Capitalism and communism are two different economic systems. Capitalism is a system where private ownership of capital, goods, and services is the norm and businesses compete in the open market. On the other hand, communism is a system where the government owns the main means of production and there is no competition or a free market economy.
In capitalist countries, individuals are free to pursue their own interests and accumulate wealth through hard work and entrepreneurship. Under communist governments, however, individuals have few economic freedoms, and resources are distributed according to a centrally planned economy.
Both systems have advantages and disadvantages, but capitalism has generally been more successful at promoting economic growth than communism. Note that in today’s world, hybrid systems of economics, having policies from all economic systems, are present, meaning that the pure form of capitalism, socialism, and communism is in the past now.
Capitalism vs. Communism
| Capitalism | Communism |
|---|---|
| Capitalism is an economic system based on private ownership of the factors of production and the free market. This means that goods and services are produced, distributed, and exchanged with minimal government intervention. | Communism is an economic system based on collective government ownership of all main goods and services. Government intervention is heavily relied upon in order to manage resources, distribution and production activities. |
| Every individual has to work for himself to create wealth. | Wealth is distributed as per needs and ability. |
| There exists a distinct class whose standing in society is measured by the material wealth in their possession. | Class is abolished. The chances of one worker earning more than the other are nonexistent. |
| Public control their own properties. | Societies control the properties own by state. |
| The welfare system is available only to those who have the wealth to pay for their services. | It supports widespread universal social welfare with an emphasis on public health and education. |
| In capitalism, profit and wages depends on the person’s ability and willingness to work | In communism, the profits are not allowed. Workers are pushed to work for the fame of the state. |
| People are free to choose or join company they want to work for. | The state decides where one should work and under who’s authority. |
| Anyone can own business. | State owns all the businesses. |
| The markets in capitalism are free and competitive. | There is no competition in the market. |
| It prefers individual freedom. | It prefers societies. |
| It is based on principle of individual rights. | It is based on the principle of community rights. |
| The system of government is democratic in capitalism | The system of government is Totalitarian. |
| Many countries have capitalism including US, Singapore, New Zealand, Australia, Switzerland, Ireland, Taiwan, and United Kingdom. | Today communism is the official form of government in only five countries: China, North Korea, Laos, Cuba, and Vietnam. |
Capitalism, Socialism, Communism: Distinguishing Important Economic Concepts
Capitalism, socialism and communism are three distinct and different economic systems that form the basis of many countries around the world.
Capitalism is an economic system characterized by private ownership of the means of production, where goods and services are exchanged in a free market based on supply and demand.
Socialism is an economic system where the means of production are collectively owned, with government control over distribution of resources.
Communism is an economic structure in which all resources are owned by a central authority, with all decisions regarding production and distribution made by this body.
Each economic system has its own advantages and disadvantages, but all three provide important frameworks for understanding how economies work.
Drawbacks of Capitalism
While capitalism has been credited with driving economic growth and innovation, it is not without its drawbacks. In a capitalist system, those who are wealthy are able to increase their wealth by taking advantage of loopholes or exploiting workers for low wages. This can lead to inequality between those who have access to resources and those who do not. Furthermore, capitalism can lead to environmental degradation as companies seek to maximize profits by avoiding regulations that protect public health or the environment. Finally, capitalism often leads to monopolies where large companies dominate particular markets and limit competition.
Drawbacks in Communism
Communism is an economic and social system that is based on the abolition of private ownership and control of the means of production. It seeks to create a society where all people are equal, with no class distinctions. Unfortunately, communism has failed in many countries due to its inability to provide a sustainable economy. The lack of incentives for people to work hard, as well as the lack of private ownership, have caused many countries to experience economic hardship and poverty.
The centralized planning of production also often leads to shortages in goods and services. Additionally, communism does not recognize individual rights or freedoms, which can lead to oppressive regimes that do not allow for democracy or freedom of expression. In other words, communism has largely been unsuccessful in creating a system of equality and prosperity for all citizens due to its lack of focus on individual rights or incentives.
History of Communism and Capitalism
The history of Communism begins with Karl Marx and Friedrich Engels and their manifesto, the Communist Manifesto. This document outlined the ideas of Marx and Engels on how to bring about a revolution that would benefit the proletariat and lead to a new form of socialism. The core of their philosophy was that the means of production should be owned by the state instead of private property owners, enabling a more equitable distribution of resources and wealth.
This revolutionary idea is now known as Marxism, which has been adapted over time but still retains its core values. Communism is an extension of Marx’s theory, where all resources are held in common and no private property exists.
In the early 20th century, Communism became popular in Russia and other countries, leading to several decades of experimentation with different forms of government based on these principles. Despite its checkered past, communism continues to influence politics around the world today.
The modern capitalist theory is traditionally traced to the 18th-century treatise An Inquiry into the Nature and Causes of the Wealth of Nations by Scottish political economist Adam Smith, and the origins of capitalism as an economic system can be placed in the 16th century.
Capitalism developed historically out of previous systems of feudalism and mercantilism in Europe, and dramatically expanded industrialization and the large-scale availability of mass-market consumer goods.
Which is Better: Capitalism or Communism?
The debate over which system of economics is better, capitalism or communism, has been ongoing for many years. Supporters of capitalism argue that it encourages innovation and competition, while supporters of communism point to its equal distribution of resources.
Both systems have advantages and disadvantages; however, it is important to note that neither system has achieved widespread success in its purest form. In practice, most countries employ elements from both systems as part of their economic structure. Ultimately, it is up to the state to decide which system it believes works best for them.
Key Differences Between Communism and Capitalism
- Difference between socialism and capitalism
- Difference between sole proprietorship and partnership
- Difference between trade-offs and opportunity costs
Is China communist or capitalist?
China is an economic powerhouse and, in recent years, has been the world’s largest economy. However, its economic system is a complex mix of both communism and capitalism. Despite the country’s ideological adherence to communism, it has embraced capitalist principles such as free-market economics and private enterprise.
This combination of both communism and capitalism can be seen in China’s economic structure; state-owned enterprises make up a large portion of the economy while at the same time, private companies have been encouraged to thrive and grow. This hybrid system has allowed the Chinese economy to flourish while still maintaining some aspects of its communist roots.
While it may not fit neatly into either category today, it appears that China is best described as a hybrid system that combines elements from both communism and capitalism.
What do capitalism and communism have in common?
Capitalism and communism are two different systems of economic organization that have a number of similarities and differences. Both systems recognize the importance of private property, but they differ in how it is used and regulated.
Both systems strive to create an equitable society, but they do so in different ways. In capitalism, the competition encourages individuals to produce goods and services for profit, while in communism the government owns and distributes resources according to need.
Also, both systems aim to ensure the well-being of citizens through the provision of public services such as education, healthcare, and welfare programs. However, capitalism seeks to achieve this through market forces while communism relies on centralized state control.
Despite their differences, both capitalism and communism ultimately seek to improve the lives of citizens by providing them with stability, security, and opportunity.
