Difference Between Socialism and Capitalism

Socialism vs Capitalism

Socialism is a form of economy that works for equality among the members of society by pooling the resources of the people to be collectively controlled by the state or the public through communes or councils. There is no market in a socialist economy and therefore, there is no competition. The quantity of products produced and distributed is regulated, including the price that the consumer will pay for the products.

Capitalism, on the other hand, is an economic and political system that is based on the principle of individual rights. It believes that it is inequality that will drive the people to be more innovative and productive. Resources in a capitalistic society are privately owned by individuals or groups of individuals. These individuals or groups of individuals freely trade in a market that has a level playing field. The government stays in the background and allows the forces of supply and demand to freely operate with the guidance of laws and regulations. The law of supply and demand provides that if the supply is greater than the demand for a particular commodity, the price of that particular commodity will go down. Conversely the price of a commodity goes up if there is less supply than the demand.

In socialism, the wealth or the goods and services are distributed to the people based on the work contribution of an individual to produce such wealth. Socialists believe that if individuals work for the sake of everyone in society and receive all the goods and services, work ethics will be heightened.

People, on the other hand, are given equal opportunity to work for their own individual wealth in a capitalist society. Individuals are presumed to be naturally competitive. It is their competitiveness that will drive them to improve. Individuals or groups of individuals in a capitalist society decide on the quantity, quality and price of goods they will produce and sell in a competitive market in order to get the amount of wealth they want. No limits are set to what an individual can earn. This resuls in people having different social status based on the wealth they have accumulated. Thus, there are rich and poor people in one society. Advocates of socialism believe that this is dangerous because the accumulation of wealth by a certain few gives rise to dominance that could lead to the exploitation of people with lesser wealth.

Summary:

1. Socialism is an economic system based on the principle of equality while capitalism is an economic and political system based on the principle of individual rights.
2. In socialism, wealth or the goods and services are equitably shared by all members of society based on the individual’s productive efforts while in capitalism, each individual works for his own wealth.
3. Socialists believe that the work ethics of an individual will increase if he receives the goods and services he needs when he works for everyone else while capitalists believe that it is man’s nature of being competitive that will drive him to work more for more wealth.

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