In a capitalistic society, individuals and businesses aim to earn a profit with the production of

their investment and labor in a free market operating largely by supply and demand.

Socialism is when the government owns and/or controls productive enterprises.

A mixed economy is aspects of both.

Capitalism
Capitalism is an economic system in which private individuals or businesses own capital
goods. Business owners (capitalists) employ workers (labor) who receive only wages; labor
doesn't own the means of production but instead uses them on behalf of the owners of capital.

The production of goods and services under capitalism is based on supply and demand in the
general market—known as a market economy—rather than through central planning—which is
known as a planned economy or command economy.

The purest form of capitalism is free-market or laissez-faire capitalism. Here, private

individuals are unrestrained. They may determine where to invest, what to produce or sell, and
at which prices to exchange goods and services. The laissez-faire marketplace operates
without checks or controls. Today, most countries practice a mixed capitalist system that
includes some degree of government regulation of business and ownership of select industries

Capitalism is an economic system characterized by private ownership of the means of

production, with labor solely paid wages.

 Capitalism depends on the enforcement of private property rights, which provide

incentives for investment in and productive use of capital.
 Capitalism developed out of feudalism and mercantilism in Europe and dramatically
expanded industrialization and the large-scale availability of mass-market consumer
goods.
 Pure capitalism can be contrasted with pure socialism (where all means of production
are collective or state-owned).

Socialism

Socialism is a populist economic and political system based on collective, common, or public
ownership of the means of production. Those means of production include the machinery,
tools, and factories used to produce goods that aim to directly satisfy human needs.

In contrast to capitalism, whereby business owners control the means of production and pay
wages to workers to use those means, socialism envisions shared ownership and control
among the laboring class.

In a purely socialist system, all production and distribution decisions are made by the
collective, directed by a central planner or government body. Worker cooperatives, however,
are also a form of socialized production. Socialist systems tend to have robust welfare systems
and social safety nets so that individuals rely on the state for everything from food to
healthcare. The government determines the output and pricing levels of these goods and
services.

Socialists contend that shared ownership of resources and central planning provide a more
equal distribution of goods and services and a more equitable society.

 Socialism is an economic and political system based on collective ownership of the

means of production.
  All legal production and distribution decisions are made by the government in a socialist
system. The government also determines all output and pricing levels and supplies its
citizens with everything from food to healthcare.
 Proponents of socialism believe that it leads to a more equal distribution of goods and
services and a more equitable society.
 Socialist ideals include production for use, rather than for profit; an equitable
distribution of wealth and material resources among all people; no more competitive
buying and selling in the market; and free access to goods and services.

Common ownership under socialism may take shape through technocratic, oligarchic,
totalitarian, democratic, or even voluntary rule. A prominent historical example of a socialist
country, albeit one run by communists, is the former Union of Soviet Socialist Republics
(U.S.S.R.), also known as the Soviet Union..

Due to its practical challenges and poor track record, socialism is sometimes referred to as a
utopian or “post-scarcity” system, although modern adherents believe it could work if only
properly implemented.

They argue that socialism creates equality and provides security—a worker’s value comes from
the amount of time they work, not in the value of what they produce—while capitalism exploits
workers for the benefit of the wealthy

Mixed Economic System

A mixed economic system is a system that combines aspects of both capitalism and socialism.
A mixed economic system protects private property and allows a level of economic freedom in
the use of capital, but also allows for governments to interfere in economic activities in order
to achieve social aims.

According to neoclassical theory, mixed economies are less efficient than pure free markets,
but proponents of government interventions argue that the base conditions required for
efficiency in free markets, such as equal information and rational market participants, cannot
be achieved in practical application.

 A mixed economy is an economy organized with some free-market elements and some
socialistic elements, which lies on a continuum somewhere between pure capitalism
and pure socialism.
 Mixed economies typically maintain private ownership of most of the means of
production, with the government intervening through regulations.
 Mixed economies socialize select industries that are deemed essential or that produce
public goods.
 All known historical and modern economies are examples of mixed economies, though
some economists have critiqued the economic effects of various forms of mixed
economy.

Understanding Mixed Economic Systems

Most modern economies feature a synthesis of two or more economic systems, with economies
falling at some point along a continuum. The public sector works alongside the private sector,
but they may compete for the same limited resources. Mixed economic systems do not block
the private sector from profit-seeking, but do regulate business and may nationalize industries
that provide a public good.

