Capitalism vs communism
Capitalism vs communism, the short answer
Capitalism holds productive property privately and lets prices set by exchange decide what gets made; communism, in Marxist theory, holds it in common with no private owners and no state, distributing output by need instead. One assumes markets coordinate best; the other assumes fair coordination is only possible once class and scarcity are gone.
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What capitalism holds
Capitalism holds that the means of production should be privately owned by individuals and firms, with prices set through voluntary exchange in competitive markets coordinating what gets produced and consumed.
- Ownership: factories, land, and capital are owned by private individuals and firms, not the state or society as a whole.
- Coordination: prices arising from supply and demand direct resources to their most valued uses, without a central planner.
- Distribution: income follows ownership, labor sold at a market wage, and returns to capital and risk.
- Status: implemented, in varying degrees, by most economies operating today.
What communism holds
Communism, in Marxist theory, is a final, classless, stateless stage in which the means of production are held in common and output is distributed by need rather than ownership or exchange.
- Ownership: the means of production are held in common by society, with no private owners or state administering them.
- Coordination: Marxist theory holds that need itself, not prices or a market, directs production once scarcity has been overcome.
- Distribution: output is shared according to each person's need, not according to labor sold or capital owned.
- Status: never implemented anywhere by Marx's own definition; self-described communist states describe themselves as socialist states still working toward it.
Where they overlap
Both hold that concentrated, unaccountable economic power is a problem worth designing against, even though they propose opposite fixes: capitalism disperses power through competition among many private owners, while communism eliminates private ownership of productive property entirely.
A shared target: unaccountable concentrations of power
Neither system, as its own theorists describe it, wants economic power concentrated in a single unaccountable actor: capitalism relies on competition to prevent any one firm from dominating a market, while communism eliminates private capital ownership specifically to prevent a propertied class from dominating everyone else.
Both emerged as answers to the same industrial-era conditions
Both traditions trace their modern form to the same nineteenth-century industrial economy, and both offer a theory of how ownership of productive property should be structured in response to it, even though they land on opposite answers.
Where they actually differ
| Axis | capitalism | communism |
|---|---|---|
| Ownership | Private, held by individuals and firms | Common, held by society as a whole, with no private owners |
| Coordination mechanism | Prices set by supply and demand in competitive markets | Need itself, once scarcity is overcome per Marxist theory; no market or price system |
| The state's role | Enforces contracts and property rights; scope varies by variant | Dissolves entirely once class distinctions disappear, per Marxist theory |
| Real-world status | Implemented, in varying forms, by most economies operating today | Never implemented anywhere by Marx's own definition |
Why they get confused
The two terms are often used as a simple binary, the entire spectrum of economic systems collapsed into just these two labels, when both are specific, theorized systems with a great deal of variation and a large space between them.
In practice, virtually every government commonly described as communist has been, by Marxist theory's own definition, a socialist state led by a communist party and still transitioning toward communism, not a government that has achieved it. Meanwhile capitalism is often used loosely to describe any market activity at all, even though socialist and mixed economies also use markets and prices for many transactions; what identifies a system as capitalist specifically is private ownership of the means of production, not the presence of markets alone.
Sources
Sources here overlap heavily with the socialism comparisons, since capitalism and communism sit at opposite ends of the same theoretical debate about ownership.
- 1.Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 1776.
- 2.Marx, Karl, and Friedrich Engels. Manifesto of the Communist Party. 1848.
- 3.Stanford Encyclopedia of Philosophy. Karl Marx. Section on historical materialism and the stages of communist society.
- 4.Encyclopaedia Britannica. Capitalism.
- 5.Encyclopaedia Britannica. Communism.