Features Of Socialism And Capitalism Essay

Socialism: Characteristics, Pros, Cons, Examples and Types

What It Is, How It Works, Comparison to Capitalism, Communism, Fascism

Socialism is an economic system where everyone in the society equally owns the factors of production. The ownership is usually through a democratically-elected government. It could also be a cooperative or a public corporation where everyone owns shares. The four factors of production are labor, entrepreneurship, capital goods and natural resources. 

Socialism's mantra is, "From each according to his ability, to each according to his contribution." Everyone in society receives a share of the production based on how much they've contributed.

That motivates them to work long hours if they want to receive more.

Workers receive their share after a percent has been deducted for the common good. Examples are transportation, defense and education. Some also define the common good as caring for those who can't directly contribute to production. Examples include the elderly, children and their caretakers. (Source: State and Revolution, Vladimir Lenin. Critique of the Gotha Program, Karl Marx.)

Socialism assumes that the basic nature of people is cooperative. That nature hasn't yet emerged in full because capitalism or feudalism has forced people to be competitive. Therefore, a basic tenet of socialism is that the economic system must support this basic human nature for these qualities to emerge.

These factors are valued for their usefulness to people. This includes individual needs and greater social needs. That might include preservation of natural resources, education or health care.That requires most economic decisions to be made by central planning, as in a command economy.


Workers are no longer exploited, since they own the means of production. All profits are spread equitably among all workers, according to his or her contribution. The cooperative system realizes that even those who can't work must have their basic needs met, for the good of the whole.

That means poverty is eliminated and everyone has equal access to health care and education.

No one is discriminated against. 

Everyone works at what they are best at and what they enjoy. If society needs jobs to be done that no one wants, It offers higher compensation to make it worthwhile.

Natural resources are preserved, again for the good of the whole.


The biggest disadvantage of socialism is that it relies on the cooperative nature of humans to work. Therefore, those within society who are competitive, not cooperative, will always seek to overthrow and disrupt it for their own gain. 

A second related criticism is that it doesn't reward people for being entrepreneurial and competitive. Therefore, it won't be as innovative as a capitalistic society.

A third possibility is that the government set up to represent the masses may abuse its position and claim power for itself. 

Difference Between Socialism, Capitalism, Communism and Fascism

Factors of production are owned byEveryoneIndividualsEveryoneIndividuals
Factors of production are valued forUsefulness to peopleProfitUsefulness to peopleNation building
Allocation decided byCentral planLaw of demand and supplyCentral planCentral plan
From each according to hisAbilityMarket decidesAbilityValue to the nation
To each according to hisContributionWealthNeed

Examples of Socialist Countries

There are no countries that are 100 percent socialist, according to the Socialist Party of the United Kingdom. Most have mixed economies that incorporate socialism with capitalism, communism or both. Here's a list of countries that are considered to have a strong socialist system:

Norway, Sweden, and Denmark: The state provides health care, education, and pensions. But these countries also have successful capitalists. The top 10 percent of each nation's people hold more than 65 percent of the wealth. That's because most people don't feel the need to accumulate wealth since the government provides a great quality of life. 

Cuba, China, Vietnam, Russia and North Korea: These countries incorporate characteristics of both socialism and communism.

Algeria, Angola, Bangladesh, Guyana, India, Mozambique, Portugal, Sri Lanka, and Tanzania: These countries all expressly state they are socialist in their constitutions.

Their economies are primarily run by the government. All have democratically-elected governments.

Belarus, Laos, Syria, Turkmenistan, Venezuela, Zambia: These countries all have a very strong aspect governance, ranging from healthcare, the media, or social programs, that are run by the government.

Many other countries, such as Ireland, France, Great Britain, Netherlands, New Zealand, and Belguim, have strong socialist parties and a high level of social support provided by the government. However, most businesses are privately-owned, making them essentially capitalist. 

Many traditional economies use socialism, although many still use private ownership. 

Eight Types of Socialism

There are eight types of socialism. They differ on how capitalism can best be turned into socialism. They also emphasize different aspects of socialism. Here are a few of the major branches, according to "Socialism by Branch," in The Basics of Philosophy.

Democratic Socialism: The factors of production are managed by a democratically-elected government.Central planning distributes common goods, such as mass transit, housing, and energy, while the free market is allowed to distribute consumer goods.  

Revolutionary Socialism: Socialism will emerge only after capitalism has been destroyed. "There is no peaceful road to socialism." The factors of production are owned by the workers and managed by them through central planning.  

Libertarian Socialism: Libertarianism assumes that the basic nature of people is rational, autonomous and self-determining. Once the strictures of capitalism have been removed, people will naturally seek a socialist society that takes care of all. That's because they see it is the best for their own self-interest. 

Market Socialism: Production is owned by the workers, who decide how to distribute among themselves. They would sell excess production on the free market. Or, it could be turned over to society at large, which would distribute it according to the free market. 

Green Socialism: A socialistic economy that highly values the maintenance of natural resources. This will be achieved through public ownership of large corporations. It also emphasizes public transit and locally-sourced food. Production will be focused on making sure everyone has enough of the basics instead of consumer products they don't really need. Everyone will be guaranteed a livable wage. 

Christian Socialism: Christian teachings of brotherhood are the same values expressed by socialism. 

Utopian Socialism: This was more a vision of equality than a concrete plan. It arose in the early 19th century, before industrialization. It would be achieved peacefully through a series of experimental societies. 

Fabian Socialism: A British organization in the late 1900s that advocated a gradual change to socialism through laws, elections, and other peaceful means. 


Their distinctions are many, but perhaps the fundamental difference between capitalism and socialism lies in the scope of government intervention in the economy. The capitalist economic model allows free market conditions to drive innovation and wealth creation; this liberalization of market forces allows for the freedom of choice, resulting in either success or failure. The socialist-based economy incorporates elements of centralized economic planning, utilized to ensure conformity and to encourage equality of opportunity and economic outcome.


In a capitalist economy, property and businesses are owned and controlled by individuals. In a socialist economy, the state owns and controls the major means of production. In some socialist economic models, worker cooperatives have primacy over production. Other socialist economic models allow individual ownership of enterprise and property, albeit with high taxes and stringent government controls.


The capitalist economy is unconcerned about equity (in the sense of equality). The argument is that inequality is the driving force that encourages innovation, which then pushes economic development. The primary concern of the socialist model, in contrast, is an equitable redistribution of wealth and resources from the rich to the poor, out of fairness and to ensure "an even playing field" in opportunity and outcome.


The capitalist argument is that the profit incentive drives corporations to develop innovative new products that have demand in the marketplace. It is argued that the state ownership of the means of production leads to inefficiency because without the motivation to earn more money, management, workers and developers are less likely to put forth the extra effort to push new ideas or products.


In a capitalist economy, the state does not directly employ the workforce. This can lead to unemployment during times of economic recession. In a socialist economy, the state is the primary employer. During times of economic hardship, the socialist state can order hiring, so there is full employment even if workers are not performing tasks that are particularly useful.

Mixed Economy

Some countries incorporate both the private sector system of capitalism and the public sector enterprise of socialism to overcome the disadvantages of both systems. These countries are referred to as having mixed economies. In these economies, the government intervenes to prevent any individual or company from having a monopolistic stance and undue concentration of economic power. Resources in these systems may be owned by both state and individuals.


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