Capitalism and socialism are two words that come up in conversation more and more. People often don’t clearly understand what the words mean and how they relate to everyday life.

In his video for the Entrepreneurship Protection Program (EPP), author Jeffery Lord explains how the act of simply choosing where to get his dry cleaning done is “practicing” capitalism.

Capitalism, at least of the free market variety, is simply the voluntary exchange of goods and services for money (or other forms of compensation). At its heart, capitalism happens when you agree to work for a business or try to convince customers to patronize your business. In his video, Jeffery notes that capitalism is freedom, “It is the ability to be recognized as an individual.”

Socialism, on the other hand, is at its heart a form of collectivism. Rather than determining how to have best your needs met, an outside force, i.e., the government, makes that decision for you. Sometimes, the government’s decision involves something as everyday as how much of your earnings you are allowed to keep. Other times, the decision the government makes for you is much more profound and involves how and where your children will be educated. Or, what businesses are allowed to open, and how you can use your private property. All of these examples have one thing in common; the government makes your decision for you and makes achieving the American Dream even more difficult.

As British statesman Winston Churchill once remarked, “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”

Please take a few minutes to watch Jeffery Lord’s video. He has a remarkable personal story and admirably describes the struggle between capitalism and socialism.