Capitalism and Socialism are both economic schools of thought that are to an extent virtually opposite of each other. Understanding the differences between them is important as it can help you understand a great deal about economic discussion and thought.
Capitalism: To each their own. Markets should be free of government intervention and the principles of supply and demand will produce the best economic outcome for society as a whole. Government should not be involved as the market will provide the most efficient responses needed.
Socialism: Individuals should have access to what they need but are also rewarded based on their contribution to society. Large scale industry and public services should be communally or government owned and managed to ensure the benefits flow to society as a whole.
Ownership of Property
Capitalism: Private property and ownership of industry and other capital goods should be dominant, public and government property should be very limited in scope (or non-existent).
Socialism: Individuals own their personal goods like clothes or homes, but means of production and most land would be public and communal ownership.
Freedom of Choice
Capitalism: All individuals make their own decisions and will make the best one for them as they know they will live with the consequences.
Socialism: Individuals have freedom to make decisions that impact them alone, but wide scale issues like health care and education are collectively are driven by communal consensus and what is best for society.
Access to Services
Capitalism: Access to services (healthcare, education, etc.) is driven by what you have the means to pay for.
Socialism: Everyone has equal and free access to the services they may need.
Both: Freedom of religion – everyone can make their own personal decisions.
Key Economic Principles
Capitalism: Supply and demand and the ability of buyers and sellers to make the best decisions for them will ensure effective pricing in the markets. There is an emphasis on individual profit versus making decisions to benefit society as a whole. Individuals who make bad decisions or do not contribute are on their own.
Socialism: Collective decision making in the market place will ensure that everyone has what they need and that decisions are made in the best interests of society. Individuals who work harder and smarter can benefit more, but those that do not will still have their basic needs addressed.
Capitalism Vs Socialism in Practice
In reality there are no pure capitalist or socialist countries in the world, rather you could consider each principle to be at either end of a spectrum and some countries are closer to being Capitalist or closer to being Socialist. Most countries have some free market (Capitalist) principles but also have some broad social benefit (Socialist) principles in place. People tend to view the United States as being closer to the Capitalist principles, and countries like Canada or Norway being more Socialist in nature. Democrats lean toward Socialism; Republicans toward Capitalism. In reality they are all a mix of principles, just a little more leaning 1 direction and the other.
There are No pure Capitalist or Socialist countries.