Key difference: Socialism refers to an economic system that aims to distribute resources to each person as per their deeds. Communism refers to an economic and political system which aims to distribute resources to each person as per their needs.
Communism and socialism are ideological principles that developed in response to the Industrial Revolution. During the Industrial Revolution, the capitalist factory owners grew extremely wealthy by exploiting their workers, who were paid less, had extremely long hours without meal breaks or proper ventilation. Both socialism and communism aimed to improve the situation of the workers and boost economic growth by means of different ideals.
According to dictionary.com, the definition of socialism states it is a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole. It is less extreme and more flexible than communism.
The word communism comes from the Latin word "communis", which means "shared" or "belong to all". It is the idea of a free society with no division or alienation, where the people are free from oppression and scarcity. The definition of communism states that it is a theory or system of social organization based on the holding of all property in common, actual ownership being ascribed to the community as a whole or to the state. Communism is a system of social organization in which all economic and social activity is controlled by a totalitarian state dominated by a single and self-perpetuating political party.
The main difference is that socialism mainly relates to the economic system whereas communism relates to the political system. Both are systems of production for use based on public ownership of the means of production and centralized planning. Socialism believes that planned social control should be used to manage the economy, whereas, communism believes that centralized organizations should manage the economy to bring about statelessness and classlessness, i.e. everyone will be equal.
Also, socialism is a form of new society which grows directly out of capitalism, whereas, communism is a development or "higher stage" of socialism. Socialism believes in bringing about a classless society by means of capitalism and private ownership. It coexists and builds on capitalism. Socialism allows for workers' cooperative groups to control a factory or farm together. Communism, however, believes in bringing about classlessness by putting an end to capitalism and private ownership. It says that all properties, factories, etc. should be owned by the central government.
Another difference is that socialists believe economic control can be brought about by involving many people as possible in the set up of the classless society. Communists, on the other hand, believe that small group of people should have the responsibility of setting up the society.
According to the socialist ideal, the production is distributed according to people's deeds, the quantity and quality of work done, as oppose to in communism, where the production is distributed according to the people's needs. However, in this case, it is first important to have the production high enough to cover everyone’s needs. The communist ideal claims that people will work in the communist society not because they have to but because they want to and out of a sense of responsibility.
Both communism and socialism were methods designed to improve the lives of ordinary people, and to equally distribute wealth among the people and hence create classlessness. In practicality, however, neither is able to achieve their ideal goal. Socialism does reward hard work, where each worker's share of the profit depends upon her or his contribution to society. Communism, on the other hand, provides no incentive for people to work. The central planners simply take one’s products and distribute it among the public equally. The workers realized that they would not benefit from working harder, hence they stopped working.
Further, socialism and communism have been criticized by capitalists claiming that the two systems have distorted or absent price signals, slow or stagnant technological advancement, as well as reduced incentives, prosperity, and feasibility.
In modern terminology, communism has become synonymous to policies of states controlled by communist parties, regardless of the practical content of the actual economic system. Some examples of such states include the Socialist Republic of Vietnam, the People's Republic of China (PRC), the Soviet Union, Cuba, Cambodia and Laos.
Some example of socialist states that have socialist policies, in combination with a capitalist economy and democratic political system, include Sweden, Norway, France, Canada, India and the United Kingdom. These countries have incorporated some socialist ideas into their economic systems. These include worker benefits such as vacation time, universal health care, subsidized child-care, etc. without demanding central control of industry.