Compare And Contrast Capitalism And Socialism Essay

Capitalism and Socialism are two economic systems that have opposing views on the end goal and how to reach it. Capitalism is centered around competition and privatization while Socialism is driven by social equality. As with any philosophy, there are positive and negative aspects. Capitalism’s focus on competitive economics downplays social reform. Socialism’s concentration on social equality often does not allow for rational economic decision making. Each with their strengths and weaknesses, both of these systems are fueled by good intentions. Often, good intentions are lost when policy makers wear blinders and fail to see their direction has been changed by their inability to incorporate proper freedom and control.

The idea of fairness is an equalizing cause that brings people together and spurs them into action. Both Capitalism and Socialism are grounded by the idea of fairness. It is, in essence, their focus. However, they both see fairness as measured by something entirely different from the other. Capitalists believe that fairness is found in the freedom of competitive pricing, production, and distribution of goods. It is also highlighted by the private ownership of property and decision making. Socialists believe fairness can only be achieved by the equal distribution of wealth and opportunity through collective means. The government owned and managed production and distribution of goods allows steady work for everyone and a society built on equal lifestyles. Capitalists reward their labor with possibilities of wealth, power and property. Socialists offer social justice through equal opportunity, pay, and care. The workforce for each magnifies this key difference of focus and cause.

No ideal can become reality unless is has been embraced by the group. In the case of Capitalism, the labor force believes that education, hard work, patience and connections can lead to prestige and wealth for everyone. Any negative issues that arise from the combination of human nature and competition are simply a small price to pay for the immense opportunities offered by the system. Socialism expects just the opposite from its workers. Socialists believe that the natural human need to care for each other is built into the concepts of collective control. They feel that the workers will accept and embrace the loss of control to governmental authority as an exchange for the betterment of society. For these two methods, the freedom or control of the worker is what makes their policies successful.

The level of social care is also defined by these different views. Socialists build every part of their system around the needs of the people. Socialistic governments have high tax rates, so as to pay for the social programs, such as medical care. Capitalists systems, being more focused on the individual’s achievements, tends to handle social issues as a second thought. Programs are funded by government transfer of wealth. The competitive drive of the Capitalist demands that each person choose to work hard for what they need. The scale of individual wealth versus care through the collective continues to tip back and forth in political elections.

Capitalism and Socialism are both driven by strong ideals. One looks to competitive economics to allow the worker to provide for himself and achieve any level of success. The other believes the willingness to relinquish wealth and prestige, for the good of the many, will result in a strong economy and society. History shows us that the internal struggle between the self and the group will continue to manifest itself in this way. The global picture is colored by both of these systems. Capitalism and Socialism are part of an international battle of practicality versus ideology, empowerment versus support, and choice versus control.

Filed Under: Capitalism, Law & Politics, Political Systems


Their distinctions are many, but perhaps the fundamental difference between capitalism and socialism lies in the scope of government intervention in the economy. The capitalist economic model allows free market conditions to drive innovation and wealth creation; this liberalization of market forces allows for the freedom of choice, resulting in either success or failure. The socialist-based economy incorporates elements of centralized economic planning, utilized to ensure conformity and to encourage equality of opportunity and economic outcome.


In a capitalist economy, property and businesses are owned and controlled by individuals. In a socialist economy, the state owns and controls the major means of production. In some socialist economic models, worker cooperatives have primacy over production. Other socialist economic models allow individual ownership of enterprise and property, albeit with high taxes and stringent government controls.


The capitalist economy is unconcerned about equity (in the sense of equality). The argument is that inequality is the driving force that encourages innovation, which then pushes economic development. The primary concern of the socialist model, in contrast, is an equitable redistribution of wealth and resources from the rich to the poor, out of fairness and to ensure "an even playing field" in opportunity and outcome.


The capitalist argument is that the profit incentive drives corporations to develop innovative new products that have demand in the marketplace. It is argued that the state ownership of the means of production leads to inefficiency because without the motivation to earn more money, management, workers and developers are less likely to put forth the extra effort to push new ideas or products.


In a capitalist economy, the state does not directly employ the workforce. This can lead to unemployment during times of economic recession. In a socialist economy, the state is the primary employer. During times of economic hardship, the socialist state can order hiring, so there is full employment even if workers are not performing tasks that are particularly useful.

Mixed Economy

Some countries incorporate both the private sector system of capitalism and the public sector enterprise of socialism to overcome the disadvantages of both systems. These countries are referred to as having mixed economies. In these economies, the government intervenes to prevent any individual or company from having a monopolistic stance and undue concentration of economic power. Resources in these systems may be owned by both state and individuals.

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