Socialism vs. Capitalism: What Is the Difference?

Fokusiert / Getty Images

  • U.S. Economy
  • Supply & Demand
  • Archaeology
  • B.S., Texas A&M University

Socialism and capitalism are the two main economic systems used in developed countries today. The main difference between capitalism and socialism is the extent to which the government controls the economy.

Key Takeaways: Socialism vs. Capitalism

  • Socialism is an economic and political system under which the means of production are publicly owned. Production and consumer prices are controlled by the government to best meet the needs of the people.
  • Capitalism is an economic system under which the means of production are privately owned. Production and consumer prices are based on a free-market system of “supply and demand.”
  • Socialism is most often criticized for its provision of social services programs requiring high taxes that may decelerate economic growth.
  • Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes.

Socialist governments strive to eliminate economic inequality by tightly controlling businesses and distributing wealth through programs that benefit the poor, such as free education and healthcare. Capitalism, on the other hand, holds that private enterprise utilizes economic resources more efficiently than the government and that society benefits when the distribution of wealth is determined by a freely-operating market.

The United States is generally considered to be a capitalist country, while many Scandinavian and Western European countries are considered socialist democracies. In reality, however, most developed countries—including the U.S.—employ a mixture of socialist and capitalist programs.

Capitalism Definition

Capitalism is an economic system under which private individuals own and control businesses, property, and capital—the “means of production.” The volume of goods and services produced is based on a system of “ supply and demand ,” which encourages businesses to manufacture quality products as efficiently and inexpensively as possible.

In the purest form of capitalism— free market or laissez-faire capitalism—individuals are unrestrained in participating in the economy. They decide where to invest their money, as well as what to produce and sell at what prices. True laissez-faire capitalism operates without government controls. In reality, however, most capitalist countries employ some degree of government regulation of business and private investment.

Capitalist systems make little or no effort to prevent income inequality . Theoretically, financial inequality encourages competition and innovation, which drive economic growth. Under capitalism, the government does not employ the general workforce. As a result, unemployment can increase during economic downturns . Under capitalism, individuals contribute to the economy based on the needs of the market and are rewarded by the economy based on their personal wealth.

Socialism Definition 

Socialism describes a variety of economic systems under which the means of production are owned equally by everyone in society. In some socialist economies, the democratically elected government owns and controls major businesses and industries. In other socialist economies, production is controlled by worker cooperatives. In a few others, individual ownership of enterprise and property is allowed, but with high taxes and government control. 

The mantra of socialism is, “From each according to his ability, to each according to his contribution.” This means that each person in society gets a share of the economy’s collective production—goods and wealth—based on how much they have contributed to generating it. Workers are paid their share of production after a percentage has been deducted to help pay for social programs that serve “the common good.” 

In contrast to capitalism, the main concern of socialism is the elimination of “rich” and “poor” socio-economic classes by ensuring an equal distribution of wealth among the people. To accomplish this, the socialist government controls the labor market, sometimes to the extent of being the primary employer. This allows the government to ensure full employment even during economic downturns. 

The Socialism vs. Capitalism Debate  

The key arguments in the socialism vs. capitalism debate focus on socio-economic equality and the extent to which the government controls wealth and production.

Ownership and Income Equality 

Capitalists argue that private ownership of property (land, businesses, goods, and wealth) is essential to ensuring the natural right of people to control their own affairs. Capitalists believe that because private-sector enterprise uses resources more efficiently than government, society is better off when the free market decides who profits and who does not. In addition, private ownership of property makes it possible for people to borrow and invest money, thus growing the economy. 

Socialists, on the other hand, believe that property should be owned by everyone. They argue that capitalism’s private ownership allows a relatively few wealthy people to acquire most of the property. The resulting income inequality leaves those less well off at the mercy of the rich. Socialists believe that since income inequality hurts the entire society, the government should reduce it through programs that benefit the poor such as free education and healthcare and higher taxes on the wealthy. 

Consumer Prices

Under capitalism, consumer prices are determined by free market forces. Socialists argue that this can enable businesses that have become monopolies to exploit their power by charging excessively higher prices than warranted by their production costs. 

In socialist economies, consumer prices are usually controlled by the government. Capitalists say this can lead to shortages and surpluses of essential products. Venezuela is often cited as an example. According to Human Rights Watch, “most Venezuelans go to bed hungry.” Hyperinflation and deteriorating health conditions under the socialist economic policies of President Nicolás Maduro have driven an estimated 3 million people to leave the country as food became a political weapon. 

Efficiency and Innovation 

The profit incentive of capitalism’s private ownership encourages businesses to be more efficient and innovative, enabling them to manufacture better products at lower costs. While businesses often fail under capitalism, these failures give rise to new, more efficient businesses through a process known as “creative destruction.” 

Socialists say that state ownership prevents business failures, prevents monopolies, and allows the government to control production to best meet the needs of the people. However, say capitalists, state ownership breeds inefficiency and indifference as labor and management have no personal profit incentive. 

Healthcare and Taxation 

Socialists argue that governments have a moral responsibility to provide essential social services. They believe that universally needed services like healthcare, as a natural right, should be provided free to everyone by the government. To this end, hospitals and clinics in socialist countries are often owned and controlled by the government. 

Capitalists contend that state, rather than private control, leads to inefficiency and lengthy delays in providing healthcare services. In addition, the costs of providing healthcare and other social services force socialist governments to impose high progressive taxes while increasing government spending, both of which have a chilling effect on the economy. 

Capitalist and Socialist Countries Today 

Today, there are few if any developed countries that are 100% capitalist or socialist. Indeed, the economies of most countries combine elements of socialism and capitalism.

In Norway, Sweden, and Denmark—generally considered socialist—the government provides healthcare, education, and pensions. However, private ownership of property creates a degree of income inequality. An average of 65% of each nation’s wealth is held by only 10% of the people—a characteristic of capitalism.

The economies of Cuba, China, Vietnam, Russia, and North Korea incorporate characteristics of both socialism and communism .

While countries such as Great Britain, France, and Ireland have strong socialist parties, and their governments provide many social support programs, most businesses are privately owned, making them essentially capitalist.

The United States, long considered the prototype of capitalism, isn’t even ranked in the top 10 most capitalist countries, according to the conservative think tank Heritage Foundation. The U.S. drops in the Foundation’s Index of Economic Freedom due to its level of government regulation of business and private investment.

Indeed, the Preamble of the U.S. Constitution sets one the nation’s goals to be “promote the general welfare.” In order to accomplish this, the United States employs certain socialist-like social safety net programs , such as Social Security, Medicare, food stamps , and housing assistance.

Contrary to popular belief, socialism did not evolve from Marxism . Societies that were to varying degrees “socialist” have existed or have been imagined since ancient times. Examples of actual socialist societies that predated or were uninfluenced by German philosopher and economic critic Karl Marx were Christian monastic enclaves during and after the Roman Empire and the 19th-century utopian social experiments proposed by Welsh philanthropist Robert Owen. Premodern or non-Marxist literature that envisioned ideal socialist societies include The Republic by Plato , Utopia by Sir Thomas More, and Social Destiny of Man by Charles Fourier. 

Socialism vs. Communism

Unlike socialism, communism is both an ideology and a form of government. As an ideology, it predicts the establishment of a dictatorship controlled by the working-class proletariat established through violent revolution and the eventual disappearance of social and economic class and state. As a form of government, communism is equivalent in principle to the dictatorship of the proletariat and in practice to a dictatorship of communists. In contrast, socialism is not tied to any specific ideology. It presupposes the existence of the state and is compatible with democracy and allows for peaceful political change.

Capitalism 

While no single person can be said to have invented capitalism, capitalist-like systems existed as far back as ancient times. The ideology of modern capitalism is usually attributed to Scottish political economist Adam Smith in his classic 1776 economic treatise The Wealth of Nations. The origins of capitalism as a functional economic system can be traced to 16th to 18th century England, where the early Industrial Revolution gave rise to mass enterprises, such as the textile industry, iron, and steam power . These industrial advancements led to a system in which accumulated profit was invested to increase productivity—the essence of capitalism.

Despite its modern status as the world’s predominant economic system, capitalism has been criticized for several reasons throughout history. These include the unpredictable and unstable nature of capitalist growth, social harms, such as pollution and abusive treatment of workers, and forms of economic disparity, such as income inequality . Some historians connect profit-driven economic models such as capitalism to the rise of oppressive institutions such as human enslavement , colonialism , and imperialism .

Sources and Further Reference

  • “Back to Basics: What is Capitalism?” International Monetary Fund , June 2015, https://www.imf.org/external/pubs/ft/fandd/2015/06/basics.htm.
  • Fulcher, James. “Capitalism A Very Short Introduction.” Oxford, 2004, ISBN 978-0-19-280218-7.
  • de Soto, Hernando. The Mystery of Capital.” International Monetary Fund , March, 2001, https://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm.
  • Busky, Donald F. “Democratic Socialism: A Global Survey.” Praeger, 2000, ISBN 978-0-275-96886-1.
  • Nove, Alec. “The Economics of Feasible Socialism Revisited.” Routledge, 1992, ISBN-10: 0044460155.
  • Newport, Frank. “The Meaning of ‘Socialism’ to Americans Today.” Gallup , October 2018), https://news.gallup.com/opinion/polling-matters/243362/meaning-socialism-americans-today.aspx.
  • The Differences Between Communism and Socialism
  • A Mixed Economy: The Role of the Market
  • What Is Socialism? Definition and Examples
  • The Main Points of "The Communist Manifesto"
  • America's Capitalist Economy
  • 5 Things That Make Capitalism "Global"
  • The Three Historic Phases of Capitalism and How They Differ
  • What Is Capitalism?
  • What Is Communism? Definition and Examples
  • The Critical View on Global Capitalism
  • What Is the Meaning of Globalization in Sociology?
  • A List of Current Communist Countries in the World
  • All About Marxist Sociology
  • How to Be an Ethical Consumer in Today's World
  • The Globalization of Capitalism
  • Student Opportunities

About Hoover

Located on the campus of Stanford University and in Washington, DC, the Hoover Institution is the nation’s preeminent research center dedicated to generating policy ideas that promote economic prosperity, national security, and democratic governance. 

  • The Hoover Story
  • Hoover Timeline & History
  • Mission Statement
  • Vision of the Institution Today
  • Key Focus Areas
  • About our Fellows
  • Research Programs
  • Annual Reports
  • Hoover in DC
  • Fellowship Opportunities
  • Visit Hoover
  • David and Joan Traitel Building & Rental Information
  • Newsletter Subscriptions
  • Connect With Us

Hoover scholars form the Institution’s core and create breakthrough ideas aligned with our mission and ideals. What sets Hoover apart from all other policy organizations is its status as a center of scholarly excellence, its locus as a forum of scholarly discussion of public policy, and its ability to bring the conclusions of this scholarship to a public audience.

  • Douglas Rivers
  • Philip Zelikow
  • Steven Koonin
  • Arun Majumdar
  • Chester E. Finn Jr.
  • John H. Cochrane
  • China's Global Sharp Power Project
  • Economic Policy Group
  • History Working Group
  • Hoover Education Success Initiative
  • National Security Task Force
  • National Security, Technology & Law Working Group
  • Middle East and the Islamic World Working Group
  • Military History/Contemporary Conflict Working Group
  • Renewing Indigenous Economies Project
  • State & Local Governance
  • Strengthening US-India Relations
  • Technology, Economics, and Governance Working Group
  • Taiwan in the Indo-Pacific Region

Books by Hoover Fellows

Books by Hoover Fellows

Economics Working Papers

Economics Working Papers

Hoover Education Success Initiative | The Papers

Hoover Education Success Initiative

  • Hoover Fellows Program
  • National Fellows Program
  • Student Fellowship Program
  • Veteran Fellowship Program
  • Congressional Fellowship Program
  • Media Fellowship Program
  • Silas Palmer Fellowship
  • Economic Fellowship Program

Throughout our over one-hundred-year history, our work has directly led to policies that have produced greater freedom, democracy, and opportunity in the United States and the world.

  • Determining America’s Role in the World
  • Answering Challenges to Advanced Economies
  • Empowering State and Local Governance
  • Revitalizing History
  • Confronting and Competing with China
  • Revitalizing American Institutions
  • Reforming K-12 Education
  • Understanding Public Opinion
  • Understanding the Effects of Technology on Economics and Governance
  • Energy & Environment
  • Health Care
  • Immigration
  • International Affairs
  • Key Countries / Regions
  • Law & Policy
  • Politics & Public Opinion
  • Science & Technology
  • Security & Defense
  • State & Local
  • Books by Fellows
  • Published Works by Fellows
  • Working Papers
  • Congressional Testimony
  • Hoover Press
  • PERIODICALS
  • The Caravan
  • China's Global Sharp Power
  • Economic Policy
  • History Lab
  • Hoover Education
  • Global Policy & Strategy
  • National Security, Technology & Law
  • Middle East and the Islamic World
  • Military History & Contemporary Conflict
  • Renewing Indigenous Economies
  • State and Local Governance
  • Technology, Economics, and Governance

Hoover scholars offer analysis of current policy challenges and provide solutions on how America can advance freedom, peace, and prosperity.

  • China Global Sharp Power Weekly Alert
  • Email newsletters
  • Hoover Daily Report
  • Subscription to Email Alerts
  • Periodicals
  • California on Your Mind
  • Defining Ideas
  • Hoover Digest
  • Video Series
  • Uncommon Knowledge
  • Battlegrounds
  • GoodFellows
  • Hoover Events
  • Capital Conversations
  • Hoover Book Club
  • AUDIO PODCASTS
  • Matters of Policy & Politics
  • Economics, Applied
  • Secrets of Statecraft
  • Pacific Century
  • Libertarian
  • Library & Archives

Support Hoover

Learn more about joining the community of supporters and scholars working together to advance Hoover’s mission and values.

pic

What is MyHoover?

MyHoover delivers a personalized experience at  Hoover.org . In a few easy steps, create an account and receive the most recent analysis from Hoover fellows tailored to your specific policy interests.

Watch this video for an overview of MyHoover.

Log In to MyHoover

google_icon

Forgot Password

Don't have an account? Sign up

Have questions? Contact us

  • Support the Mission of the Hoover Institution
  • Subscribe to the Hoover Daily Report
  • Follow Hoover on Social Media

Make a Gift

Your gift helps advance ideas that promote a free society.

  • About Hoover Institution
  • Meet Our Fellows
  • Focus Areas
  • Research Teams
  • Library & Archives

Library & archives

All sections, capitalism vs. socialism.

Over the last century countries have experimented with variations on both capitalism and socialsm. So how do socialism, capitalism, and their many variants compare?

Image

From economic shutdowns to trillions of dollars in new government spending, the 2020 COVID-19 pandemic led to a dramatic increase in government action. While much of the increase was temporary, there is now a growing desire to further expand government. We see calls for single-payer health care systems, expanded child-care subsidies, and trillions of dollars in federal infrastructure investments.

Arguments about what government should and should not do are not new. We regularly see them in the debates over the merits of socialism versus free market capitalism. While these debates are often in the abstract, over the last century countries have experimented with variations on both economic systems. The  Hoover Institution’s Human Prosperity Project  critically examined many of these experiments to see which economic system is best for human flourishing. The video below describes the project’s objectives:

So how do socialism, capitalism, and their many variants compare?

Part 2: How do socialism and capitalism affect income and opportunities?

Delivering broad-based prosperity should be the primary goal of all economic systems, but not all systems deliver the same results. Supporters of capitalism argue that free markets give people—entrepreneurs, investors, and workers—the right incentives to create goods and services that people value. The result is higher standards of living. Those sympathetic to socialism, however, respond that capitalism may produce wealth for some, but without government involvement in the economy many are left behind.

In his Human Prosperity Project essay  Socialism, Capitalism, and Income  economist Edward Lazear analyzed decades of income trends across 162 countries. He studied how incomes for low and high earners changed as countries shifted from government-controlled economies to more market-oriented economies. His conclusion?

The historical record provides evidence on how countries have fared under the two extreme systems as well as under intermediate cases, where countries adopt primarily private ownership and economic freedom but couple that with a large government sector and transfers. The general evidence suggests that both across countries and over time within a country, providing more economic freedom improves the incomes of all groups, including the lowest group.

Lazear points to several specific examples. First, China: in the 1980s, the Chinese Communist government began to adopt market-based reforms. Lazear finds that the market reforms, as skeptics of capitalism would predict, did increase income inequality. But, more importantly, the market reforms lifted millions of people out of poverty. Lazear notes:

Today, the poorest Chinese earn five times as much as they did just two decades earlier. Throughout the 1980s and before, a large fraction of the Chinese population lived in abject poverty. Today’s poor in China remain poor by developed-country standards, but there is no denying that they are far better off than they were even two decades ago. Indeed, the rapid lifting of so many out of the worst state of poverty is likely the greatest change in human welfare in world history.

As the video below highlights, market reforms led to similar economic miracles in India, Chile, and South Korea:

Part 3: What about mixed economies?

Of course, most modern-day critics of capitalism are not advocating for complete government control over the economy. They don’t want the economic policies of the Soviet Union or early Communist China; instead, they point to nations with mixed economies to emulate, such as those featuring social democracy. So how do these policies affect incomes and opportunities?

Economist Lee Ohanian compares the labor market policies of Europe and the United States in his essay The Effect of Economic Freedom on Labor Market Efficiency and Performance . Compared to the United States, European nations have higher minimum wages, stricter rules that prevent the firing of workers, and high rates of unionization. These rules are intended to protect workers, but Ohanian finds that they discourage employment and result in lower compensation rates. His analysis indicates:

These findings have important implications for economic policy making. They indicate that policies that enhance the free and efficient operation of the labor market significantly expand opportunities and increase prosperity. Moreover, they suggest that economic policy reforms can substantially improve economic performance in countries with heavily regulated labor markets and high tax rates.

The video below highlights some of Ohanian’s key findings:

What about the effects of income redistribution and the taxes that pay for it? Supporters argue that these programs keep people out of poverty. Critics, however, argue that financing these systems comes with high costs both to taxpayers and to recipients.

In their essay Taxation, Individual Actions, and Economic Prosperity: A Review , Joshua Rauh and Gregory Kearney consider the effects of raising tax rates on high-income Americans to finance new government spending. They examine the effects of income and wealth taxes in Europe. They find that wealth taxes and high income tax rates discourage high-income filers from investing in a country, which ultimately reduces economic growth. Thus, calls in the United States to increase income and wealth taxes “come despite a body of evidence showing that the country is already one of the more progressive tax regimes in the world, that wealth confiscation results in worse outcomes for the broader economy.”

The long-term consequences of redistribution don’t fall just on taxpayers. Such transfer systems also create incentives for individuals to leave or stay out of the work force. In their contribution to the Human Prosperity Project , economist John Cogan and Daniel Heil consider the effects of Universal Basic Income (UBI) programs, which would provide a “no-strings-attached” cash benefit to families. They find that modern UBI proposals in the United States would either prove costly—requiring tax rates that would reduce incentives to work and invest—or would require steep phase-out provisions that punish recipients who try to re-enter the workforce. In either case, the result is that UBI programs are likely to reduce employment rates, ultimately depriving recipients of long-term economic opportunities.

Part 4: What about other aspects of human flourishing?

Human flourishing is more than material prosperity. For example, it requires a clean environment and access to good health care.

It might seem that socialist economies—where government controls the means of production—would have better environmental track records. Yet the evidence suggests the opposite. In his essay Environmental Markets vs. Environmental Socialism: Capturing Prosperity and Environmental Quality Economist , Terry Anderson summarizes the literature on economic systems’ effects on the environment. He points to research showing that countries with more economic freedom tend to have better environmental outcomes:

Seth Norton calculated the statistical relationship between various freedom indexes and environmental improvements. His results show that institutions—especially property rights and the rule of law—are key to human well-being and environmental quality. Dividing a sample of countries into groups with low, medium, and high economic freedom and similar categories for the rule of law, Norton showed that in all cases except water pollution, countries with low economic freedom are worse off than those in countries with moderate economic freedom, while in all cases those in countries with high economic freedom are better off than those in countries with medium economic freedom. A similar pattern is evident for the rule-of-law measures.

Anderson explains this surprising result with the adage that “no one washes a rental car.” In free-market societies, property rights give individuals incentive to protect and preserve the resources they own. In countries without these property rights provisions, no one has the right incentives, much like no one has the incentive to wash a rental car (except the rental car companies). The video below further explains why free markets and cleaner environments go hand and hand.

What about health care? Many developed nations that have generally free economies have still opted for government-run health care. The programs vary by country. Even in the United States, the government plays a large role in health care. Large government programs such as Medicare and Medicaid provide health care to low-income families, the disabled, and seniors. Nevertheless, relative to most developed nations, the United States relies far more heavily on the private sector and markets.

In his essay  The Costs of Regulation and Centralization in Health Care  Dr. Scott Atlas compares health care in the United States with that in other developed nations. The United States consistently ranks high across a variety of quality metrics. The system offers shorter wait times and faster access to life-saving drugs and medical equipment. The result is that the US system tends to deliver better medical outcomes than other developed nations. Watch this video to learn more:

Part 5: Conclusion

We’ve seen that whether we look at income statistics or environmental outcomes, economies with freer markets tend to have better outcomes. Nevertheless, there still may be unseen dimensions of economic systems that these statistics don’t address. Is there another way to determine which system is best for human flourishing?

Perhaps the best method is to observe where people choose to live when offered the choice. In his essay  Leaving Socialism Behind: A Lesson from German History ,  Russell Berman catalogues widespread immigration from East Germany to West Germany during the Cold War. Watch this video to learn its causes:

Citations and Additional Reading

  • Why did liberal democracies succeed while communist nations failed in the twentieth century? Hoover Institution senior fellow Peter Berkowitz provides an answer in his essay  Capitalism, Socialism, and Freedom .
  • In his essay  Socialism vs. The American Constitutional Structure: The Advantages of Decentralization and Federalism , John Yoo highlights the constitutional provisions that would make it difficult for the United States to adopt widescale socialist policies.
  • Explore the other Human Prosperity Project essays  here .

View the discussion thread.

footer

Join the Hoover Institution’s community of supporters in ideas advancing freedom.

 alt=

1000-Word Philosophy: An Introductory Anthology

1000-Word Philosophy: An Introductory Anthology

Philosophy, One Thousand Words at a Time

Arguments for Capitalism and Socialism

Author: Thomas Metcalf Category: Social and Political Philosophy Wordcount: 993

Editor’s Note: This essay is the second in a two-part series authored by Tom on the topic of capitalism and socialism. The first essay, on defining capitalism and socialism, is available here .

Listen here

Suppose I had a magic wand that allowed one to produce 500 donuts per hour. I say to you, “Let’s make a deal. You use this wand to produce donuts, and then sell those donuts for $500 and give me the proceeds. I’ll give you $10 for every hour you spend doing this. I’ll spend that time playing video games.”

My activity—playing video games—seems pretty easy. Your job requires much more effort. And I might end up with a lot more money than $10 for every hour you work. How is that fair?

In the story, the magic wand is analogous to capital goods : assets (typically machinery and buildings, such as robots, sewing machines, computers, and factories) that make labor, or providing goods and services, more productive. Standard definitions of ‘capitalism’ and ‘socialism’ indicate that, in general, capitalist systems permit people to privately own and control capital goods, whereas socialist systems do not. And capitalist systems tend to contain widespread wage labor, absentee ownership, and property income; socialist systems generally don’t. [1]

Capital goods are morally interesting. As in the case of the magic wand, ownership of capital goods can allow one to make lots of money without working. In contrast, other people have to work for a living. This might be unfair or harmful. This essay surveys and explains the main arguments in this debate. [2]

Commercial donut manufacturing.

1. Capitalism

Arguments for capitalism tend to hold that it’s beneficial to society for there to be incentives to produce, own, and use capital goods like the magic wand, or that it’s wrong to forcibly prevent people from doing so. Here are four arguments for capitalism, stated briefly:

(1) Competition: ‘When individuals compete with each other for profits, this benefits the consumer.’ [3]

Critique : Competition also may encourage selfish and predatory behavior. Competition can also occur in some socialist systems. [4]

(2) Freedom: ‘Preventing people from owning capital restricts their freedom. Seizing their income in the form of taxes may constitute theft.’ [5]

Critiques : Maybe owning property, itself, restricts freedom, by excluding others from using it. [6] If I announce that I own something, I may be thereby announcing that I will force you not to use it. And maybe “freedom” requires the ability to pursue one’s own goals, which in turn requires some amount of wealth. [7] Further, if people must choose between work and starvation, then their choice to work may not be really “free” anyway. [8] And the general distribution of wealth is arguably the result of a morally arbitrary “natural lottery,” [9] which may not actually confer strict property-rights over one’s holdings. [10] I didn’t choose where I was born, nor my parents’ wealth, nor my natural talents, which allow me to acquire wealth. So perhaps it’s not a violation of my rights to take some of that property from me.

