Answer:
Step-by-step explanation:
Socialism is an economic and political system under which the means of production are publicly owned. Production and consumer prices are controlled by the government to best meet the needs of the people.
Capitalism is an economic system under which the means of production are privately owned. Production and consumer prices are based on a free-market system of “supply and demand.”
Socialism is most often criticized for its provision of social services programs requiring high taxes that may decelerate economic growth.
Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes.
Socialist governments strive to eliminate economic inequality by tightly controlling businesses and distributing wealth through programs that benefit the poor, such as free education and healthcare. Capitalism, on the other hand, holds that private enterprise utilizes economic resources more efficiently than the government and that society benefits when the distribution of wealth is determined by a freely-operating market.
Capitalism Definition
Capitalism is an economic system under which private individuals own and control businesses, property, and capital—the “means of production.” The volume of goods and services produced is based on a system of “supply and demand,” which encourages businesses to manufacture quality products as efficiently and inexpensively as possible.
Socialism Definition
Socialism describes a variety of economic systems under which the means of production are owned equally by everyone in society. In some socialist economies, the democratically elected government owns and controls major businesses and industries. In other socialist economies, production is controlled by worker cooperatives. In a few others, individual ownership of enterprise and property is allowed, but with high taxes and government control.
Ownership and Income Equality
Capitalists argue that private ownership of property (land, businesses, goods, and wealth) is essential to ensuring the natural right of people to control their own affairs. Capitalists believe that because private-sector enterprise uses resources more efficiently than government, society is better off when the free market decides who profits and who does not. In addition, private ownership of property makes it possible for people to borrow and invest money, thus growing the economy.
Socialists, on the other hand, believe that property should be owned by everyone. They argue that capitalism’s private ownership allows a relatively few wealthy people to acquire most of the property. The resulting income inequality leaves those less well off at the mercy of the rich. Socialists believe that since income inequality hurts the entire society, the government should reduce it through programs that benefit the poor such as free education and healthcare and higher taxes on the wealthy.
Consumer Prices
Under capitalism, consumer prices are determined by free market forces. Socialists argue that this can enable businesses that have become monopolies to exploit their power by charging excessively higher prices than warranted by their production costs.
Efficiency and Innovation
The profit incentive of capitalism’s private ownership encourages businesses to be more efficient and innovative, enabling them to manufacture better products at lower costs. While businesses often fail under capitalism, these failures give rise to new, more efficient businesses through a process known as “creative destruction.”
Healthcare and Taxation
Socialists argue that governments have a moral responsibility to provide essential social services. They believe that universally needed services like healthcare, as a natural right, should be provided free to everyone by the government. To this end, hospitals and clinics in socialist countries are often owned and controlled by the government.
Capitalist and Socialist Countries Today
Today, there are few if any developed countries that are 100% capitalist or socialist. Indeed, the economies of most countries combine elements of socialism and capitalism.
In Norway, Sweden, and Denmark—generally considered socialist—the government provides healthcare, education, and pensions. However, private ownership of property creates a degree of income inequality. An average of 65% of each nation’s wealth is held by only 10% of the people—a characteristic of capitalism.
The economies of Cuba, China, Vietnam, Russia, and North Korea incorporate characteristics of both socialism and communism.
While countries such as Great Britain, France, and Ireland have strong socialist parties, and their governments provide many social support programs, most businesses are privately owned, making them essentially capitalist.