It was during the nineteenth century that debates raged over the principles and practices of communism and capitalism, two competing economic models. These debates were spurred by industrialisation, the European Revolutions of 1848 and the publication of The Communist Manifesto (in the same year) which really brought economics to the forefront of public debate. But there are some important differences between these two models, which can be summarised as below:
- Capitalism is based on the...
It was during the nineteenth century that debates raged over the principles and practices of communism and capitalism, two competing economic models. These debates were spurred by industrialisation, the European Revolutions of 1848 and the publication of The Communist Manifesto (in the same year) which really brought economics to the forefront of public debate. But there are some important differences between these two models, which can be summarised as below:
- Capitalism is based on the private ownership of the means of production, e.g. factories and businesses. This means that single individuals have complete control. In contrast, communism bans private ownership and the means of production are instead shared by the individual members of a society.
- Capitalism also promotes free competition between business owners and does not invite the government or any other force to intervene. This is where we get the phrase 'laissez-faire' from; it literally means 'to let go.' Under communism, the government is heavily involved in controlling prices and other market conditions.
- Finally, in a capitalist society, prices are determined by the principles of supply and demand. If supply is high, for example, the prices tend to drop and if it is low, prices tend to rise. But under communism, supply and demand are not allowed to control or dictate the economy. It is the government who intervenes to set the price of commodities.
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