Capitalism Vs Marxism Differences and Similarities

The capitalism vs Marxism essay aims at explaining the various areas where capitalism and Marxism are similar as well as their areas of differences. This article explains the two concepts, stating the arguments for and against each of them. Capitalism is an economic system that basically has to do with private ownership and control of resources. The private sector is the driving mechanism of the economy. On the other hand, Marxism explains the impact of capitalism on productivity, labor, and economic development. Comparing and contrasting them will help in clarifying what the two concepts stand for.

Table of Contents


What is Capitalism?

Capitalism is an economic system whereby private individuals fully own and control all factors of production. Here, they are in charge of trade and industry in the economy. in essence, private individuals own all capital goods The capitalist economy is one of the major economic systems that are in existence in most economies of the world. In this economy, the major factor that determines the production level of goods and services and their prices are the forces of supply and demand.

A capitalist or a free-market economy is known as the Laissez-faire economy. Here, it is the private individuals who determine the basic economic problems in society since they own and control all means of production.

Who is a capitalist?

A capitalist refers to someone who has capital and invests it in a business, a wealthy person, or a person who favors capitalism.

Capitalism pros and cons

1. Advantages of capitalism

Efficient resource allocation

Due to the fact that competition exists, the allocation of resources tends to be more efficient in the capitalist economy. Here, companies utilize their resources in such a way that they can increase productivity and quality. They employ strategies to cut down their costs while they increase productivity and their level of competition. Under capitalism, a firm that lacks productive skills will go out of business.

Utilization of available resources

When it comes to the optimal utilization of resources available, capitalism has a great advantage. Producers engage their scarce resources in an efficient and economical manner. When producers are strategic with regard to this, they can minimize the level of wastage of resources. Every firm gives in its best towards maximizing profit while minimizing costs which is possible only through an economic way of using resources.

Financial incentives

Under capitalism, the people have incentives to be more creative and innovative. Both individuals and firms have a higher level of motivation to work. Firms can engage themselves in research and development so that they can facilitate expansion. They do this to avoid being overthrown from business as it is necessary for them to survive in a competitive business environment. Every firm competes for the patronage and money of the consumers by improving the quality of their products. There are large financial rewards in the capitalist economy even as firms take risks in setting up a business.

Minimal discrimination

Capitalism is a relevant tool that brings people together thereby helping people to fight the issue of discrimination. With this, the system boosts the level of domestic and international trade. In other words, the economic system works towards breaking down trade barriers It ignores racial and tribal differences, which aids in bringing countries together. Under this system, haters will have to find ways of dealing with their hatred.

Raising the standards of living

Through the reduction of poverty, capitalism helps to improve the standard of living. It is an important factor that economic growth amounts to a rise in the standard of living. Furthermore, an improved standard of living can be traced to the reduction of poverty. Also, the growth of a country’s GDP  through production and entrepreneurship amounts to the reduction of poverty in the economy.

Consumer choices

This type of economy provides for freedom of choice. This implies that individuals can choose what they want to buy and choose where they want to work. It is these choices that give rise to competition that triggers producers to improve the quality of their products.

Dynamic efficiency

Business firms can respond highly to respond to changes in consumer behavior, choices, tastes, and preferences. They can swiftly respond to new consumer trends and promptly respond to consumer tastes and preferences.

Minimal government control

Government control is at its minimum in this type of economy. If the government tries to control a capitalist economy, problems will result. These problems can include corruption, lack of incentives, and poor information. Also, a corrupt government is hazardous to any economy. In this case, the interference of government will do more harm than good and this can erode an economy.


Individuals have the right to pursue their self-interests and personal satisfaction. S, one can do whatever he desires without experiencing any form of civil and political pressure. This system emphasizes the idea that the actions of people are beneficial to society. In essence, humans are the most productive factors that lead to economic growth. They earn money thereby gaining more political and financial freedom.


Individuals can study the demand of consumers as they are free to own and control capital and productive resources. With this, they will be able to produce commodities that will satisfy their wants. When businesses compete with one another in the market, firms get motivated to produce more and lower prices, especially when demand grows.

Invention and innovation

The idea of capitalism encourages firms to come up with new business ideas. With this, their efficiency in the market can have a progressive movement. To find new business ideas and apply them to the process of production will ease rapid expansion, greater employment opportunities, and a greater income level. Creative and innovative firms enjoy the benefits of their research as they bring to existence things that never existed.

