Difference Between Capitalism And Socialism

The main difference between capitalism and socialism is that private individuals own the means of production in capitalism. On the other hand, in socialism, a democratically elected government owns the means of production.

This article will discuss the difference between capitalism and socialism in great depth. But, before we get to that, let’s quickly go through the list of topics listed under the table of contents (TOC) we will cover in this blog.

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Table of contents (TOC)

• Difference between capitalism and socialism
• What is a capitalist model?
• What is a socialist model?
• Key differences between capitalism and socialism

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Difference between capitalism and socialism 

For a better understanding, let’s explore the difference between capitalism and socialism in a tabular format:

Benchmark	Capitalism	Socialism
Means of production are owned by	Private individuals	Government
Prices are determined by	Demand and supply market	Government
Encourages efficiency and innovation	Yes	No
Healthcare services are provided by	Private sector	Government
Provides free or cheap healthcare	No	Yes
Taxes imposed are	Low or limited	High
Works on the principle of	Individual Rights	Equality
Wealth is equally shared by all the people of the country	No	Yes
Government interference	No interference or less interference	Yes. Government decides everything

What is a capitalist model?

Capitalist model definition: A capitalist model is a type of economic model that is owned by private individuals, and those private individuals control the means of production, such as real estate, capital, etc. 

The goods and services produced in this type of economic model rely entirely on free market conditions to make a profit. Most of you won’t know the meaning of the term “free market.” A free market is an economic system that works on supply and demand. In this economic system, buyers and sellers can exchange products or services in an agreeable term with little or no government intervention. So, in a capitalist model, a company’s main objective is to make as much profit as possible with the help of market conditions. The organization makes all the decisions related to the product to increase its profit.

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What is a socialist model?

Socialist model definition: A socialist model is a type of economic model in which the means of production is owned by everyone in the society or mostly by a democratically elected government.

A democratically elected government primarily owns the goods and services produced in this economic model. In some socialist models, worker cooperatives also control the means of production. In this model, each individual in society receives a share of the economy’s joint production based on how significantly they contributed to its creation.

Key differences between capitalism and socialism

Here are the key differences between capitalism and socialism:

• Capitalism operates on the premise of individual rights, whereas socialism operates on equality.
• Wealth is not distributed equally among all citizens of a country in capitalism, but it occurs in the socialist model.
• Capitalistic prices are determined by the demand and supply markets, whereas the government determines prices in socialism.
• The government decides almost everything in socialism, but government interference in capitalism is zero or almost non-existent.
• Capitalism is the model in which means of production are owned and controlled by private individuals. Socialism, on the other hand, is a model in which the government owns the means of production.

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Conclusion

Capitalism is a type of economic model in which private individuals own the means of production. However, socialism is a system in which the means of production are owned by a democratically elected government or, to a lesser extent, by the general public.