Socialism VS Capitalism

an economic, political, and social system in which property, business, and industry are privately owned, directed towards making the greatest possible profits for successful organizations and people

a : a system of society or group living in which there is no private property

b : a system or condition of society in which the means of production are owned and controlled by the state

Your definition of Socialism is wrong.

Socialism is when the community owns the means of production rather than private owners or the state. The state version of socialism came after the original idea of socialism.

a : a system of society or group living in which there is no private property

The state version of socialism came after the original idea of socialism.

Originally Socialism was a series of steps which gave the public more and more control over the means of production and diminished the private sector and the state.

Essentially, a society where the state owns the means of production is even less socialist than capitalism.

Socialism can be a tricky thing to define because not only is there an erroneous and bastardised state version of socialism which is not truly socialist but socialism is also both a system in and of itself and an umbrella term for multiple far left systems.

Social democracy, democratic socialism, socialism and communism are all types of socialism.

A decade ago, most people interested in politics associated the words social democracy with business-friendly governments, lower taxes, economic growth, high wages and low unemployment. Social democracy seemed to be the guardian of a new Gilded Age. It meant good times, a positive Third Way between capitalism and socialism. It represented a progressive vision of market reforms, new public management and rising consumption, a shift from savings capitalism to a capitalism of easy lending, the triumph of a new era of ‘privatised Keynesianism’ led by the governments of David Lange, Bill Clinton, Tony Blair and Gerhard Schröder.

Social Democracy is an ideology that seeks to promote egalitarianism within a capitalist system.

The basis of capitalism is individualism. The economic system stems from humanistic ideals of the 18th century European Enlightenment -- beliefs that each human being is individually unique and valuable. This mode of thinking was a turning point. Before the Enlightenment, governments didn't talk about human rights. But in this vision of humanity, a society made up of unique individuals who pursue their individual interests is healthy -- it's characterized by progress, spiritual and worldly wealth, and liberty. Individuals are not just free to pursue self-interested goals; they should pursue self-interested goals.

It's easy to see how this shift in social consciousness became the basis of capitalism. If self-interest is a good thing, and personal wealth is a self-interested goal, then widespread personal wealth is a good thing. And if individual welfare leads to overall social welfare, than individual wealth leads to overall social wealth.

The added philosophical view that turns the social concept of individualism into the economic concept of capitalism came from Adam Smith in the late 1700s. His book, "An Inquiry into the Nature and Causes of the Wealth of Nations," had a profound effect on economic principles. Before Smith, the economic self-interest of the individual was seen as counterproductive -- or at least non-contributory -- to the economic welfare of society as a whole. Smith disagreed with this belief. He suggested two concepts that ultimately became the basis of capitalism:

Because self-interest guides producers to create exactly what people want, the pursuit of personal gain eventually benefits society.

An economy has a natural design. Left to its own devices -- and removed from politics, religion and all other pursuits -- it will regulate itself. As long as no one throws a spoke in the wheel, the economy will work the way it's supposed to, and everyone will benefit.

Smith's overall view is that an "invisible hand" guides the economy through the combination of self-interest, private ownership and competition. The end of this natural economic balance is general social wealth. In other words, everybody benefits.

Real Capitalism: The Practice

In Smith's model, there is a natural economic order that produces the greatest good. Government interference interrupts this natural order. His theory of capitalism plays out like this:

• There is an owner class: The means of production (capital) are owned only by the few people (capitalists) who can pay for them. Modern means of production are things like machines, factories and land.
  
• There is a working class: The people (laborers) who use capital to produce goods and have no ownership of that capital. Capitalists pay the laborers with wages (money), not with the products the laborers produce. The laborers use that money to purchase the goods they want. In this way, no one who purchases goods (the consumer) has any real connection to those goods.
  
• Rational calculation for profit guides production: The capitalists try to judge the market and adjust production accordingly in order to realize the greatest possible profit.
  
• Society is made up of consumers: Because people are disconnected from the goods they produce, the process of buying things, not of creating things, becomes the primary way in which people define themselves.
  
• The more profit the capitalists bring in, the more goods they produce. The more goods the capitalists produce, the lower the price of those goods. The lower the price of goods, the more people can afford to buy, and the higher the standard of living throughout society.
  
• The government's only real role in capitalism is to maintain peace and order so the economy can work without interruption. This laissez-faire (anti-interference) system of economics relies on interconnected, self-regulating networks of producers, consumers and markets that operate on the principles of supply and demand.
  

Essentially, when more people want something, supply goes down and price goes up. When fewer people want something, supply goes up and price goes down. In the end, it's all about finding a way to turn a profit. Profit results from obtaining or producing goods for less than you sell them for. This core value of capitalism dates back thousands of years to a practice known as mercantilism. On the next page, we'll look at how capitalism may owe its very existence to the spread of Islam from the Middle East to Europe.

CAPITALISM TERMINOLOGY

Finance Capitalism: An economic system in which the product is money instead of goods. Profits are obtained through the buying and selling of foreign currencies and financial products like stocks and bonds.

Marxist Economics (or Planned Economy): In the late 19th century, Karl Marx proposed an anti-capitalist economic system. Instead of private ownership for personal gain, Marx promoted public ownership for collective gain -- goods distributed throughout society based on need. Marxism is the basis of the communist economic systems of the former USSR and, until recently, China.

Mixed Economy: A system that incorporates components of pure capitalism and components of a planned economy.

Monopoly Capitalism: A system in which the means of production are all privately owned by huge corporate conglomerates that bring in exorbitant profits by eliminating the competition component of the free market.

Pure Capitalism (also Laissez-Faire Economics, Market Economy or Free Market): A system in which the government doesn't interfere. The system works on the principle of a Free Market, in which all financial dealings are controlled by private producers and consumers. Through private ownership, competition and self-interest, the economy achieves a natural balance and maintains the overall economic good.

State Capitalism: An economic system in which the means of production are privately owned, but the state controls the market to various degrees.