2. Disadvantages of capitalism

Higher-income and wealth inequality

Under capitalism, individuals and businesses tend to care less about the less privileged. Due to the high level of competition, the focus of people deviates from societal benefits. In turn, this amounts to a higher level of income inequality. People’s priority is basically on self-interests above societal benefits. In turn, capitalists exploit consumers.

Economic instability

In this type of economy, there is joy when the economy expands and the opposite during contraction. Economic contraction can amount to an economic recession which in turn, increases the rate of unemployment. In such situations, wealthy individuals have more immunity as they can go back to their wealth reserve. Capitalism, therefore, does not always stay on the growth pattern. This is because some segments in the economy enjoy growth and development while others do not.

Fewer advantages for the low-skilled people

Business firms with insufficient skills may have no place to survive in a capitalist economy. This is because this type of economy requires people to remain competitive. Based on the theory of capitalism, social welfare and security and programs are not in existence. By implication, whoever does/cannot contribute will face life-threatening experiences. This is because of the fact that everyone pursues their own personal interests above others.

Requirements for successful consumption

A capitalist economy remains ineffective without consumers spending their money. If consumers decide to save more for the future, people will struggle to survive. In essence, for capitalism to survive, its successful consumption must be present.

Consumerism and environmental costs

Endless production is required for capitalism to be successful. These production activities can amount to environmental disasters which in turn raise questions that pertain to sustainability. The long-term effects of these continuous productions are environmental pollution and climatic changes. In the long run, the depletion of natural resources takes place and this lowers the overall quality of life in society.

Greed while seeking profit

In this type of economy, personal profit comes before every other thing. Producers compete among themselves as their emphasis and focus are on profit. They then sell products at the highest possible price and also try to keep their costs low. The fact that firms are obsessed with profits brings about a higher level of income inequality. Also, the people tend not to have equal opportunity. Greed amounts to a rise in the rate at which capitalists exploit consumers, and some firms can dominate the market by eliminating smaller firms. When they dominate, they will exploit consumers by charging higher prices on commodities and services.

Workforce limitations

Theoretically, production inputs should transit from unprofitable to profitable businesses. It is unfortunate that this does not work for the working class or the labor force, This, in turn, gives rise to a high rate of unemployment even as businesses fluctuate. People face difficulty in securing full-time jobs unless during an economic boom.

Neglect of social benefits

Because of the self-interest that people pursue under this type of economy, they tend to ignore societal benefits. Also, a major characteristic of a capitalist economy is the profit motive. In this case, the government will have to step in to provide social benefits.

Class struggle

Class struggles and conflicts are inevitable under this type of economy. Labor unrests such as strikes and riots are in full existence. Also, conflicts between employers and employees exist especially when wage earners feel that they are facing exploitation from capitalists.


What Is Marxism? 

Marxism is an economic, political, and social concept that critically checks the impact of capitalism on labor, productivity, and economic development. This concept was named after the famous Karl Marx. It advocates for a worker revolution to overturn the capitalist economic system in favor of communism. The theory argues that class struggles especially between the working class and the capitalists can amount to revolutionary communism. It explains the relationship that exists in a capitalist economy. This concept focuses on class struggles that exist between the working class and the capitalists and it encompasses the theory of class conflict and Marxian economics.

The key concepts of Marxism include labor, commodities, dialectic, alienation, the general intellect, communism, socialism, materialism, ideology, means of communication, surplus value, the working class, and class struggles. These concepts are of great importance to the Marxist theory.

Examples of Marxism today include telephone, large media, and an oil company that came about as a result of the combination of several smaller oil companies ( or oil conglomerates).

Marxist theory and ideology

Karl Marx stated that the power relationships in existence between the capitalists and the working class were in the nature of exploitation. In this situation, class struggles and conflicts are inevitable. Marx believed that these class struggles will eventually result in revolution. In this revolution, the working class will overthrow the capitalists and seize economic control.

The concept of Marxism was first formulated publicly by Karl Marx and Friedrich Engels in the 1984 pamphlet (The Communist Manifesto) where they laid down the theory of class struggles and revolution. Marxism focuses basically on the criticisms of capitalism that Karl Marx wrote about in his book in 1867 (Das Kapital.1).

Karl Marx believed the inherent seed of capitalism is destruction. He also stated that when the capitalists alienate and exploit the working class, it will eventually push the working class to rebellion against the capitalists. They will however seize control of the means of production. Marx predicted that the collective ownership of means of production would replace private ownership of means of production. This will first take place under socialism and then transit to communism. In the human development’s final phase, class distinctions, social classes, and class conflicts/struggles will cease to exist.

