The main differences between capitalism and socialism revolve around the government role and to the equality of economy.
Here are the main differences:
| Capitalism | Socialism | |
|---|---|---|
| Definition | A theory or system of social organization based on the free market and in privatization, where ownership is attributed to individual persons. The capitalist system defends the 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. In socialism, the state controls the economy, and is responsible for reducing social inequality, through programs that benefit the poor. |
| Philosophy | The means of production are privately owned, being 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. |
| Ideas | Capitalism opposes government intervention in the economy, because capitalists believe it introduces inefficiencies. A free market produces the best economic result for society. | All individuals should have access to basic consumer items and public goods. Large-scale industries are collective goods and therefore the return of those industries should benefit society as a whole.. |
| Main defenders | Richard Cantillon, Adam Smith. | Karl Marx, Friedrich Engels, Lenin. |
| Political system | It can coexist with a variety of political systems, including dictatorship, democratic republic, anarchism, and direct democracy. Most capitalists defend a Democratic Republic. | Can coexist with different political systems. Most socialists defend the participatory democracy. |
| Economic system | Market-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 structure | Classes 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. |
| Religion | Freedom of religion. | Freedom of religion. |
| Private property | Private 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 choice | All individuals make decisions for themselves, and must live with the consequences of their actions. Freedom of choice allows consumers to boost the economy. | Religion, employment, and marriage depend on the individual. Education is compulsory. |
| Economic coordination | The 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. |
| Examples | The 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 structure | The 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 movements | Classical Liberalism, Social Liberalism, Libertarianism, Neoliberalism, Modern Social Democracy, and Anarchism. | Democratic socialism, communism, libertarian socialism, social anarchism, and unionism. |
| Variations | Free market capitalism (also known as capitalism of the laissez faire), state capitalism (also known as neomercantilism). | Market of socialism, communism, state socialism, social anarchism. |
| First exponents | The ideas of trade, purchase and sale, exist since the beginning of civilization. Free market capitalism o laissez faire It was brought into 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 world | Capitalists 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. |
See also Modernity and postmodernity: characteristics and differences.
Individuals choose what to consume, and that choice leads to more competition and better products and services..
Demand-produced goods and services create incentives to reduce costs and avoid waste.
This process increases the gross national product (GDP) and raises living standards.
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.
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 to live..
Disasters of all kinds can strike at any time, and when they do, an immense amount of services and goods are needed to ensure everyone is safe and cared for..
In socialism, the government has full control of those goods and can easily mobilize them to the areas that need them most..
The idea of socialism is used in practically all countries, in some way. It is the only way to ensure 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..
Companies with monopoly power (when a specific person or company is the only supplier of a certain merchandise) can abuse their position by charging higher prices.
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..
An economy based on the market of consumers and producers can have many variations, such as recisions and unemployment.
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..
Private property is prohibited in a socialist society. This means that you have nothing, since the goods belong to "everyone" or to the government..
With socialism, you have your basic needs taken care of, so you don't have to worry about your meals or if 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..
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 Difference between socialism and communism.
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