Although the terms are sometimes used interchangeably, and communism and socialism are related concepts, the two systems are different in crucial ways. However, both communism and socialism arose in response to the Industrial Revolution, during which capitalist factory owners grew extremely wealthy by exploiting their workers.
Early in the industrial period, workers toiled under horrendously difficult and unsafe conditions. They might work 12 or 14 hours per day, six days per week, without meal breaks. Workers included children as young as 6, who were valued because their small hands and nimble fingers could get inside the machinery to repair it or clear blockages. The factories often were poorly lit and had no ventilation systems, and dangerous or poorly-designed machinery all too frequently maimed or killed the workers.
Basic Theory of Communism
In reaction to these horrible conditions within capitalism, German theorists Karl Marx (1818-1883) and Friedrich Engels (1820-1895) created the alternative economic and political system called communism. In their books, The Condition of the Working Class in England, The Communist Manifesto, and Das Kapital, Marx and Engels decried the abuse of workers in the capitalist system, and laid out a utopian alternative.
Under communism, none of the "means of production" - factories, land, etc. - are owned by individuals. Instead, the government controls the means of production, and all of the people work together. The wealth produced is shared out among the people based on their needs, rather than on their contribution to the work. The result, in theory, is a classless society where everything is public, rather than private, property.
In order to achieve this communist workers' paradise, the capitalist system must be destroyed through violent revolution. Marx and Engels believed that industrial workers (the "proletariat") would rise up around the world and overthrow the middle class (the "bourgeoisie"). Once the communist system was established, even government would cease to be necessary, as everyone toiled together for the common good.
The theory of socialism, while similar in many ways to communism, is less extreme and more flexible. For example, although government control of the means of production is one possible solution, socialism also allows for workers' cooperative groups to control a factory or farm together.
Rather than crushing capitalism and overthrowing the bourgeoisie, socialist theory allows for the more gradual reform of capitalism through legal and political processes, such as the election of socialists to national office. Also unlike communism, in which the proceeds are divided based on need, under socialism the proceeds are divided based on each individual's contribution to society.
Thus, while communism requires the violent overthrow of the established political order, socialism can work within the political structure. In addition, where communism demands central control over the means of production (at least in the initial stages), socialism allows for more free enterprise among workers' cooperatives.
Communism and Socialism in Action
Both communism and socialism were designed to improve the lives of ordinary people, and to more equitably distribute wealth. In theory, either system should have been able to provide for the working masses. In practice, however, the two had very different outcomes.
Because communism provides no incentive for people to work - after all, the central planners will simply take your products, then redistribute them equally regardless of how much effort you expend - it tended to lead to impoverishment and immiseration. Workers quickly realized that they would not benefit from working harder, so most gave up. Socialism, in contrast, does reward hard work. After all, each worker's share of the profit depends upon her or his contribution to society.
Countries that implemented one or another version of communism in the 20th century include Russia (as the Soviet Union), China, Vietnam, Cambodia, Cuba, and North Korea. In every case, communist dictators rose to power in order to enforce the reordering of the political and economic structure. Today, Russia and Cambodia are no longer communist, China and Vietnam are politically communist but economically capitalist, and Cuba and North Korea continue to practice communism.
Countries with socialist policies, in combination with a capitalist economy and democratic political system, include Sweden, Norway, France, Canada, India and the United Kingdom. In each of these cases, socialism has achieved the moderation of capitalistic drives for profit at any human expense, without disincentivizing work or brutalizing the populace. Socialist policies provide for worker benefits such as vacation time, universal health care, subsidized child-care, etc. without demanding central control of industry.
In short, the practical difference between communism and socialism can be summed up this way: Would you prefer to live in Norway, or in North Korea?