For example, the United States is a mixed economy, as it leaves ownership of the means of
production in mostly private hands but incorporates elements such as subsidies for agriculture,
regulation on manufacturing, and partial or full public ownership of some industries like letter
delivery and national defense. In fact, all known historical and modern economies fall
somewhere on the continuum of mixed economies. Both pure socialism and pure free markets
represent theoretical constructs only.

Technically, almost every country can be considered a mixed economy, since it is difficult for a
country to sustain economic activity without some degree of government intervention or
market activity. Even North Korea allows a limited number of private markets.

But the best examples of mixed economies are those countries where the government takes a
significant role in directing the course of the market economy. Many countries in Western
Europe are considered mixed economies because the government offers generous welfare
programs and tight regulations on business activity. The United States, for example, has many
social programs to benefit the poor, as well as several government-owned enterprises.

Conversely, many socialist-oriented countries can be considered mixed economies because of

their large private sectors. Both China and Vietnam have successfully privatized many of their
state-owned enterprises while retaining a leading role for the government in economic affairs.

What Are Some Examples of Socialist and Capitalist Countries?

There are very few examples of purely socialist and capitalist countries. Rather, most countries
use elements of both while swaying heavily toward the principles of one. For instance, the
United States operates a mixed system with predominantly capitalistic principles. The
government does intervene in certain cases but free market forces do have a major role in
pricing and production. China, on the other hand, is deemed to be one of the most common
examples of a socialist country. That's because many corporations are state-run

nterestingly, no pure socialist, pure capitalist, or pure communist economy exists in the world
today. All economic system changes were introduced with a big bang approach and had to
make “adjustments” to allow appropriate modifications as the situation developed.

To analyze the socialist economies further, let’s look at the cases of three prominent socialist
economies across the globe: Cuba, China, and North Korea.

How Cuba's Socialist Market Economy Works

Cuba has a mostly state-run economy including a national health care program, government-
sponsored education free for its citizens at all levels, subsidized housing, utilities,
entertainment, and even subsidized food programs. Together, these social programs are
meant to compensate for the low salaries of Cuban workers, making them better off than their
international counterparts in many other countries.

As a socialist economy, Cuba has a primarily planned economy; around 88% of its labor force
worked in state-owned enterprises in 2017, though that figure dropped to 64% in 2022. Cuba
does not have a stock exchange, a crucial indicator of a capital-free economy.

Cuba's Economy Today

Former President Raúl Castro unveiled economic reforms in 2010 aimed to shift toward a
mixed economy that would allow free-market mechanisms, remove government control of
small businesses, lay off unnecessary state workers, and make self-employment easier.

Why was this change needed in a pure “socialist economy”? The reason is that Cuba's
economy was in disarray. GDP was registered at 2.4% per year with stagnation at 2% per year
during Raul Castro's presidency from 2008 to 2018. This ends up being less than the 5%
annual growth needed in Cuba to sustain growth. In addition, the country experienced
shortages of consumer staples, energy rationing, and price inflation.
Castro's successor, President Miguel Díaz-Canel, ended the country's two-currency system in
2021, leading to sharp currency devaluations and soaring prices for food and other necessities.
Inflation topped 200% and tens of thousands of Cubans took to the streets to protest.

Cuba still operates with a parallel financial system; one that operates on the usual social
programs in critical sectors while allowing a free-market economy in the tourism, export, and
international business sectors.

Cuba's economy has also suffered greatly from U.S. sanctions, which have cost the country
more than an estimated $130 billion.

As of 2017, 12% of Cuban workers were employed in the private sector; after the country's
various economic updates, that proportion rose to 23% in 2022. The private sector in some
shape or form provides income and jobs to four out of 10 Cubans of working age.

The country has continued to introduce reforms through new laws aimed at bringing in
higher foreign investment, which was a shift from being a complement of the economy to an
essential part of it. Cuba has moved away from its socialist economy toward one that focuses
on implementing capitalist structures.

How China's Socialist Market Economy Works

A significant portion of the Chinese economy is still government-controlled, although the

number of government programs has declined significantly. Healthcare expenses, for example,
were covered for 95% of the population as of 2020 through three public insurance
programs. China's foreign policy continues to be pro-socialist, but it has essentially become a
free-market economy. In essence, China no longer remains a “pure socialist economy."

In 2023, China's state-owned enterprises accounted for 61% of the country's largest firms by
market capitalization, while the share of the private sector dropped below 40%, down from
55.4% in 2021.10

How has China managed to grow its economic influence?

Effectively, China transitioned from a “socialist economy” to a “socialist market economy.” The
communist regime in China quickly realized that it would be to its disadvantage to keep China's
economy secluded from the rest of the world. Since then, it has been able to successfully
strike a balance between the “collective” and “capitalist” approaches.