(3) Public Goods: [11] ‘When objects, including capital, must be shared with others, then no one is strongly motivated to produce them. In turn, society is poorer and labor is more difficult because production is inefficient.’ [12]

Critique : People might be motivated to produce capital for altruistic reasons, [13] or may be coerced in some socialist systems to do so. Some putatively socialist systems allow for profitable production of capital goods. [14]

  (4) Tragedy of the Commons: ‘When capital, natural resources, or the environment are publicly controlled, no one is strongly motivated to protect them.’ [15]

Critique : As before, people might be motivated by altruism. [16] Some systems with partially-private control of capital may nevertheless qualify as socialist. [17]

2. Socialism

Arguments for socialism tend to hold that it’s unfair or harmful to have a system like in the story of the magic wand, a system with widespread wage labor and property income. Here are four arguments for socialism, stated briefly:

(1) Fairness: ‘It’s unfair to make money just by owning capital, as is possible only in a capitalist system.’ [18]

Critique : Perhaps fairness isn’t as morally important as consent, freedom, property rights, or beneficial consequences. And perhaps wage laborers consent to work, and capital owners have property rights over their capital. [19]

(2) Inequality: ‘When people can privately own capital, they can use it to get even richer relative to the poor, and the wage laborers are left poorer and poorer relative to the rich, thereby worsening the inequality that already exists between capital-owners and wage-laborers.’ [20]

Critiques : This is a disputable empirical claim. [21] And perhaps the ability to privately own capital encourages people to invest in building capital goods, thereby making goods and services cheaper. Further, perhaps monopolies commonly granted by social control over capital are “captured” by wealthy special-interests, [22] which harm the poor by enacting regressive laws. [23]

(3) Labor: ‘Wage laborers are alienated from their labor, exploited, and unfree because they must obey their bosses’ orders.’ [24]

Critiques : If this alienation and exploitation are net-harmful to workers, then why do workers consent to work? If the answer is ‘because they’ll suffer severe hardship otherwise,’ then strictly speaking, this is a critique of allowing poverty, not a critique of allowing wage labor.

(4) Selfishness: ‘When people can privately own capital, they selfishly pursue profit above all else, which leads to further inequality, environmental degradation, non-productive industries, economic instability, colonialism, mass murder, and slavery.’

Critique : These are also disputable empirical claims. Maybe when people are given control over socially -owned capital, they selfishly extract personal wealth from it. [25] Maybe when the environment is socially controlled, everyone is individually motivated to over-harvest and pollute. [26] State intervention in the economy may be a major cause of the existence of non-productive industry, pollution, and economic instability. [27] Last, some of the worst perpetrators of historical evils are governments, not private corporations. [28]

  3. Conclusion

It is difficult to justifiably draw general conclusions about what a pure capitalism or socialism would be like in practice. [29] But an examination of the merits and demerits of each system gives us some guidance about whether we should move a society in either direction.

[1] See my Defining Capitalism and Socialism for an explanation of how to define these systems.

[2] For much-more-extensive surveys, see Gilabert and O’Neill n.d. and Arnold n.d.

[3] By analogy, different people might try to construct even better magic wands, or use them for better purposes. Typically the benefits are thought to include lower prices, increased equality, innovation, and more options. See Smith 2003 [1776]: bk. 1, ch. 2 and Friedman and Friedman 1979: ch. 1.

[4] Schweickart 2011 presents an outline of a market socialism comprising much competition.

[5] By analogy, if I legitimately own the magic wand, then what gives you the right to threaten violence against me if I don’t give it to you? Nozick 1974: ch. 7 presents a general discussion of how socialism might restrict freedom and how taxation may be akin to theft or forced labor.

[6] Spencer 1995 [1871]: 103-4 and Zwolinski 2015 discuss how property might require coercion. See also Scott 2011: 32-33. Indeed, property in general may essentially be theft (Proudhon 1994 [1840]).

[7] See Rawls (1999: 176-7) for this sort of argument. See John Rawls’ ‘A Theory of Justice’ by Ben Davies for an introduction.

[8] See e.g. Burawoy 1979 for a discussion of whether workers consent to work. See also Marx 2004 (1867): vol. IV, ch. VII.

[9] Rawls 1999: 62 ff.

[10] Relatedly, while one may currently hold capital, one may greatly owe the existence of that product to many other people or to society in general. See e.g. Kropotkin 2015 [1913]: chs. 1-3 and Murphy and Nagel 2002.

[11] A public good is a good that is non-excludable (roughly, it is expensive to prevent people from using it) and non-rivalrously consumed (roughly, preventing people from using it causes harm without benefiting anyone) (Cowen 2008).

[12] By analogy, why bother building magic wands at all if someone else is immediately going to take it from me and start using it? Standard economic theory holds that public goods (non-excludable and non-rivalrous goods) will, on the free market, be underproduced. This is normally taken to be an argument for government to produce public goods. See e.g. Gaus 2008: 84 ff.

[13] For example, according to Marxist communism, the ideal socialist society would comprise production for use, not for profit. See e.g. Marx 2004 [1867]: vol. 1 ch. 7. See also Kropotkin 1902, which is a defense of the general claim that humans will tend to be altruistic, at least in anarcho-communist systems.

[14] In a market-socialist system (cf. Schweickart 2011), it is possible to make capital goods and sell them at a profit that gets distributed to the laborers.

[15] By analogy, if I know that anyone in the neighborhood can use the magic wand, I might not invest my own time and money to maintain it. But if it’s mine alone, I care a lot more about maintaining it. This is the basis of the well-known ‘Tragedy of the Commons’ alleged problem. See, e.g., Hardin 1968.

[16] Kropotkin 1902.

[17] As before, in Schweickart’s (2011) system, firms will be motivated to protect capital if they must pay for capital’s deprecation, even though the capital is owned by society.

[18] By analogy, as noted, the wand-owner might make lots of money for basically doing no work. Sherman 1995: 130; Schweickart 2011: § 3.2.

[19] See e.g. Friedman 2002 for a collection of consequentialist arguments for capitalism, and Nozick 1974: chs. 3 and 7 for some arguments concerning freedom and capitalist systems.

[20] By analogy, the wand-owner might accumulate so much money as to start buying other magic wands and renting those out as well. See e.g. Piketty 2014.

[21] Taking the world as a whole, wealth in absolute terms has been increasing greatly, and global poverty has been decreasing steeply, including in countries that have moved in mostly capitalist directions. See e.g. World Bank Group 2016: 3. Friedman 1989: ch. 5 argues that capitalism is responsible for the improved position of the poor today compared to the past.

[22] See e.g. Friedman 1989: ch. 7 for a discussion of regulatory capture.

[23] Friedman 2002: chs. IV and IX; Friedman 1989: ch. 4.

[24] By analogy, the person I’ve hired to use the wand might need to obey my orders, because they don’t have a wand of their own to rent out, and they might starve without the job I’ve offered them. Marx 2009 [1932] introduces and develops this concept of alienation. See Dan Lowe’s 2015 Karl Marx’s Conception of Alienation for an overview. See also Anderson 2015 for an argument that private corporations coercively violate their workers’ freedom.

[25] See n. 21 above. This result is most-obvious in countries in which dictators enrich themselves, but there is nothing in principle preventing rulers of ostensibly democratic countries from doing so as well. Presumably this worry explains the presence of the Emoluments Clause in the U. S. Constitution.

[26] See n. 14.

[27] See e.g. Friedman 2002: chs. III and V and the example of compliance costs for regulations.

[28] See Huemer 2013: ch. 6 ff.

[29] All or nearly all large-scale economies have been mixed economies. In contrast, a pure capitalism would be an anarcho-capitalism (see e.g. Gaus 2010: 75 ff. and Huemer 2013), and a pure socialism wouldn’t permit people to privately own scissors. See also the entry “Defining Capitalism and Socialism.”

Anderson, Elizabeth. 2015. Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It) . Princeton, NJ: Princeton University Press.

Arnold, Samuel. N. d. “Socialism.” In The Internet Encyclopedia of Philosophy (ed.), The Internet Encyclopedia of Philosophy , URL = < https://www.iep.utm.edu/socialis/ >

Burawoy, Michael. 1979. Manufacturing Consent: Changes in the Labor Process under Monopoly Capitalism . Chicago, IL and London, UK: The University of Chicago Press.

Cohen, G. A. 2009. Why Not Socialism? Princeton, NJ: Princeton University Press.

Cowen, Tyler. 2008. “Public Goods.” In David R. Henderson (ed.), The Concise Encyclopedia of Economics . Indianapolis, IN: Liberty Fund.

Dagger, Richard and Terence Ball. 2019. “Socialism.” In Encyclopædia Britannica, inc. (ed.), E ncyclopædia Britannica . Retrieved from https://www.britannica.com/topic/socialism

Dahl, Robert A. 1993. “Why All Democratic Countries have Mixed Economies.” Nomos 35: 259-82.

Dictionary.com. N.d. “Capitalism.” URL = < https://www.dictionary.com/browse/capitalism >

Editors of Encyclopædia Britannica. 2019. “Henri de Saint-Simon.” In Encyclopædia Britannica , Retrieved from https://www.britannica.com/biography/Henri-de-Saint-Simon

Friedman, David D. 1989. The Machinery of Freedom: Guide to a Radical Capitalism , Second Edition. La Salle, IL: Open Court Publishing Company.

Friedman, Milton. 2002. Capitalism and Freedom . Chicago, IL: University of Chicago Press.

Friedman, Milton and Rose Friedman. 1979. Free to Choose: A Personal Statement . New York, NY: Harcourt Brace.

Gaus, Gerald. 2010. “The Idea and Ideal of Capitalism.” In George G. Brenkert and Tom L. Beauchamp (eds.), The Oxford Handbook of Business Ethics . New York, NY: Oxford University Press.

Gaus, Gerald. 2008. On Philosophy, Politics, and Economics . Belmont, CA: Thomson Wadsworth.

Gilabert, Pablo and Martin O’Neill. 2019. “Socialism.” In E. N. Zalta (ed.), The Stanford Encyclopedia of Philosophy . Retrieved from https://plato.stanford.edu/entries/socialism/ .

Hardin, Garrett. 1968. “The Tragedy of the Commons.” Science 162(3859): 1243-48.

Herzog, Lisa. 2019. “Markets.” In E. N. Zalta (ed.), The Stanford Encyclopedia of Philosophy , Spring 2019 Edition, URL =https://plato.stanford.edu/archives/spr2019/entries/markets/

Huemer, Michael. 2013. The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey . Houndmills, UK and New York, NY: Palgrave Macmillan.

Investopedia. 2019. “Mixed Economic System.” Retrieved from https://www.investopedia.com/terms/m/mixed-economic-system.asp

Kropotkin, P. 1902. Mutual Aid: A Factor of Evolution . New York, NY: McClure Phillips & Co.

Kropotkin, Peter. 2015 [1913]. The Conquest of Bread. London, UK: Penguin Classics.

Lowe, Dan. 2015. “Karl Marx’s Conception of Alienation.” 1000-Word Philosophy . Retrieved from https://1000wordphilosophy.com/2015/05/13/karl-marxs-conception-of-alienation/.

Marx, Karl. 2009 [1932]. “Economic and Philosophic Manuscripts of 1844.” In Karl Marx and Friedrich Engels, Economic and Philosophic Manuscripts of 1844 and the Communist Manifesto , tr. Martin Milligan (Amherst, NY: Prometheus Books), pp. 13-202.

Marx, Karl. 2004 [1867]. Capital: A Critique of Political Economy, Volume One . New York, NY: Penguin Classics.

Merriam-Webster. N.d. “Capitalism.” URL = < https://www.merriam-webster.com/dictionary/capitalism >

Mill, John Stuart. 1965 [1848]. Principles of Political Economy with Some of Their Applications to Social Philosophy, Volume I: The Principles of Political Economy I , ed. J. M. Robson. Toronto, ON: University of Toronto Press.

Murphy, Liam and Thomas Nagel. 2002. The Myth of Ownership: Taxes and Justice. Oxford, UK: Oxford University Press.

Nozick, Robert. 1974. Anarchy, State, and Utopia . New York, NY: Basic Books.

Oxford English Dictionary, N.d. a. “Capital.” Retrieved from http://www.oed.com/view/Entry/27450

Oxford English Dictionary. N.d. b. “Capitalism.” Retrieved from http://www.oed.com/view/Entry/27454

Oxford English Dictionary. N.d. c. “Mixed Economy.” Retrieved from http://www.oed.com/view/Entry/120348

Oxford English Dictionary. N.d. d. “Socialism.” Retrieved from http://www.oed.com/view/Entry/183741

Piketty, Thomas. 2014. Capital in the Twenty-First Century , tr. Arthur Goldhammer. Cambridge, MA: Harvard University Press.

Proudhon, Pierre-Joseph. 1994 [1840]. What is Property? Ed. Donald R. Kelley and Bonnie G. Smith. Cambridge, UK: Cambridge University Press.

Rawls, John. 1999. A Theory of Justice, Revised Edition . Cambridge, MA: Harvard University Press.

Schweickart, David. 2011. After Capitalism , Second Edition. Lanham, MD: Rowman & Littlefield.

Scott, Bruce R. 2011. Capitalism: Its Origins and Evolution as a System of Governance . New York, NY: Springer Science+Business Media.

Sherman, Howard J. 1995. Reinventing Marxism . Baltimore, MD: Johns Hopkins University Press.

Smith, Adam. 2003 [1776]. The Wealth of Nations . New York, NY: Bantam Dell.

Wikipedia. N.d. “Capitalism.” URL =

Wiktionary. N.d. “Capitalism.” URL =

World Bank Group. 2016. Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change. Washington, DC: World Bank Group and The International Monetary Fund.

Zwolinski, Matt. 2015. “Property Rights, Coercion, and the Welfare State: The Libertarian Case for a Basic Income for All.” The Independent Review 19(4): 515-29

Related Essays

Defining Capitalism and Socialism by Tom Metcalf

Marx’s Conception of Alienation by Dan Lowe

Karl Marx’s Theory of History by Angus Taylor

On Karl Marx’s Slogan “From Each According to their Ability, To Each According to their Need”  by Sam Badger

John Rawls’ ‘A Theory of Justice’ by Ben Davies

Social Contract Theory by David Antonini

Ethical Egoism: The Morality of Selfishness  by Nathan Nobis

Reparations for Historic Injustice by Joseph Frigault 

George Orwell’s Philosophical Views by Mark Satta

PDF Download

Download this essay in PDF . 

About the Author

Tom Metcalf is an associate professor at Spring Hill College in Mobile, AL. He received his PhD in philosophy from the University of Colorado, Boulder. He specializes in ethics, metaethics, epistemology, and the philosophy of religion. Tom has two cats whose names are Hesperus and Phosphorus. shc.academia.edu/ThomasMetcalf

Follow 1000-Word Philosophy on Facebook , Twitter and subscribe to receive email notifications of new essays at 1000WordPhilosophy.com

Share this:, 13 thoughts on “ arguments for capitalism and socialism ”.

  • Pingback: Defining Capitalism and Socialism – 1000-Word Philosophy: An Introductory Anthology

Reblogged this on SIPAHOUSEPRESS .

  • Pingback: The Week’s End // A Thought-Provoking Round-Up – Lisa Marie Blair
  • Pingback: Online Philosophy Resources Weekly Update - Daily Nous
  • Pingback: Reparations for Historic Injustice – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: John Rawls’ ‘A Theory of Justice’ – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: Political Philosophy: A collection of articles, videos, and podcasts - The Daily Idea
  • Pingback: Distributive Justice: How Should Resources be Allocated? – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: George Orwell’s Philosophical Views – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: Business Ethics – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: Karl Marx’s Conception of Alienation – 1000-Word Philosophy: An Introductory Anthology
  • Pingback: Ethical Egoism: The Morality of Selfishness – 1000-Word Philosophy: An Introductory Anthology

Comments are closed.

' src=

  • Already have a WordPress.com account? Log in now.
  • Subscribe Subscribed
  • Copy shortlink
  • Report this content
  • View post in Reader
  • Manage subscriptions
  • Collapse this bar

PrepScholar

Choose Your Test

Sat / act prep online guides and tips, the 9 key capitalism vs socialism differences, explained.

author image

General Education

feature-versus-NOT-CC-expert364-wikimedia

Capitalism vs socialism is often framed as the major political face-off of our time. People often think of capitalism vs socialism as two totally opposite political ideologies. But are they really completely different systems? And should we compare capitalism and socialism at all? 

Here’s the facts: it does make sense to compare capitalism and socialism because they’re the main economic systems used in developed countries today. But to truly understand the differences between capitalism and socialism, we have to look to unbiased sources . These terms refer to complex philosophies that can’t be summed up by a meme, stereotype, or hot take! 

Capitalism vs socialism can be a complex topic, which is why we’re here to help you gain an objective understanding of capitalism vs socialism. In this article, we’ll provide a full guide to capitalism vs socialism that includes the following: 

  • A deep dive into socialism, and a deep dive into capitalism
  • A guide to the differences between democratic socialism vs capitalism
  • A socialism vs capitalism chart with side-by-side comparisons
  • A brief comparison of these concepts and other political theories, particularly capitalism vs socialism vs communism

Let’s get started!

Featured Image: Expert364/ Wikimedia

Capitalism vs Socialism: What’s the Difference?

Capitalism is an economic system in which the means of production are under private ownership, rather than government control. The means of production generally refers to entrepreneurship, capital goods, natural resources, and labor. Capitalism depends on a free market economy driven by supply and demand. 

In simplest terms, socialism is an umbrella term for types of economic systems that aim to eradicate inequality through shared ownership. To socialists, wealth should belong to the  workers who make the products, rather than groups of private owners. In practice, this means that the means of production are run and controlled by the government, which represents the will of the people.

As such, socialism is ultimately designed to increase social justice and equality regardless of class, race, or other socioeconomic factors . 

As models for economic systems, the primary difference between capitalism and socialism is the extent to which the government controls the economy. Capitalists believe that private enterprise, or privately owned business, is better at using economic resources. Asa result, capitalism argues that private business is what facilitates equitable distribution of wealth through a free market. In contrast, socialists believe that income inequality is most effectively managed through tight control of businesses and redistribution of wealth through social programs that are run by the government, such as free healthcare, education, and housing.

At first glance, capitalism and socialism might seem entirely incompatible. The truth is, most developed countries today implement some combination of capitalist and socialist practices in their economic structure and domestic policy. To help you understand how capitalism and socialism can be integrated in practice, we’ll do a deep dive into both socialism and capitalism, starting with socialism, next. 

body-sit-on-question-mark-cc0

What Is Socialism?

We’ve covered the core differences between capitalism vs socialism, so let’s take a closer look at socialism next. Below, we’ll give you a more comprehensive definition of socialism, go over the history of the term, explain democratic socialism vs capitalism, and provide some examples of socialist governments today . 

Because socialism and communism are often easily confused, we’ll also touch on capitalism vs socialism vs communism.

Socialism: Overview and Definition

Socialism is a social, economic, and political doctrine that calls for collective ownership of a society’s means of production. The main goal of socialism is to eliminate socioeconomic classes by ensuring equal distribution of wealth among the people. To accomplish this, a socialist government--which is elected by the people--has control over the country’s economy, including major businesses and industries and the labor market. At its core, socialism is designed to eliminate inequality through government regulation.

The word “socialism” comes from the Latin sociare, which means to combine or to share. But the modern term “socialism” didn’t appear until the 19th century. French philosopher and revolutionary Henri de Saint-Simon coined the term in his writings about the  abuses of the capitalist system and the  Industrial Revolution. 

The thing to keep in mind about socialism is that it’s a blanket term that covers a wide variety of socialist ideas, practices, and theories. In his 1924 encyclopedia of socialism, historian Angelo Rappoport identified forty different definitions of socialism. This is why it’s tough to pin down a universal definition of socialism today. 

As an economic system and political theory, socialism has been applied in many different countries in many different ways . For example, communism is at its heart a form of socialism because it argues that everything in a society should be collectively owned and distributed to each according to their needs. But democratic socialism--which can combine capitalist and socialist ideologies--is also a type of socialism! 

Having said that, socialism is almost always employed as a critique of some aspect of capitalism . In some cases, socialism is also employed to replace capitalism. In most cases, though, socialism and capitalism are used together so that each ideology can make up for the other’s shortcomings. 

History of Socialism

Socialism was first used to criticize capitalist systems at the height of the Industrial Revolution in the 19th century. Henri de Saint-Simon and other prominent French philosophers were the first to critique the poverty and inequality of industrialized capitalism, and socialist thinkers advocated the transformation of society into small communities without private property. 

Socialism gained international recognition at the end of the 19th century. It was during this time that the movement became more oriented toward revolutionary thinking . This strain of socialist thought is largely attributed to the work of German philosophers Karl Marx and Friedrich Engels . In 1848, Marx and Engels wrote and dispersed a pamphlet called The Communist Manifesto detailing their ideas about socialism . 

According to the Communist Manifesto, socialism must eventually evolve into a more advanced system: communism . In the communist form of socialism as described by Marx and Engels (called Marxism), there would be no state, no money, and no social classes. Essentially, communism argues that private enterprise shouldn’t exist, and that the public (through the government) should own all the means of production in a society. 

This means that when socialism evolves into communism, it is fundamentally incompatible with capitalism . That’s because communism argues everything should be owned by the people and managed by government, whereas capitalism believes that economies should be run on private enterprise, which is controlled by individuals and not the government.This is why capitalism vs socialism vs communism can often be confusing. Just remember: the key difference between socialism and communism is that communism seeks to eliminate capitalism. But communism is just one type of socialism, and many other forms of socialism can be integrated into a capitalist economy. 

Marx and Engels helped popularize socialism, and in the 20th century, the first socialist governments appeared . The first mass party in Latin America, the Socialist Party of Argentina, was established in the 1890s, and in 1902, the British Labour Party won its first seats in Parliament. These elections of socialist politicians ushered in a new era of political legitimacy for the socialist movement. 

More radical forms of socialism emerged following World War I . In 1917, the Bolshevik Revolution occurred in Russia, led by philosopher Vladimir Lenin . Lenin and the Bolshevik faction of socialists overthrew the Russian monarchy and installed the first ever constitutionally socialist state, known as the Russian Socialist Federative Soviet Republic. Socialists who embrace Lenin’s methods today are most often referred to as communists.

By the 1920s, socialism in various forms had become the dominant secular movement on a global scale. That’s not to say that most governments were “socialist,” but they had definitely begun incorporating socialist ideas into their political policies. As socialism became more accepted, new forms of socialism continued to emerge, including the most common forms of socialism today: social democracy and democratic socialism. 

body-bernie-Sanders-name101-wikimedia

Bernie Sanders is the most well-known proponent of democratic socialism in the United States. (Secret-Name101/WikiMedia) 

Democratic Socialism vs Capitalism

Democratic socialism brings three core concepts together: democracy , socialism, and capitalism. Generally speaking, democratic socialism co mbines the safety net of a socialist economy with the wealth creation of capitalism within a democratic system of government. 

Here’s what that means. First things first: the organizational structure of the government is a democracy. Every citizen of a country can vote in a free and fair election to elect officials to represent them in government. These officials then represent the will of the people that elected them. You can learn more about democracies (vs republics and other types of government) in this article. 

Democratic socialism also combines aspects of socialism and capitalism in terms of its political ideologies and economic systems. Under democratic socialism , the elements of society that provide for basic human needs--like healthcare, labor protections, and childcare--are owned collectively and run by the government. 

However, democratic socialism also embraces aspects of capitalism--usually in terms of economic structure. Democratic socialism recognizes the importance of private enterprise, especially in terms of building national wealth. When the two are combined, though, capitalism is more tightly regulated by the government. 

