Difference Between
Communism and Capitalism

You may heard of these two ideological systems..communism and capitalism. But what is the difference between communism and capitalism? Today we will be looking at the key features of both systems.

Brief Overview - Communism and Capitalism

Communism At A Glance

  • Communism, or a centrally planned economy is an economic system where the means of production are all owned and controlled by the government or state in behalf of the people.
  • Communism promotes collectivism and therefore stresses human interdependence and the community. Communism emphasizes group goals and the common good over individual goals or individual gain.

Capitalism at a Glance

  • Capitalism or a  market economy is an economic system where the means of production are all owned and controlled by individual producers and consumers. Ideally, there is no government intervention in the economy.  
  • Capitalism promotes individualism and therefore stresses the importance of ideas such as personal autonomy and self-reliance.

Key Principles of Capitalism

Capitalism features the principles of Individualism which are:

  • Rule of Law
  • Individual Rights and Freedoms
  • Private Property
  • Economic Freedom
  • Self-interest
  • Competition

Key Principles of Communism

Communism features the principles of collectivism which are:

  • Adherence to collective norms
  • Collective Responsibility
  • Public Property
  • Economic Equality
  • Collective Interest
  • Co-operation

Notice the differences between the principles of communism and capitalism as shown above.

All you ever wanted to know about

  • Capitalism is based on the ideology of Classical Liberalism which also focuses on individualism.
  • Capitalistic ideology believes the most beneficial economic system to be the 'free market', and economy that operates with limited government intervention and relies on the choices that rational individuals make in their own self-interest.
  • Capitalistic ideology began to grow and develop as a result of the industrial revolution, when Britain's traditional economy which was largely based on subsidence farming in rural areas, shifted to factory work in urban centers.

The Enlightenment and The Industrial Revolution

The world of ideas was being influenced by the writings of enlightenment thinkers who advocated the primacy of human reason, human initiative and individual worth. Former commoners were free to create wealth and achieve status. The government was more friendly to business and innovation and a huge number of innovators were encouraged by the possibility of reward.

These factors resulted in the development of the factory system, the mechanization of labour, the mass production and consumption of factory goods, the expansion of capitalism and free enterprise and the shaping of the modern industrialized world.

Key Term when talking about Capitalism:

The French term 'Laissez-faire' - which literally means 'leave alone' was a definitive of capitalism at the time and referred to a reduction of government involvement in the economy. Individual actions and achievements were deemed more productive in economic decision making than government actions.

The term 'Laissez-faire ' reflects the belief that individuals need to be given the freedom to make their own decisions and that individuals' selfishness and competitiveness will unintentionally improve society.

The Figure-head of Capitalism : Adam Smith

Capitalism is heavily based on the ideas of Adam Smith, a political economist. Adam Smith believed that if people first and foremost worked for themselves, everyone would be better off. In 1776, he published The Wealth of Nations in which he described a system that where individuals work for their own self-interest in a free market system. Smith spoke about the idea of 'an invisible hand', his justification for self-interest as an economic motive and explained that by having every individual  look after his or her best interests, then he or she unwittingly ends up helping everyone else, by providing jobs and cheaper products.

Adam Smith also believed that the government's role should be limited to maintaining the rule of law, to ensure that contracts were followed and to provide only a few public works such as primary education and road maintenance. Smith's works provided the foundation for much of the capitalist system.

All You Ever Wanted to Know about

Communism is a radical form of socialism, often called scientific socialism or Marxism, after its founder Karl Marx.  Marx developed  a theory that history is the story of evolving class warfare. He said that:

  • Capitalism emerges from Feudalism
  • Violent Conflict occurs between the bourgeoisie (owners) and the proletariat (workers) and the proletariat wins.
  • A victorious proletariat establishes a centrally planned economy and income is distributed according to the value of the work performed.
  • Economic equality is established.
  • Social Classes gradually disappear.
  • People work for societal good rather than personal gain.
  • The State withers away.

Marx argued that this workers revolution was necessary before any significant changes could be made in society.

Marx collaborated with Friedrich Engels to write the Communist Manifesto in 1848. Marx believed that economics was the foundation of society and that the means of production, such as factories needed to be in the worker's hands.

Fundamental Ideas of Communism

  • The abolition of property in land and application of all rents of land to public purposes.
  • A heavy progressive or graduated income tax.
  • Abolition of all rights inheritance.
  • Confiscation of the property of all emigrants and rebels.
  • Centralization of credit in the hands of the state by means of a national bank with state capital and an exclusive monopoly.
  • Centralization of the means of communication and transport in the hands of the state.
  • Extension of factories and instruments of production owned by the state.
  • Equal obligation of all to work.
  • Free Education for all children combined with industrial production.

Early Communism and Communism Today

Communist ideas have existed since ancient times. Primitive humans, living in clans, worked for the benefit of the entire clan and shared the fruits of their labour. Many 19th century idealists disgusted by the ongoing oppression created by the industrial revolution broke away from society to form communal utopias. In our modern day, many nations have implemented communist regimes such as: The Soviet Union, Afghanistan, China, Vietnam, Laos, Cuba, Cambodia, Ethiopia, North Korea.

The abolition of private property and the centralization of the means of production (such as factories and machinery) in the hands of the state would become essential characteristics of the economies of countries who implemented communist ideas.

To Sum Up...Here is a chart to show the differences between communism and capitalism



The group, or collective is important and more valuable than a single individual.

Individuals are important and entitled to make decisions.

The strength of the group relies on the contributions of everyone, and the individual may need to sacrifice.

Individual effort is valued and each individual should be allowed to develop his or her potential.

The individual should take initiative and value personal achievements.

The efforts of the group are most important and individual efforts may not always be celebrated.

Co-operation is viewed as the best way to succeed.

The view that competition promotes excellence

Private property and individual wealth are valued.

Wealth is shared.

I hope you enjoyed my comprehensive guide on the two ideologies and that it was informative on the difference between capitalism and communism.

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