Differences between Capitalism and Socialism

Capitalism is a economic and political system whereby all or most of the economic activities or means of production and distribution are owned and controlled by private individuals or organizations without little or no interference from the government. The economic activity of the government is always at minimum or low.

Socialism on the other hand may be defined as an economic system in which all or most part of the means of production and distribution are collectively owned, managed and controlled by the state.

What are some differences between Capitalism and socialism?

1. FREEDOM OF CHOICE.

Capitalism enables freedom of choice to consumers and workers. Because there are large number of goods and services produced in the country by many private individuals, it's always very easy for consumers to choose from the varieties of goods available. Workers in a capitalist economy have the freedom of choice to engage in economic activities that may bring good profits to them. Socialism on the other hand does not provide the people with alternative choice. Since the goods and services are mainly produced by the government, there's no alternative for the consumers.

2. ECONOMIC COMPETITION

As a result of many goods being produced by many different private individuals, economic competition is assured. Many people will like to satisfy their customers thus creating competition among the producers or controller of economic activities. Economic competition will promote efficiency of goods and services which will bring economic progress, absence of economic competition in socialism brings about low quality of goods produced. In capitalism, monopoly is discouraged as many producers are working hard to gain the market favor which is quite a no for socialism which creates monopolistic situations. Socialism does not encourage invention and innovation because of absence of competition

3. SELF RELIANCE.

Since the government cannot provide everything in terms of satisfying human wants, then capitalism may just be the best option to be self reliant . Capitalism encourages hard work among people in the production of goods and services which they need since it's not possible for the government to provide it all. Capitalism guarantees maximum freedom of enterprise, ability to work freely without government interference. It helps people to be more innovative and creative since they control the economy

4. INEQUALITY BETWEEN THE RICH AND THE POOR

Socialism bridges the gap between the rich and the poor. Capitalism makes the rich people more rich while poor keeps getting poorer. This is because of the economic exploitation in capitalist economy. People especially the consumers are always exploited because capitalist market is driven mainly towards making profits, unlike socialism which is geared at satisfying the needs of the people.

5. UNHEALTHY RIVALRY

While healthy rivalry can boost the pace of economic development and growth, unhealthy rivalry can cause havoc in the economy. Unhealthy rivalry is one of the disadvantages of capitalist economy. Socialism does not allow for unhealthy rivalry because it is the government in control not many individuals. Unhealthy rivalry may send some private firms especially infant ones into oblivion thereby creating more unemployment. And as a result of this effect, there may be increase in crime rate. Capitalism creates an atmosphere of job insecurity while socialism ensures job security.

In conclusion, there may be diverse views on which is the best economic system. Regardless combining the two economic systems together otherwise known as mixed economy can be a better option as that will to some extent reduce the shortcomings of both of the economic systems.