Terminology
Different people mean different things when they use the terms “capitalism” and “socialism”, depending on whether they are in favor of the idea or against it. Often, supporters of one ideology focus only on its advantages and use the opposing term as a derogatory label. This leads to futile arguments. Therefore, the goal of this page is to clarify some of the meaning, and suggest a more fruitful approach.
[This page requires improvement and re-editing]
Common Ground
It seems that both sides agree that capitalism advocates minimizing market intervention by the government, reducing taxes, and promoting private ownership of as many assets as possible. In contrast, socialism advocates increasing government involvement in the economy, raising taxes, and state ownership of some resources in order to fund social services and reduce “inequality” and unfair exploitation of less wealthy people by the more wealthy people.
Issues
Supporters of capitalism emphasize that it promotes individual sovereignty (personal freedom) and personal responsibility.
Care and concern for the weak in society: Critics of capitalism argue that it lacks compassion and care for others because it abandons the weak and the poor. Those with money can afford essential services like healthcare and education, while the poor, who lack funds, are left without such services or with poor-quality alternatives. However, supporters of capitalism argue that the state can in fact provide a financial safety net, but it should do so only for the truly unfortunate who cannot work (e.g. people with permanent or temporary debilitating disabilities) and not for those who can work but are unwilling to, who exploit the system and live at the expense of others. They also argue that concern for the weak should be expressed through personal initiatives (philanthropy and volunteering) rather than through coercion (i.e. welfare payments that are funded by taxation).
Fair economy: Supporters of socialism are in favor of centralized management of production resources, arguing that this enables a more equal and just society. They claim that capitalism, with an unregulated free market, does not lead to fair and perfect competition but rather to the concentration of power in the hands of a few (e.g. monopolies, tycoons). On the other hand, critics of socialism argue that despite the good intentions behind using government regulation to create fair competition, in practice it results in a ruling bureaucratic class, which becomes the new elite, relying on favoritism and nepotism. They argue that centralized management cannot be effective and efficient, as it cannot reach or adapt to the huge number of small details in the market.
Economic inequality: Critics of (neo-liberal) capitalism argue that it causes wealth produced by everyone to be transferred from the hands of the producers (workers) to the capital owners (tycoons), leading to an unjust society with large economic disparities—hence the label “predatory capitalism”. However, supporters of capitalism argue that even when inequality is greater in capitalist countries, the poor people in those countries are still generally better off than the poor in socialist countries, because a free market encourages production and economic growth, and increases the supply of goods and services—thereby lowering prices and raising wages for everyone.
Political power: Critics of capitalism argue that economic inequality translates into unfair differences in political power—the richest individuals have more influence over the government through lobbying, media ownership (capital-government-media ties, crony capitalism), and the poor don’t have a good chance of improving their economic, health, and emotional wellbeing compared to the middle class. These critics say that encouraging economic growth through a free market alone is not enough to improve quality of life for all. They state that the fruits of growth must reach many, not just a few. Therefore, socialists support redistribution of wealth through taxation on the rich and payments to the poor.
Conclusion
In practice, most countries operate according to a mix of elements from both ideologies (e.g. see social market economy). Therefore, the use of the terms “capitalism” and “socialism” can be very confusing and may hinder productive discussion and the clarification of desirable policies. Instead, it’s better to mention the specific issues you want to talk about instead of using broad and imprecise terms like “capitalism” and “socialism”.