What is Social Capitalism?

Jessica Ellis
Jessica Ellis

Social capitalism is an economic philosophy that blends the free market sensibility of capitalism with the welfare outreach of socialism. It fundamentally rejects the idea that a society must be either socialist or capitalist, instead suggesting that great benefit to the free market can be obtained through government management of the macro economy. A relatively new concept gaining popularity in the 21st century, social capitalism proponents suggest that there are numerous social capitalist systems already in existence that serve as examples of the powerful potential embedded in this theory.

Sculpture of Karl Marx (foreground) and Friedrich Engels.
Sculpture of Karl Marx (foreground) and Friedrich Engels.

In traditional capitalism, most actions are dictated by the waxing and waning of the market. Governments are meant to have as little market involvement as possible, in order to leave the freedom of entrepreneurs, investors, and employees intact. In this model, profit is the motivating factor for work at all levels of society. The downside of capitalism is that it can create a system in which a few prosper and a great many survive, with an additional class of those unable to do either. Traditional capitalism tends to rely on the survival of the fittest and wealthiest, regardless of whether that wealth or fitness is a result of natural talent or inherited position.

A statue of Deng Xiaoping, the Chinese politician who introduced the idea of the socialist market economy, sometimes considered state capitalism.
A statue of Deng Xiaoping, the Chinese politician who introduced the idea of the socialist market economy, sometimes considered state capitalism.

Socialism, on the other hand, promotes the inherent equality of all people, using rigorous government control to attempt to enforce equity. In the vision of Karl Marx, the father of communism, an ideal socialist society would give all people equal opportunity, equal wealth, and instill a sense of the common good above that of personal advancement. Unfortunately, in practice this theory tends to create a system ripe for corruption, in which government members have massive control over all other citizens. Since socialism does not exist in a vacuum, it is also possible for private entrepreneurs to make personal fortunes in international or black market trades, depleting the illusion of equal chances for all.

Social capitalism seeks to blend the best qualities of each system while dampening the disadvantages of both. Programs that meet a social capitalism standard include things like government control of wages and working hours; measures that protect the lower-level employees while not unduly inhibiting the practice of business. By using government involvement to raise the earning potential and living standards of the lowest economic brackets, social capitalism actually seeks to boost both market participation and potential for market profit.

In most theories of social capitalism, which are by no means in universal agreement with one another, government involvement is linked proportionally to the economic position of the individual. Middle-income and wealthy individuals will feel the least effect of macroeconomic policies, as they are supported far more through the practice of the capitalist market. Lower income individuals would have the benefit of government-run social programs, such as low-cost medical care or job training programs, since the capitalist free market is necessarily less concerned with their survival. By assisting people in the lower economic brackets, the government following the principles of social capitalism would hope to boost these individuals into the upper tier of society where they are able to survive in a free market economy.

Jessica Ellis
Jessica Ellis

With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica is passionate about drama and film. She has many other interests, and enjoys learning and writing about a wide range of topics in her role as a wiseGEEK writer.

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Discussion Comments


The problem with government control of industries or institutions is not only corruption, which is true in any government, but more so there is no incentive to innovate or increase performance because there is no competition.

Government controls tend to lead to higher forms of bureaucracy, lowering efficiency.


I totally I agree with your posts. Very well said. To add one thing though, I think there should be some kind of enforcement in place for those who can afford to pay taxes but don't. And I do think the rich should have to pay more taxes. I do not understand why there are so many tax breaks in place for those that can afford to pay, but don't pay.


So this is far more fundamental. The US privatized utilities, highways, education, prisons. The problem is that when you create a profit motive for what are essential services, you create conflict. The prison population has skyrocketed because there is a profit motive and then a lobby to create the three strikes rule to increase prison population.

Utility infrastructure has crumbled because utilities need to pay shareholders instead of putting money back into infrastructure. Highways have been privatized to generate more money. There are essential services that should never be privatized because they should not be run as a revenue generating model, but as an essential service.


We need Medicare for all people in the United States. If there are those who are having trouble paying taxes, they should be freed during that tax year. This debt should be removed from them. Are we the richest land on earth or a cruel taskmaster that cares only for the rich and powerful? We need more social capitalists in our government. These individuals will be mostly liberal Democrats, in the tradition of Truman, Stevenson, Kennedy, and Johnson. It would be wonderful to have another Hubert Humphrey, God rest his soul.

I miss Sen. Hubert Humphrey. We do not need a conservative Republican Ronald Reagan. On the contrary, we need the liberal Democrat Ronald Reagan of 1948, who supported the New Deal, Harry Truman and Hubert Humphrey.

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