The Difference Between Communism and Capitalism

Two different socio-economic approaches: communism and capitalism.
Communism and Capitalism.

Communism is a political and socio economic ideology based on the abolition of private property and social classes. Capitalism, on the other hand, refers to a socioeconomic system based on private ownership of the means of production and free trade.

In general, the term capitalism is used to refer to liberal political systems. Liberalism presupposes private ownership as a fundamental right, which is the most essential difference between capitalist economic models and a communist economy.

In turn, communism is a phase following socialism. Communist society is characterized by the existence of a single social class, the proletariat, and withering away from the state.

What Is Communism?

Communism is a political, social and economic ideology based on an egalitarian society, without any kind of social division or classes.

It can also refer to the concept of primitive communism. In this context, communism describes the structure of hunter-gatherer societies throughout history. In the prehistoric period, human beings were equally organized. The resources and property hunted and gathered were shared with all members of a group, in accordance with individual needs.

However, the most common use of the term is associated with the writings of Karl Marx and Friedrich Engels. According to these authors, communism is an egalitarian society, without social classes. It will be possible to establish such a society through the abolition of private property and the collectivization of the means of production.


The idea of economic determinism is central to Marxism. It is a theory that suggests that economic forces determine, shape, and define all political, social, cultural, intellectual, and technological aspects of a society. Marx’s economic determinism means that an egalitarian society would emerge as a stage of human society evolution. Only after capitalism is abolished. For Marx and Engels, the end of capitalism would happen through a revolution that would start the socialist phase. In it, private property and social classes would continue to exist, but under the command of the working class, the proletariat.

During this period, called the dictatorship of the proletariat, a process of re-education and transformation of society would take place. Private ownership would be abolished and production would have one strict objective, the satisfaction of everyone’s needs.

From then on, the role of the State would become irrelevant and could also be abolished. Ultimately, establishing a mode of production in which the means of production are not owned by anyone.

This stage is summarized in the motto: “From each according to his ability, to each according to his needs“. In other words, each individual should produce respecting his capacity and receive so that he can meet all his needs.

Thus, communism is understood as an egalitarian society, without classes, without private property, internationalist and without the presence of the State.

Examples of Communist Countries

Throughout the 20th century, several countries had socialist regimes on a larger or smaller scale. However, none have been able to fully implement the ideas developed by Marx and have effectively become a communist country.

The Soviet Union

Communism is strongly associated with the Soviet Union. Its origin dates back to October 1917. During the 1917 Russian Revolution, Tsar Nicholas II was overthrown by the Bolsheviks. Eventually, a socialist state was established in the regions that had previously belonged to the Russian Empire.

Prior to that, during the 1905 Russian Revolution Tsar Nicholas II was forced to offer some reforms. These concessions were laid out in the October Manifesto, a document that in effect marked the end of unlimited autocracy in Russia.

The Soviet Union was formally established on December 29, 1922. Delegations sent from Russia, Ukraine, Transcaucasia and Belarus, approved the treaty and declared the establishment of the Union of Soviet Socialist Republics (USSR). On December 30, 1922, these 2 documents were ratified by the first Soviet Congress of the USSR. The country’s first leader was the revolutionary Marxist, Vladimir Lenin.

Lenin was a communist politician, philosopher, and revolutionary who led the Russian October Revolution. His school of thought is known as Leninism or Marxism-Leninism.

People’s Republic of China

The history of the People’s Republic of China can be divided into two clearly differentiated stages. The first was dominated by the figure of Mao Zedong. Mao defended a revolutionary vision of communism. In his view all aspects of society, culture, economy and politics should be at the service of the ideological cause. Mao’s radical policies led to moments of crisis in which other Party leaders would question his authority.

In turn, Mao reacted by launching intense campaigns of ideological reaffirmation. Among these campaigns, the Great Leap Forward and the Cultural Revolution deserve special mention. Their effects on Chinese society were felt for a long time. After Mao’s death in 1976, his successor Hua Guofeng ended up handing over power to Deng Xiaoping. A pragmatic leader who put an end to revolutionary policies while maintaining the centralist and authoritarian character of the State. He was the one who launched a series of reforms that initiated a process of intense economic growth in China.

What Is Capitalism?

Capitalism is a social and economic system based on the free market, the right to private property. It is guided by the profit motive.

In this system, the main means of production is capital itself, in the form of money or credit. Capital enables the production of goods and services in accordance with the laws of supply and demand.

Unlike communism, capital accumulation is not understood as a harmful effect on social structure. On the contrary, for Adam Smith, one of the main liberal thinkers, people’s self-interest makes them productive.

For this author, the possibility of profit accumulating capital increases production and consumption. Thus, an invisible hand guides individuals to attainable the common good.

In the context of free markets, the invisible hand would make producers offer increasingly better quality products at lower prices. This would cause more people to consume and increase the producer’s profit and enable new investments in production. Thus, generating a virtuous circle of production and consumption, supply and demand.

Capitalism also differs from communism in that it does not have a well-defined social, political and economic structure. On the contrary, there are several distinct capitalist models. For example, welfare states with Laissezfaire economic systems and neoliberalism. Laissez-faire (French: “allow to do”) is basically the idea that society can organize itself without the need for constant intervention of the State.

Examples of Capitalist Countries

Welfare States

A welfare state means that a government guarantees the minimum basic rights for a dignified life to its citizens. The welfare state also allows free association between people and the free market. To some extent, most Western Democracies are welfare states.

The four characteristics of a welfare state are:

  1. Medical care: originally based on a universal and free system, to which citizens contribute funds to partially fund these services.
  2. Social security: while the main objective of this feature is contributory pensions, some countries offer coverage to other contingencies, such as disability.
  3. Education: universal and compulsory up to certain levels and subsidized secondary or higher levels.
  4. Social services: dedicated to providing services based on contributory benefits, usually in the form of taxes.

European Models of the Welfare State

Depending on various variables there are four different models of the Welfare State in Europe.

  1. Nordic model (Denmark, Norway, Sweden, Iceland, Finland).
  2. Continental model (Germany, Austria, France, Belgium, Holland, Luxembourg).
  3. Anglo-Saxon Model (UK, Ireland).
  4. Mediterranean Model (Spain, Greece, Italy, Portugal).


Neoliberalism, on the other hand, implies minimum state intervention. It presupposes gradual decrease in the presence of the state and the self-regulation of the economy based on market rules. Neoliberalism points to a broad liberalization of the economy, free trade and drastic reduction in public spending. It favors the private sector, which would go on to perform the powers traditionally assumed by the government.

However, the use and definition of the term has evolved in the last decades and there is no unified criterion to neoliberalism. Many associate the term with the works of the liberal economists Friedrich Hayek and Milton Friedman. It also used to represent a set of economic policies introduced in the United Kingdom and the United States.


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