Difference Between Capitalism, Socialism and Communism - Detailed Comparison & Types & More!

The Difference Between Capitalism, Socialism, and Communism depends on their philosophies, policies, and actions. Without the involvement of the State, capitalism supports a free market and a healthy economy as a whole. Socialism uses flexible methods to manage the state. Communism supports the total control of the government’s overall production standards and other resources. Socialism employs flexible types of state control. Communism seeks total governmental control over all means of production and resources, while capitalism supports a free market and an unrestricted free economy.

The Difference Between Capitalism, Socialism, and Communism is one of the most important topics for the UPSC IAS exam. It covers a significant part of the World History subject in the General Studies Paper-1 syllabus, and the capitalism topic also forms a part of the Economy subject in the General Studies Paper-3 syllabus.

In this article, we shall study in detail the types of capitalism, communism, and socialism and the difference between capitalism, socialism, and communism UPSC. 

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Download World History UPSC Notes with the linked article!

Difference Between Capitalism, Socialism and Communism – Detailed Comparison & Types & More : Download PDF Here!

Difference between Capitalism, Socialism, and Communism

Capitalism, Socialism, and Communism are terms that are based on ideologies, religious choices, historical origins, a country’s welfare system, and possession of financial resources. Let’s discuss the differences between Capitalism, Socialism, and Communism in detail.

Difference between Capitalism, Socialism, and Communism
Capitalism	Socialism	Communism
The term “Capitalism” was first recognized by Das Kapital in 1867. However, Adam Smith is regarded as the founder of Modern Capitalism.	The term “socialism” was first coined to refer to the ideologies advocated by the French utopian socialists Charles Fourier and Henri Saint-Simon.	According to London Owenite (John) Goodwyn Barmby (1820–1881), who claimed in 1848, the term Communism was coined in 1840.
Capitalism originated in the 15th and 16th centuries, during the early Renaissance. However, Western Europe and the European descendants of the Americas and Oceania saw the emergence of modern capitalism in the early nineteenth century.	Socialism was more apparent after 1848 and near the end of the 18th century. However, The Industrial Revolution is when socialism as a political movement first emerged.	Communalism was founded by the German Philosopher Karl Marx in 1848. Communism has its deep roots in the theory of Marxism.
Capitalism is an economic structure where private persons own the production equipment.	Socialism is an economic system in which the government owns and controls the majority of the means of production.	Communism is an economic system in which, in theory, all goods are owned jointly and income is distributed according to need.
In capitalist states, government control and interference are seen as a minimum.	Socialists believe in using incremental methods to achieve their aims of governmental ownership and control of production.	In communism, people aren’t given a lot of choices to choose what to make.
The capitalist economic system is dynamic.	The Socialist economic system is flexible.	The Communist state has a static economic system.
Private ownership of natural resources and properties is permitted.	There is competition in the nationalization of property, owner compensation, avoidance of overproduction, and duplication of effort.	There isn’t much flexibility for people to choose what to make. Individuals work to their full potential with compensation \ determined by the government. In most controlled economies, incentives are used to encourage work at its full potential.
In capitalist states, people are not much concerned about their religious choices.	People can freely promote their religion in socialism.	There is no place for religion in communism. The people and institutions completely ignore it.
In capitalism, only wealthy people who can afford to pay for their services are eligible for the welfare system.	Socialism is concerned with the well-being of society and is the state’s primary concern, without exception.	Communism supports social welfare for all, with a concentration on public health and education
In line with democratic and liberal ideals, capitalism seeks to establish a free society, economy, and market.	Socialism does not always seek to build a communist system of government. It is possible for it to coexist with capitalist policies, resulting in a mixed economy.	Establishing a communist egalitarian order is communism’s ultimate goal; this is typically done through revolutions or authoritarian governments.

Know the Difference Between Marxism and Communism with the linked article!

What is Capitalism?

Capitalism is referred to as an economic system where individual actors own and control property according to their interests and where supply and demand freely determine market prices in a way that can best serve society. A capitalist economy allows for the private ownership and control of capital assets like mines, factories, and railroads. It also allows for the purchase of labour for monetary wages, the accrual of capital gains to private owners, and allocating of capital and labour between competing uses through market prices.

Capitalism is founded on pillars such as self-interest, private ownership of property, the restricted role of government to protect the rights of individuals, market mechanisms to determine prices through decentralization, customers’ satisfaction, and their freedom to choose investment, consumption, and production.

Types of Capitalism

• Responsible Capitalism: social market economy or “responsible capitalism” is fundamentally a free market economy with some degree of government control to prevent the excesses and injustices of capitalism.
• Advanced Capitalism: A macroeconomic and macrocultural system known as advanced capitalism significantly impacts people’s well-being.
• Turbo Capitalism: This refers to a style of capitalism that is unregulated, has financial deregulation, privatization, and lower taxes for the wealthy.
• Crony Capitalism describes a situation where a company’s ability to succeed depends on its ability to strategically influence politicians, public servants, and other people in authority. “Crony capitalism” exists in China, South Korea, and Latin America.
• State Capitalism: State capitalism happens when publicly held businesses play a significant role in the market economy. The government also has a significant role in planning under state capitalism, such as when deciding to invest in transportation and communication.
• Vulture Capitalism: Vulture capitalism is buying up faltering businesses, selling off their assets, and allowing a select group of venture capitalists to profit financially at the expense of legitimate businesses and everyday workers. The phrase comes from the vulture bird, which hunts down and kills distressed creatures.
• Mercantilism: Governments adopted this economic strategy to strengthen their states at the expense of other nations. Governments wanted to build up their riches in the form of gold or silver and make sure that exports outpaced imports.