Examples of Socialist Governments Today

There are many different ways that a country can implement socialism today . Socialism is a broad category that encompasses multiple types of economic systems. It’s also compatible with various government systems. 

While there aren’t any purely socialist countries in the world today, there are nations that are categorized as communist by virtue of how much power the government has over social and economic systems. Those countries are: 

  • China, or the People’s Republic of China
  • Cuba, or Republic of Cuba
  • Laos, or Lao People’s Democratic Republic
  • Vietnam, or Socialist Republic of Vietnam
  • North Korea, or Democratic People’s Republic of Korea

Most countries implement aspects of socialism that are compatible with their form of government and economy in order to create equality for all people. These countries tend to have prominent socialist or democratic socialist political parties. Having a socialist political party does not necessarily mean that a country “is socialist.” Most of the time, it just means that some aspects of a country’s domestic agenda are influenced by socialism. 

Some of the countries with very influential socialist parties include the following: 

  • Denmark 
  • Poland 
  • South Korea
  • United Kingdom
  • Venezuela 

Because democratic socialism is such a popular topic today, let’s look more closely at one country that implements democratic socialism: Sweden.

Sweden adheres to the Nordic Model , which refers to the economic and social policies common to the Nordic countries of Denmark, Finland, Iceland, Norway, and Sweden. The Nordic Model in Sweden fits the description of democratic socialism for two main reasons: it supports a universalist welfare state to promote social mobility, but it remains committed  to a market-based economy that’s partially fueled by private enterprise.

Sweden’s democratic government provides free health care, education, and lifetime retirement income. As a result, their Swedish citizens pay some of the highest taxes in the world. A high percentage of Sweden’s workers belong to a labor union, and the country is ranked high for protection of workers’ rights because of its strong social partnership between employers, trade unions, and the government.

At the same time, Sweden has a mixed-market capitalist economic system and high degrees of private ownership. To regulate its capitalist economy, Sweden allows free trade combined with collective risk sharing. These measures provide a form of protection against the risks associated with economic openness.

In other words: the country combines socialism and capitalism! in order to ’s political ideology is socialist, but its economy is capitalist. 

Because the government meets most of their needs, the Swedish people aren’t very concerned with accumulating wealth. As of 2020, Sweden also ranks high on the Global Peace Index and is ranked in the top 10 on the World Happiness Report.

body-money-suitcase-cc0

Many people associate capitalism with making money. That's because capitalism believes that privately owned businesses should be the bedrock of a national economy.

What Is Capitalism?

Now that we’ve covered socialism, let’s tackle capitalism next . Below, we’ll give you a comprehensive definition and history of capitalism, and we’ll provide some examples of capitalist governments today . 

Capitalism: Overview and Definition

Capitalism is an economic system in which the private sector owns most of the means of production . In a capitalist economy, the government plays a lesser role. The main goal of capitalism is to employ the means of production to make a profit and generate capital. To accomplish this, capitalism usually has a free market economy , which is based on supply and demand and limited government control. At its core, capitalism is designed to enable private entities, which are often corporations, to make a profit . 

The term capitalism is derived from the word “capital,” which evolved from the late Latin word capitale . Capitale is based on the Latin word caput , which means "head" and connotes something of value, such as money, property, or livestock. Capitale emerged in the 12th to 13th centuries to refer to funds, stocks of merchandise, sum of money, or money carrying interest. By 1283, it was used to describe the capital assets of a trading firm . By this time, capital was often used interchangeably with other words, including wealth, money, funds, goods, assets, and property.

In English language usage, the term “capitalism” first appears in author William Makepeace Thackeray’s 1854 novel, The Newcomes. In Thackeray’s novel, “capitalism” refers to “having ownership of capital.” Other initial usage of capitalism in the modern period employs the term to describe a new type of economy. In this economy, capital, or the source of income, doesn’t belong to the workers who generate it through labor. Instead, it belongs to the people who own the businesses and companies that pay for the labor. 

Also keep in mind that just like socialism, capitalism exists on a spectrum . But whereas types of socialism are often categorized by how much power a centralized government has, types of capitalism are usually defined by how free and unregulated the economy is. 

History of Capitalism

Capitalism developed out of systems of feudalism and mercantilism in Europe during the Renaissance. In these systems, capital existed in the form of simple commodity exchange and production. 

At the end of the 16th century, the economic foundations of the agricultural feudal system began to break down in England. Land and resources became concentrated in the hands of a few private owners, and the labor market became more competitive. The expanding system put pressure on owners and workers to increase productivity to make greater profits. By the early 17th century, feudalism was effectively replaced by a new centralized state and economic market in England.

Between the 16th and 18th centuries in England, an economic doctrine of mercantilism prevailed. Merchant traders explored foreign lands and engaged in trade for profit. Under the rule of Queen Elizabeth I, merchants were granted state support. Through subsidies and other economic incentives, merchants expanded commerce and trade and made profits by buying and selling goods. 

The continued growth of capitalism required specific technologies for mass production, which early feudalist societies and individual merchants didn’t have. These technologies became widely available during the Industrial Revolution, and those who owned them were called industrialists. Industrialists facilitated the development of factory systems and manufacturing . These systems required a complex division of labor and established the modern concept of the capitalist mode of production. 

The Industrial Revolution established the dominance of capitalism as an economic system in the western world. By the 19th century, capitalism had spread globally . And by the end of the 19th century, goods and information were able to circulate around the world at a whole new pace. This was due to technologies such as the telegraph, the steamship, and railway. But this growth also hinged on a large--and cheap--labor force. 

When the Great Depression had a global impact in the 1930s, socialist practices first entered into the capitalist economies of the world. By the end of World War II, governments began  regulating these open, capitalist markets. Welfare states emerged in capitalist countries during this time as well. Since then, there hasn’t been a purely capitalist system in the world. Today, most capitalist economies incorporate some form of socialist practice. 

body-united-kingdom-flag-cc0

Many countries embrace capitalism...even if they also implement socialist policies. One good example of this is the United Kingdom, which has strong social programs but still allows for a robust private sector.

Examples of Capitalism Governments Today

There are many types of capitalism in existence today. Different countries’ implementation of capitalism may feature different economic policies and institutional structures. However, at their core, all capitalist countries share a common element: they are primarily based on private ownership of the means of production, generating profit through production, market-based control of resources, and accumulation of capital. 

Today, there are over 100 countries that have a capitalist economy . Here are a few examples of countries have some form of a capitalist economy:

  • Austria 
  • Chile 
  • Ireland 
  • Japan 
  • Mauritius 
  • Netherlands 
  • United States of America

It’s important to recognize that none of these countries implement pure capitalism . Instead, they implement a form of capitalism that may be combined with other types of economic markets or political ideologies, including socialism. Let’s look at an example of a capitalist economy to understand what capitalism looks like in practice next.

The United States has a democratic capitalist political-economic system . The U.S. economy is also referred to as a mixed market economy. This means that it has characteristics of both capitalism and socialism that are combined with a democratic system of government. 

In the form of capitalism implemented by the U.S., the means of production are based on private ownership and for-profit business. In other words: most businesses and services are privately owned, and those companies’ primary goal is to make money. But because the economy has regulations, taxation, and some subsidization, the U.S. can’t be considered a purely capitalist economy. 

Prior to World War II, the U.S. more closely resembled a truly free market . However, the government has always had some role in controlling the U.S. economy. Today, the U.S. government has partial control over education, physical infrastructure, healthcare, and postal deliveries. The government also provides subsidies to oil and financial companies and agricultural producers. While private businesses have a high degree of autonomy in the U.S., they are required to register with government agencies.

Some critics argue that the U.S. capitalist system serves the interests of a small percentage of the population, known as the one percent. Because of income inequality and intensifying class divisions in the U.S., many critics of capitalism advocate for the adoption of more socialist policies as a means to bridge that class divide . Two well-known advocates of increasing socialist policy in the U.S. are senator Bernie Sanders of Vermont and Alexandria Ocasio-Cortez of New York. 

body-compare-apples-oranges

Socialism vs Capitalism: Chart Comparison

We’ve covered a lot of info concerning capitalism vs socialism, so let’s condense things down to the core differences between capitalism and socialism next. 

Keep reading for a side by side comparison of capitalism and socialism in our chart below.

Fascism, Communism, and Marxism: A Quick Comparison 

Now that we’ve covered the differences between capitalism and socialism, let’s explain how they compare to other systems that they’re sometimes confused with. We’ll briefly clarify the differences between the socialist and capitalist systems and communism and fascism. 

Fascism vs Capitalism and Socialism

Fascism is a political ideology that supports authoritarianism and ultra-nationalism. Fascist states are ruled under dictatorships. They also suppress opposition by force and tightly control society and the economy. 

But how does fascism compare to socialism and capitalism? Socialism is generally considered incompatible with fascism. Socialism is liberally-minded and progressive, and it’s a relatively flexible ideology, whereas fascism is none of these things. In fact, because it is a far-right ideology, fascism opposes socialism. 

The relationship between capitalism and fascism is a little more complicated. Historically, fascism has sought to do away with capitalism because of its emphasis on autonomy and limited state control. However, fascism supports private ownership, wealth accumulation among private individuals, and a market economy. This means that fascism can support a very specific kind of capitalism, but capitalist economies are rarely fascist.

Communism vs Capitalism and Socialism

Let’s talk now about capitalism and socialism in relation to communism. Communism proposes a socioeconomic structure and political system that completely replaces a capitalist system with public ownership and communal control of the means of production. In communism, everything is collectively owned and private enterprise is eliminated. Because it seeks to eliminate money and social classes, communism is ultimately incompatible with capitalism.

However, socialism and communism are more closely related. In simplest terms, communism is a more revolutionary form of socialism , based on the ideology of Karl Marx. Socialism and communism share a core goal of placing power over the means of production in the hands of workers. Unlike communism, though, socialism is widely compatible with other forms of government. Forms of socialism can also be integrated into other economic systems, such as capitalism. 

Marxism vs Capitalism And Socialism 

You may also be wondering how Marxism relates to socialism and capitalism . Marxism is the political and economic theory proposed by Karl Marx and Friedrich Engels. Marxist theory was adapted by followers of Marx and Engels to articulate a specific approach to communism. This means that Marxism is a type of communism that incorporates socialist principles. Ultimately, socialism is a much broader concept than Marxism.

Marxism also addresses capitalism, though. In his book, Das Kapital, Karl Marx describes a capitalist mode of production. He is often credited as defining the modern concept of capitalism through his harsh critiques of it . He ultimately believed that capitalism would eventually stagnate, and socialism would take its place. 

body-whats-next-cc0

What’s Next? 

If you want to learn more about how different governments work , check out our article on democracies versus republics. 

The U.S. government is set up in three parts where no one section of the government has more power than the other . We’ll teach you everything you need to know about this checks and balances system. 

If all of these topics are fascinating to you, then you might be interested in majoring in political science. Our experts will teach you everything you need to know about a political science degree , including what types of careers are available for poli-sci grads.

Need more help with this topic? Check out Tutorbase!

Our vetted tutor database includes a range of experienced educators who can help you polish an essay for English or explain how derivatives work for Calculus. You can use dozens of filters and search criteria to find the perfect person for your needs.

Connect With a Tutor Now

Ashley Sufflé Robinson has a Ph.D. in 19th Century English Literature. As a content writer for PrepScholar, Ashley is passionate about giving college-bound students the in-depth information they need to get into the school of their dreams.

Student and Parent Forum

Our new student and parent forum, at ExpertHub.PrepScholar.com , allow you to interact with your peers and the PrepScholar staff. See how other students and parents are navigating high school, college, and the college admissions process. Ask questions; get answers.

Join the Conversation

Ask a Question Below

Have any questions about this article or other topics? Ask below and we'll reply!

Improve With Our Famous Guides

  • For All Students

The 5 Strategies You Must Be Using to Improve 160+ SAT Points

How to Get a Perfect 1600, by a Perfect Scorer

Series: How to Get 800 on Each SAT Section:

Score 800 on SAT Math

Score 800 on SAT Reading

Score 800 on SAT Writing

Series: How to Get to 600 on Each SAT Section:

Score 600 on SAT Math

Score 600 on SAT Reading

Score 600 on SAT Writing

Free Complete Official SAT Practice Tests

What SAT Target Score Should You Be Aiming For?

15 Strategies to Improve Your SAT Essay

The 5 Strategies You Must Be Using to Improve 4+ ACT Points

How to Get a Perfect 36 ACT, by a Perfect Scorer

Series: How to Get 36 on Each ACT Section:

36 on ACT English

36 on ACT Math

36 on ACT Reading

36 on ACT Science

Series: How to Get to 24 on Each ACT Section:

24 on ACT English

24 on ACT Math

24 on ACT Reading

24 on ACT Science

What ACT target score should you be aiming for?

ACT Vocabulary You Must Know

ACT Writing: 15 Tips to Raise Your Essay Score

How to Get Into Harvard and the Ivy League

How to Get a Perfect 4.0 GPA

How to Write an Amazing College Essay

What Exactly Are Colleges Looking For?

Is the ACT easier than the SAT? A Comprehensive Guide

Should you retake your SAT or ACT?

When should you take the SAT or ACT?

Stay Informed

capitalism vs socialism essay

Get the latest articles and test prep tips!

Looking for Graduate School Test Prep?

Check out our top-rated graduate blogs here:

GRE Online Prep Blog

GMAT Online Prep Blog

TOEFL Online Prep Blog

Holly R. "I am absolutely overjoyed and cannot thank you enough for helping me!”
  • Search Search Please fill out this field.
  • An Overview

Capitalist Economies

Socialist economies, key differences, the bottom line.

  • Government & Policy

Capitalist vs. Socialist Economies: What's the Difference?

capitalism vs socialism essay

Capitalist vs. Socialist Economies: An Overview

Economic systems are structures that dictate how governments and societies create and distribute goods, services, and resources across a country. Two common economic systems are capitalism and socialism . In capitalist societies, the free market (and, therefore, supply and demand) determines production and pricing with no intervention of the government. In socialist economies, governments control production, distribution, and prices. The goal is to ensure that everyone has access to the same resources, such as education and healthcare.

Key Takeaways

  • Capitalism and socialism are economic systems that countries use to manage their economic resources and regulate their means of production.
  • Capitalism is based on individual initiative and favors market mechanisms over government intervention.
  • Socialism is based on government planning and limitations on private control of resources.
  • Many economies tend to combine elements of both systems.
  • Capitalism has developed safety nets, while countries such as China and Vietnam may be edging toward full-fledged market economies.

Capitalism is defined as an economic system in which private individuals or businesses, rather than the government, own and control the factors of production: entrepreneurship, capital goods, natural resources , and labor.

The lack or limited role of government in capitalist economies extends to production—namely, what to produce, how much to produce, and when to produce it. This means that the cost of goods and services is determined by market dynamics rather than the. When entrepreneurs spot openings in the marketplace, they rush in to fill the vacuum.

Capitalism is based on several factors, including:

  • The free-market economy. This means that an economy distributes goods and services according to the law of supply and demand . According to this law, higher demand leads to an increase in prices and output by producers. The greater supply helps level prices out to the point that only the strongest competitors remain. Competitors try to boost their profits by selling their goods for as much as they can while keeping costs low.
  • The free operation of the capital markets . Supply and demand determine the fair prices for stocks, bonds, derivatives , currencies, and commodities.

Economist Adam Smith described how people are motivated to act in their self-interest in his book An Inquiry Into the Nature and Causes of the Wealth of Nations . This tendency serves as the basis for capitalism, with the invisible hand of the market serving as the balance between competing tendencies. Because markets distribute the factors of production per supply and demand, the government can limit itself to enacting and enforcing rules of fair play.

Few countries follow purely capitalist or socialist styles. Rather, they may lean heavily on one system over another. For instance, capitalism has always been the prevailing system in the United States while Bolivia is considered a socialist economy.

Unlike capitalism, socialist governments are involved in many aspects of the economy. This means that they determine the amount of output (or supply) and the pricing levels of these goods and services rather than the free market. Since production and  distribution  decisions are made by the government. individuals living in socialist economies depend on the state for food, employment, healthcare, and everything else.

The goal of socialism is to put more control in the hands of the government and reduce the power of corporations . While corporations have more freedom and leeway in controlling production and pricing in purely capitalist economies, that isn't true with socialist countries. Workers would have more control, reducing (or eliminating) private ownership and profit.

Both communism and socialism refer to left-wing schools of economic thought that oppose capitalism. However, socialism was around several decades before the release of The Communist Manifesto , an influential 1848 pamphlet by  Karl Marx  and Friedrich Engels . Socialism is more permissive than pure communism, which makes no allowances for private property.

In purely socialist economies , market forces play a back seat when it comes to important economic decisions. This approach is also referred to as central planning. Advocates of socialism argue that the shared ownership of resources and the impact of central planning allow for a more equal distribution of goods and services and a fairer society.

Communist countries, such as China, North Korea, and Cuba, tend toward socialism, while Western European countries favor capitalist economies and try to chart a middle course. But even at their extremes, both systems have their pros and cons.

People in capitalist economies have strong incentives to work hard, increase efficiency , and produce superior products. By rewarding ingenuity and innovation, the market maximizes economic growth and individual prosperity while providing a variety of goods and services for consumers. By encouraging the production of desirable goods and services and discouraging the production of unwanted or unnecessary ones, the marketplace self-regulates, leaving less room for government interference and mismanagement.

But, capitalism does not guarantee that each person's basic needs will be met. That's because market mechanisms are mechanical rather than normative and agnostic concerning social effects.

Theoretically, socialist economies provide people with the necessities as there is reduced economic inequity and insecurity. The government itself can produce the goods people require to meet their needs, even if the production of those goods does not result in a profit. Under socialism, there’s more room for value judgments with less attention paid to calculations involving profit and nothing but profit.

Socialist economies can also be more efficient in the sense that there’s less of a need to sell goods to consumers who might not need them, resulting in less money spent on product promotion and marketing efforts.

In socialist societies, basic needs are met; a socialist system's primary benefit is that the people living under it are given a social safety net.

Criticism of Capitalist and Socialist Economies

Capitalism relies on innovation with little to no intervention from the government. But, critics of capitalism suggest that since it limits how much governments can do when it comes to production, it puts too much power in the hands of corporations. When this occurs, companies can set prices as high as they want to pursue big profits . This may edge out the competition, who may not be able to pay their employees or innovate even further.

There are also social problems associated with purely capitalist economies. For instance, companies that want to increase their supplies to meet high demand from consumers generally have to boost their output. This can lead to increased pollution and a higher environmental impact. Increased production may also lead to unsafe workplaces and income inequality between workers and corporate heads.

Socialism may have certain shortcomings even though it aims to promote equality and reduce inequities. For instance, people have less to strive for and feel less connected to the fruits of their efforts. With their basic needs already provided for, they may have fewer incentives to innovate and increase efficiency. As a result, the engines of economic growth are weaker.

Critics also suggest that socialist government planners and planning mechanisms are not infallible, or incorruptible. In some of these economies, there are shortfalls of even the most essential goods. Because there's no free market to ease adjustments, the system may not regulate itself as quickly, or as well.

Equality is another concern. In theory, everyone is equal under socialism. In practice, hierarchies do emerge and party officials and well-connected individuals find themselves in better positions to receive favored goods.

Examples of Capitalist and Socialist Economies

Purely capitalist and purely socialist economies rarely exist. Instead, most countries often operate under mixed economies by using principles of different systems, with one system dominating over the other. For instance:

  • The United States is a predominantly capitalist society with elements of a socialist system. While the market determines prices limited intervention from the government. The federal government has some control over the economy while providing some forms of social welfare to its citizens.
  • Chima is considered to be as close to a socialist country as possible. Many industries are nationalized in China where state-owned corporations are common. There are elements of capitalism, though, as some private companies operate alongside government-run corporations.

Heritage Foundation List

The Heritage Foundation compiles an annual list of the most capitalist countries. That is, they rank highest for promoting economic opportunity, individual empowerment, and prosperity. In 2022, the top ten were:

  • Switzerland
  • New Zealand
  • The Netherlands

The United States ranked 25th in the world.

What Is the Role of Corporations in Capitalist and Socialist Economies?

Corporations typically have more power in capitalist economies. This gives them more power to determine prices, output, and the types of goods and services that are brought to market. In purely socialist economies, corporations are generally owned and operated by the government. Rather than the corporation, it is the government that controls production and pricing in fully socialist socieities.

What Are Some Examples of Socialist and Capitalist Countries?

There are very few examples of purely socialist and capitalist countries. Rather, most countries use elements of both while swaying heavily toward the principles of one. For instance, the United States operates a mixed system with predominantly capitalistic principles. The government does intervene in certain cases but free market forces do have a major role in pricing and production. China, on the other hand, is deemed to be one of the most common examples of a socialist country. That's because many corporations are state-run.

Is Communism the Same As Socialism?

People often confuse communism and socialism, thinking they're one and the same. But, they are different. Socialism aims to evenly distribute resources, goods, and services to everyone by ensuring equality among the working class. Individuals are still allowed to own property. Communism, on the other hand, property is owned communally. Governments run their industries. They also control output and production.

Capitalism and socialism are two different types of economic systems. Few countries operate under purely capitalist or socialist principles. Instead, they use principles of both and lean heavily on one type of system. For instance, the United States is a capitalist society with some socialist ideals. While capitalism puts more power in the hands of corporations, governments play a bigger role in socialist economies. One isn't better than the other. Both have benefits as well as downsides.

Adam Smith, via Google Books " An Inquiry into the Nature and Causes of the Wealth of Nations ," Page xxviii.

James C. Docherty and Peter Lamb, via Google Books. " Historical Dictionary of Socialism ," Pages xxi–xxiii. Scarecrow Press, 2006.

Asia Link Business. " China’s Economy ."

Heritage Foundation. " 2022 Index of Economic Freedom ."

Heritage Foundation. " 2022 Index of Economic Freedom: United States ."

capitalism vs socialism essay

  • Terms of Service
  • Editorial Policy
  • Privacy Policy
  • Your Privacy Choices

SEP home page

  • Table of Contents
  • Random Entry
  • Chronological
  • Editorial Information
  • About the SEP
  • Editorial Board
  • How to Cite the SEP
  • Special Characters
  • Advanced Tools
  • Support the SEP
  • PDFs for SEP Friends
  • Make a Donation
  • SEPIA for Libraries
  • Entry Contents

Bibliography

Academic tools.

  • Friends PDF Preview
  • Author and Citation Info
  • Back to Top

Socialism is a rich tradition of political thought and practice, the history of which contains a vast number of views and theories, often differing in many of their conceptual, empirical, and normative commitments. In his 1924 Dictionary of Socialism , Angelo Rappoport canvassed no fewer than forty definitions of socialism, telling his readers in the book’s preface that “there are many mansions in the House of Socialism” (Rappoport 1924: v, 34–41). To take even a relatively restricted subset of socialist thought, Leszek Kołakowski could fill over 1,300 pages in his magisterial survey of Main Currents of Marxism (Kołakowski 1978 [2008]). Our aim is of necessity more modest. In what follows, we are concerned to present the main features of socialism, both as a critique of capitalism, and as a proposal for its replacement. Our focus is predominantly on literature written within a philosophical idiom, focusing in particular on philosophical writing on socialism produced during the past forty-or-so years. Furthermore, our discussion concentrates on the normative contrast between socialism and capitalism as economic systems. Both socialism and capitalism grant workers legal control of their labor power, but socialism, unlike capitalism, requires that the bulk of the means of production workers use to yield goods and services be under the effective control of workers themselves, rather than in the hands of the members of a different, capitalist class under whose direction they must toil. As we will explain below, this contrast has been articulated further in different ways, and socialists have not only made distinctive claims regarding economic organization but also regarding the processes of transformation fulfilling them and the principles and ideals orienting their justification (including, as we will see, certain understandings of freedom, equality, solidarity, and democracy). [ 1 ]

1. Socialism and Capitalism

2. three dimensions of socialist views, 3.1 socialist principles, 3.2.1 exploitation, 3.2.2 interference and domination, 3.2.3 alienation, 3.2.4 inefficiency, 3.2.5 liberal egalitarianism and inequality in capitalism, 4.1 central and participatory planning, 4.2 market socialism, 4.3 less comprehensive, piecemeal reforms, 5. socialist transformation (dimension diii), other internet resources, related entries.