Marxism pros and cons

1) Advantages of Marxism

True equality

The concept of Marxism creates true equality although it has been considered communism. It usually places emphasis on human rights. Equal gender roles, access to education, and health care form part of the Marxist’s foundation. Marx believed that equality should be in existence before the law and societal services where every individual will have an equal say and opportunity and there will be no form f gender-based discrimination. By implication, every individual should have access to the most important he is in need of. These basic needs should be accessible regardless of an individual’s job, residence, or activities.

Protects unions’ rights

The concept helps in encouraging people to come together and form unions that will stand up for their rights. The aim of this is to prevent anyone from facing exploitation from his manager. This, in turn, creates a system of checks and balances to ease the achievement of maximum production level. There is a common belief that the Marxist idea does not exploit workers, followers believe that the formation of unions is a great idea.

Rare debt

People and communities work together to achieve success. While farmers produce crops and livestock, doctors make provision of health services, manufacturers produce finished goods, etc. People come together to provide for one another while the government distributes necessary resources. Because of this chain of activities, Marxism reduces the tendency of public debt.

Societal benefits

Marxism possesses some level of societal benefits. When we look at the theory, it considers society in its entirety. The theory acknowledges every social force that is involved including the interest power of different groups. Laying emphasis on the impact of class struggles in society is an effective mechanism in explaining societal change. This helps in organizing society under capitalism where the capitalists maximize profits with the working class.

Helps with capitalism

In cases whereby large multinationals are dominant in the economy of the entire world, advocates of capitalism would state that the future lies with small businesses or small is beautiful. However, we can consider the fact that the youthful phase of capitalism has gone beyond recall. As long as Marxism is concerned, one cannot avoid monopoly in a capitalist economy where larger and small capitals yield the same result. In modern days, multinationals and monopolies in their wide range tend to take possession of the world and this makes to have access to economies of scale,  gathering sums of money, the ability to manipulate commodity prices, and having an influence on government policies. Marxism has been able to carry out predictions on the inevitable tendency of monopoly where free market was standard

2) Disadvantages of Marxism

Elimination of private ownership concept 

Marxism tries to eliminate the concept of private property ownership. Here, the state gives everyone a place to live as they are part of the community even as they contribute to their common good. This means that no individual has control over where he lives as well as what he does to contribute to societal growth. This theory suggests that they should abolish the ownership of private property and enterprises. In turn, it is not possible for any individual to take advantage of opportunities since there will be no extra reward for hard work.

Abolishes religion

Though the Marxist theory permits religion, the people do not have the right to practice their religion in an organized manner. It is certain that religion can place one group in a superior position to others. This does not go in accordance with the idea of equality that Karl Marx had. So, there would be no organized religion as he believed that people used religion to control others. Because of this, people lack the freedom of choosing their spirituality.

No opportunities for entrepreneurs

Usually, this theory gives no room for entrepreneurship. Here, even those that seem to have their own business enterprise are still working under the government. This implies that an individual cannot have his own restaurant, sole proprietorship, corporations, private limited liability companies, or private partnerships. The government is fully in control of everything.

Negative effects on education

The idea of Marxism has negative effects on the educational system. Here, the educational sector will only implement that which is under the absolute control of the state. It is the state that decides the methodology of teaching, curriculum construction, and the system of examination. This does not permit other agencies of education be it local or regional. Economics occupies a relevant position in the curriculum. With this, education looks at economics as the cornerstone of every human activity although this is not factual. Because of this, the neglect of the creative faculties of children can result.

It can lead to communism

When Marxism occurs, it is possible for communism to also occur because there is a notion that this philosophy can result in a dictatorship. Certainly, individualism will have no place and this can create a society that is dangerous without anyone having motivation. In theoretical terms, equality, where everyone has access to fair treatment, sounds great, the individual is still out of focus.

Capitalism vs Marxism

Capitalism vs Marxism similarities

The capitalism vs communism similarities explains the areas in which the two concepts are similar, that is, the factors they have in common. These factors include;

  • Same view of the individual
  • View on labor and capital
  • Natural resources endowment
  • Involvement of ownership and control
  • Same view of production
  • Economic impact and goals

Same view of the individual

One area in which capitalism and Marxism are similar is how they view the individual. They view each individual primarily as an economic unit. According to Karl Marx, the forces of production and roles in an economic system defined every individual.

View on labor and capital

Both capitalism and Marxism look at labor and capital as the primary forces that drive an economy.

Natural resources endowment

They both agree with the fact that the world is endowed with diverse natural resources that human labor has to activate.

Involvement of ownership and control

Both capitalism and Marxism involve the ownership and control of factors of production.

