Difference Between Capitalism and Communism

In our today’s topic, we will discuss the economic ideologies that emerged in the last centuries, i.e. capitalism and communism. Adam Smith, the renowned Scottish Economist, wrote a book, The Wealth of Nations in which he sparked the idea of Capitalism.

On the other hand, Karl Marx, a famous Philosopher, and Sociologist, from Germany, initiated the idea of Communism, in his book The Communist Manifesto, as a response to Capitalism. These two political theories are in opposition to each other as in the former promotes private ownership, the latter stands against it. Take a full read of the article given below, to have a clear understanding of the differences between capitalism and communism.

Content: Capitalism Vs Communism

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Capitalism	Communism
Meaning	Capitalism is an economic system in which the trade and industry of the economy is owned and controlled by private individuals, to make profit.	Communism refers to social system in which country's trade and industry are controlled by the community and the share of each individual relies on his ability and needs.
Basis	Principle of Individual Rights	Principle of Community Rights
Promotes	Class Distinction	Egalitarian Society
System of Government	Democratic	Totalitarian
Government interference	No or negligible	High
Wealth Distribution	Every individual has to work for himself to create wealth.	Wealth is distributed as per needs and ability.
Factors of production	Privately-owned	State-owned
Preference to	Individual freedom	Society
Market	Free and Competitive	Absence of competition with State-owned market
Individual Incentives	Profit and wages depends on the person's ability and willingness to work	Profits not allowed. Workers are pushed to work for the fame of the state.
Capital Sources	Invested by owners which may be borrowed. It may be reinvested out of profits earned.	state provide all the resources, to begin the business owned by the state.
Depreciation	Legal	No depreciation
Labour	Workers are free to select the employer and occupation	State determines one's employer and employment.
Business	Individuals have the right to own business	All the productive capacity including communes are owned by the state.

Definition of Capitalism

The term ‘capitalism’ implies an economic system that advocates private ownership of the means of production, distribution, and exchange, to earn profit. In this system, the determination of production and price of the goods and services are done by the market, i.e. the demand and supply forces play a significant role here.

The key features of capitalism are individual rights, private property, accumulation of wealth, market economy, free and competitive market, self-interest, minimal government intervention. In a capitalist economy, it is the owners who decide and invest, in the financial and capital market on the production inputs. The competition in the economy decided the price and distribution of merchandise in the economy.

Definition of Communism

A form of socialism, in which the means of production, resources, and property are owned and controlled by the egalitarian society, i.e. by the community equally is called Communism. It is based on the idea of shared ownership. The theory of communism was mainly sparked by the German philosophers cum sociologist Karl Marx and Friedrich Engels. The central principle behind communism is, the contribution and share of each would be based on his ability and needs.

In this political system, the government owns everything and all the individual works for a common goal. Therefore, class distinction does not exist, as all are considered equal. Communism aims at removing the gap between the wealthy and poor and establishing equality in the economy.

Conclusion

Both communism and capitalism are a form of social organization, that is associated with trade and industry in the economy and discusses the ownership of property.

As every coin has two aspects, a good and a bad, so as with the case of communism and capitalism. In capitalism, the distribution of wealth is uneven, due to which the rich get richer while the poor become poorer. On the other hand, in communism, there is an equal distribution of wealth, but it does not allow individuals to have private property. Communism attempts to eliminate capitalism in the economy, as it was introduced, as a response to injustices of capitalism.