Capitalism and Socialism
We explain what capitalism and socialism are, the most important economic systems, and what their differences are.
Capitalism and socialism are two opposing economic and philosophical systems.
There are many ways to explain the differences between capitalism and socialism, two opposing economic and philosophical systems. Let’s start by defining them both.
CAPITALISM: Capitalism is a system that is based on the private ownership of the means of production and the accumulation of capital as a way to the wealth of nations. In this system, supply and demand, elements that make up the logic of the market, regulate the distribution of capital and, therefore, the allocation of resources.
It arose as a consequence of the rise of the bourgeoisie as the ruling class in the Modern Age and especially after the Industrial Revolution, which allowed the emergence of the industrial consumer society.
SOCIALISM: For its part, socialism is a political and economic doctrine that promotes social and community ownership of the means of production, as well as its administration by the working class, the proletariat, in order to build a society devoid of social classes, in which equality reigns in the distribution of resources and opportunities.
Socialism also comes from the Bourgeois Revolutions and Liberalism born of the French Enlightenment, but it would not be until the 20th century, with the contributions of Karl Marx and Frederick Engels, that socialism would embrace a “scientific” logic, that is, a model and a procedure, and would thus cease to be simply a way of criticizing the prevailing system.
Socialism is also known as communism, although the two terms are not exactly the same.
How do they differ?
The great distinction between these two systems points, first and foremost, to the model of economic functioning and the role of the State in it. While the capitalists defend full economic freedom, leaving it to the market to determine the needs of production and consumption, and therefore where wealth flows, the socialists prefer an intervened economy controlled by the state, which would act as a watchdog entity to avoid social inequality.
This protectionist role of the state is seen by the capitalists as an artificial intervention that does not really allow for a productive balance of productive and consumer forces, but benefits some artificially through the imposition of taxes or trade restrictions.
Furthermore, they argue that the State never manages resources as efficiently as entrepreneurship and that the distribution of economic aid to the underprivileged, social plans and other forms of social investment only make the underprivileged more dependent on State support.
For their part, the socialists accuse the market of not building stable societies at all, but of favouring only the powerful, those who control the means of production and large national and international capital. The capitalist society is, in its view, a great factory of poverty, since the privileged model of life of the upper classes can only be sustained by the exploitation of the work force of the lower classes.
One could say that the socialists advocate communal property and the principle of solidarity above all else, while the capitalists defend freedom and individualism at all costs, even in spite of the injustices it may entail.