Policies allow entrepreneurs and investors to take profits but within the controls of the state.
Around 2004, the government began to allow a person’s right to private property. Establishing
a special economic zone and opening up to international trade have allowed the country to
embark on fast-paced economic growth; all courtesy to the right changes to the socialist
policies at the required time.

How North Korea's Socialist Market Economy Works

North Korea—the world's most totalitarian state—is another prominent example of a socialist
economy. Like Cuba, North Korea has an almost entirely state-controlled economy, with similar
social programs to those of Cuba. There is no stock exchange in North Korea, either.

Around mid-1975, North Korea was better educated and more productive than China (based
on international trade per capita). However, the economic and social situation has been
precarious in North Korea since a massive famine hit the country between 1994 and 1998.

Today, many world powers have discontinued aid and trade with North Korea due to the many
human rights abuse allegations of the totalitarian government. These sanctions by other world
powers have significantly restricted any economic development of the North Korean economy.
Apart from the challenges of dynastic rule in North Korea, which prevents the country from
becoming self-reliant, the campaign of "military-first politics" also imposes a heavy burden on
the economy.

North Korea’s only foreign-trade partner is China, and the business is dominated
by middlemen who broker the deals between Chinese companies and North Korean firms. This
has completely closed off North Korea on nearly all fronts. In a 2022 report, the United Nations
estimated that 10.7 million North Koreans were facing severe food shortages after harvest
failures in 2019. About 42% of North Korea's population was suspected to be undernourished.

Recent Developments in North Korea

Due to a lack of self-sufficient manufacturing facilities and markets in the country and
increasing dependency on China, private firms and businesses are on the rise in North Korea.

Irrespective of the existing situations and causal factors, the development of parallel “second”
markets, where citizens and firms trade or barter for goods and services, are thriving.

Indicating a significant shift from the heavily controlled "socialist” economy of North Korea,
this parallel system is seeing involvement from all—housewives exchanging unused goods for
the ones required, farmers selling their produce locally, and an increasing number of firms
importing Chinese goods through agents.

Lack of credible official information on North Korea makes it hard to observe the economic
development (or lack thereof), but available information does point to the existence of a
different financial system.

Capitalism is the dominant economic system in Western countries. In comparison, fewer

countries use socialist economic systems. As of 2020, only Laos, China, Cuba, and Vietnam
claimed to follow the principles of socialism as dictated by Marxist and Leninist theories. More
often, however, it is difficult to label countries as solely capitalist or socialist. Many have mixed
economies that operate under both capitalist and socialist principles.

Examples of Capitalism

The United States is one example of capitalism, but it doesn't rank among the 10 countries with
the freest markets, according to the Index of Economic Freedom for 2021. It bases its ranking
on nine variables, including a lack of corruption, low debt levels, and protection of property
rights.

The top 10 most capitalistic countries are:

1. Singapore
2. New Zealand
3. Australia
4. Switzerland
5. Ireland
6. Taiwan
7. United Kingdom
8. Estonia
9. Canada
10. Denmark

https://www.thebalancemoney.com/capitalism-characteristics-examples-pros-cons-3305588
Econ. Freedom Index

Note that scores of 70 or higher would generally be considered capitalist countries, while those
from 60.0-69.9 would be borderline

The Index of Economic Freedom has measured the impact of liberty and free markets around
the globe
Economic freedom is the fundamental right of every human to control his or her own labor and
property. In an economically free society, individuals are free to work, produce, consume, and
invest in any way they please. In economically free societies, governments allow labor, capital,
and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent
necessary to protect and maintain liberty itself.

How do you measure economic freedom?

We measure economic freedom based on 12 quantitative and qualitative factors, grouped into
four broad categories, or pillars, of economic freedom:

 Rule of Law (property rights, government integrity, judicial effectiveness);

 Government Size (government spending, tax burden, fiscal health);
 Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and
 Open Markets (trade freedom, investment freedom, financial freedom).

Each of the twelve economic freedoms within these categories is graded on a scale of 0 to 100.
A country’s overall score is derived by averaging these twelve economic freedoms, with equal
weight being given to each.

Economic freedom brings greater prosperity. The Index of Economic Freedom documents the
positive relationship between economic freedom and a variety of positive social and economic
goals. The ideals of economic freedom are strongly associated with healthier societies, cleaner
environments, greater per capita wealth, human development, democracy, and poverty
elimination. https://www.heritage.org/index/pages/about

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https://worldpopulationreview.com/country-rankings/capitalist-countries