Socialism is best defined in contrast with capitalism, as socialism has arisen both as a critical challenge to capitalism, and as a proposal for overcoming and replacing it. In the classical, Marxist definition (G.A. Cohen 2000a: ch.3; Fraser 2014: 57–9), capitalism involves certain relations of production . These comprise certain forms of control over the productive forces —the labor power that workers deploy in production and the means of production such as natural resources, tools, and spaces they employ to yield goods and services—and certain social patterns of economic interaction that typically correlate with that control. Capitalism displays the following constitutive features:

(i) The bulk of the means of production is privately owned and controlled . (ii) People legally own their labor power. (Here capitalism differs from slavery and feudalism, under which systems some individuals are entitled to control, whether completely or partially, the labor power of others). (iii) Markets are the main mechanism allocating inputs and outputs of production and determining how societies’ productive surplus is used, including whether and how it is consumed or invested.

An additional feature that is typically present wherever (i)–(iii) hold, is that:

(iv) There is a class division between capitalists and workers, involving specific relations (e.g., whether of bargaining, conflict, or subordination) between those classes, and shaping the labor market, the firm, and the broader political process.

The existence of wage labor is often seen by socialists as a necessary condition for a society to be counted as capitalist (Schweickart 2002 [2011: 23]). Typically, workers (unlike capitalists) must sell their labor power to make a living. They sell it to capitalists, who (unlike the workers) control the means of production. Capitalists typically subordinate workers in the production process, as capitalists have asymmetric decision-making power over what gets produced and how it gets produced. Capitalists also own the output of production and sell it in the market, and they control the predominant bulk of the flow of investment within the economy. The relation between capitalists and workers can involve cooperation, but also relations of conflict (e.g., regarding wages and working conditions). This more-or-less antagonistic power relationship between capitalists and workers plays out in a number of areas, within production itself, and in the broader political process, as in both the economic and political domains decisions are made about who does what, and who gets what.

There are possible economic systems that would present exceptions, in which (iv) does not hold even if (i), (ii) and (iii) all obtain. Examples here are a society of independent commodity producers or a property-owning democracy (in which individuals or groups of workers own firms). There is debate, however, as to how feasible—accessible and stable—these are in a modern economic environment (O’Neill 2012).

Another feature that is also typically seen as arising where (i)–(iii) hold is this:

(v) Production is primarily oriented to capital accumulation (i.e., economic production is primarily oriented to profit rather than to the satisfaction of human needs). (G.A. Cohen 2000a; Roemer 2017).

In contrast to capitalism, socialism can be defined as a type of society in which, at a minimum, (i) is turned into (i*):

(i*) The bulk of the means of production is under social, democratic control.

Changes with regard to features (ii), (iii), and (v) are hotly debated amongst socialists. Regarding (ii), socialists retain the view that workers should control their labor power, but many do not affirm the kind of absolute, libertarian property rights in labor power that would, e.g., prevent taxation or other forms of mandatory contribution to cater for the basic needs of others (G.A. Cohen 1995). Regarding (iii), there is a recent burgeoning literature on “market socialism”, which we discuss below, where proposals are advanced to create an economy that is socialist but nevertheless features extensive markets. Finally, regarding (v), although most socialists agree that, due to competitive pressures, capitalists are bound to seek profit maximization, some puzzle over whether when they do this, it is “greed and fear” and not the generation of resources to make others besides themselves better-off that is the dominant, more basic drive and hence the degree to which profit-maximization should be seen as a normatively troubling phenomenon. (See Steiner 2014, in contrast with G.A. Cohen 2009, discussing the case of capitalists amassing capital to give it away through charity.) Furthermore, some socialists argue that the search for profits in a market socialist economy is not inherently suspicious (Schweickart 2002 [2011]). Most socialists, however, tend to find the profit motive problematic.

An important point about this definition of socialism is that socialism is not equivalent to, and is arguably in conflict with, statism. (i*) involves expansion of social power—power based on the capacity to mobilize voluntary cooperation and collective action—as distinct from state power—power based on the control of rule-making and rule enforcing over a territory—as well of economic power—power based on the control of material resources (Wright 2010). If a state controls the economy but is not in turn democratically controlled by the individuals engaged in economic life, what we have is some form of statism, not socialism (see also Arnold n.d. in Other Internet Resources (OIR) ; Dardot & Laval 2014).

When characterizing socialist views, it is useful to distinguish between three dimensions of a conception of a social justice (Gilabert 2017a). We identify these three dimensions as:

(DI) the core ideals and principles animating that conception of justice; (DII) the social institutions and practices implementing the ideals specified at DI; (DIII) the processes of transformation leading agents and their society from where they are currently, to the social outcome specified in DII.

The characterization of capitalism and socialism in the previous section focuses on the social institutions and practices constituting each form of society (i.e., on DII). We step back from this institutional dimension in section 3, below, to consider the central normative commitments of socialism (DI) and to survey their deployment in the socialist critique of capitalism. We then, in section 4 , engage in a more detailed discussion of accounts of the institutional shape of socialism (DII), exploring the various proposed implementations of socialist ideals and principles outlined under DI. We turn to accounts of the transition to socialism (DIII) in section 5 .

3. Socialist Critiques of Capitalism and their Grounds (Dimension DI)

Socialists have condemned capitalism by alleging that it typically features exploitation, domination, alienation, and inefficiency. Before surveying these criticisms, it is important to note that they rely on various ideals and principles at DI. We first mention these grounds briefly, and then elaborate on them as we discuss their engagement in socialists’ critical arguments. We set aside the debate, conducted mostly during the 1980s and largely centered on the interpretation of Marx’s writings, as to whether the condemnation of capitalism and the advocacy for socialism relies (or should rely), on moral grounds (Geras 1985; Lukes 1985; Peffer 1990). Whereas some Marxist socialists take the view that criticism of capitalism can be conducted without making use—either explicitly or implicitly—of arguments with a moral foundation, our focus is on arguments that do rely on such grounds.

Socialists have deployed ideals and principles of equality, democracy, individual freedom, self-realization, and community or solidarity. Regarding equality , they have proposed strong versions of the principle of equality of opportunity according to which everyone should have “broadly equal access to the necessary material and social means to live flourishing lives” (Wright 2010: 12; Roemer 1994a: 11–4; Nielsen 1985). Some, but by no means all, socialists construe equality of opportunity in a luck-egalitarian way, as requiring the neutralization of inequalities of access to advantage that result from people’s circumstances rather than their choices (G.A. Cohen 2009: 17–9). Socialists also embrace the ideal of democracy , requiring that people have “broadly equal access to the necessary means to participate meaningfully in decisions” affecting their lives (Wright 2010: 12; Arnold n.d. [OIR] : sect. 4). Many socialists say that democratic participation should be available not only at the level of governmental institutions, but also in various economic arenas (such as within the firm). Third, socialists are committed to the importance of individual freedom . This commitment includes versions of the standard ideas of negative liberty and non-domination (requiring security from inappropriate interference by others). But it also typically includes a more demanding, positive form of self-determination, as the “real freedom” of being able to develop one’s own projects and bring them to fruition (Elster 1985: 205; Gould 1988: ch. 1; Van Parijs 1995: ch. 1; Castoriadis 1979). An ideal of self-realization through autonomously chosen activities featuring people’s development and exercise of their creative and productive capacities in cooperation with others sometimes informs socialists’ positive views of freedom and equality—as in the view that there should be a requirement of access to the conditions of self-realization at work (Elster 1986: ch. 3). Finally, and relatedly, socialists often affirm an idea of community or solidarity , according to which people should organize their economic life so that they treat the freedom and well-being of others as intrinsically significant. People should recognize positive duties to support other people, or, as Einstein (1949) put it, a “sense of responsibility for [their] fellow men”. Or, as Cohen put it, people should “care about, and, where necessary and possible, care for, one another, and, too, care that they care about one another” (G.A. Cohen 2009: 34–5). Community is sometimes presented as a moral ideal which is not itself a demand of justice but can be used to temper problematic results permitted by some demands of justice (such as the inequalities of outcome permitted by a luck-egalitarian principle of equality of opportunity (G.A. Cohen 2009)). However, community is sometimes presented within socialist views as a demand of justice itself (Gilabert 2012). Some socialists also take solidarity as partly shaping a desirable form of “social freedom” in which people are able not only to advance their own good but also to act with and for others (Honneth 2015 [2017: ch. I]).

Given the diversity of fundamental principles to which socialists commonly appeal, it is perhaps unsurprising that few attempts have been made to link these principles under a unified framework. A suggested strategy has been to articulate some aspects of them as requirements flowing from what we might call the Abilities / Needs Principle, following Marx’s famous dictum, in The Critique of the Gotha Program , that a communist society should be organized so as to realize the goals of producing and distributing “From each according to [their] abilities, to each according to [their] needs”. This principle, presented with brevity and in the absence of much elaboration by Marx (Marx 1875 [1978b: 531]) has been interpreted in different ways. One, descriptive interpretation simply takes it to be a prediction of how people will feel motivated to act in a socialist society. Another, straightforwardly normative interpretation construes the Marxian dictum as stating duties to contribute to, and claims to benefit from, the social product—addressing the allocation of both the burdens and benefits of social cooperation. Its fulfillment would, in an egalitarian and solidaristic fashion, empower people to live flourishing lives (Carens 2003, Gilabert 2015). The normative principle itself has also been interpreted as an articulation of the broader, and more basic, idea of human dignity. Aiming at solidaristic empowerment , this idea could be understood as requiring that we support people in the pursuit of a flourishing life by not blocking, and by enabling, the development and exercise of their valuable capacities, which are at the basis of their moral status as agents with dignity (Gilabert 2017b).

3.2 Socialist Charges against Capitalism

The first typical charge leveled by socialists is that capitalism features the exploitation of wage workers by their capitalist employers. Exploitation has been characterized in two ways. First, in the so-called “technical” Marxist characterization, workers are exploited by capitalists when the value embodied in the goods they can purchase with their wages is inferior to the value embodied in the goods they produce—with the capitalists appropriating the difference. To maximize the profit resulting from the sale of what the workers produce, capitalists have an incentive to keep wages low. This descriptive characterization, which focuses on the flow of surplus labor from workers to capitalists, differs from another common, normative characterization of exploitation, according to which exploitation involves taking unfair, wrongful, or unjust advantage of the productive efforts of others. An obvious question is when, if ever, incidents of exploitation in the technical sense involve exploitation in the normative sense. When is the transfer of surplus labor from workers to capitalists such that it involves wrongful advantage taking of the former by the latter? Socialists have provided at least four answers to this question. (For critical surveys see Arnsperger and Van Parijs 2003: ch. III; Vrousalis 2018; Wolff 1999).

The first answer is offered by the unequal exchange account , according to which A exploits B if and only if in their exchange A gets more than B does. This account effectively collapses the normative sense of exploitation into the technical one. But critics have argued that this account fails to provide sufficient conditions for exploitation in the normative sense. Not every unequal exchange is wrongful: it would not be wrong to transfer resources from workers to people who (perhaps through no choice or fault of their own) are unable to work.

A second proposal is to say that A exploits B if and only if A gets surplus labor from B in a way that is coerced or forced. This labor entitlement account (Holmstrom 1977; Reiman 1987) relies on the view that workers are entitled to the product of their labor, and that capitalists wrongly deprive them of it. In a capitalist economy, workers are compelled to transfer surplus labor to capitalists on pain of severe poverty. This is a result of the coercively enforced system of private property rights in the means of production. Since they do not control means of production to secure their own subsistence, workers have no reasonable alternative to selling their labor power to capitalists and to toil on the terms favored by the latter. Critics of this approach have argued that it, like the previous account, fails to provide sufficient conditions for wrongful exploitation because it would (counterintuitively) have to condemn transfers from workers to destitute people unable to work. Furthermore, it has been argued that the account fails to provide necessary conditions for the occurrence of exploitation. Problematic transfers of surplus labor can occur without coercion. For example, A may have sophisticated means of production, not obtained from others through coercion, and hire B to work on them at a perhaps unfairly low wage, which B voluntarily accepts despite having acceptable, although less advantageous, alternatives (Roemer 1994b: ch. 4).

The third, unfair distribution of productive endowments account suggests that the core problem with capitalist exploitation (and with other forms of exploitation in class-divided social systems) is that it proceeds against a background distribution of initial access to productive assets that is inegalitarian. A is an exploiter, and B is exploited, if and only if A gains from B ’s labor and A would be worse off, and B better off, in an alternative hypothetical economic environment in which the initial distribution of assets was equal (with everything else remaining constant) (Roemer 1994b: 110). This account relies on a luck-egalitarian principle of equality of opportunity. (According to luck-egalitarianism, no one should be made worse-off than others due to circumstances beyond their control.) Critics have argued that, because of that, it fails to provide necessary conditions for wrongful exploitation. If A finds B stuck in a pit, it would be wrong for A to offer B rescue only if B signs a sweatshop contract with A —even if B happened to have fallen into the pit after voluntarily taking the risk to go hiking in an area well known to be dotted with such perilous obstacles (Vrousalis 2013, 2018). Other critics worry that this account neglects the centrality of relations of power or dominance between exploiters and exploited (Veneziani 2013).

A fourth approach directly focuses on the fact that exploitation typically arises when there is a significant power asymmetry between the parties involved. The more powerful instrumentalize and take advantage of the vulnerability of the less powerful to benefit from this asymmetry in positions (Goodin 1987). A specific version of this view, the domination for self-enrichment account (Vrousalis 2013, 2018), says that A exploits B if A benefits from a transaction in which A dominates B . (On this account, domination involves a disrespectful use of A ’s power over B .) Capitalist property rights, with the resulting unequal access to the means of production, put propertyless workers at the mercy of capitalists, who use their superior power over them to extract surplus labor. A worry about this approach is that it does not explain when the more powerful party is taking too much from the less powerful party. For example, take a situation where A and B start with equal assets, but A chooses to work hard while B chooses to spend more time at leisure, so that at a later time A controls the means of production, while B has only their own labor power. We imagine that A offers B employment, and then ask, in light of their ex ante equal position, at what level of wage for B and profit for A would the transaction involve wrongful exploitation? To come to a settled view on this question, it might be necessary to combine reliance on a principle of freedom as non-domination with appeal to additional socialist principles addressing just distribution—such as some version of the principles of equality and solidarity mentioned above in section 4.1 .

Capitalism is often defended by saying that it maximally extends people’s freedom, understood as the absence of interference. Socialism would allegedly depress that freedom by prohibiting or limiting capitalist activities such as setting up a private firm, hiring wage workers, and keeping, investing, or spending profits. Socialists generally acknowledge that a socialist economy would severely constrain some such freedoms. But they point out that capitalist property rights also involve interference. They remind us that “private property by one person presupposes non-ownership on the part of other persons” (Marx 1991: 812) and warn that often, although

liberals and libertarians see the freedom which is intrinsic to capitalism, they overlook the unfreedom which necessarily accompanies capitalist freedom. (G.A. Cohen 2011: 150)

Workers could and would be coercively interfered with if they tried to use means of production possessed by capitalists, to walk away with the products of their labor in capitalist firms, or to access consumption goods they do not have enough money to buy. In fact, every economic system opens some zones of non-interference while closing others. Hence the appropriate question is not whether capitalism or socialism involve interference—they both do—but whether either of them involves more net interference, or more troubling forms of interference, than the other. And the answer to that question is far from obvious. It could very well be that most agents in a socialist society face less (troublesome) interference as they pursue their projects of production and consumption than agents in a capitalist society (G.A. Cohen 2011: chs. 7–8).

Capitalist economic relations are often defended by saying that they are the result of free choices by consenting adults. Wage workers are not slaves or serfs—they have the legal right to refuse to work for capitalists. But socialists reply that the relationship between capitalists and workers actually involves domination. Workers are inappropriately subject to the will of capitalists in the shaping of the terms on which they work (both in the spheres of exchange and production, and within the broader political process). Workers’ consent to their exploitation is given in circumstances of deep vulnerability and asymmetry of power. According to Marx, two conditions help explain workers’ apparently free choice to enter into a nevertheless exploitative contract: (1) in capitalism (unlike in feudalism or slave societies) workers own their labor power, but (2) they do not own means of production. Because of their deprivation (2), workers have no reasonable alternative to using their entitlement (1) to sell their labor power to the capitalists—who do own the means of production (Marx 1867 [1990: 272–3]). Through labor-saving technical innovations spurred by competition, capitalism also constantly produces unemployment, which weakens the bargaining power of individual workers further. Thus, Marx says that although workers voluntarily enter into exploitative contracts, they are “compelled [to do so] by social conditions”.

The silent compulsion of economic relations sets the seal on the domination of the capitalist over the worker…. [The worker’s] dependence on capital … springs from the conditions of production themselves, and is guaranteed in perpetuity by them. (Marx 1867 [1990: 382, 899])

Because of the deep background inequality of power resulting from their structural position within a capitalist economy, workers accept a pattern of economic transaction in which they submit to the direction of capitalists during the activities of production, and surrender to those same capitalists a disproportional share of the fruits of their labor. Although some individual workers might be able to escape their vulnerable condition by saving and starting a firm of their own, most would find this extremely difficult, and they could not all do it simultaneously within capitalism (Elster 1985: 208–16; G.A. Cohen 1988: ch. 13).

Socialists sometimes say that capitalism flouts an ideal of non-domination as freedom from being subject to rules one has systematically less power to shape than others (Gourevitch 2013; Arnold 2017; Gilabert 2017b: 566–7—on which this and the previous paragraph draw). Capitalist relations of production involve domination and the dependence of workers on the discretion of capitalists’ choices at three critical junctures. The first, mentioned above, concerns the labor contract. Due to their lack of control of the means of production, workers must largely submit, on pain of starvation or severe poverty, to the terms capitalists offer them. The second concerns interactions in the workplace. Capitalists and their managers rule the activities of workers by unilaterally deciding what and how the latter produce. Although in the sphere of circulation workers and capitalists might look (misleadingly, given the first point) like equally free contractors striking fair deals, once we enter the “hidden abode” of production it is clear to all sides that what exists is relationships of intense subjection of some to the will of others (Marx 1867 [1990: 279–80]). Workers effectively spend many of their waking hours doing what others dictate them to do. Third, and finally, capitalists have a disproportionate impact on the legal and political process shaping the institutional structure of the society in which they exploit workers, with capitalist interests dominating the political processes which in turn set the contours of property and labor law. Even if workers manage to obtain the legal right to vote and create their own trade unions and parties (which labor movements achieved in some countries after much struggle), capitalists exert disproportionate influence via greater access to mass media, the funding of political parties, the threat of disinvestment and capital flight if governments reduce their profit margin, and the past and prospective recruitment of state officials in lucrative jobs in their firms and lobbying agencies (Wright 2010: 81–4). At the spheres of exchange, production, and in the broader political process, workers and capitalist have asymmetric structural power. Consequently, the former are significantly subject to the will of the latter in the shaping of the terms on which they work (see further Wright 2000 [2015]). This inequality of structural power, some socialists claim, is an affront to workers’ dignity as self-determining, self-mastering agents.

The third point about domination mentioned above is also deployed by socialists to say that capitalism conflicts with democracy (Wright 2010: 81–4; Arnold n.d. [OIR] : sect. 4; Bowles and Gintis 1986; Meiksins Wood 1995). Democracy requires that people have roughly equal power to affect the political process that structures their social life—or at least that inequalities do not reflect morally irrelevant features such as race, gender, and class. Socialists have made three points regarding the conflict between capitalism and democracy. The first concerns political democracy of the kind that is familiar today. Even in the presence of multi-party electoral systems, members of the capitalist class—despite being a minority of the population—have significantly more influence than members of the working class. Governments have a tendency to adapt their agendas to the wishes of capitalists because they depend on their investment decisions to raise the taxes to fund public policies, as well as for the variety of other reasons outlined above. Even if socialist parties win elections, as long as they do not change the fundamentals of the economic system, they must be congenial to the wishes of capitalists. Thus, socialists have argued that deep changes in the economic structure of society are needed to make electoral democracy fulfill its promise. Political power cannot be insulated from economic power. They also, secondly, think that such changes may be directly significant. Indeed, as radical democrats, socialists have argued that reducing inequality of decision-making power within the economic sphere itself is not only instrumentally significant (to reduce inequality within the governmental sphere), but also intrinsically significant to increase people’s self-determination in their daily lives as economic agents. Therefore, most democratic socialists call for a solution to the problem of the conflict between democracy and capitalism by extending democratic principles into the economy (Fleurbaey 2006). Exploring the parallel between the political and economic systems, socialists have argued that democratic principles should apply in the economic arena as they do in the political domain, as economic decisions, like political decisions, have dramatic consequences for the freedom and well-being of people. Returning to the issue of the relations between the two arenas, socialists have also argued that fostering workers’ self-determination in the economy (notably in the workplace) enhances democratic participation at the political level (Coutrot 2018: ch. 9; Arnold 2012; see survey on workplace democracy in Frega et al. 2019). A third strand of argument, finally, has explored the importance of socialist reforms for fulfilling the ideal of a deliberative democracy in which people participate as free and equal reasoners seeking to make decisions that actually cater for the common good of all (J. Cohen 1989).

As mentioned above, socialists have included, in their affirmation of individual freedom, a specific concern with real or effective freedom to lead flourishing lives. This freedom is often linked with a positive ideal of self-realization , which in turn motivates a critique of capitalism as generating alienation. This perspective informs Marx’s views on the strong contrast between productive activity under socialism and under capitalism. In socialism, the “realm of necessity” and the correspondingly necessary, but typically unsavory, labor required to secure basic subsistence would be reduced so that people also access a “realm of freedom” in which a desirable form of work involving creativity, cultivation of talents, and meaningful cooperation with others is available. This realm of freedom would unleash “the development of human energy which is an end in itself” (Marx 1991: 957–9). This work, allowing for and facilitating individuals’ self-realization, would enable the “all-round development of the individual”, and would in fact become a “prime want” (Marx 1875 [1978b: 531]). The socialist society would feature “the development of the rich individuality which is all-sided in its production as in its consumption” (Marx 1857–8 [1973: 325]); it would constitute a “higher form of society in which the full and free development of every individual forms the ruling principle” (Marx 1867 [1990: 739]). By contrast, capitalism denies the majority of the population access to self-realization at work. Workers typically toil in tasks which are uninteresting and even stunting. They do not control how production unfolds or what is done with the outputs of production. And their relations with others is not one of fellowship, but rather of domination (under their bosses) and of competition (against their fellow workers). When alienated,

labor is external to the worker, i.e., it does not belong to his essential being; … in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. … It is therefore not the satisfaction of a need; it is merely a means to satisfy needs external to it. (Marx 1844 [1978a: 74])

Recent scholarship has developed these ideas further. Elster has provided the most detailed discussion and development of the Marxian ideal of self-realization. The idea is defined as “the full and free actualization and externalization of the powers and the abilities of the individual” (Elster 1986: 43; 1989: 131). Self-actualization involves a two-step process in which individuals develop their powers (e.g., learn the principles and techniques of civil engineering) and then actualize those powers (e.g., design and participate in the construction of a bridge). Self-externalization, in turn, features a process in which individuals’ powers become visible to others with the potential beneficial outcome of social recognition and the accompanying boost in self-respect and self-esteem. However, Elster says that this Marxian ideal must be reformulated to make it more realistic. No one can develop all their powers fully, and no feasible economy would enable everyone always to get exactly their first-choice jobs and conduct them only in the ways they would most like. Furthermore, self-realization for and with others (and thus also the combination of self-realization with community) may not always work smoothly, as producers entangled in large and complex societies may not feel strongly moved by the needs of distant others, and significant forms of division of labor will likely persist. Still, Elster thinks the socialist ideal of self-realization remains worth pursuing, for example through the generation of opportunities to produce in worker cooperatives. Others have construed the demand for real options to produce in ways that involve self-realization and solidarity as significant for the implementation of the Abilities / Needs Principle (Gilabert 2015: 207–12), and defended a right to opportunities for meaningful work against the charge that it violates a liberal constraint of neutrality about conceptions of the good (Gilabert 2018b: sect. 3.3). (For more discussion on alienation and self-realization, see Jaeggi 2014: ch. 10.)

