Socialism vs Communism vs Capitalism vs Social Democracy by Denis Tsarev and Sabrina Zuniga

Do people really want socialism?

February 2020, by Denis Tsarev

Those who promote socialism usually entertain a number of misconceptions about what socialism, capitalism and social democracy are.

Let us start with the definition. Socialism is an economic, and consequently a political system in which the state or the “public” own the means of production, i.e. of businesses and industries, and in which private ownership of businesses is not allowed. It was devised as an alternative and in its essence an opposite system to capitalism. Capitalism, unlike socialism, rests on private ownership of businesses, where each person is allowed to start and own a business and keep most of the profits, none of which is permissible in a socialist economy. 

1. Socialism is not merely social programs like public healthcare or education run by the government. Private businesses and keeping of profits are not allowed in a socialist system, they are illegal (in the USSR, for example, long prison and sometimes death sentences were prescribed by law for running even a small business or private prodcution). Moreover, once a socialist system is established and all businesses are transferred to the ownership of the state or the “public”, those individuals who  used to run a private business in the past are categorised by most socialist theoreticians as members of the hostile social class of the bourgeoisie. Hence, if one owns a business, be it a coffee shop or a computer store, and promotes socialism, he or she must be prepared that under a socialist system his or her business would be expropriated and the owner ostracised by the new state.

2. Welfare and other social programs run by the government are called social democratic policies, not socialist, and exist in capitalist economies. Private business owners pay taxes and generate revenues for the government, which then uses it to fund various social programs like public education and healthcare. Hence, it is capitalists and private entrepreneurs who are funding our public programs. These programs rely on the wealth that a capitalist economy generates. Whoever promotes socialism by saying that we need more “socialist policies” like public healthcare or public education, is not talking about socialism, but about social democratic policies within a capitalist system.

3. As long as people are allowed to own private businesses, keep most of the profits, hire employees and voluntary exchange goods, this is capitalism. Even if the government is using tax money to run social programs, this is still capitalism with social democratic policies. How effective these social programs can be or usually are, is a different question: supporters of a small government that keeps taxes low disagree with supporters of a big welfare state that hikes taxes, but both of them talk about different versions of a capitalist system as long as private enterprise is allowed and tax rates are reasonable to keep the businesses profitable to owners.

4. Sweden and other Nordic countries are not socialist. They are capitalist. It’s not illegal to own a business and keep most of the profits in Sweden or Denmark. Yes, they do have high taxes and social democratic policies, but these exist within a capitalist system.

5. Democratic socialism is an oxymoron. The two terms are incompatible, because no democratic government will be able to use force to expropriate the means of production from private individuals and abolish and criminalise private businesses. These actions require an authoritarian political system. If  a politician calls for “democratic socialism”, but is not planning to ban private business and transfer all ownership of the means of production to the state or the “public”, he or she is not talking about any kind of socialism.

6. Saying that the USSR or the Soviet Eastern Bloc countries were not really socialist, but simply totalitarian dictatorships and did not represent socialism, is incorrect. In these countries, private ownership of the means of production (businesses and industries) was abolished and hence, these countries perfectly exemplified the definition of a socialist system. These countries were socialist both in name and in practice.

7. Saying that these countries were not socialist, but communist, is incorrect too. They were led by communist parties, whose goal was to implement communism eventually, but before they would do so, they practiced socialism (and were officially admitting to have been doing so). Communism is a theoretical system, according to Marx, Engels and Lenin, where no money and no classes exist and all goods are free and distributed according to need. However, these regimes never managed to implement communism. Lenin and his successors referred to socialism and the socialist economic system as only the first stage of or the prelude to communism.

In literature in political science and history, countries such as the USSR or North Korea are often referred to as “communist countries”, but that simply means they are or were lead by self-declared communist parties, whose goal it was to achieve communism. It does not mean that the economic systems of those countries were communist. Hence, the definitions of communist countries and communist regimes in political science and history are somewhat different from the definition of communism in economics.

8. Some often say that when it comes to discussing socialism and communism, we should not be looking at Marx, Engels, Lenin, Mao as well as any of the officially self-declared socialist governments and communist parties, as their ideas of socialism and communism were incorrect. It is said that there are other “more correct” ideas and definitions of socialism and communism as expounded by individual politicians or scholars.

Marx and Engels, however, were the founders of the communist ideology, the authors of the Communist Manifesto as well as of a large number of other works on communism that were later revered as the principal doctrine by most self-declared communist and socialist regimes. Lenin, Stalin, Mao, Castro and other self-declared communist leaders who were in power in their respective countries, and who implemented socialism and were set to achieve communist societies, were the only ones who brought socialism to practice on a national level.

The term “socialism” is sometimes loosely used in relation to various experiments and policies that took place before Marx and his followers developed a specific economic theory around it. For instance, Robert Owen’s social experiments or early monastic communities are sometimes referred to as socialist. But when discussing economics and political theory, only in the later part of the 19th century, with Marx and his followers, did a concrete theory of what socialism is come about.

Capitalism is a naturally existing phenomenon that can be examined and studied as it appears, whereas communism and socialism are constructed systems that do not exist on their own in any nation, unless forcefully  implemented by a power that professes to adhere to a socialist blueprint or communist ideology. The key principles of this blueprint were defined by Marx and Engels, and any significant amendments thereto would cause it to cease being legitimately termed socialism.

Watch our video on why the economic aspects of socialism necessarily lead to political tyranny for further discussion.

“After Communism” by Robert Heilbroner,  New Yorker, September 10, 1990 (available online at The Library of Economics and Liberty

“Capitalism vs. Socialism: The Bruenig-Caplan Debate”, by Bryan Caplan, Mar 5 2018

“Bernie’s Democratic Socialism Isn’t Socialism, It’s Social Democracy” by Tim Worstall, Forbes, May 17, 2016

“Trump Is Right to Warn Democrats About ‘Socialism’” by Cass R. Sunstein, Bloomberg, February 7, 2019

“Don’t confuse ‘social democracy’ and ‘democratic socialism’” by Austin Stadelman, The Daily Illini, September 5, 2018

“The Democrats will self-destruct by embracing socialism” by Niall Ferguson, Globe and Mail, Feb 11, 2019

“Milton Friedman: Capitalism or socialism, which is more humane?” by Milton Friedman, 1978, available online on Youtube at Free To Choose Network:

“Socialism vs. Capitalism: One Clear Winner”, by Kay Coles James, The Heritage Foundation, October 26, 2018

“Socialism” by Terence Ball and Richard Dagger, Encyclopedia Britannica

“The Principles of Communism” by Friedrich Engels, 1847

“The Opportunity Costs of Socialism” by The Council of Economic Advisers (Executive Office of the US President), 2018

“Lenin’s Conception of Socialism: Learning from the early experiences of the world’s first socialist revolution” by Richard Fleming, Forward, Vol. 9, No. 1, Spring/Summer 1989

The Rise and Fall of Communism by Archie Brown, Harper Collins, 2009


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