Capitalism and Socialism: Meaning and Differences Between Them

Capitalism is a formal system of government wherein the country’s trade is under private ownership and they do the trade with the sole purpose of earning profit but under Socialism, the production, distribution, and regulation of the products should be done by a group as a whole and not individually.

• Capitalism propagates economic freedom which often leads to economic growth and consumer choice which is not completely found in a socialist system.
• There are often fluctuations seen in a capitalist economy which is not regularly found in a socialist economy.
• As capitalism is a free economy, there is no interference seen by the government whereas in a socialist system the government has sole control over the economy.
• There is a prevalent supposition as seen by the capitalist system that when the economy is under the control of a government, the resources are not utilized as efficiently as they are utilized under private ownership but in a socialist system, they believe that the government provides necessary goods to the people as per their needs.
• Under capitalism, an individual is free to choose the product of his choice which increases competition and prevents wastage of resources but in socialism, there is at times wastage of resources as the goods are provided as per the need of the individual.
• In the capitalist system, the gross national income increases at a faster rate which quickly improves their standard of living but in a socialist system, there is no quick advancement in the standard of living.
• There is a high prevalence of inequality in a capitalist system wherein a small group of people may not be given much importance but in a socialist system, everyone is given equal importance and the wealth is not concentrated in the hands of few people but it is actually redistributed as per the situation.
• At times recession and unemployment are also prevalent in a capitalist system whereas, in a socialist system, everyone is given employment as far as possible under the various schemes introduced by the government.
• In a capitalist economy the large scale industries maybe under private ownership but in a socialist system they are always under co-operative ownership.
• Capitalism doesn’t care about inequality but a socialist system believes it to be very harmful to the society and their primary concern is the necessary needs of the poor people.
• Capitalism with its lots of freedom may either go into profit or loss but in a socialist system, it is always supported by the government so it doesn’t have to worry a lot.
• There is much of an innovation and creation in a capitalist system but in a socialist system, the prevalent technology is given more importance and there is a slow advancement in technology.
• There is no restriction in holding a lot of properties under capitalism but in socialism, they have lots of restrictions amongst which at times high taxes are also applicable on them if they want to hold properties under their sole control.