Capitalism is an economic system wherein the means of production and distribution are privately owned and operated within the context of a free market, whereas in socialism the means of production and distribution are owned by the government, usually purportedly on behalf of workers.
Note that both these defionitions are ideal abstractions. No pure example of either system has ever existed. Let me give an analogy from geometry. (If you have trouble with the concept of analogies, please exit post.
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A 'circle' is an abstract geometric concept - no circle has ever actually existed, only approximations to a circle, since in any actual "circle" there are always imperfections that depart from the definition of that locus of coplanar points all equidistant from a given point called the center.
All existing "capitalist" economies have all kinds of government control over the means of production, and government interference in markets (sometimes with disastrous results as with the 2008 financial near-collapse), likewise all socialist states depart from their ideal, as eg in countries like vietnam and cuba where the government allows small private entrepreneurship. When the departures from the respective abstractions become pervasive, it should be considered whether to continue to eg call a country capitalist, when it no longer is even a rough approximation to the abstraction.
Simply as a sort of "shorthand" way of speaking, people will refer to eg the US as having a capitalist system, and that's OK when everyone understands that it is "shorthand" for the real system. Where problems arise is when large scale problems arise from large scale government interference in markets, and people try to ascribe the problems to "capitalism". That has in fact happened over and over,
Note that both these defionitions are ideal abstractions. No pure example of either system has ever existed. Let me give an analogy from geometry. (If you have trouble with the concept of analogies, please exit post.
) A 'circle' is an abstract geometric concept - no circle has ever actually existed, only approximations to a circle, since in any actual "circle" there are always imperfections that depart from the definition of that locus of coplanar points all equidistant from a given point called the center.
All existing "capitalist" economies have all kinds of government control over the means of production, and government interference in markets (sometimes with disastrous results as with the 2008 financial near-collapse), likewise all socialist states depart from their ideal, as eg in countries like vietnam and cuba where the government allows small private entrepreneurship. When the departures from the respective abstractions become pervasive, it should be considered whether to continue to eg call a country capitalist, when it no longer is even a rough approximation to the abstraction.
Simply as a sort of "shorthand" way of speaking, people will refer to eg the US as having a capitalist system, and that's OK when everyone understands that it is "shorthand" for the real system. Where problems arise is when large scale problems arise from large scale government interference in markets, and people try to ascribe the problems to "capitalism". That has in fact happened over and over,
