I have observed that when Americans discuss the relative merits of socialism vs. capitalism, the chief debates that come up are
• What would happen if we remove the stimulus for innovation and productivity that a free market generates? This implies having a free market including individual ownership and control, and to varying degrees a laissez-faire government.
• Would it be possible to have a thriving society in which we would not have 20% of the population living in poverty and without adequate healthcare, housing or economic security?
Fundamentally, we characterize and differentiate capitalism from socialism by the way they handle production (industry), distribution, and exchange (trade) of wealth and goods. In capitalism, capital (or the "means of production") is owned, operated, and traded for the purpose of generating profits for private owners or shareholders. Capitalism emphasizes individual profit rather workers or society as a whole. Socialism emphasizes profit being distributed among the society or workforce to complement individual wages/salaries (“Capitalism vs Socialism - Difference and Comparison | Diffen”).
Capitalism grew out of mercantilism and the end of feudalism—in particular the growth of urban centers and allowing individual property rights. Up until the 12th century, less than 5% of the population of Europe lived in towns (Beattie). When it became possible for individuals to own land and tradespeople to earn real wages, this encouraged more people to move into towns where they could get money rather than subsistence in exchange for labor. Individuals (including both nobles and now tradespeople) were now able to purchase good on their own, leading to further growth of industry.
The industrial revolut...
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