Further scholarship explores recent changes in the organization of production. Boltanski and Chiapello argue that since the 1980s capitalism has partly absorbed (what they dub) the “artistic critique” against de-skilled and heteronomous work by generating schemes of economic activity in which workers operate in teams and have significant decision-making powers. However, these new forms of work, although common especially in certain knowledge-intensive sectors, are not available to all workers, and they still operate under the ultimate control of capital owners and their profit maximizing strategies. They also operate in tandem with the elimination of the social security policies typical of the (increasingly eroded) welfare state. Thus, the “artistic” strand in the socialist critique of capitalism as hampering people’s authenticity, creativity, and autonomy has not been fully absorbed and should be renewed. It should also be combined with the other, “social critique” strand which challenges inequality, insecurity, and selfishness (Boltanski and Chiapello 2018: Introduction, sect. 2). Other authors find in these new forms of work the seeds of future forms of economic organization—arguing that they provide evidence that workers can plan and control sophisticated processes of production on their own and that capitalists and their managers are largely redundant (Negri 2008).

The critique of alienation has also been recently developed further by Forst (2017) by exploring the relation between alienation and domination. On this account, the central problem with alienation is that it involves the denial of people’s autonomy—their ability and right to shape their social life on terms they could justify to themselves and to each other as free and equal co-legislators. (See also the general analysis of the concept of alienation in Leopold 2018.)

A traditional criticism of capitalism (especially amongst Marxists) is that it is inefficient. Capitalism is prone to cyclic crises in which wealth and human potential is destroyed and squandered. For example, to cut costs and maximize profits, firms choose work-saving technologies and lay off workers. But at the aggregate level, this erodes the demand for their products, which forces firms to cut costs further (by laying off even more workers or halting production). Socialism would, it has been argued, not be so prone to crises, as the rationale for production would not be profit maximization but need satisfaction. Although important, this line of criticism is less widespread amongst contemporary socialists. Historically, capitalism has proved quite resilient, resurrecting itself after crises and expanding its productivity dramatically over time. In might very well be that capitalism is the best feasible regime if the only standard of assessment were productivity.

Still, socialists point out that capitalism involves some significant inefficiencies. Examples are the underproduction of public goods (such as public transportation and education), the underpricing and overconsumption of natural resources (such as fossil fuels and fishing stocks), negative externalities (such as pollution), the costs of monitoring and enforcing market contracts and private property (given that the exploited may not be so keen to work as hard as their profit-maximizing bosses require, and that the marginalized may be moved by desperation to steal), and certain defects of intellectual property rights (such as blocking the diffusion of innovation, and alienating those who engage in creative activities because of their intrinsic appeal and because of the will to serve the public rather than maximize monetary reward) (Wright 2010: 55–65). Really existing capitalist societies have introduced regulations to counter some of these problems, at least to some extent. Examples are taxes and constraints to limit economic activities with negative externalities, and public funding and subsidies to sustain activities with positive externalities which are not sufficiently supported by the market. But, socialists insist, such mechanisms are external to capitalism, as they limit property rights and the scope for profit maximization as the primary orientation in the organization of the economy. The regulations involve the hybridization of the economic system by introducing some non-capitalist, and even socialist elements.

There is also an important issue of whether efficiency should only be understood in terms of maximizing production of material consumption goods. If the metric, or the utility space, that is taken into account when engaging in maximization assessments includes more than these goods, then capitalism can also be criticized as inefficient on account of its tendency to depress the availability of leisure time (as well as to distribute it quite unequally). This carries limitation of people’s access to the various goods that leisure enables—such as the cultivation of friendships, family, and community or political participation. Technological innovations create the opportunity to choose between retaining the previous level of production while using fewer inputs (such as labor time) or maintaining the level of inputs while producing more. John Maynard Keynes famously held that it would be reasonable to tend towards the prior option, and expected societies to take this path as the technological frontier advanced (Keynes 1930/31 [2010]; Pecchi and Piga 2010). Nevertheless, in large part because of the profit maximization motive, capitalism displays an inherent bias in favor of the second, arguably inferior, option. Capitalism thereby narrows the realistic options of its constituent economic agents—both firms and individuals. Firms would lose their competitive edge and risk bankruptcy if they did not pursue profits ahead of the broader interests of their workers (as their products would likely be more expensive). And it is typically hard for workers to find jobs that pay reasonable salaries for fewer hours of work. Socialists concerned with expanding leisure time—and also with environmental risks—find this bias quite alarming (see, e.g., G.A. Cohen 2000a: ch. XI). If a conflict between further increase in the production of material objects for consumption and the expansion of leisure time (and environmental protection) is unavoidable, then it is not clear, all things considered, that the former should be prioritized, especially when an economy has already reached a high level of material productivity.

Capitalism has also been challenged on liberal egalitarian grounds, and in ways that lend themselves to support for socialism. (Rawls 2001; Barry 2005; Piketty 2014; O’Neill 2008a, 2012, 2017; Ronzoni 2018). While many of John Rawls’s readers long took him to be a proponent of an egalitarian form of a capitalist welfare state, or as one might put it “a slightly imaginary Sweden”, in fact Rawls rejected such institutional arrangements as inadequate to the task of realizing principles of political liberty or equality of opportunity, or of keeping material inequalities within sufficiently tight bounds. His own avowed view of the institutions that would be needed to realize liberal egalitarian principles of justice was officially neutral as between a form of “property-owning democracy”, which would combine private property in the means of production with its egalitarian distribution, and hence the abolition of the separate classes of capitalists and workers; and a form of liberal democratic socialism that would see public ownership of the preponderance of the means of production, with devolved control of particular firms (Rawls 2001: 135–40; O’Neill and Williamson 2012). While Rawls’s version of liberal democratic socialism was insufficiently developed in his own writings, he stands as an interesting case of a theorist whose defense of a form of democratic socialism is based on normative foundations that are not themselves distinctively socialist, but concerned with the core liberal democratic values of justice and equality (see also Edmundson 2017; Ypi 2018).

In a similar vein to Rawls, another instance of a theorist who defends at least partially socialist institutional arrangements on liberal egalitarian grounds was the Nobel Prize winning economist James Meade. Giving a central place to decidedly liberal values of freedom, security and independence, Meade argued that the likely levels of socioeconomic inequality under capitalism were such that a capitalist economy would need to be extensively tempered by socialist elements, such as the development of a citizens’ sovereign wealth fund, if the economic system were to be justifiable to those living under it (Meade 1964; O’Neill 2015 [OIR] , 2017; O’Neill and White 2019). Looking back before Meade, J. S. Mill can also be seen as a theorist who traveled along what we might describe as “the liberal road to socialism”, with Mill in his Autobiography describing his own view as the acceptance of a “qualified socialism” (Mill 1873 [2018]), and arguing for a range of measures to create a more egalitarian economy, including making the case for a steady-state rather than a growth-oriented economy, arguing for workers’ collective ownership and self-management of firms in preference to the hierarchical structures characteristic of most firms under capitalism, and endorsing steep taxation of inheritance and unearned income (Mill 2008; see also Ten 1998; O’Neill 2008b, Pateman 1970). More recently, the argument has been advanced that as capitalist economies tend towards higher levels of inequality, and in particular with the rapid velocity at which the incomes and wealth of the very rich in society is increasing, many of those who had seen their normative commitments as requiring only the mild reform of capitalist economies might need to come to see the need to endorse more radical socialist institutional proposals (Ronzoni 2018).

4. Socialist Institutional Designs (Dimension DII)

The foregoing discussion focused on socialist critiques of capitalism. These critiques make the case that capitalism fails to fulfill principles, or to realize values, to which socialists are committed. But what would an alternative economic system look like which would fulfill those principles, or realize those values—or at least honor them to a larger extent? This brings us to dimension DII of socialism. We will consider several proposed models. We will address here critical concerns about both the feasibility and the desirability of these models. Arguments comparing ideal socialist designs with actual capitalist societies are unsatisfactory; we must compare like with like (Nove 1991; Brennan 2014; Corneo 2017). Thus, we should compare ideal forms of socialism with ideal forms of capitalism, and actual versions of capitalism with actual versions of socialism. Most importantly, we should entertain comparisons between the best feasible incarnations of these systems. This requires formulating feasible forms of socialism. Feasibility assessments can play out in two ways: they may regard the (degree of) workability and stability of a proposed socialist system once introduced, or they may regard its (degree of) accessibility from current conditions when it is not yet in place. We address the former concerns in this section, leaving the latter for section 5 when we turn to dimension DIII of socialism and the questions of socialist transition or transformation.

Would socialism do better than capitalism regarding the ideals of equality, democracy, individual freedom, self-realization, and solidarity? This depends on the availability of workable versions of socialism that fulfill these ideals (or do so at least to a greater extent than workable forms of capitalism). A first set of proposals envision an economic system that does away with both private property in the means of production and with markets. The first version of this model is central planning . This can be understood within a top-down, hierarchical model. A central authority gathers information about the technical potential in the economy and about consumers’ needs and formulates a set of production objectives which seek an optimal match between the former and the latter. These objectives are articulated into a plan that is passed down to intermediate agencies and eventually to local firms, which must produce according to the plan handed down. If it works, this proposal would secure the highest feasible levels of equal access to consumption goods for everyone. However, critics have argued that the model faces serious feasibility hurdles (Corneo 2017: ch. 5: Roemer 1994a: ch. 5). It is very hard for a central authority to gather the relevant information from producers and consumers. Second, even if it could gather enough information, the computation of an optimal plan would require enormously complex calculations which may be beyond the capacity of planners (even with access to the most sophisticated technological assistance). Finally, there may be significant incentive deficits. For example, firms might tend to exaggerate the resources they need to produce and mislead about how much they can produce. Without facing strong sticks and carrots (such as the prospects for either bankruptcy and profit offered by a competitive market), firms might well display low levels of innovation. As a result, a planned economy would likely lag behind surrounding capitalist economies, and their members would tend to lose faith in it. High levels of cooperation (and willingness to innovate) could still exist if sufficiently many individuals in this society possessed a strong sense of duty. But critics find this unlikely to materialize, warning that “a system that only works with exceptional individuals only works in exceptional cases” (Corneo 2017: 127).

Actual experiments in centrally planned economies have only partially approximated the best version of it. Thus, in addition to the problems mentioned above (which affect even that best version), they have displayed additional defects. For example, the system introduced in the Soviet Union featured intense concentration of political and economic power in the hands of an elite controlling a single party which, in turn, controlled a non-democratic state apparatus. Despite its successes in industrializing the country (making it capable of mobilizing in a war effort to defeat Nazi Germany), the model failed to generate sufficient technical innovation and intensive growth to deliver differentiated consumer goods of the kind available within advanced capitalist economies. Furthermore, it trampled upon civil and political liberties that many socialists would themselves hold dear.

Responding to such widespread disempowerment, a second model for socialist planning has recommended that planning be done in a different, more democratic way. Thus, the participatory planning (or participatory economy, “Parecon”) model proposes the following institutional features (Albert 2003, 2016 [OIR] ). First, the means of production would be socially owned. Second, production would take place in firms controlled by workers (thus fostering democracy within the workplace). Third, balanced “job complexes” are put in place in which workers can both engage in intellectual and manual labor (thus fostering and generalizing self-realization). Fourth, in a solidaristic fashion, remuneration of workers would track their effort, sacrifice, and special needs (and not their relative power or output—which would likely reflect differences in native abilities for which they are not morally responsible). Finally, and crucially, economic coordination would be based on comprehensive participatory planning. This would involve a complex system of nested worker councils, consumer councils, and an Iteration Facilitation Board. Various rounds of deliberation within, and between, worker and consumer councils, facilitated by this board, would be undertaken until matches between supply and demands schedules are found—with recourse to voting procedures only when no full agreement exists but several promising arrangements arise. This would turn the economy into an arena of deliberative democracy.

This proposal seems to cater for the full palette of socialist values stated in section 4.1 . Importantly, it overcomes the deficits regarding freedom displayed by central planning. Critics have warned, however, that Parecon faces serious feasibility obstacles. In particular, the iterative planning constituting the fifth institutional dimension of the Parecon proposal would require immense information complexity (Wright 2010: 260–5). It is unlikely that participants in the operations of this board, even with the help of sophisticated computers, would manage it sufficiently well to generate a production plan that satisfactorily caters to the diversity of individuals’ needs. A defense of Parecon would retort that beyond initial stages, the process of economic decision-making would not be too cumbersome. Furthermore, it might turn out to involve no more paperwork and time devoted to planning and to assessment behind computer terminals than is found in existing capitalist societies (with their myriad individual and corporate budgeting exercises, and their various accounting and legal epicycles). And, in any case, even if it is more cumbersome and less efficient in terms of productivity, Parecon might still be preferable overall as an economic system, given its superior performance regarding the values of freedom, equality, self-realization, solidarity, and democracy (Arnold n.d. [OIR] : sect. 8.b).

Some of the above-mentioned problems of central planning, regarding inefficiency and concentration of power, have motivated some socialists to explore alternative economic systems in which markets are given a central role. Markets generate problems of their own (especially when they involve monopolies, negative externalities, and asymmetric information). But if regulations are introduced to counter these “market failures”, markets can be the best feasible mechanism for generating matches between demand and supply in large, complex societies (as higher prices signal high demand, with supply rushing to cover it, while lower prices signal low demand, leading supply to concentrate on other products). Market socialism affirms the traditional socialist desideratum of preventing a division of society between a class of capitalists who do not need to work to make a living and a class of laborers having to work for them, but it retains from capitalism the utilization of markets to guide production. There has been a lively debate on this approach, with several specific systems being proposed.

One version is the economic democracy model (Schweickart 2002 [2011], 2015 [OIR] ). It has three basic features. First, production is undertaken in firms managed by workers. Worker self-managed enterprises would gain temporary control of some means of production (which would be leased out by the state). Workers determine what gets produced and how it is produced, and determine compensation schemes. Second, there is a market for goods and services. The profit motive persists and some inequalities within and between firms are possible, but likely much smaller than in capitalism (as there would be no separate capitalist class, and workers will not democratically select income schemes that involve significant inequality within their firms). Finally, investment flows are socially controlled through democratically accountable public investment banks, which determine funding for enterprises on the basis of socially relevant criteria. The revenues for these banks come from a capital assets tax. This system would (through its second feature) mobilize the efficiency of markets while also (through its other features) attending to socialist ideals of self-determination, self-realization, and equal opportunity. To address some potential difficulties, the model has been extended to include further features, such as a commitment of the government as an employer of last resort, the creation of socialist savings and loans associations, the accommodation of an entrepreneurial-capitalist sector for particularly innovative small firms, and some forms of protectionism regarding foreign trade.

Self-management market socialism has been defended as feasible by pointing at the experience of cooperatives (such as the Mondragón Corporation in the Basque Country in Spain, which has (as of 2015) over 70,000 worker-owners participating in a network of cooperative businesses). But it has also been criticized on five counts (Corneo 2017: ch. 6). First, it would generate unfair distributions, as workers doing the same work in different enterprises would end up with unequal income if the enterprises are not equally successful in the market. Second, workers would face high levels of financial risk, as their resources would be concentrated in their firm rather than spread more widely. Third, it could generate inefficient responses to market prices, as self-managed enterprises reduce hiring if prices for their products are high—so that members keep more of the profit—and hire more if the prices are low—to cover for fixed costs of production. Given the previous point, the system could also generate high unemployment. Having the government require firms to hire more would lead to lower productivity. However, the further features in the model discussed above might address this problem by allowing for small private enterprises to be formed, and by having in the background the government play a role as an employer of last resort (although this might also limit overall productivity). Finally, although some of the problems of efficiency could be handled through the banks controlling investment, it is not clear that the enormous power of such banks could be made sufficiently accountable to a democratic process so as to avoid the potential problem of cooptation by elites. (See, however, Malleson 2014 on democratic control of investment.)

Another market socialist model, proposed by Carens (1981, 2003), does not impose worker self-management. The Carensian model mirrors the current capitalist system in most respects while introducing two key innovative features. First, there would be direct governmental provision regarding certain individually differentiated needs (via a public health care system, for example). Second, to access other consumption goods, everyone working full time would get the same post tax income. Pre-tax salaries would vary, signaling levels of demand in the market. People would choose jobs not only on the basis of their self-regarding preferences, but also out of a sense of social duty to use their capacities to support others in society. Thus, honoring the Abilities / Needs Principle , they would apply for jobs (within their competencies) in which the pre-tax income is relatively high. If it worked, this model would recruit the efficiency of markets, but it would not involve the selfish motives and inegalitarian outcomes typically linked to them in capitalism.

One worry about the Carensian model is that it might be unrealistic to expect an economic system to work well when it relies so heavily on a sense of duty to motivate people to make cooperative contributions. This worry could be assuaged by presenting this model as the long-term target of a socialist transformation which would progressively develop a social ethos supporting it (Gilabert 2011, 2017a), by noting empirical findings about the significant traction of non-egoistic motives in economic behavior (Bowles and Gintis 2011) and the feasibility of “moral incentives” (Guevara 1977, Lizárraga 2011), and by exploring strategies to mobilize simultaneously various motivational mechanisms to sustain the proposed scheme. Two other worries are the following (Gilabert 2015). First, the model makes no explicit provision regarding real opportunities for work in self-managed firms. To cater more fully for ideals of self-determination and self-realization, a requirement could be added that the government promote such opportunities for those willing to take them. Second, the model is not sufficiently sensitive to different individual preferences regarding leisure and consumption (requiring simply that everyone work full time and wind up with the same consumption and leisure bundles). More flexible schedules could be introduced so that people who want to consume more could work longer hours and have higher salaries, while people who want to enjoy more free time could work fewer hours and have lower salaries. Considerations of reciprocity and equality could still be honored by equalizing the incomes of those working the same number of hours.

Many forms of market socialism allow for some hierarchy at the point of production. These managerial forms are usually defended on grounds of greater efficiency. But they face the question of how to incentivize managers to behave in ways that foster innovation and productivity. One way to do this is to set up a stock market that would help to measure the performance of the firms they manage and to push them to make optimal decisions. An example of this approach (there are others—Corneo 2017: ch. 8) is coupon market socialism . In Roemer’s (1994a) version, this economic system operates with two kinds of money: dollars (euros, pesos, etc.) and coupons. Dollars are used to purchase commodities for consumption and production, and coupons are used in a stock market to purchase shares in corporations. The two kinds of money are not convertible (with an exception to be outlined below). Each person, when reaching adulthood, is provided with an equal set of coupons. They can use them in a state-regulated stock market (directly or through mutual investment funds) to purchase shares in corporations at market price. They receive the dividends from their investments in dollars, but they cannot cash the coupons themselves. When they die, people’s coupons and shares go back to the state for distribution to new generations—no inherited wealth is allowed—and coupons cannot be transferred as gifts. Thus, there is no separate class of capital owners in this economy. But there will be income inequality resulting from people’s different fortunes with their investments (dividends) as well as from the income they gain in the jobs they take through the labor market (in managerial and non-managerial positions). Coupons can however be converted into dollars by corporations; they can cash their shares to pay for capital investments. The exchange is regulated by a public central bank. Further, public banks or public investment funds, operating with relative independence from the government, would steer enterprises receiving coupons so that they maximize profit in the competitive markets for the goods and services they produce (so that they maximize the returns on the coupons invested). Part of that profit is also taxed for direct welfare provisions by the state.

This model caters for ideals of equality of opportunity (given equal distribution of coupons) and democracy (given the elimination of capitalist dynasties that have the ability to transform massive economic power into political influence). It also gives people freedom to choose how to use their resources and includes solidaristic schemes of public provision to meet needs regarding education and health care. Via the competitive markets in consumption goods and shares, it also promises high levels of innovation and productivity. (In some versions of the model this is enhanced by allowing limited forms of private ownership of firms to facilitate the input of highly innovative entrepreneurial individuals—Corneo 2017: 192–7). The model departs from traditional forms of socialism by not exactly instituting social property in means of production (but rather the equal dispersal of coupons across individuals in each generation). But defenders of this model say that socialists should not fetishize any property scheme; they should instead see such schemes instrumentally in terms of how well they fare in the implementation of core normative principles (such as equality of opportunity) (Roemer 1994a: 23–4, 124–5). Critics have worries, however, that the model does not go far enough in honoring socialist principles. For example, they have argued that a managerial (by contrast to a self-management) form of market socialism is deficient in terms of self-determination and self-realization at the workplace (Satz 1996), and that the levels of inequalities in income, and the competitive attitudes in the market that it would generate, violate ideals of community (G.A. Cohen 2009). In response, a defender of coupon market socialism can emphasize that the model is meant to be applied in the short-term, and that further institutional and cultural arrangements more fully in line with socialist principles can be introduced later on, as they become more feasible (Roemer 1994a: 25–7, 118). A worry, however, is that the model may entrench institutional and cultural configurations which may diminish rather than enhance the prospects for deeper changes in the future (Brighouse 1996; Gilabert 2011).

The models discussed above envision comprehensive “system change” in which the class division between capitalists and wage laborers disappears. Socialists have also explored piecemeal reforms that stop short of that structural change. An important historical example is the combination of a market economy and the welfare state . In this model, although property in the means of production remains private, and markets allocate most inputs and outputs of production, a robust governmental framework is put in place to limit the power of capitalists over workers and to improve the life-prospects of the latter. Thus, social insurance addresses the risks associated with illness, unemployment, disability, and old age. Tax-funded, state provision of many of those goods that markets typically fail to deliver for all is introduced (such as high-quality education, public transportation, and health care). And collective bargaining gives unions and other instruments of workers’ power some sway on the determination of their working conditions, as well as providing an important foundation for the political agency of the working class (O’Neill and White 2018).

This welfare state model was developed with great success during the three decades after World War II, especially in Northern Europe, but also, in weaker but significant forms, in other countries (including some in the Global South). However, since the 1980s, this model has been in significant retreat, or even in crisis. Wealth and income inequality have been increasing dramatically during this time (Piketty 2014; O’Neill 2017). The financial sector has become extremely powerful and able largely to escape governmental regulation as globalization allows capital to flow across borders. A “race to the bottom” features states competing with each other to attract investment by lowering tax rates and other regulations, thus undermining states’ ability to implement welfare policies (see, e.g., Dietsch 2015, 2018). Some socialists have seen this crisis as a reason to abandon the welfare state and pursue more comprehensive changes of the kind discussed above. Others, however, have argued that the model should be defended given that it has been proven to work quite well while the alternatives have uncertain prospects.

One example of the approach of extending or retrenching the mixed economy and welfare state proposes a combination of two moves (Corneo 2017: ch. 10, Epilogue, Appendix). The first move is to revamp the welfare state by introducing mechanisms of greater accountability of politicians to citizens (such as regulation of the dealings of politicians with private companies, and more instances of direct democracy in order to empower citizens), an improvement of the quality of public services delivered by the welfare state (introducing exacting audits and evaluations and fostering the training and recruitment of excellent civil servants), and international coordination of tax policies to prevent tax competition and tax evasion. The second move in this proposal is to run controlled experiments of market socialism to present it as a credible threat to the powerful actors seeking to undermine the welfare state. This threat would help stabilize the welfare state as the menace of communist revolution did after 1945. Specifically, welfare states could create new institutions that would be relatively independent from governments and be run by highly competent and democratically accountable civil servants. “Sovereign Wealth Funds” would invest public money in well-functioning enterprises, to yield an equal “social dividend” for citizens (on Sovereign Wealth Funds, see also Cummine 2016, O’Neill and White 2019). The second institution, a “Federal Shareholder”, would go further by using some of these funds to buy 51% of the shares of selected enterprises and take the lead within their boards of directors or supervisory boards. The objective would be to show that these enterprises (which would include significant participation of workers in their management, and ethical guidelines regarding environmental impacts and other concerns) maximize profits and thus offer a desirable and feasible alternative to the standard capitalist enterprise. Effectively, this strategy would run controlled experiments of shareholder market socialism. The working population would learn about the feasibility of market socialism, and capitalist opponents of welfare entitlements would be disciplined by fear of the generalization of such experiments to settle again for the welfare state.

