owned by individuals, worker cooperatives, or shareholders.
The means of production are socially owned with the profit produced for the whole of society (in models of public ownership) or for all officials who are members of the company (in models of cooperative ownership).
Political movementsClassical liberalism, social liberalism, libertarianism, neoliberalism, modern social democracy, and anarchism.Democratic socialism, communism, libertarian socialism, social anarchism and unionism.
VariationsFree market capitalism (also known as laissez faire capitalism), State capitalism (also known as neomercantilism).Market of socialism, communism, state socialism, social anarchism.
First exponentsThe ideas of trade, purchase and sale, have existed since the beginning of civilization.
Free market or laissez faire capitalism was brought to the world during the 18th century by John Locke and Adam Smith, seeking an alternative to feudalism.
In 1516, Thomas More wrote in Utopia about a society based on the common ownership of goods.
In 1776, Adam Smith defended the labor theory of value, ignoring Kant’s view that prices are derived from supply and demand.
Vision of the worldCapitalists view market-based societies as symbols of freedom, taking pride in allowing social and economic freedoms not experienced in the realm of communism and fascism.
The focus is individualism as opposed to nationalism.
Socialism is a movement of the worker and the middle class, all for a common democratic goal.

Comparative infographic

Main characteristics of capitalism

  • It is a market-based economy, made up of buyers (people) and sellers (private or corporate companies);
  • The goods and services produced are destined to profit, and that profit is reinvested in the economy;
  • The government should not interfere in free market economies, that is, the market determines investments, production, distribution and decisions;
  • Government interference is only permitted by making and enforcing rules or policies governing the conduct of business;
  • There is a need for continuous production and purchase for a capitalist economy to function efficiently;
  • Capitalists believe that the government does not use economic resources efficiently as a private company.

See also Modernity and postmodernity: characteristics and differences.

Main characteristics of socialism

  • The means of production are owned by public companies or cooperatives, and individuals are compensated on the basis of the principle of individual contribution;
  • There is equal opportunity for all;
  • Large-scale industries are cooperative endeavors, and therefore the returns from those industries must be returned and benefit society as a whole;
  • Economic activity and production are planned by the central planning authority and based on human consumption needs and not on economic demands;
  • Socialists believe that economic inequality is bad for society and the government is responsible for reducing it through programs that benefit the poor.

Advantages of capitalism

1. Consumer choice

Individuals choose what to consume, and that choice leads to more competition and better products and services.

2. Efficiency of the economy

Goods and services produced on a demand basis create incentives to reduce costs and avoid waste.

3. Economic growth and expansion

This process increases the gross national product (GDP) and raises living standards.

Advantages of socialism

1. Decrease inequality

In socialism, no individual can have much more than the other, and businesses are owned by the government. Money is not a controlling factor in a socialist society.

2. Needs are met

Everyone’s needs must be met. This means that health care is universal, education is free, food is provided, as well as clothing and other items necessary for living.

3. Mobilization of goods

Disasters of all kinds can strike at any time, and when they do, an immense amount of services and goods are needed to ensure that everyone is safe and cared for.

Under socialism, the government has full control of those goods and can easily mobilize them to the areas that need them most.

4. Has widely used ideas

The idea of ​​socialism is used in practically all countries, in some way. It is the only way to guarantee that some of the most basic and necessary things are provided to all people.

Some examples of this are the public education system in the United States and universal health care in Canada.

Disadvantages of capitalism

1. Power monopolies

Companies with monopoly power (when a specific person or company is the only supplier of a certain good) can abuse their position by charging higher prices.

2. Inequality

A capitalist society is based on the right to pass wealth on to future generations.
If a small group of people retain all the wealth and that wealth continues to be transmitted to the same groups of people, inequalities and social division occur.

3. Recession and unemployment

An economy based on the market of consumers and producers can have many variations, such as shortages and unemployment.

Disadvantages of socialism

1. The historical failure

Around the world, various countries tried the idea of ​​socialism, and all of them failed.

This is one of the biggest problems with socialism, the fact that it has been proven not to work, no matter how many different adjustments the government tries to apply.

2. Nothing is yours

Private property is prohibited in a socialist society. This means that you have nothing, since the goods belong to “everyone” or to the government.

3. Less innovation and growth

With socialism, you have your basic needs taken care of, so you don’t have to worry about your meals or whether you have a home.

This may sound good, but it can make people settle, and with it innovation, creativity, motivation and other forms of advancement of society diminish.

4. It is expensive

It costs a lot of money to provide everyone with the things they need, and that money must come from somewhere.

So all the money that is earned by citizens is taxed in huge percentages to cover all costs.

See also:

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