Same view of production

They both believe in production as a major mechanism for improving an economy’s standard of living.

Economic impact and goals

Both capitalism and Marxism look forward to the goals of an economy, they want to achieve something within an economy. The two systems/concepts have a major impact on an economy which can either be positive or negative on the basis of their strengths and weaknesses.

Differences between capitalism and Marxism

Capitalism vs Marxism comparison chart

The capitalism vs Marxism chart below summarizes the differences that exist between capitalism and Marxism.

Capitalism vs Marxism differences
Basis for comparison
Meaning and definition
An economic system whereby private individuals own and control means of production.
An economic, political, and social concept that critically checks the impact of capitalism on labor, productivity, and economic development.
Economic structure
Free enterprise economy
Natural outgrowing of the free-market economy
Private sector
The transition from private to public sector.
Divides society into rich and poor.
The gradual elimination of class distinctions.
Individual growth
Societal growth
Economic growth
Economic growth of the state is absent.
The economic growth of the state is present.
Benefits of capital
To the business owner alone.
To both society and the public
Priority to societal needs
individual freedom is prioritized above society.
More priority on societal benefits than individual interests.
Ownership structure
Private ownership and control
Government ownership and control
Individual freedom
The gradual elimination of individual freedom
Organized practice abolished

Capitalism vs Marxism explained

Meaning and definition

Capitalism is an economic system whereby private individuals own and control means of production. On the other hand, Marxism is an economic, political, and social concept that critically checks the impact of capitalism on labor, productivity, and economic development.

Economic structure

While capitalism is a free enterprise economy, Marxism looks towards a natural outgrowing of the free-market economy which will first come about as socialism and then transit into communism.


The capitalist economy is an economy in which the private sector is the driving force. On the other hand, Marxism predicts that there will be a transition from the private sector to the public sector.


Under capitalism, there is a division of classes into rich and poor which displays economic and wealth inequality. on the other hand, Marxism proposes that class distinctions will be eliminated to foster equality amongst every individual. The Marxist theory, therefore believes that capitalism inherently contains consumer exploitation which will, in turn, amount to rebellion against the capitalists and their overthrow.


While capitalism focuses on individual growth and ignores the economic growth of the state, Marxism places priority on societal and economic growth above individual growth.

Benefits of capital

Since capitalism focuses on self-interest, capital benefits the business owner or capitalist alone. Under Marxism, capital is meant to be of benefit to both the public and society.

Priority to societal needs

Under the capitalist economy, individual needs and freedom are prioritized above that of society. Under Marxism, societal needs and benefits should be the basic priority rather than individual interests and freedom.

Ownership structure

As a major characteristic of capitalism, private individuals own and control assets and resources. On the other hand, Marxism looks towards/or predicts the overthrow of capitalists where the government will own and control all resources.

Individual freedom

Individual freedom is prominent in the capitalist economy which may amount to the abuse of monopoly power while Marxism proposes the elimination of individual freedom through the transition from a free-market economy to socialism and then communism.


Since freedom exists maximally in the capitalist economy, religion is not an exceptional case. On the other hand, Marxism permits religion but does not permit its organized practice as Marx believed that religion goes contrary to the idea of equality.

Frequently asked questions

How does Marxism differ from capitalism?

Capitalism is a free enterprise economy while Marxism looks towards outgrowing it. While capitalism basically has to do with the private sector, Marxism believes that the private sector will transit to the public sector. Class distinctions and conflicts exist in the capitalist economy while Marxism argues that these class struggles will amount to revolutionary communism. Under capitalism, individual growth is prominent while under Marxism, societal growth is prominent. Capitalism permits religion while Marxism does not permit an organized practice of the religion.

What does Marxism say about capitalism?

Marxism believes that the increasing competition that is peculiar to capitalism will only amount to bankruptcy among capitalists and also the increase in monopolies while fewer people control the economy. These bankrupt capitalists will then join the working class thereby adding to the unemployment rate. The theory also stated that capitalism is inherently exploitative in nature which will certainly amount to class conflicts. In turn, these class struggles will amount to a revolution. In addition, capitalism is unplanned in nature which can result in huge problems with regard to supply and demand thereby causing severe economic depression.

Is capitalism a Marxist?

Capitalism is not Marxist, but it is a one-step in the historical progression of economic systems that would follow one another in sequential order.

Why did Marx hate capitalism?

Marx hated capitalism because he saw a situation in which capitalists exploited workers by unjustly extracting surplus for their personal gains. As a result, he viewed capitalism as immoral.