Another strategy is to introduce various experiments seeking to expand the impact of social power (as different from state and economic power) within society (as defined in sect. 1). (See survey in Wright 2010: chs. 6–7). A set of mechanisms would target the deepening of democracy. Forms of direct democracy could foster citizens’ deliberative engagement in decision-making, as exemplified by the introduction of municipal participatory budgeting in Porto Alegre, Brazil (which features citizens’ assemblies identifying priorities for public policy). The quality of representative democracy can be enhanced (and its subservience to the power of capitalists decreased) by introducing egalitarian funding of electoral campaigns (e.g., by giving citizens a sum of money to allocate to the parties they favor, while forcing parties to choose between getting funding from that source and any other source—such as corporations), and by creating random citizen assemblies to generate policy options which can then be subject to society-wide referenda (as in the attempt to change the electoral system in British Columbia in Canada). Finally, forms of associational democracy can be introduced that feature deliberation or bargaining between government, labor, business, and civil society groups when devising national economic policies or when introducing regional or local (e.g., environmental) regulations. A second set of mechanisms would foster social empowerment more directly in the economy. Examples are the promotion of the social economy sector featuring economic activity involving self-management and production oriented to use value (as displayed, e.g., by Wikipedia and child care units in Quebec), an unconditional basic income strengthening people’s ability to engage in economic activities they find intrinsically valuable, and the expansion of the cooperative sector. None of these mechanisms on its own would make a society socialist rather than capitalist. But if we see societies as complex “ecologies” rather than as homogeneous “organisms”, we can notice that they are hybrids including diverse institutional logics. An increase in the incidence of social empowerment may significantly extend the socialist aspects of a society, and even eventually make them dominant (a point to which we return in the next section).

A final point worth mentioning as we close our discussion of dimension DII of socialism concerns the growing interest in addressing not only the economic arena, but also the political and personal-private ones. Some scholars argue that classical socialists neglected the increasing “functional differentiation” of modern society into these three “spheres”, concentrating in an unduly narrow way on the economic one (Honneth 2015 [2017]). Thus, recent socialist work has increasingly explored how to extend socialist principles to the organization of relatively autonomous governmental institutions and practices and to the shaping of intimate relationships among family members, friends, and lovers, as well as to the relations between these diverse social arenas (see also Fraser 2009, 2014; Albert 2017). There is, of course, also a long-standing tradition of feminist socialism that has pushed for a wide scope in the application of socialist ideals and a broader understanding of labor that covers productive and reproductive activities beyond the formal workplace (see, e.g., Arruzza 2013, 2016; Dalla Costa and James 1972; Federici 2012; Ehrenreich 1976 [2018]; Gould 1973–4; Rowbotham et al 1979; Rowbotham 1998).

We turn now to the last dimension of socialism (DIII), which concerns the transformation of capitalist societies into socialist ones. The discussion on this dimension is difficult in at least two respects which call for philosophical exploration (Gilabert 2017a: 113–23, 2015: 216–20). The first issue concerns feasibility. The question is whether socialist systems are accessible from where we are now—whether there is a path from here to there. But what does feasibility mean here? It cannot just mean logical or physical possibility, as these would rule out very few social systems. The relevant feasibility parameters seem instead to involve matters of technical development, economic organization, political mobilization, and moral culture. (For some discussion on these parameters see Wright 2010: ch. 8; Chibber 2017.) But such parameters are comparatively “soft”, in that they indicate probability prospects rather than pose strict limits of possibility, and can be significantly changed over time. When something is not feasible to do right now, we could have dynamic duties to make it feasible to do later by developing our relevant capacities in the meantime. The feasibility judgments must then be scalar rather than binary and allow for diachronic variation. These features make them somewhat murky, and not straightforwardly amenable to the hard-edged use of impossibility claims to debunk normative requirements (via contraposition on the principle that ought implies can).

A second difficulty concerns the articulation of all things considered appropriate strategies that combine feasibility considerations with the normative desiderata provided by socialist principles. The question here is: what is the most reasonable path of transformation to pursue for socialists given their understanding of the principles animating their political project, viewed against the background of what seems more or less feasible to achieve at different moments, and within different historical contexts? Complex judgments have to be formed about the precise social systems at which it would be right to aim at different stages of the sequence of transformation, and about the specific modes of political action to deploy in such processes. These judgments would combine feasibility and desirability to assess short-term and long-term goals, their intrinsic costs and benefits, and the promise of the former to enhance the achievement of the latter. The difficulty of forming such judgments is compounded by the uncertainty about the prospects of large societal changes (but also about the long-term consequences of settling for the status quo).

Marx (1875 [1978b]) himself seemed to address some of these issues in his short text “The Critique of the Gotha Program” of 1875. Marx here envisioned the process of socialist transformation as including two phases. The final phase would fully implement the Abilities / Needs Principle . But he did not take that scenario to be immediately accessible. An intermediate step should be pursued, in which the economy would be ruled by a Contribution Principle requiring that (after some provisions are put aside to fulfill basic needs regarding health care, education, and support for those unable to work) people gain access to consumption goods in proportion to how much they contribute. This lower phase of socialist transformation would be reasonable because it would enhance the prospects of transitioning away from capitalism and of generating the conditions for the full realization of socialism. The implementation of the Contribution Principle would fulfill the promise systematically broken by capitalism that people would benefit according to their labor input (as in capitalism capitalists get much more, and workers much less, than they give). It would also incentivize people to increase production to the level necessary for the introduction of socialism proper. Once such level of development is in place, the social ethos could move away from the mantra of the “exchange of equivalents” and instead adopt a different outlook in which people produce according to their diverse abilities, and consume according to their diverse needs. This sequential picture of transformation features diachronic judgments about changes in feasibility parameters (such as the expansion of technical capacity and a change in patterns of motivation). Marx also envisioned political dimensions of this process, including a “dictatorship of the proletariat” (which would not, as some popular interpretations hold, involve violation of civil and political rights, but a change in the political constitution and majoritarian policies that secure the elimination of capitalist property rights (Elster 1985: 447–9)). In time, the state (understood as an apparatus of class rule rather than, more generally, as an administrative device) would “wither away”.

History has not moved smoothly in the direction many socialists predicted. It has not been obvious that the following steps in the expected pattern materialized or are likely to do so: capitalism generating a large, destitute, and homogeneous working class; this class responding to some of the cyclical crises capitalism is prone to by creating a coherent and powerful political movement; this movement gaining control of government and resolutely and successfully implementing a socialist economic system (G.A. Cohen 2000b: ch.6; Laclau and Mouffe 1985). Given the fact that this process did not materialize, and seems unlikely to do so, it turns out that it would be both self-defeating and irresponsible to fail to address difficult questions about the relative feasibility and moral desirability of different strategies of potential socialist transformation. For example, if the process of transformation involves two or more stages (be they the two mentioned above, or some sequence going, say, from the welfare state to shareholder or coupon market socialism and then to the Carensian model), it might be asked who is to evaluate and decide upon what is to be done at each stage of the process, on what grounds can it be expected that earlier stages will enhance the likelihood of the success of later stages rather than undermine them (e.g., by enshrining institutions or values that will make it hard to move further along the path), what transitional costs can be accepted in earlier stages, and whether the costs expected are outweighed by the desirability and the increased probability of attaining the later stages. Such questions do not want for difficulty.

Addressing questions such as these dilemmas of transitional strategy, socialists have envisaged different approaches to social and political transformation. Four significant examples (extensively discussed in Wright 2010: Part III, 2015b, 2016—which we follow here) are articulated by considering two dimensions of analysis regarding (a) the primary goal of the strategy (either (i) transcending the structures of capitalism, or (ii) neutralizing the worst harms of it) and (b) the primary target of the strategy (either (i) the state and other institutions at the macro-level of the system, or (ii) the economic activities of individuals, organizations, and communities).

The first strategy, smashing capitalism , picks out the combination of possibilities (a.i) and (b.i). A political organization (e.g., a revolutionary party) takes advantage of some of the crises generated by capitalism to seize state power, proceeding to use that power to counter opposition to the revolution and to build a socialist society. This is the strategy favored by revolutionary socialists and many Marxists, and pursued in the twentieth century in countries such as Russia and China. If we look at the historical evidence, we see that although this strategy succeeded in some cases in transitioning out of previously existing capitalist or proto-capitalist economic systems, it failed in terms of building socialism. It led instead to a form of authoritarian statism. There is debate about the causes of these failures. Some factors may have been the economically backward and politically hostile circumstances in which the strategy was implemented, the leaders’ deficits (in terms of their tactics or motives), and the hierarchical frameworks used to suppress opposition after the revolution which remained in place for the long-term to subvert revolutionaries’ aims. Large system changes normally have to face a “transitional trough” after their onset, in which the material interests of many people are temporarily set back (Przeworski 1985). A political dilemma arises, in that, if liberal democratic politics is retained (with a free press, liberty of association, and multiparty elections) the revolutionaries may be unseated due to citizens’ political response to the “valley of transition”, while if liberal democratic politics are supplanted, then authoritarian statism may be the consequence, eradicating the possibility of a socialist outcome to which it would be worthwhile to seek to transition.

A second strategy, picking out the combination of possibilities (a.ii) and (b.i), has been taming capitalism . It mobilizes the population (sometimes in sharp political struggles) to elect governments and implement policies that respond to the worst harms generated by capitalism, with the aim of neutralizing them. New policies include social insurance responding to risks faced by the population (e.g., illness and unemployment), tax funded, state provision of public goods which markets tend to fail to provide (e.g., education, public transportation, research and development, etc.), and regulation of negative externalities produced in markets (e.g., regarding pollution, product and workplace hazards, predatory market behavior, etc.). The strategy, implemented by social-democratic parties, worked quite well during the three decades of the “Golden Age” or Trente Glorieuses following World War II. However, progress was halted and partly rolled back since the retreat of social democracy and the introduction of neoliberalism in the 1980s. Possible explanatory factors are the financialization of capitalism, and the effects of globalization, as discussed above in section 4.3 . There is a debate as to whether capitalism is really tamable—it may be that the Golden Age was only a historical anomaly, borne out of a very particular set of political and economic circumstances.

The third strategy, escaping capitalism , picks out the combination of possibilities (a.ii) and (b.ii). Capitalism might be too strong to destroy. But people could avoid its worst harms by insulating themselves from its dynamics. They could focus on family and friendships, become self-subsistence farmers, create intentional communities, and explore modes of life involving “voluntary simplicity”. However, this strategy seems available mostly to relatively well-off people who can fund their escape with wealth they have amassed or received from capitalist activities. The working poor may not be so lucky.

The final strategy, eroding capitalism , picks out the combination of (a.i) and (b.ii). Economic systems are here seen as hybrids. People can introduce new, socialist forms of collective activity (such as worker cooperatives) and progressively expand them, eventually turning them from marginal to dominant. Recently this kind of strategy of the erosion of capitalism through institutional transformation rather than piecemeal changes within existing economic structures, has been referred to as “the institutional turn” in leftist political economy (see Guinan and O’Neill 2018). Wright (2015b, 2016) suggests the analogy of a lake ecosystem, with the introduction of a new species of fish that at first thrives in one location, and then spreads out, eventually becoming a dominant species. Historically, the transformation from feudalism to capitalism in some parts of Europe has come about in this way, with pockets of commercial, financial, and manufacturing activity taking place in cities and expanding over time. Some anarchists seem to hold a version of this strategy today. It offers hope for change even when the state seems uncongenial, and likely to remain so. But critics find it far-fetched, as it seems unlikely to go sufficiently far given the enormous economic and political power of large capitalist corporations and the tendency of the state to repress serious threats to its rules. To go further, the power of the state has to be at least partially recruited. The fourth strategy then, according to Wright, is only plausible when combined with the second.

As discussed by Wright, this combined strategy would have two elements (we could see Corneo’s proposal discussed in section 4.3 as another version of this approach). First, it would address some important, problematic junctures to expand state action in ways that even capitalists would have to accept. And second, the solutions to the crises introduced by state action would be selected in such a way that they would enhance long-term prospects for socialist change. One critical juncture is global warming, and the social and political problems of the Anthropocene era (Löwy 2005; Purdy 2015; Wark 2016). Responding to its effects would require massive generation of state-provided public goods, which could remove neoliberal compunctions about state activism. A second critical juncture concerns the large levels of long-term unemployment, precariousness, and marginalization generated by new trends in automation and information technology. This involves threats to social peace, and insufficient demand for the products corporations need to sell on the consumption market. Such threats could be averted by introducing an unconditional basic income policy (Van Parijs and Vanderborght 2017), or by the significant expansion of public services, or by some other mechanism that secures for everybody a minimally dignified economic condition independent of their position within the labor market. Now, these state policies could foster the growth of social power and the prospects for socialist change in the future. Workers would have more power in the labor market when they came to be less reliant upon it. They could also be more successful in forming cooperatives. The social economy sector could flourish under such conditions. People could also devote more time to political activism. Together, these trends from below, combined with state activism from above, could expand knowledge about the workability of egalitarian, democratic, and solidaristic forms of economic activity, and strengthen the motivation to extend their scope. Although some critics find this strategy naïve (Riley 2016), proponents think that something like it must be tried if the aim is democratic socialism rather than authoritarian statism. (For specific worries about the political feasibility of a robust universal basic income policy as a precursor to rather than as a result of socialism, see Gourevitch and Stanczyk 2018).

Other significant issues regarding dimension DIII of socialism are the identification of appropriate political agents of change and their prospects of success in the context of contemporary globalization. On the first point, socialists increasingly explore the significance not only of workers’ movements, but also their intersection with the efforts of activists focused on overcoming gender- and race-based oppression (Davis 1981; Albert 2017). Some argue that the primary addressee of socialist politics should not be any specific class or movement, but the more inclusive, and politically equal group of citizens of a democratic community. For example, Honneth (2015 [2017: ch. IV]), following in part John Dewey and Juergen Habermas, argues that the primary addressee and agent of change for socialism should be the citizens assembled in the democratic public sphere. Although normatively appealing, this proposal may face serious feasibility difficulties, as existing democratic arenas are intensely contaminated and disabled by the inequalities socialists criticize and seek to overcome. The second issue is also relevant here. There is a traditional question whether socialism is to be pursued in one country or internationally. The tendency to embrace an internationalist horizon of political change is characteristic among socialists as they typically see their ideals of freedom, equality, and solidarity as having global scope, while they also note that, as a matter of feasibility, the increasing porousness of borders for capitalist economic activity make it the case that socialist politics may not go very far in any country without reshaping the broader international context. A difficulty here is that despite the existence of international social movements (including workers’ movements, international NGOs, human rights institutions and associations, and other actors), institutional agency beyond borders that can seriously contest capitalist frameworks is not currently very strong. In addressing these difficulties, action and research on socialist justice must interact with ongoing work in the related areas of gender, race, democracy, human rights, and global justice. [ 2 ]

