Capitalism and socialism are often considered to be two concurring ideologies having nothing in common. While the core features of capitalism are freedom of choice and private ownership, socialists protect some kind of economic democracy. They claim that means of production belong to all people involved in production. Although communism proved to be unattainable, socialism is still present in the contemporary Western policy as the concept of welfare state. In the beginning of the XX century, the difference between capitalism and socialism was much clearer.
I would not agree that socialism first appeared in the XIX century as an ideology in the West and great political experiment in the East. However, it is true that it existed primarily as utopia, an idea expressed by ancient philosophers and writers of the Renaissance. These ideas reflected the pursuit of the general equality. At the same time, capitalism existed as the actual reality. Modern capitalism differs from the world economic system of the middle ages or ancient times, though it is based on same core principles. According to Abu-Lughod, “within the same general region, a variety of social formations coexisted: from the monetized trading centers to outpockets untouched by the changes taking place.” In ancient times, economic relationships were concentrated in developed centers as well, and within these centers, wealth was accumulated in the hands of the few.
Money had almost the same functions (means of payment, store of value, and means of exchange) and credit relationships were common. For all ancient Empires, the government (regardless of its form) had restricted control over the market. That was pure capitalism with no restrictions regarding ownership or power. But one had to be strong enough to take and hold the power. The competition was much more severe as there were no generally accepted rules, and an agreement could occur only if it brought the mutual benefit.
From the socialist point of view, this system was a disorder, it was regarded as Imperialism. Imperialism is known for its unrestricted tension to hold the power, its primary interest being to enhance wealth and influence, and its secondary interest being to install its own values and institutions. The arguments against imperialism were not unfounded. The Industrial Revolution created manufacturing giants with severe working conditions and no social protection. Technological advance and power made it possible for relatively small countries (such as Netherlands and Great Britain) to exploit distant less developed areas establishing their own rules often discriminating the local population. However, Imperialism was not the final stage of capitalism as well as communism did not result from socialism. Instead of moving towards the opposite directions (as it was predicted by the philosophers and politics of the past), capitalism and socialism are often connected by contemporary political regimes to create qualitatively new kind of political and economic freedom.
I consider that different approaches towards the concept of freedom represent the major distinction between these political systems. Capitalism stands for the freedom of choice, it “breeds excellence because it encourages initiative.” Socialism argues for introducing democratic values into the economy. The economy “has to be run for the overall benefit of the entire population, not for the benefits of a very few people.” The competition between two economic systems today has its roots in this discrepancy. I tend to believe that in the future the confrontation of these opposite economic systems should disappear just like the competition between capitalistic and communistic ideologies in the past.
By providing strict regulations, socialistic approach generates intended consequences. That is, the government set annual objectives for the unemployment reduction or poverty elimination. These objectives are carefully thought out and the intended consequence is calculated and forecasted. Most socialist politicians of the XX century made decisions based on intended consequences having a poor understanding of possible social and economic impact of these decisions. Bright examples are Holodomor in the Soviet Union in 1932-33 and Great Chinese Famine in 1959-61. Aiming to redistribute resources among the population and achieve an economic equality, dictators took lives of millions of people. They did not predict unintended social consequences of their decisions.
On the contrary, capitalism makes an advantage from unintended market consequence known as the “invisible hand”. In the early XIX century, it was generally accepted that the economy achieves its maximum efficiency without government intervention. However, 2008 financial crisis proved the opposite. The more advanced and integrate an economic system becomes, the more flexible and wise regulation it requires. Unlike the ancient times, this regulation today is grounded on interstate agreements and generally accepted rules.
Today the concept of welfare state prevails in the Western Europe. “Even the conservative opponents of socialists no longer question the ‘social state’, despite rising concern about its affordability.” Many political parties today do not consider themselves as purely socialistic or conservative. Instead, they try to reach the optimal balance aiming either to win more voters or to build a really comprehensive and effective political system. It results in disputes such as “is Obama a socialist?” while he simply tries to assure minimal social benefits and equal opportunities for all.
