Capitalism vs Socialism  

The main difference between capitalism and Socialism is the extent of government intervention ion the economy. There are also different aims of the economic systems.

Economic System

Capitalism

Socialism

Equity Capitalism is unconcerned about equity. It is argued that inequality is essential to encourage innovation and economic development Socialism is concerned with redistributing resources from the rich to the poor. This is to ensure everyone has both equal opportunities and equal outcomes.
Ownership Private businesses will be owned by private individuals The State will own and control the main means of production. In some models of socialism, ownership would not be by the government but worker cooperatives.
Efficiency It is argued that the profit incentive encourages firms to be more efficient, cut costs and innovate new products that people want It is argued that state ownership often leads to inefficiency because workers and managers lack any incentive to cut costs
Unemployment In capitalist economic systems, the state doesn’t directly provide jobs. Therefore in times of recession, unemployment in capitalist economic systems can rise to very high levels Employment is often directed by the state. therefore, the state can provide full employment even if workers are not doing anything particularly essential.
Price Controls Prices are determined by market forces. Firms with monopoly power may be able to exploit their position and charge much higher prices. In a state managed economy prices are usually set by the government this can lead to shortages and surpluses

 

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