  • Akyeampong, Emmanuel, 2018, “African Socialism; or, the Search for an Indigenous Model of Economic Development?”, Economic History of Developing Regions , 33(1): 69–87. doi:10.1080/20780389.2018.1434411
  • Albert, Michael, 2003, Parecon: Life After Capitalism , London: Verso.
  • –––, 2017, Practical Utopia: Strategies for a Desirable Society , Oakland: PM Press.
  • ANC (African National Congress), 1955, The Freedom Charter: Adopted at the Congress of the People at Kliptown, Johnannesburg, on June 25 and 26, 1955 . [ ANC 1955 available online , from Wits Historical Papers, University of Witwatersrand.]
  • Aricó, José, 2017, José Aricó: dilemas del marxismo en América Latina, antología esencial , Martín Cortés (ed.), Buenos Aires: CLACSO. [ Aricó 2017 available online ]
  • Arneson, Richard, 2016, “Exploitation, Domination, Competitive Markets, and Unfair Division: Exploitation, Domination, Competitive Markets, Unfair Division”, The Southern Journal of Philosophy , 54(S1-Exploitation): 9–30. doi:10.1111/sjp.12182
  • Arnold, Samuel, 2012, “The Difference Principle at Work”, Journal of Political Philosophy , 20(1): 94–118. doi:10.1111/j.1467-9760.2010.00393.x
  • –––, 2017, “Capitalism, Class Conflict, and Domination”, Socialism and Democracy , 31(1): 106–124. doi:10.1080/08854300.2016.1215810
  • Arnsperger, Christian and Philippe Van Parijs, 2003, Éthique économique et sociale , Paris: La Découverte.
  • Arruzza, Cinzia, 2013, Dangerous Liaisons: The Marriages and Divorces of Marxism and Feminism , (IIRE Notebook for Study and Research 55), Pontypool, Wales: Merlin Press.
  • –––, 2016, “Functionalist, Determinist, Reductionist: Social Reproduction Feminism and Its Critics”, Science & Society , 80(1): 9–30. doi:10.1521/siso.2016.80.1.9
  • Barry, Brian, 2005, Why Social Justice Matters , Cambridge: Polity.
  • Blackburn, Robin, 2011, “Reclaiming Human Rights: Review of The Last Utopia by Samuel Moyn”, New Left Review , 69(May/June): 126–138. [ Blackburn 2011 available online ]
  • Boltanski, Luc and Eve Chiapello, 2018, The New Spirit of Capitalism , London: Verso.
  • Bowles, Samuel and Herbert Gintis, 1986, Democracy and Capitalism: Property, Community and the Contradictions of Modern Social Thought , New York: Routledge.
  • –––, 2011, A Cooperative Species: Human Reciprocity and Its Evolution , Princeton, NJ: Princeton University Press. doi:10.23943/princeton/9780691151250.001.0001
  • Brennan, Jason, 2014, Why Not Capitalism? New York: Routledge.
  • Brighouse, Harry, 1996, “Transitional and Utopian Market Socialism”, in Wright 1996: 187–208.
  • Carens, Joseph H., 1981, Equality, Incentives, and the Market: An Essay in Utopian Politico-Economic Theory , Chicago: University of Chicago Press.
  • –––, 2003, “An Interpretation and Defense of the Socialist Principle of Distribution”, Social Philosophy and Policy , 20(1): 145–177. doi:10.1017/S0265052503201072
  • Castoriadis, Cornelius, 1979, Le Contenu du Socialisme , Paris: Éditions 10/18.
  • Chakrabarty, Bidyut, 2014, Communism in India: Events, Processes and Ideologies , New Delhi: Oxford University Press. doi:10.1093/acprof:oso/9780199974894.001.0001
  • –––, 2018, Left Radicalism in India , New York: Routledge
  • Chibber, Vivek, 2017, “Rescuing Class from the Cultural Turn”, Catalyst , 1(1).
  • Cohen, G. A., 1988, History, Labour, and Freedom , Oxford: Oxford University Press.
  • –––, 1995, Self-ownership, Freedom, and Equality , Cambridge: Cambridge University Press.
  • –––, 2000a, Karl Marx’s Theory of History: A Defense , expanded edition, Princeton: Princeton University Press.
  • –––, 2000b, If You’re an Egalitarian, How Come You’re So Rich? Cambridge, MA: Harvard University Press.
  • –––, 2008, Rescuing Justice and Equality , Cambridge, MA: Harvard University Press.
  • –––, 2009, Why Not Socialism? Princeton: Princeton University Press.
  • –––, 2011, On the Currency of Egalitarian Justice and Other Essays in Political Philosophy , Princeton: Princeton University Press.
  • Cohen, Joshua, 1989, “The Economic Basis of Deliberative Democracy”, Social Philosophy and Policy , 6(2): 25–50. doi:10.1017/S0265052500000625
  • Cohen, Joshua and Joel Rogers, 1995, Associations and Democracy: The Real Utopias Project, Volume 1 , London: Verso.
  • Cole, G. D. H., 1929, The Next Ten Years in British Social and Economic Policy , London: Routledge.
  • Collins, Hugh, Gillian Lester, and Virginia Mantouvalou (eds.), 2018, Philosophical Foundations of Labour Law , Oxford: Oxford University Press. doi:10.1093/oso/9780198825272.001.0001
  • Corneo, Giacomo, 2017, Is Capitalism Obsolete? A Journey through Alternative Economic Systems , Cambridge, MA: Harvard University Press.
  • Coutrot, Thomas, 2018, Libérer le travail , Paris: Seuil.
  • Cummine, Angela, 2016, Citizens’ Wealth , New Haven, CT: Yale University Press.
  • Dalla Costa, Mariarosa and Selma James, 1972, The Power of Women & the Subversion of Community , Bristol: Falling Wall Press Ltd. ( Dalla Costa and James 1972 available online )
  • Dardot, Pierre and Christian Laval, 2014, Commun. Essai sur la révolution au XXIe siècle , Paris: La Découverte.
  • Davis, Angela, 1981, Women, Race and Class , New York: Random House.
  • Dietsch, Peter, 2015, Catching Capital: The Ethics of Tax Competition , New York: Oxford University Press. doi:10.1093/acprof:oso/9780190251512.001.0001
  • –––, 2018, “The State and Tax Competition: A Normative Perspective”, in Taxation: Philosophical Perspectives , Martin O’Neill and Shepley Orr (eds.), Oxford: Oxford University Press, chapter 12.
  • Dussel, Enrique, 1998, Etica de la liberación , Madrid: Trotta.
  • Edmundson, William A., 2017, John Rawls: Reticent Socialist , Cambridge: Cambridge University Press.
  • Ehrenreich, Barbara, 1976 [2018], “What is Socialist Feminism?” WIN Magazine . Reprinted with a new introduction in Jacobin , 07.30.2018. [ Ehrenreich 1976 [2018] available online ]
  • Einstein, Albert, 1949, “Why Socialism?”, Monthly Review , 1. Reprinted in 2009, Monthly Review , 61(1): 55–61. doi:10.14452/MR-061-01-2009-05_7
  • Elster, Jon, 1985, Making Sense of Marx , Cambridge: Cambridge University Press.
  • –––, 1986, An Introduction to Karl Marx , Cambridge, Cambridge University Press.
  • –––, 1989, “Self-Realization in Work and Politics: The Marxist Conception of the Good Life”, in Elster and Moene 1989: 127–158.
  • Elster, Jon and Karl Ove Moene (eds.), 1989, Alternatives to Capitalism , Cambridge: Cambridge University Press.
  • Fanon, Frantz, 1952, Peau noire, masques blancs , Paris: Seuil.
  • –––, 1961, Les damnés de la terre , Paris: Maspero.
  • Federici, Silvia, 2012, Revolution at Point Zero: Housework, Reproduction and Feminist Struggle , Oakland, CA: MP Press.
  • Fleurbaey, Marc, 2006, Capitalisme ou démocratie? L'alternative du XXIe siècle , Paris: Grasset & Fasquelle.
  • Forst, Rainer, 2017, “Noumenal Alienation: Rousseau, Kant and Marx on the Dialectics of Self-Determination”, Kantian Review , 22(4): 523–551. doi:10.1017/S1369415417000267
  • Frega, Roberto, Lisa Herzog, and Christian Neuhäuser, 2019, “Workplace Democracy—The Recent Debate”, Philosophy Compass , 14(4): e12574. doi:10.1111/phc3.12574
  • Fraser, Nancy, 2009, “Feminism, Capitalism and the Cunning of History”, New Left Review , 56(Mar/Apr): 97–117. [ Fraser 2009 available online ]
  • –––, 2014, “Behind Marx’s Hidden Abode: For an Expanded Conception of Capitalism”, New Left Review , 86(Mar/Apr): 55–72. [ Fraser 2014 available online ]
  • Fraser, Nancy and Rahel Jaeggi, 2018, Capitalism , Cambridge: Polity.
  • Gargarella, Roberto, 2010, The Legal Foundations of Inequality: Constitutionalism in the Americas, 1776–1860 , Cambridge: Cambridge University Press. doi:10.1017/CBO9780511750618
  • Geras, Norman, 1985, “The Controversy about Marx and Justice”, New Left Review , 1/150(Mar/Apr): 47–85. [ Geras 1985 available online ]
  • Getachew, Adom, 2019, Worldmaking after Empire: The Rise and Fall of Self-Determination , Princeton, NJ: Princeton University Press. doi:10.23943/princeton/9780691179155.001.0001
  • Gilabert, Pablo, 2011, “Debate: Feasibility and Socialism”, Journal of Political Philosophy , 19(1): 52–63. doi:10.1111/j.1467-9760.2010.00383.x
  • –––, 2012, “Cohen on Socialism, Equality and Community”, Socialist Studies/Études Socialistes , 8: 101–121. doi:10.18740/S4W019
  • –––, 2015, “The Socialist Principle ‘From Each According To Their Abilities, To Each According To Their Needs’”, Journal of Social Philosophy , 46(2): 197–225. doi:10.1111/josp.12096
  • –––, 2017a, “Justice and Feasibility: A Dynamic Approach”, in Political Utopias: Contemporary Debates , Michael Weber and Kevin Vallier (eds.), Oxford: Oxford University Press, 95–126. doi:10.1093/acprof:oso/9780190280598.003.0006
  • –––, 2017b, “Kantian Dignity and Marxian Socialism”, Kantian Review , 22(4): 553–577. doi:10.1017/S1369415417000279
  • –––, 2018a, Human Dignity and Human Rights , Oxford: Oxford University Press. doi:10.1093/oso/9780198827221.001.0001
  • –––, 2018b, “Dignity at Work”, in Collins, Lester, and Mantouvalou 2018: 68–86.
  • Goodin, Robert, 1987, “Exploiting a Person and Exploiting a Situation”, in Modern Theories of Exploitation , Andrew Reeve (ed.), London: SAGE, 166–200.
  • Gould, Carol C., 1973–4, “The Woman Question: Philosophy of Liberation and the Liberation of Philosophy”, Philosophical Forum , 5: 5–44.
  • –––, 1981, “Socialism and Democracy”, Praxis International , 1: 49–63.
  • –––, 1988, Rethinking Democracy: Freedom and Social Cooperation in Politics, Economy, and Society , Cambridge: Cambridge University Press.
  • Gourevitch, Alex, 2013, “Labor Republicanism and the Transformation of Work”, Political Theory , 41(4): 591–617. doi:10.1177/0090591713485370
  • Gourevitch, Alex and Lucas Stanczyk, 2018, “The Basic Income Illusion”, Catalyst , 1(4).
  • Guevara, Ernesto, 1977, El Socialismo y El Hombre Nuevo , Mexico DF: Siglo XXI.
  • Guinan, Joe and Martin O'Neill, 2018, “The Institutional Turn: Labour’s New Political Economy”, Renewal: A Journal of Social Democracy , 26(2): 5–16. [ Guinan and O'Neill 2018 available online ]
  • Harnecker, Marta, 2015, A World to Build. New Paths towards Twenty-First Century Socialism , New York: Monthly Review Press.
  • Holmstrom, Nancy, 1977, “Exploitation”, Canadian Journal of Philosophy , 7(2): 353–369. doi:10.1080/00455091.1977.10717024
  • Honneth, Axel, 2015 [2017], Die Idee des Sozialismus. Versuch einer Aktualisierung , Berlin: Suhrkamp Verlag. Translated as The Idea of Socialism: Towards a Renewal , Joseph Ganahl (trans.), Cambridge: Polity.
  • Jaeggi, Rahel, 2014, Alienation , New York: Columbia University Press.
  • James, C. L. R., 1984, At the Rendezvous of Victory: Selected Writings , London: Allison and Busby.
  • –––, 2001, The Black Jacobins: Toussaint L'ouverture and the San Domingo Revolution , new edition. London: Penguin Books [original publication 1938]
  • Keat, Russell and John O’Neill, 2011, “Socialism”, in Routledge Encyclopedia of Philosophy , London: Routledge. doi:10.4324/9780415249126-S058-2
  • Keynes, John Maynard, 1930/1931 [2010], “Economic Possibilities for Our Grandchildren”, The Nation and Athenaeum) and reprinted in his, 1931, Essays in Persuasion . Reprinted 2010, London: Palgrave Macmillan UK, 2010, 321–332. doi:10.1007/978-1-349-59072-8_25
  • Kołakowski, Leszek, 1974 [2008], Main Currents of Marxism , London: W. W. Norton & Company.
  • Laclau, Ernesto, and Mouffe, Chantal, 1985, Hegemony and Socialist Strategy , London: Verso.
  • Lal, Priya, 2015, African Socialism in Postcolonial Tanzania: Between the Village and the World , Cambridge: Cambridge University Press. doi:10.1017/CBO9781316221679
  • Le Bot, Yvon, 1997, Subcomandante Marcos. El sueño Zapatista. Entrevistas con el Subcomandante Marcos, el mayor Moisés y el comandante Tacho, del Ejército Zapatista de Liberación Nacional , Barcelona: Plaza & Janés.
  • Leopold, David, 2018, “Alienation”, The Stanford Encyclopedia of Philosophy (Fall 2018 Edition), Edward N. Zalta (ed.), URL = < https://plato.stanford.edu/archives/fall2018/entries/alienation/ >
  • Lewis, Su Lin, 2019, “Asian Socialists and the Forgotten Architects of Post-Colonial Freedom, 1952–56”, Journal of World History , 30 (1&2): 55–88.
  • Lizárraga, Fernando, 2011, El marxismo y la justicia social. La idea de igualdad en Ernesto Che Guevara , Chile: Escaparate Ediciones.
  • Lohia, Ram Manohar, 1963, Marx, Gandhi and Socialism , Hyderabad: Navahind.
  • Löwy, Michel, 2005, Ecosocialism. A Radical Alternative to Capitalist Catastrophe , Chicago, IL: Haymarket Books.
  • Lukes, Steven, 1985, Marxism and Morality , Oxford: Oxford University Press.
  • Malleson, Tom, 2014, After Occupy: Economic Democracy for the 21st Century , Oxford: Oxford University Press. doi:10.1093/acprof:oso/9780199330102.001.0001
  • Manley, Michael, 1990, The Politics of Change: a Jamaican Testament , Washington DC: Howard University Press [first published 1974]
  • –––, 1991, The Poverty of Nations: Reflections on Underdevelopment and the World Economy , London: Pluto Press.
  • Mariátegui, José Carlos, 1928, Siete Ensayos de Interpretación de la Realidad Peruana , Caracas, Venezuela.
  • –––, 2010, La tarea americana , Buenos Aires: Prometeo.
  • Marx, Karl, 1857–8 [1973], Grundrisse , London: Penguin. Original composition 1857–8.
  • –––, 1844 [1978a], “Economic and Philosophic Manuscript of 1844”, in in The Marx-Engels Reader , R. Tucker (ed.), second edition, New York: Norton, 66–125. Original composition 1844.
  • –––, 1875 [1978b], “Critique of the Gotha Program”, in The Marx-Engels Reader , R. Tucker (ed.), second edition, New York: Norton, 525–541. Original composition 1875.
  • –––, 1867 [1990], Capital 1 , London: Penguin. Original publication 1867.
  • –––, 1991, Capital 3 , London: Penguin. Original composition: incomplete manuscript later edited and released by Friedrich Engels.
  • Meade, James, 1948, Planning and the Price Mechanism , London: Routledge.
  • –––, 1964, Efficiency, Equality and the Ownership of Property , London: Routledge.
  • –––, 1967, An Intelligent Radical’s Guide to Economic Policy , London: Routledge.
  • Meiksins Wood, Ellen, 1995, Democracy Against Capitalism: Renewing Historical Materialism , Cambridge: Cambridge University Press. Reprinted by Verso in 2016.
  • Mill, John Stuart, 2008, Principles of Political Economy and Chapters on Socialism , Jonathan Riley (ed.), Oxford: Oxford University Press. [ Principles of Political Economy originally published 1848; Chapters on Socialism originally published 1879]
  • –––, 1873 [2018], Autobiography , Oxford: Oxford University Press. [originally published 1873]
  • Morsink, Johannes, 1999, The Universal Declaration of Human Rights. Origins, Drafting and Intent , Philadelphia, PA: University of Pennsylvania Press.
  • Narayan, Jayaprakash, 1980, A Revolutionary's Quest: Selected Writings of Jayaprakash Narayan , Bimal Prasad (ed.), New Delhi: Oxford University Press.
  • Negri, Antonio, 2008, Goodbye Mr. Socialism , New York: Sever Stories Press.
  • Nell, Edward and Onora O’Neill, 1992 [2003], “Justice Under Socialism”, in Transformational Growth and Effective Demand , by Edward J. Nell, London: Palgrave Macmillan UK, 663–674. Reprinted in Justice , fourth edition, J. Sterba (ed.), Toronto: Thomson-Wadsworth, 2003, 77–85. doi:10.1007/978-1-349-21779-3_28
  • Nielsen, Kai, 1985, Equality and Liberty , Totowa, NJ: Rowman & Allanheld.
  • Nkrumah, Kwame, 1961, I Speak of Freedom: a Statement of African Ideology , New York: Frederick A. Praeger.
  • –––, 1963, Africa Must Unite , New York: International.
  • –––, 1965, Neocolonialism: The Last Stage of Imperialism , New York: Internationalism.
  • Nove, Alec, 1991, The Economics of Feasible Socialism Revisited , London: Harper Collins.
  • –––, 2008, “Socialism”, in The New Palgrave Dictionary of Economics , Steven N. Durlauf and Lawrence E. blume (eds.), London: Palgrave Macmillan UK. doi:10.1057/978-1-349-95121-5_1718-2
  • Nyerere, Julius, 1967, Freedom and Unity: A Selection from Writings and Speeches 1952–1965 , Dar es Salaam: Oxford University Press.
  • –––, 1968a, Freedom and Socialism: A Selection from Writings and Speeches 1965–1967 , Dar es Salaam: Oxford University Press.
  • –––, 1968b, Ujamaa: Essays on Socialism , London: Oxford University Press.
  • O’Neill, Martin, 2008a, “What Should Egalitarians Believe?”, Philosophy & Public Affairs , 36(2): 119–156. doi:10.1111/j.1088-4963.2008.00130.x
  • –––, 2008b, “Three Rawlsian Routes towards Economic Democracy”, Revue de Philosophie Économique , 9(1): 29–55
  • –––, 2012, “Free (and Fair) Markets without Capitalism. Political Values, Principles of Justice, and Property-Owning Democracy”, in O’Neill and Williamson 2012: 75–100.
  • –––, 2017, “Survey Article: Philosophy and Public Policy after Piketty”, Journal of Political Philosophy , 25(3): 343–375. doi:10.1111/jopp.12129
  • O’Neill, Martin and Stuart White, 2018, “Trade Unions and Political Equality”, Collins, Lester, and Mantouvalou 2018: 252–268.
  • –––, 2019, “James Meade, Public Ownership, and the Idea of a Citizens’ Trust”, International Journal of Public Policy , 15(1/2): 23–37. doi:10.1504/IJPP.2019.099052
  • O’Neill, Martin and Thad Williamson (eds.), 2012, Property-Owning Democracy: Rawls and Beyond , Oxford: Wiley-Blackwell. doi:10.1002/9781444355192
  • Pateman, Carole, 1970, Participation and Democratic Theory , Cambridge: Cambridge University Press. doi:10.1017/CBO9780511720444
  • Pecchi, Lorenzo and Gustavo Piga (eds), 2010, Revisiting Keynes , Cambridge, MA: MIT Press.
  • Peffer, Rodney, 1990, Marxism, Morality, and Social Justice , Princeton: Princeton University Press.
  • Piketty, Thomas, 2014, Capitalism in the Twenty-First Century , Cambridge, MA: Harvard University Press.
  • Przeworski, Adam, 1985, Capitalism and Social Democracy , Cambridge: Cambridge University Press.
  • Purdy, Jedediah, 2015, After Nature: A Politics for the Anthropocene , Cambridge, MA: Harvard University Press.
  • Rappoport, Angelo, 1924, Dictionary of Socialism , London: T. Fischer Unwin.
  • Rawls, John, 2001, Justice as Fairness. A Restatement , Cambridge, MA: Harvard University Press.
  • Reiman, Jeffrey, 1987, “Exploitation, Force, and the Moral Assessment of Capitalism: Thoughts on Roemer and Cohen”, Philosophy and Public Affairs , 16(1): 3–41.
  • Riley, Dylan, 2016, “An Anticapitalism That Can Win”, Jacobin , 1.7.16. ( Riley 2016 available online )
  • Roemer, John E. (ed.), 1986, Analytical Marxism , Cambridge: Cambridge University Press.
  • –––, 1994a, A Future for Socialism , Cambridge, MA: Harvard University Press.
  • –––, 1994b, Egalitarian Perspectives: Essays in Philosophical Economics , Cambridge: Cambridge University Press. doi:10.1017/CBO9780511528293
  • –––, 2017, “Socialism Revised”, Philosophy & Public Affairs , 45(3): 261–315. doi:10.1111/papa.12089
  • Ronzoni, Miriam, 2018, “How Social Democrats May Become Reluctant Radicals: Thomas Piketty’s Capital and Wolfgang Streeck’s Buying Time ”, European Journal of Political Theory , 17(1): 118–127. doi:10.1177/1474885115601602
  • Rowbotham, Sheila, 1998, “Dear Dr. Marx: A Letter from a Socialist Feminist”, in The Communist Manifesto Now. Socialist Register 1998 , Leo Panitch (ed.), London: Merlin Press, 1-17.
  • Rowbotham, Sheila, Lynne Segal, and Hilary Wainwright (eds), 1979, Beyond the Fragments: Feminism and the Making of Socialism , London: Merlin Press.
  • Sassoon, Donald, 1996 [2013], One Hundred Years of Socialism: The West European Left in the Twentieth Century , London: I. B Tauris. New edition 2013.
  • Satz, Debra, 1996, “Status Inequalities and Models of Market Socialism”, in Wright 1996: 71–89.
  • Schweickart, David, 2002 [2011], After Capitalism , Lantham, MD: Rowman & Littlefield. Second edition 2011.
  • Steiner, Hillel, 2014, “Greed and Fear”, Politics, Philosophy & Economics , 13(2): 140–150. doi:10.1177/1470594X14528649
  • Svampa, Maristella, 2016, Debates Latinoamericanos. Indianismo, desarrollo, dependencia y populismo , Buenos Aires: Edhasa.
  • Sypnowich, Christine, 2017, Equality Renewed. Justice, Flourishing and the Egalitarian Ideal , New York: Routledge. doi:10.4324/9781315458335
  • Ten, C. L., 1998, “Democracy, Socialism, and the Working Classes”, in The Cambridge Companion to Mill , John Skorupski (ed.), Cambridge: Cambridge University Press, 372–395. doi:10.1017/CCOL0521419875.011
  • White, Stuart, 2015, “Basic Capital in the Egalitarian Toolkit?”, Journal of Applied Philosophy , 32(4): 417–431. doi:10.1111/japp.12129
  • Van Parijs, Philippe, 1993, Marxism Recycled , (Studies in Marxism and Social Theory), Cambridge: Cambridge University Press.
  • –––, 1995, Real Freedom for All: What (If Anything) Can Justify Capitalism? Oxford: Oxford University Press. doi:10.1093/0198293577.001.0001
  • Van Parijs, Philippe and Yannick Vanderborght, 2017, Basic Income. A Radical Proposal for a Free Society and a Sane Economy , Cambridge, MA: Harvard University Press.
  • Veneziani, Roberto, 2013, “Exploitation, Inequality and Power”, Journal of Theoretical Politics , 25(4): 526–545. doi:10.1177/0951629813477275
  • Vrousalis, Nicholas, 2013, “Exploitation, Vulnerability, and Social Domination”, Philosophy & Public Affairs , 41(2): 131–157. doi:10.1111/papa.12013
  • –––, 2018, “Exploitation: A Primer”, Philosophy Compass , 13(2): e12486. doi:10.1111/phc3.12486
  • Wark, McKenzie, 2016, Molecular Red: Theory for the Anthropocene , London: Verso.
  • Williams, Eric, 1944 [1994], Capitalism and Slavery , Chapel Hill, NC: University of North Carolina Press.
  • Wolff, Jonathan, 1999, “Marx and Exploitation”, The Journal of Ethics , 3(2): 105–120. doi:10.1023/A:1009811416665
  • Wright, Erik Olin (ed.), 1996 Equal Shares. Making Market Socialism Work , London: Verso.
  • –––, 2000 [2015], “Working-Class Power, Capitalist-Class Interests, and Class Compromise”, American Journal of Sociology , 105(4): 957–1002. Reprinted in his Understanding Class , London: Verso, 2015, 85–230. doi:10.1086/210397
  • –––, 2010, Envisioning Real Utopias , London: Verso.
  • –––, 2015a, “Eroding Capitalism: A Comment on Stuart White’s ‘Basic Capital in the Egalitarian Toolkit’: Eroding Capitalism”, Journal of Applied Philosophy , 32(4): 432–439. doi:10.1111/japp.12128
  • –––, 2015b, “How to Be an Anticapitalist Today”, Jacobin 12.2.15. ( Wright 2015b available online )
  • –––, 2016, “How to Think About (And Win) Socialism”, Jacobin , 4.27.16. ( Wright 2016 available online )
  • Ypi, Lea, 2018, “The Politics of Reticent Socialism”, Catalyst , 2(3): 156–175.
  • Žižek, Slavoj, 2005, “Against Human Rights”, New Left Review , 34(July/Aug): 115–131. [ Žižek 2005 available online ]
How to cite this entry . Preview the PDF version of this entry at the Friends of the SEP Society . Look up topics and thinkers related to this entry at the Internet Philosophy Ontology Project (InPhO). Enhanced bibliography for this entry at PhilPapers , with links to its database.
  • Albert, Michael, 2016, “What’s Next? Parecon, or Participatory Economics”. [ Albert 2016 available online ]
  • Arnold, Samuel, n.d., “Socialism”, Internet Encyclopedia of Philosophy , Accessed 20 June 2019. [ Arnold n.d. available online ]
  • O’Neill, Martin, 2015, “James Meade and Predistribution: 50 Years Before his Time”, Policy Network: Classics of Social Democratic Thought , 28 May 2015. ( O’Neill 2015 available online )
  • Schweickart, David, 2015, “Economic Democracy: An Ethically Desirable Socialism That Is Economically Viable”, The Next System Project , October. URL = < https://thenextsystem.org/economic-democracy >
  • Marxists Internet Archive , (primary texts from various Marxist thinkers)
  • Marx-Engels Gesamtausgabe (German), includes much of Marx’s and Engels’s correspondence
  • New Left Review
  • Marx bibliography , maintained by Andrew Chitty (University of Sussex)

alienation | common good | critical theory | democracy | domination | economics [normative] and economic justice | egalitarianism | equality | exploitation | feminist philosophy, topics: perspectives on class and work | justice | justice: distributive | liberty: positive and negative | markets | Marx, Karl | Marxism, analytical | Mill, John Stuart | Mill, John Stuart: moral and political philosophy | property and ownership | revolution

Acknowledgments

For helpful discussion, comments and suggestions we thank a referee, Samuel Arnold, Christopher Brooke, Lee Churchman, Michaela Collord, Chiara Cordelli, Katrina Forrester, Roberto Gargarella, Carol Gould, Alex Gourevitch, Alex Guerrero, Daniel Hill, Brendan Hogan, Juan Iosa, Bruno Leipold, Su Lin Lewis, Fernando Lizárraga, Romina Rekers, Indrajit Roy, Sagar Sanyal, Claire Smith, Lucas Stanczyk, Roberto Veneziani, Nicholas Vrousalis, Stuart White, Jonathan Wolff, and Lea Ypi.

Copyright © 2019 by Pablo Gilabert < pablo . gilabert @ concordia . ca > Martin O’Neill < martin . oneill @ york . ac . uk >

  • Accessibility

Support SEP

Mirror sites.

View this site from another server:

  • Info about mirror sites

The Stanford Encyclopedia of Philosophy is copyright © 2023 by The Metaphysics Research Lab , Department of Philosophy, Stanford University

Library of Congress Catalog Data: ISSN 1095-5054

Jump to navigation

Home

Capitalism vs. Socialism

capitalism vs socialism essay

From economic shutdowns to trillions of dollars in new government spending, the 2020 COVID-19 pandemic led to a dramatic increase in government action. While much of the increase was temporary, there is now a growing desire to further expand government. We see calls for single-payer health care systems, expanded child-care subsidies, and trillions of dollars in federal infrastructure investments.

Arguments about what government should and should not do are not new. We regularly see them in the debates over the merits of socialism versus free market capitalism. While these debates are often in the abstract, over the last century countries have experimented with variations on both economic systems. The Hoover Institution’s Human Prosperity Project critically examined many of these experiments to see which economic system is best for human flourishing. The video below describes the project’s objectives:

So how do socialism, capitalism, and their many variants compare?

What do these economic systems look like?

In heated policy debates and on social media, we often hear policies described as socialist or capitalist. Sometimes it seems the terms are used as pejoratives rather than as honest descriptions. So what do these terms actually mean?

Capitalism refers to an economic system where economic decisions—such as what to make and how much to charge for it—are made by private actors. There are robust protections for property rights, which give people more reason to invest in businesses and invent new products. By contrast, in socialism economic decisions are largely made by the government. Policy makers decide what gets made and determine prices and wages.

Now, of course, even in capitalist economies governments still play an economic role. Likewise, private individuals still make some decisions in socialist economies. It gets even more complicated: some economies have social democracy, where governments leave most economic decisions in the hands of individuals but take an active role in redistributing income and regulating labor markets and industries. 

You can find a helpful glossary of related terms here .

capitalism vs socialism essay

How do socialism and capitalism affect income and opportunities?

Delivering broad-based prosperity should be the primary goal of all economic systems, but not all systems deliver the same results. Supporters of capitalism argue that free markets give people—entrepreneurs, investors, and workers—the right incentives to create goods and services that people value. The result is higher standards of living. Those sympathetic to socialism, however, respond that capitalism may produce wealth for some, but without government involvement in the economy many are left behind. 

In his Human Prosperity Project essay Socialism, Capitalism, and Income economist Edward Lazear analyzed decades of income trends across 162 countries. He studied how incomes for low and high earners changed as countries shifted from government-controlled economies to more market-oriented economies. His conclusion?

The historical record provides evidence on how countries have fared under the two extreme systems as well as under intermediate cases, where countries adopt primarily private ownership and economic freedom but couple that with a large government sector and transfers. The general evidence suggests that both across countries and over time within a country, providing more economic freedom improves the incomes of all groups, including the lowest group.

capitalism vs socialism essay

Lazear points to several specific examples. First, China: in the 1980s, the Chinese Communist government began to adopt market-based reforms. Lazear finds that the market reforms, as skeptics of capitalism would predict, did increase income inequality. But, more importantly, the market reforms lifted millions of people out of poverty. Lazear notes:

Today, the poorest Chinese earn five times as much as they did just two decades earlier. Throughout the 1980s and before, a large fraction of the Chinese population lived in abject poverty. Today’s poor in China remain poor by developed-country standards, but there is no denying that they are far better off than they were even two decades ago. Indeed, the rapid lifting of so many out of the worst state of poverty is likely the greatest change in human welfare in world history.

As the video below highlights, market reforms led to similar economic miracles in India, Chile, and South Korea:

What about mixed economies?

Of course, most modern-day critics of capitalism are not advocating for complete government control over the economy. They don’t want the economic policies of the Soviet Union or early Communist China; instead, they point to nations with mixed economies to emulate, such as those featuring social democracy. So how do these policies affect incomes and opportunities?

Economist Lee Ohanian compares the labor market policies of Europe and the United States in his essay The Effect of Economic Freedom on Labor Market Efficiency and Performance . Compared to the United States, European nations have higher minimum wages, stricter rules that prevent the firing of workers, and high rates of unionization. These rules are intended to protect workers, but Ohanian finds that they discourage employment and result in lower compensation rates. His analysis indicates:

These findings have important implications for economic policy making. They indicate that policies that enhance the free and efficient operation of the labor market significantly expand opportunities and increase prosperity. Moreover, they suggest that economic policy reforms can substantially improve economic performance in countries with heavily regulated labor markets and high tax rates.

capitalism vs socialism essay

The video below highlights some of Ohanian’s key findings:

What about the effects of income redistribution and the taxes that pay for it?  Supporters argue that these programs keep people out of poverty. Critics, however, argue that financing these systems comes with high costs both to taxpayers and to recipients.

In their essay Taxation, Individual Actions, and Economic Prosperity: A Review Joshua Rauh and Gregory Kearney consider the effects of raising tax rates on high-income Americans to finance new government spending. They examine the effects of income and wealth taxes in Europe. They find that wealth taxes and high income tax rates discourage high-income filers from investing in a country, which ultimately reduces economic growth. Thus, calls in the United States to increase income and wealth taxes “come despite a body of evidence showing that the country is already one of the more progressive tax regimes in the world, that wealth confiscation results in worse outcomes for the broader economy.”

capitalism vs socialism essay

The long-term consequences of redistribution don’t fall just on taxpayers. Such transfer systems also create incentives for individuals to leave or stay out of the work force. In their contribution to the Human Prosperity Project , economist John Cogan and Daniel Heil consider the effects of Universal Basic Income (UBI) programs, which would provide a “no-strings-attached” cash benefit to families. They find that modern UBI proposals in the United States would either prove costly—requiring tax rates that would reduce incentives to work and invest—or would require steep phase-out provisions that punish recipients who try to re-enter the workforce. In either case, the result is that UBI programs are likely to reduce employment rates, ultimately depriving recipients of long-term economic opportunities.

capitalism vs socialism essay

What about other aspects of human flourishing?

