Capitalism is a type of economic system where the means of production are owned by private individuals. Socialism on the other hand is a system where the means of production like money and other forms of capital are owned to some extent by the public. Take a look below to know the difference between capitalism and socialism. Also understand the concept of the two terms that are used so frequently in the Indian Economic System.
Capitalism:
In a capitalist system the economy is substantially run by individuals who own and operate private companies.
All the decisions over the use of resources are made by the individuals who own those companies.
Under capitalism, companies live by the motivation for profit.
The quantity of goods and services produced is based on a system of supply and demand. In the purest form of capitalism free market or laissez-faire capitalism, the individuals are unrestrained in participating in the economy.
Socialism:
Socialism is itself a variety of economic systems in which means of production are owned equally by everyone in society. In various socialist economies, a democratically elected government owns and controls major businesses and industries.
In socialism each person in society gets a share of the economy’s collective production based on how much they have contributed to generating it.
Difference between Capitalism and Socialism:
Take a look at the differences below based on the criteria
| Criteria | Capitalism | Socialism |
| Assets Ownership | Means of production is owned by private individuals | Means of production is owned by government or cooperatives |
| Income | The income is determined by free market forces | Income in such types of economy are equally distributed among all based on needs |
| Consumer Prices | Prices are determined by demand and supply/ market | Prices are decided and set by the government |
| Efficiency | Free market competition encourages efficiency and innovation | Government-owned businesses have less incentive for efficiency and innovation |
| Health Services | Healthcare services are provided by private sector | Healthcare provided free or subsidized by the government |
| Taxes | Limited taxes based on individual income | High taxes necessary to pay for public services |
These were the differences between Capitalism and Socialism based on various categories.
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