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Capitalism Vs Communism


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“The Political and Economic Theories of Capitalism and Socialism with emphasis on Adam Smith and Karl Marx”–Paul Ebeling

Adam Smith, the renowned Scottish Economist, wrote a book, The Wealth of Nations in which he sparked the idea of Capitalism.

Karl Marx, a Philosopher, and Sociologist, from Germany, initiated the idea of Communism, in his book The Communist Manifesto, as a response to Capitalism.

Marx felt that in order for the proletariat to rise up and take control of the government, it would have to unite and form its own class to overthrow the government.

Centralized property and government and the absence of classes became the basis of communism.

And Socialism practices flexible forms of state control Vs capitalism that advocates a free economy and free-market without state intervention.

The term ‘capitalism’ implies an economic system that advocates private ownership of the means of production, distribution, and exchange, to earn profit. In this system, the determination of production and price of the goods and services are done by the market, i.e. the demand and supply forces play a significant role here.

The Key features of capitalism are individual rights, private property, accumulation of wealth, market economy, free and competitive market, self-interest, minimal government intervention. In a capitalist economy, it is the owners who decide and invest, in the financial and capital market on the production inputs. The competition in the economy decided the price and distribution of merchandise in the economy.

Communism is a form of socialism, in which the means of production, resources, and property are owned and controlled by the egalitarian society, i.e. by the community equally is called Communism. It is based on the idea of shared ownership.

The theory of communism was mainly sparked by the German philosophers cum sociologist Karl Marx and Friedrich Engels. The central principle behind communism is, the contribution and share of each would be based on his ability and needs.

In this political system, the government owns everything and all the individual works for a common goal. Therefore, class distinction does not exist, as all are considered equal. Communism aims at removing the gap between the wealthy and poor and establishing equality in the economy.

The following points are noteworthy so far as the difference between capitalism and communism is concerned:

  1. An economic system in which the trade and industry of the economy are owned and controlled by private individuals to generate profit is called Capitalism. A social system in which a country’s trade and industry are controlled by the community and the share of each individual relies on his ability and needs, is called communism.
  2. Capitalism is based on the Principle of Individual Rights, whereas Communism is based on the Principle of Community Rights.
  3. Capitalism is in favor of class distinction, i.e. working class and capitalist class, hence the degree of class distinction between rich and poor is very high. On the contrary, communism opposes a division of society according to class, as it promotes a classless society, so, there is no gap between rich and poor.
  4. There is a democratic system of government in capitalism. As against this, a totalitarian government system exists in socialism. Totalitarianism is a form of government in which government owns and controls almost everything.
  5. Under capitalism, the government does not have much involvement. In contrast to communism, there is a high level of government intervention.
  6. In capitalism, every individual has to work for himself to create wealth. As opposed to this, in communism wealth is distributed as per needs and ability.
  7. The production inputs like land, labor, and capital are privately owned by the individuals and enterprises, while the means of production are held by the state, in the case of communism.
  8. In communism, more preference is given to society rather than an individual which is not in the case of capitalism, i.e. freedom of the individual is vital.
  9. In capitalism, fierce competition exists between the firms whereas in communism, as the market is controlled by the state, the competition is quite low.
  10. In communism, the profit earned by the enterprise is distributed among all the people of the economy. On the contrary, the profit of the enterprise, in capitalism, is enjoyed by the owner only.
  11. While capitalism can be found in western countries, socialism is more popular in eastern countries of the world.

Both communism and capitalism are a form of social organization, that is associated with trade and industry in the economy and discusses the ownership of property.

As every coin has 2 sides, a heads and tails, so as with the case of communism and capitalism.

In capitalism, the distribution of wealth is uneven, due to which the rich get richer while the poor become poorer.

In communism, there is an equal distribution of wealth, but it does not allow individuals to have private property.

Communism attempts to eliminate capitalism in the economy, as it was introduced, as a response to injustices of capitalism.

But, in practice, communist regimes have taken the form of coercive, authoritarian governments that cared little for the plight of the working class and sought above all else to preserve their own hold on power.

As the Industrial Revolution advanced, socialist critics blamed capitalism for creating a new class of poor, urban factory workers who labored under harsh conditions, and for widening the gulf between rich and poor.

Bottom line

Capitalism generally works better, or much better, than Communism. Human greed and familial bonds consistently turn out to be mightier motivators for most …

Have a prosperous weekend, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.