What is interesting is that pure socialism and communism has failed everywhere it has been attempted, but so has pure capitalism.
Most large modern countries today are hybrids, with a combination of capitalist and socialist principles. Some countries lean more one way or the other, but none are pure socialist or pure capitalist. And that’s a good thing.
Socialism appeals to the compassion and desire to help their fellow man, while capitalism appeals to innovation, progress and individual responsibility.
The basic flaw in pure socialism is that limiting people’s incomes, or taking away income they earned and redistributing it to others is a major demotivator for human beings. Smart people realize that they get paid about the same regardless of whether they work hard or not. So they don’t work hard. You see this in every Communist country that ever existed. I even saw it first hand when I visited the Soviet Union as a Student Ambassador. You also have the danger of too much power in one entity’s hands which can be abused. This is why many socialist and communist countries become virtual dictatorships, despite democratic constitutions saying otherwise.
The basic flaw in pure capitalism is that those that already have capital have a huge advantage over those who do not, and a society can become very unbalanced very quickly as the rich get richer and the poor get poorer. The rich can very easily control the population through low wages, manipulation and government influence.
This is why most modern countries are hybrids. They allow capitalism to exist, but then impose regulations and taxes on it to prevent abuse, and have programs that help those without capital become successful business owners. They also have many socialist inspired programs, like welfare, mandatory retirement savings (like social security), health care for the indigent and elderly, etc. Some even go so far as having dual systems in place, like having the government run postal service (USPS), but also allowing UPS, FedEx and other private delivery companies, or having both a private health care system and a public government run health care system running side by side.
In reality, it’s not that socialism and capitalism are good or bad, but rather what balance and mix is appropriate for a particular country and society. Any country that starts to lean too close to pure capitalism, or too close to pure socialism usually starts having some major social issues.