Check the Notes on Social Structure in India for UPSC Preparation!

What is Socialism?

Socialism is a form of politics and economics in which the government has no authority over the means of production or private property. The fundamental idea behind socialism is that having public ownership of the means of production promotes societal equality. The idea of the communal society was first put forward in Plato’s “Republic,” where one can find the intellectual foundations of socialism. The rise of socialism was in opposition to capitalism. Early in the 20th century, socialism evolved in India as a political movement in opposition to the British-imposed Land Revenue Settlement system.

There are many different forms of socialism, ranging from democratic socialism to revolutionary socialism, and different socialist thinkers and movements have proposed different ways of achieving a socialist society. However, some core principles often associated with socialism include the abolition of private property, collective ownership of the means of production, eliminating economic inequality, and pursuing of social and economic justice.

Types of Socialism

Socialism exists in a variety of forms around the world. Additionally, each variety of socialism has its significance. Some of the types of socialism are discussed below.

• Market Socialism: The definition of market socialism is the control of production by common working-class people.
  • Allowing the workers to manage resource distribution is a good idea. They must use the free market to sell the surplus.
• Democratic Socialism: Democratic socialism spreads socialist principles within a democratic framework.
  • In democratic socialism, the government is claimed to run the society and economy.
  • Planning allows for the equitable distribution of production resources throughout society and satisfies all needs.
• Revolutionary Socialism: According to the definition of revolutionary socialism, capitalism and socialism cannot coexist.
  • The evils of capitalism must be eliminated from society. It takes a lot of struggle to achieve pure socialism in its truest form.
  • The means of production ought to be controlled centrally by the workers.
• Marxian socialism refers to a particular historical stage of financial development and its associated social relations.
  • Marxists hold that every aspect of a person’s life, from religious convictions to legal frameworks to cultural norms, is impacted by economic and social conditions.

Check out the article on Economic Growth And Development for UPSC preparation!

What is Communism?

Communism is a philosophical, social, political, and economic philosophy that promotes eliminating all forms of social class, money, and state to create a society based on a socioeconomic system of shared ownership of resources. The principles of capitalism and private property ownership are squarely at odds with it. Karl Marx and Friedrich Engels created the communist philosophy, which promoted the use of resources created by, for, and within society. The Communist Manifesto, first published in 1848, contains the ideas that Karl Marx presented most strongly identified with the form of government known as communism.

Types of Communism

• Marxism: One of the most important philosophies significantly contributing to the modern world is Marxism.
  • Marxism is a social, economic, and political ideology that examines how the influence of the ruling class on the working class affects how wealth and advantages are distributed in society.
• Marxism-Leninism: Marxism-Leninism was the primary communist movement of the 20th century and is a political theory.
  • It refers to abiding by Marxist and Leninist principles. The Marxism of the time of imperialism and the proletariat revolution is Leninism.
• Stalinism: When Joseph Stalin served as General Secretary of the Central Committee of the Communist Party of the Soviet Union from 1934 to 1953, he instituted the political and economic system known as “Stalinism” in the Soviet Union.
  • It entails the employment of a command economy, intensive propaganda to create a personality cult around an absolute dictator, and the secret police to uphold societal subjection.
• Trotskyism: The Marxist doctrine promoted by Leon Trotsky is known as Trotskyism.
  • Trotsky, an orthodox Marxist and Leninist, advocated creating a vanguard party that would impose socialism through “all means necessary.”.
• Maoism: Maoism is a form of communism established by Mao Tse Tung.
  • It is a theory to seize State power via violent rebellion, widespread mobilization, and tactical partnerships.
  • The Maoists’ insurgency strategy also includes propaganda and misinformation against State institutions.
  • This process, which Mao referred to as the “Protracted Peoples War,” strongly emphasises the “military line” to seize power.

Conclusion

Three distinct ideologies—Capitalism, Socialism, and Communism—each have a distinct meaning and application strategy. The difference between capitalism, socialism, and communism provides insight into different countries' economic and political systems. The idea is not new to India; it dates back to the British colonial era. However, after achieving independence, socialist principles were adopted instead of capitalist principles for formulating the Constitution. Consequently, socialism and capitalism, i.e. mixed economy, are currently present in India.

Difference Between Communism, Capitalism, and Socialism UPSC Previous Year Mains Questions

1. Capitalism has guided the world economy to unprecedented prosperity. However, it often encourages shortsightedness and contributes to the wide disparities between the rich and the poor. In this light, would it be correct to believe and adopt capitalism driving inclusive growth in India? Discuss. (Statement lifted from Business-world column. (2014)

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