Human flourishing is more than material prosperity. For example, it requires a clean environment and access to good health care.

It might seem that socialist economies—where government controls the means of production—would have better environmental track records. Yet the evidence suggests the opposite. In his essay Environmental Markets vs. Environmental Socialism: Capturing Prosperity and Environmental Quality Economist Terry Anderson summarizes the literature on economic systems’ effects on the environment. He points to research showing that countries with more economic freedom tend to have better environmental outcomes:

Seth Norton calculated the statistical relationship between various freedom indexes and environmental improvements. His results show that institutions—especially property rights and the rule of law—are key to human well-being and environmental quality. Dividing a sample of countries into groups with low, medium, and high economic freedom and similar categories for the rule of law, Norton showed that in all cases except water pollution, countries with low economic freedom are worse off than those in countries with moderate economic freedom, while in all cases those in countries with high economic freedom are better off than those in countries with medium economic freedom. A similar pattern is evident for the rule-of-law measures.

capitalism vs socialism essay

Anderson explains this surprising result with the adage that “no one washes a rental car.” In free-market societies, property rights give individuals incentive to protect and preserve the resources they own. In countries without these property rights provisions, no one has the right incentives, much like no one has the incentive to wash a rental car (except the rental car companies). The video below further explains why free markets and cleaner environments go hand and hand.

What about health care? Many developed nations that have generally free economies have still opted for government-run health care. The programs vary by country. Even in the United States, the government plays a large role in health care. Large government programs such as Medicare and Medicaid provide health care to low-income families, the disabled, and seniors. Nevertheless, relative to most developed nations, the United States relies far more heavily on the private sector and markets.

capitalism vs socialism essay

In his essay The Costs of Regulation and Centralization in Health Care Dr. Scott Atlas compares health care in the United States with that in other developed nations. The United States consistently ranks high across a variety of quality metrics. The system offers shorter wait times and faster access to life-saving drugs and medical equipment. The result is that the US system tends to deliver better medical outcomes than other developed nations. Watch this video to learn more:

We’ve seen that whether we look at income statistics or environmental outcomes, economies with freer markets tend to have better outcomes. Nevertheless, there still may be unseen dimensions of economic systems that these statistics don’t address. Is there another way to determine which system is best for human flourishing?

Perhaps the best method is to observe where people choose to live when offered the choice. In his essay Leaving Socialism Behind: A Lesson from German History , Russell Berman catalogues widespread immigration from East Germany to West Germany during the Cold War. Watch this video to learn its causes:

Citations and Additional Reading

  • Why did liberal democracies succeed while communist nations failed in the twentieth century? Hoover Institution senior fellow Peter Berkowitz provides an answer in his essay Capitalism, Socialism, and Freedom .
  • In his essay Socialism vs. The American Constitutional Structure: The Advantages of Decentralization and Federalism , John Yoo highlights the constitutional provisions that would make it difficult for the United States to adopt widescale socialist policies.
  • Explore the other Human Prosperity Project essays here .

capitalism vs socialism essay

Related Content

capitalism vs socialism essay

Socialism and Free-Market Capitalism: The Human Prosperity Project

capitalism vs socialism essay

An Untold Economic Miracle

capitalism vs socialism essay

Laboring in Vain: How Regulation Affects Unemployment

View the discussion thread.

  • Connect with us

capitalism vs socialism essay

© 2024 by the Board of Trustees of Leland Stanford Junior University | Privacy Policy

Home — Essay Samples — Government & Politics — Socialism — Socialism vs. Capitalism: A Comparative Analysis

test_template

Socialism Vs. Capitalism: a Comparative Analysis

  • Categories: Capitalism Socialism

About this sample

close

Words: 844 |

Published: Sep 7, 2023

Words: 844 | Pages: 2 | 5 min read

Table of contents

Socialism: principles and characteristics, capitalism: principles and characteristics, advantages of socialism, advantages of capitalism, disadvantages of socialism, disadvantages of capitalism, conclusion: striking a balance.

  • Public Ownership: In a socialist system, the government or the community collectively owns and controls major industries, businesses, and resources. Private ownership of essential services is limited.
  • Income Redistribution: Socialism seeks to reduce income inequality by redistributing wealth through progressive taxation and social welfare programs. The goal is to ensure that everyone has access to basic necessities.
  • Central Planning: Central planning authorities, such as government agencies, often play a significant role in allocating resources, setting production quotas, and planning the economy to meet societal needs.
  • Social Safety Nets: Socialist systems typically provide robust social safety nets, including universal healthcare, education, and unemployment benefits, to protect citizens from economic hardship.
  • Collective Decision-Making: Socialist societies emphasize collective decision-making processes, with the belief that decisions about resource allocation should be made democratically and with the common good in mind.
  • Private Ownership: In capitalism, individuals or private entities own and control businesses, factories, and resources. The profit motive drives entrepreneurial activity.
  • Market Competition: Capitalist economies are marked by competition among businesses, which is believed to lead to innovation , efficiency, and lower prices for consumers.
  • Minimal Government Intervention: Capitalism advocates for limited government intervention in the economy. Government's role is primarily to enforce property rights, ensure fair competition, and protect individual liberties.
  • Profit Incentive: Capitalism is driven by the pursuit of profit. Individuals and businesses seek to maximize their financial gains through entrepreneurship and investment.
  • Consumer Choice: Capitalist systems prioritize consumer choice, allowing individuals to make decisions about what goods and services to purchase based on their preferences and needs.
  • Reduced Income Inequality: Socialism aims to reduce income inequality through wealth redistribution, ensuring that essential services are accessible to all citizens.
  • Social Safety Nets: Socialist systems provide comprehensive social safety nets, offering healthcare, education, and unemployment benefits to citizens in need.
  • Stability and Predictability: Central planning in socialism can lead to economic stability and predictability, as the government can adjust production and distribution to meet societal needs.
  • Collective Decision-Making: Socialist societies emphasize democratic decision-making, allowing citizens to have a say in resource allocation and public policies.
  • Economic Efficiency: Capitalist markets encourage competition and efficiency, often leading to innovation, lower prices, and increased productivity.
  • Individual Freedom: Capitalism prioritizes individual freedom and property rights, allowing individuals to pursue their own economic interests and make choices based on personal preferences.
  • Incentives for Entrepreneurship: The profit motive in capitalism incentivizes entrepreneurship, investment, and economic growth.
  • Adaptability: Capitalist economies can adapt quickly to changing circumstances, as the competitive nature of the market encourages businesses to respond to consumer demands.
  • Reduced Incentives: Critics argue that socialism can reduce individual incentives to work hard and innovate since income is often redistributed.
  • Bureaucracy: Central planning can lead to bureaucratic inefficiencies and a lack of responsiveness to market demands.
  • Resource Allocation Challenges: Determining how to allocate resources in a way that satisfies everyone can be a complex and challenging task.
  • Reduced Innovation: Some argue that socialism may stifle innovation compared to capitalist systems, where competition drives technological advancement.
  • Income Inequality: Critics argue that capitalism can lead to significant income inequality, with wealth concentrated in the hands of a few.
  • Lack of Access to Basic Services: In capitalist systems, individuals without financial means may struggle to access essential services like healthcare and education.
  • Market Failures: Capitalist markets are not immune to market failures, such as monopolies and externalities, which can result in inefficiencies and societal problems.
  • Short-Term Focus: The pursuit of profit in capitalism can sometimes lead to short-term thinking and disregard for long-term environmental and social consequences.

Image of Dr. Oliver Johnson

Cite this Essay

Let us write you an essay from scratch

  • 450+ experts on 30 subjects ready to help
  • Custom essay delivered in as few as 3 hours

Get high-quality help

author

Prof Ernest (PhD)

Verified writer

  • Expert in: Economics Government & Politics

writer

+ 120 experts online

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy . We’ll occasionally send you promo and account related email

No need to pay just yet!

Related Essays

4.5 pages / 1980 words

3.5 pages / 1676 words

3.5 pages / 1682 words

5 pages / 2459 words

Remember! This is just a sample.

You can get your custom paper by one of our expert writers.

121 writers online

Still can’t find what you need?

Browse our vast selection of original essay samples, each expertly formatted and styled

Related Essays on Socialism

Socialism and capitalism represent two different economic and political systems that have been the subject of much debate and controversy. Understanding the key differences between these systems is crucial for gaining insight [...]

A white picket fence and 2.5 children is the standard model of the American dream. It is an often quoted ideal and the literal dream of many people in the country. However; there is a problem in the definition of this dream in [...]

In his survey of American society in the early 1800's, Alexis de Tocqueville spares a few chapters to describe the American woman as he sees her. Obviously, from our more modern view, Tocqueville's claim that women and men in [...]

How is it that, almost 180 years after it was written, Americans today still read Tocqueville as if it were the most essential piece of American political thought? Maybe it’s because it is. When reading chapters 7 through 10 [...]

The roots of republican government and democratic ideals are firmly planted in James Madison's "The Federalist No. 51, The Structure of the Government Must Furnish the Proper Checks and Balances Between the Different [...]

Following the political upheaval and struggle for power after the second world war, George Orwell's novel 1984 cautions against the dangers of oppression and exemplifies the consequential nightmarish world of the near future. [...]

Related Topics

By clicking “Send”, you agree to our Terms of service and Privacy statement . We will occasionally send you account related emails.

Where do you want us to send this sample?

By clicking “Continue”, you agree to our terms of service and privacy policy.

Be careful. This essay is not unique

This essay was donated by a student and is likely to have been used and submitted before

Download this Sample

Free samples may contain mistakes and not unique parts

Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

Please check your inbox.

We can write you a custom essay that will follow your exact instructions and meet the deadlines. Let's fix your grades together!

Get Your Personalized Essay in 3 Hours or Less!

We use cookies to personalyze your web-site experience. By continuing we’ll assume you board with our cookie policy .

  • Instructions Followed To The Letter
  • Deadlines Met At Every Stage
  • Unique And Plagiarism Free

capitalism vs socialism essay

Capitalism vs. Socialism

Socialist vs. Capitalist Approach to Social Issues Essay

Introduction, differences between capitalism and socialism, similarities between capitalism and socialism, works cited.

While researching articles about Socialist and Capitalist economies, I came across four authors who had discussed the topics. Some of these authors outlined the benefits of capitalism while others redefined the socialist economy. My goal in this paper is to compare and contrast capitalism and socialism based on three social issues, namely; personal property, company, and retirement pension.

To achieve this goal, I have organized my paper into four sections. In the first section, I discuss the concept of capitalism. I also describe the concept of socialism. In the second section, I explain the differences between the two concepts. In the third section, I discuss the similarities between socialism and capitalism. I state their strengths and their weaknesses. I conclude my paper in the fourth section. I also include a list of references after my conclusion.

Capitalism refers to an economic system defined by privately owned resources. Blumenthal (8) defines capitalism as the freedom to exploit one’s resources. Capitalism also refers to a system where the economy is independent of the state (Ross 237). Capitalists argue that everyone has the right to own land, property, and housing among other private possessions (Blumenthal 247). Capitalism is based on the assumption that those who do not work should not eat (Pierce 387). Most Capitalists fail to consider the fact that the government cannot secure everyone’s employment. A country’s natural resources are not always evenly distributed (Ross 85).

Pierce (16) defines Socialism as a system where the government evenly distributes a country’s wealth and resources. Socialism refers to a process through which material wealth is controlled by the government (Kronenwetter 63).

Private Property

Capitalist countries have very strict policies on the private ownership of property. Capitalism leans toward private investment and innovation (Ross 128). Unlike Socialism, Capitalism provides an environment that is conducive for people to buy and sell their possessions.

Countries that practice Socialism does not have Property Rights (Kronenwetter 67). Some scholars argue that Socialism discourages people from investing in their commercial activities (Pierce 214).

Blumenthal (267) argues that Capitalism encourages creativity through the unequal distribution of resources. People with limited access to resources tend to work harder than those who have ample resources. On the other hand, Socialists give the hard-earned wealth and resources of the rich to the poor (Pierce 229). Blumenthal (114) therefore asserts that some lazy Socialists exploit their hard-working counterparts.

In a Capitalist economy, intellectual property can be patented. Capitalists are free to do as they please as long as they do not infringe on the rights of others (Blumenthal 28). In a Socialist economy, the intellectual property belongs to the government. No one is allowed to monopolize the economy (Pierce 38). The government decides how intellectual property is used.

Some scholars argue that Capitalism rewards entrepreneurs. Pierce (178) asserts that self-motivated members of a capitalist economy are more likely to generate income than their lazy counterparts.

The companies that are part of a country’s stock exchange define a capitalist market. Anyone is allowed to buy and sell shares in a capitalist economy (Blumenthal 67). The government does not distribute privately owned resources. On the other hand, a Socialist environment does not encourage private ownership (Ross 145). Government-controlled resources, therefore, define socialism (Kronenwetter 182).

In a Socialist economy, the government controls the distribution of a country’s resources. Everyone has access to healthcare and education among other social amenities. The government caters to everyone’s needs. Socialism can therefore be termed as a socially indiscriminate phenomenon (Pierce 72).

Capitalism encourages companies to maximize their profits and minimize their losses (Ross 314). Most Socialist companies do not care about the bottom line because the government controls their profits.

Capitalist companies encourage creativity among their employees. Workers in a Capitalist economy are more efficient than workers in a Socialist economy (Blumenthal 115). Capitalists are rewarded for their hard work and their resilience. Socialists are generally ineffective because there are not motivated to work harder (Pierce 227).

In a Capitalist economy, prices are determined by the market (Blumenthal 302). Prices are therefore determined by the concept of supply and demand (Ross 26). Companies are free to raise the prices of their commodities when the demand for such items is high. Companies are also required to lower the prices of their commodities when the supply outweighs demand (Pierce 224).

In a Socialist economy, the government regulates the prices of commodities (Pierce 222). Socialist governments monopolize their country’s resources. They decide how money is spent and how it is distributed among the people.

The government is not entirely responsible for creating jobs in a Capitalist economy (Blumenthal 117). Private investors create most of the jobs in a Capitalist economy (Ross 248). In a Socialist economy, the government is responsible for providing employment regardless of the country’s economic state of affairs (Pierce 216). Even unemployed Socialists are entitled to food and healthcare (Kronenwetter).

Retirement Pension

Capitalism encourages people to plan for their retirement in advance. Most organizations give their employees a retirement pension based on the nature of their work. Capitalism, therefore, rewards retirees depending on the work they did before their contracts expired. In a Capitalist economy, a retired doctor would receive a more substantial retirement pension than a janitor in the same economy.

A Socialist government caters to the needs of retirees regardless of the work they did. In a Socialist environment, everyone is entitled to the same level of care. The government is like a welfare office. Retired doctors and janitors are entitled to the same retirement pensions.

Both Socialism and Capitalism are defined by the distribution of resources. The resources in a Capitalist economy are exploited by those who can afford to do so. The government evenly distributes the resources in a Socialist economy.

Socialism can be ineffective because the government decides how resources are distributed. A socialist government can therefore take the earnings of employed individuals and give them to the unemployed members of society (Ross 42).

Capitalism can also seem ineffective because wealth is not evenly distributed. The government has little control over how a country’s resources are exploited. Private business owners tend to monopolize the economy (Kronenwetter 142).

Both concepts are based on the idea that the market can be monopolized. The richest companies control a capitalist market. In a Socialist economy, the government controls the market (Blumenthal 231).

In both cases, private parties run companies. The government has the final say in a Socialist economy. The government can also influence private companies in a Capitalist economy.

Retirement Pensions

In a Capitalist economy, private companies and government organizations provide pensions for people whose contracts have expired. In a Socialist economy, the government caters to the needs of both the retired and the unemployed.

Capitalism encourages innovation through competition. However, the Capitalist approach can be cruel and Darwinian (Kronenwetter 303). Capitalism is based on Darwin’s ideology of the survival of the fittest (Pierce 217). Socialism is based on the concept of brotherhood. The Socialist approach ensures the even distribution of resources. However, it also contributes to widespread laziness and apathy among socialists. Both ideologies have strengths and weaknesses. Socialists should embrace the concept of a hard day’s pay for a hard day’s work (Pierce 34). Capitalists should likewise, embrace the concept of sharing. Perhaps a hybrid of the two ideologies would offer a lasting solution to the problems that they face.

Blumenthal, Max. Republican Gomorrah: Inside the Movement that Shattered the Party. Minnesota: Minneapolis, 2009. Print.

Kronenwetter, Michael. Capitalism versus Socialism: Economic Policies of the US and The USSR. California: San Francisco, 1986. Print.

Pierce Charles, P. Idiot America: How Stupidity Became a Virtue in the Land of the Free. Massachusetts: Yarmouth, 2009. Print.

Ross, John. Murdered by Capitalism: A memoir of 150 Years of Life and Death on the American Left. California: San Francisco, 2006. Print.

  • Chicago (A-D)
  • Chicago (N-B)

IvyPanda. (2024, February 7). Socialist vs. Capitalist Approach to Social Issues. https://ivypanda.com/essays/socialist-vs-capitalist-approach-to-social-issues/

"Socialist vs. Capitalist Approach to Social Issues." IvyPanda , 7 Feb. 2024, ivypanda.com/essays/socialist-vs-capitalist-approach-to-social-issues/.

IvyPanda . (2024) 'Socialist vs. Capitalist Approach to Social Issues'. 7 February.

IvyPanda . 2024. "Socialist vs. Capitalist Approach to Social Issues." February 7, 2024. https://ivypanda.com/essays/socialist-vs-capitalist-approach-to-social-issues/.

1. IvyPanda . "Socialist vs. Capitalist Approach to Social Issues." February 7, 2024. https://ivypanda.com/essays/socialist-vs-capitalist-approach-to-social-issues/.

Bibliography

IvyPanda . "Socialist vs. Capitalist Approach to Social Issues." February 7, 2024. https://ivypanda.com/essays/socialist-vs-capitalist-approach-to-social-issues/.

  • 19th Century Social Theory: Socialists
  • The Social Security Pensions Policy in the EU
  • Differences between Capitalism and Socialism
  • Research of Utopian Socialist Ideas
  • Socialism: Conservative Critique by Dagger, Santoni and Somerville
  • The Website Caters to Technology Enthusiasts
  • Socialists of Revolutionary Times
  • Political Ideologies: Capitalism vs. Socialism
  • History of Pension Abuses
  • Corporate Social Responsibility: Socialist and Capitalist Perspective
  • Third World Countries: Legal System Implementation
  • Community-Based Participatory Research and Policy Advocacy
  • Rationalism and Transitology in the Current Crisis in Syria
  • Government Forms: Smallest and Largest Political Power
  • Revolutionary War in Modern Theorists’ Views

We use cookies to enhance our website for you. Proceed if you agree to this policy or learn more about it.

  • Essay Database >
  • Essay Examples >
  • Essays Topics >
  • Essay on Social Issues

Capitalism Vs Socialism Argumentative Essay Examples

Type of paper: Argumentative Essay

Topic: Social Issues , Politics , Sociology , Financial Crisis , Unemployment , Socialism , Capitalism , Liberalism

Published: 01/24/2020

ORDER PAPER LIKE THIS

The two main political, social, and economic systems within the global arena are capitalism system and socialism system. Capitalism and socialism differ widely in various aspects such as equity, ownership, unemployment, efficiency, and economic systems. In addition, capitalism and socialism hold different views and perceptions on religion, way to change, philosophical drives, political movements, and key components amongst others (Nell 178). Whereas capitalism system takes very little concern on equity and instead encourages inequality for the purposes of production, socialism enhances redistribution of resources for the main aim of ensuring equality amongst the citizens. Under capitalism system, business organizations are largely owned by private individuals as well as shareholders. Therefore, creation of jobs is within the hands of the private sectors. As a result, it becomes difficult to check on unemployment rates especially during the extreme ends of recession and boom. On the other hand, socialism system is where majority of the production firms and operations are state-owned. As a result, job creation is a duty of the state, which has the capacity and capability of restoring unemployment during recession. It is argued that capitalism system enhances efficiency of production whereas socialism system always leads to inefficient production systems (Nell 178). Amazingly, whilst socialism system derives its motivation on planning for the purposes of defining the type and magnitude of investment, capitalism system will obtain the motivation to move on from investments, productions, as well as distribution channels and procedures. Politically, capitalism system practices classical liberalism, neo-liberalism, social liberalism, libertarianism, and social democracy (Nell 178). On a different perspective, the political systems found within socialism include democratic socialism, anarchism, communism, and syndicalism amongst others. Lastly, other than enhancing free market, capitalism also provides room for freedom of religion (Nell 178). Based on the above analysis, it is therefore clear that capitalism is better than socialism.

Nell, Edward. "Capitalism versus socialism." Markets, Unemployment and Economic Policy: Essays in honour of Geoff Harcourt, Volume Two 2 (2012): 178.

double-banner

Cite this page

Share with friends using:

Removal Request

Removal Request

Finished papers: 1023

This paper is created by writer with

ID 285555462

If you want your paper to be:

Well-researched, fact-checked, and accurate

Original, fresh, based on current data

Eloquently written and immaculately formatted

275 words = 1 page double-spaced

submit your paper

Get your papers done by pros!

Other Pages

Example of personal statement on motivation that inspires, example of paper 4 immigration policy essay, free essay about global organizations and cardiovascular heart disease in women, purpose of study essays example, free essay on the effects of online courses on education, good example of essay on nestle, free history of the arab state in jerusalem case study sample, sexual orientation essay, essay on argue whether or not pans labyrinth should be classified as a fairy tale, good example of review of ethics and technology in wal mart case study, sample literature review on benefits of a vegetarian diet compared to meat eating diet, good example of essay on use of beta blocker, good example of essay on budgeting and beyond, free research paper on first world war and canada us relations, free essay about engineering, case study on recommendations for role modification, free case study about human resource management, free a good education essay sample, good example of nike a sweatshop debate case study, good example of essay on similarity in themes, written proposal essay, good st josephs college online research proposal example, example of comments on chapters 6 7 8 9 article review, free spotlight marketing report example, example of the meaning of the reading to me and my management creative writing, paper book review example, good essay about realities, beem essays, andrae essays, beland essays, angelah essays, almustafa essays, arcing essays, asac essays, asian carp essays, american liberation essays, all hallows essays, aleksandr essays, bergan essays, all time argumentative essays, an end argumentative essays, aljazeera argumentative essays.

Password recovery email has been sent to [email protected]

Use your new password to log in

You are not register!

By clicking Register, you agree to our Terms of Service and that you have read our Privacy Policy .

Now you can download documents directly to your device!

Check your email! An email with your password has already been sent to you! Now you can download documents directly to your device.

or Use the QR code to Save this Paper to Your Phone

The sample is NOT original!

Short on a deadline?

Don't waste time. Get help with 11% off using code - GETWOWED

No, thanks! I'm fine with missing my deadline

Home / Essay Samples / Economics / Capitalism / Capitalism Vs Socialism: The Debate on Economic Systems

Capitalism Vs Socialism: The Debate on Economic Systems

  • Category: Economics , Government
  • Topic: Capitalism , Socialism

Pages: 4 (1698 words)

  • Downloads: -->

--> ⚠️ Remember: This essay was written and uploaded by an--> click here.

Found a great essay sample but want a unique one?

are ready to help you with your essay

You won’t be charged yet!

Unemployment Essays

Economic Inequality Essays

Minimum Wage Essays

Brexit Essays

Capitalism Essays

Related Essays

We are glad that you like it, but you cannot copy from our website. Just insert your email and this sample will be sent to you.

By clicking “Send”, you agree to our Terms of service  and  Privacy statement . We will occasionally send you account related emails.

Your essay sample has been sent.

In fact, there is a way to get an original essay! Turn to our writers and order a plagiarism-free paper.

samplius.com uses cookies to offer you the best service possible.By continuing we’ll assume you board with our cookie policy .--> -->