Politics and economy are the most powerful social institutions that facilitate the development of modern society and social processes. Despite the fact that the two concepts are very closely intertwined, politics and economy have a different meaning within the subject of sociology.
Social science defines politics as social system of managing the state and the government of the state. Politics is related towards creating conditions of society well-being with the help of state regulation, taxes and economical systems. Political institutions are closely related to economic institutions; however, they have different meaning for social development and are directed towards different objects.
At the same time, economy is another social system that is aimed at producing and distributing goods and services to the society and within the society. All social institutions that are united under the economical concept are related to the consumption and production of commodities. Economy is not placing the process of production and consumption to the center of its orientation, but the profit that is earned with the help of production and consumption. That is the major difference between the economy and politics as social institutions.
Politics and economy are placed in the center of various economic systems that exist in the context of modern society. Capitalism and socialism are usually provided as the examples of such economic systems. The views associated with both capitalism and socialism are as a rule opposed to one another (Beckert & Streeck, 2008). Capitalism is considered to be the economic system that was created in contradiction to socialism. Therefore, the meaning of capitalism and the purpose of social institutions in capitalist system is completely different from socialism and socialist systems. While capitalism aims at creating more wealth within the society, socialism denies wealth accumulation as the purpose of social development and places the principles of equality of society members to the center of its viewpoints.
The main principles that define socialism are state ownership of commodities, centralized economy based on equality principles, and non-profit orientation of production. Socialism is most powerful in terms of its state governance, however, the basic economic principles of socialism are rather weak and do not correspond to the institutional interactions that exist in the modern society.
Capitalism is based on private ownership. As opposed to socialism, capitalism proposes profit orientation of production, the principles of decentralized economy based on wealth accumulation. Therefore, capitalism involves basic economic principles and actively involves market economy. At the same time, capitalism as economic system is lacking governmental control of production.
Both capitalism and socialism as economic systems show that the principles of politics and economy are closely related, but they can be addressed differently within the society. Moreover, social systems that are more politically-oriented such as socialism usually lack economic principles involvement. Therefore, the social institutions of the countries based on socialism are slower in economic development. At the same time, economically-oriented social systems such as capitalism are lacking government intrusion in economic processes. For this reason, even though capitalist countries are economically developed, their political systems are usually weak, and multiple political forces are presented in the government of these countries.
As a result, sociology studies both concepts in terms of their impact on the society. While politics is treated as struggle for belief systems of society, economics is definitely profit-oriented and production-based(Chapman, 2004). Swedberg (2003) believes that firms and markets are the central concepts of modern sociology. That is why the relationship between economy and politics is so important in social science. Current economy lies in continuum between economically-based social systems and politically-based social systems.