Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Share Flipboard Email. Social Sciences Economics U. Robert Longley. History and Government Expert. Robert Longley is a U. Facebook Facebook. Updated December 04, Key Takeaways: Socialism vs. Capitalism Socialism is an economic and political system under which the means of production are publicly owned. Production and consumer prices are controlled by the government to best meet the needs of the people.
Capitalism is an economic system under which the means of production are privately owned. Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes. Capitalism Socialism Ownership of Assets Means of production owned by private individuals Means of production owned by government or cooperatives Income Equality Income determined by free market forces Income equally distributed according to need Consumer Prices Prices determined by supply and demand Prices set by the government Efficiency and Innovation Free market competition encourages efficiency and innovation Government-owned businesses have less incentive for efficiency and innovation Healthcare Healthcare provided by private sector Healthcare provided free or subsidized by the government Taxation Limited taxes based on individual income High taxes necessary to pay for public services.
Featured Video. Cite this Article Format. Longley, Robert. Capitalism: What Is the Difference? Socialism vs. What Is Socialism? Definition and Examples. What Is Communism? What Is Neoliberalism? What Is Fiscal Policy? The Differences Between Communism and Socialism. What Is a Traditional Economy? What Is Anarchy? Thank you. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment.
Key Differences Between Capitalism and Socialism The following are the major differences between capitalism and socialism The economic system, in which the trade and industry are owned and controlled by private individuals is known as Capitalism. Socialism, on the other hand, is also an economic system, where the economic activities are owned and regulated by the state itself.
The basis of capitalism is the principal of individual rights, whereas socialism is based on the principle of equality. Capitalism encourages innovation and individual goals while Socialism promotes equality and fairness among society. In the socialist economy, the resources are state-owned but in the case of the capitalist economy, the means of production are privately owned.
In capitalism the prices are determined by the market forces and therefore, the firms can exercise monopoly power, by charging higher prices. Conversely, in Socialism government decides the rates of any article which leads to shortages or surfeit. In Capitalism the competition between firms is very close whereas in Socialism there is no or marginal competition because the government controls the market. In Capitalism, there is a large gap between rich class and poor class because of unequal distribution of wealth as opposed to socialism where there is no such gap because of equal distribution of income.
In Capitalism, every individual works for his own capital accumulation, but in Socialism, the wealth is shared by all the people equally. In Capitalism every person has the right to freedom of religion which also exists in Socialism, but Socialism gives more emphasis on secularism. In Capitalism, the efficiency is higher as compared to Socialism because of the profit incentive that encourages the firm to produce such products that are highly demanded by the customers while in a socialist economy there is a lack of motivation to earn money, which leads to inefficiency.
In Capitalism, there is no or marginal government interference which is just opposite in the case of Socialism. Comments Thank you for helping me with my class work.. You break it down nicely and it help me understand it even better. Thank you so much for this.. Simple and lucid language used.. Well done. In the first half of the 19th century, early socialist thinkers like Henri de Saint-Simon, Robert Owen and Charles Fourier presented their own models for reorganizing society along the lines of cooperation and community, rather than the competition inherent in capitalism, where the free market controlled the supply and demand of goods.
Then came Karl Marx , the German political philosopher and economist who would become one of the most influential socialist thinkers in history. Marx argued that all history was a history of class struggles, and that the working class or proletariat would inevitably triumph over the capital class bourgeoisie and win control over the means of production, forever erasing all classes. In fact, Marxists often refer to socialism as the first, necessary phase on the way from capitalism to communism.
Under communism, there is no such thing as private property. All property is communally owned, and each person receives a portion based on what they need.
A strong central government—the state—controls all aspects of economic production, and provides citizens with their basic necessities, including food, housing, medical care and education. By contrast, under socialism, individuals can still own property. But industrial production, or the chief means of generating wealth, is communally owned and managed by a democratically elected government. Another key difference in socialism versus communism is the means of achieving them.
In communism, a violent revolution in which the workers rise up against the middle and upper classes is seen as an inevitable part of achieving a pure communist state. Socialism is a less rigid, more flexible ideology. Its adherents seek change and reform, but often insist on making these changes through democratic processes within the existing social and political structure, not overthrowing that structure. Unlike in communism, a socialist economic system rewards individual effort and innovation.
Social democracy, the most common form of modern socialism, focuses on achieving social reforms and redistribution of wealth through democratic processes, and can co-exist alongside a free-market capitalist economy.
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