Differences between capitalism and socialism

Today, the dominant economic system in the world is undoubtedly capitalism. However, there are still countries where you can see that they are governed by socialism and although there are no exact definitions of these terms, we are going to analyze them and show the most notable differences between these two economic systems.


We can call capitalism an economic regime that is based on the generation of capital as the main element of production. Therefore, the main goal of capitalism is the production or generation of capital and individual wealth.

Capitalism consists of a regime in which the ownership of the means of production is private. As previously mentioned, these means of production operate with a view to profit and competition for consumer markets. Similarly, production, supply, demand, prices, distribution and investment are factors defined by the market.

Likewise, it can be said that the capitalist, who has the necessary resources, buys – so to speak – work from the workers in exchange for a salary as material compensation. On the other hand, the participation of the State in capitalism is very scarce. However, it has been criticized for generating social inequality at the economic level.


We can call socialism an economic regime in which the means of production are socialized and administrative control over them is collectivist. Generally, the control can be state or community.

In the socialist system, the social relations of production are based on the basis of collective social ownership of the means of production. Consequently, theoretically annulling social classes as unequal as those of the capitalist system. Likewise, it is about mitigating the excessive appropriation of the benefit generated as a result of labor -exploitation- as in capitalism, completely disappearing the social class struggle.

In the same way, the predominant attribute of socialism is the capacity of the State to make decisions in economic matters. However, the concept or perception of what socialism is has varied over time, according to the people who have tried to implement this system. But theoretically, socialism seeks to achieve equality of social classes through state intervention in production processes.

Differences between capitalism and socialism:

Capitalism Socialism
In capitalism the means of production are used to generate profits for the owners of the means of production. In socialism the means of production are owned by the state or the workers.
In capitalism profits or profits only enrich the capitalist, who owns the means of production. In socialism profits must be repatriated among the labor force or the community.
In capitalism, competition to generate profits motivates economic activity. Supply, demand, production, among others, are defined by the market. In socialism economic activity is regulated by the state. It is only intended to produce what is necessary for the community, according to the State’s criteria.
In capitalism, social classes are adjusted according to the relationship they have with capital. In socialism, it seeks to annul the differences between social classes.

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