Question

With reference to Capitalism and Socialism, state the following:

Difference between Capitalism and Socialism in terms of control means of production.

Answer 1

Capitalism :

1. In Capitalism, production is for profit – useful goods and services are a by-product of pursuing profit.
2. Competition for ownership of capital drives economic activity and creates a price system that determines resource allocation; profits are reinvested in the economy.
3.  Private property in capital and other goods is the dominant form of property.
4. Production decisions are driven by consumer demand. Individuals choose what to consume and this choice leads to more competition and better products and services.
5. It relies on markets to determine investment, production, and distribution decisions.

Socialism :

1. In Socialism, production is for use – useful goods and services are produced specifically for their usefulness.
2. Economic activity and production especially are adjusted by the State to meet human needs and economic demands.
3. Two kinds of property – Personal property, such as houses, clothing, etc. owned by the individual. Public property includes factories, and means of production owned by the State but with worker control.
4. Production decisions are driven more by the State than by consumer demand. These decisions are made on the basis of human consumption needs and economic demands.
5.  It relies on planning to determine investment and production decisions. Planning may be centralised or decentralised.