Capitalism is effectively free market, not freedom as far as civil rights go.
Civil rights are incumbent upon private property rights -- what you would call economic freedom.
What is freedom of speech but the freedom to own a printing press, and distribute newspapers printed by
your equipment on
your paper to anyone who is willing to pay?
In fact, in libertarian theory there is no right that is not derived from a private property right. Ultimately all negative human rights are derived from the self-ownership principle -- that each animate intelligent being owns the inalienable property of their own physical body.
So a free-market, or state-less capitalism, includes in it the civil liberties.
Socialism uses tax dollars into public programs: Education, subways, homeless shelters, etc. While this doesn't restrict anyone from opening their own homeless shelters, the government effectively puts smaller competitors out of business as their have a virtually unlimited source of funds. Hence the name free market capitalism.
Real full-socialism involves government planning of every aspect of economic and therefore private life. The government chooses where you live, your job, your school, how many kids you can have, what healthcare you get, what food you eat, and ultimately everything you can and can't do and can and can't have.
Partial socialism, or state-capitalism, as we have now involves a large government with central planning which constantly interferes with a hampered market.
It is not that government forces out smaller competitors, in many cases, it is that the government
will not allow other people to compete with it. In the case of banking and insurance, they are controlled government monopolies with many branch companies, but one controlling agent.
In the case of education and healthcare, this disallowing of real competetion causes the price to ever incease and the quality to ever decrease, as the people receiving funds to provide the services have no incentive to serve the customer. When they stuff up, they get more money. When they do a good job, their funding gets cut.
In other instances, such as water and transportation, the government has already made the consumer's purchase for them. The tax money is extracted in payment for these services, wether they are used or not. This makes it impossible to compete effectively, because almost no one will buy a service they've already paid for once.
If $50 a year of my taxes have already gone toward funding a road, then I am going to be naturally unwilling to pay an additional $50 to use an alternate competeting form of transport, like a private rail. This is because the government has effectively made my consumer decision for me. It has reached into my pocket, taken my $50 and told me that I am going to buy their transport service wether I like it or not!
And the last point I wanted to make is about state charity -- homeless shelters and the like.
If the government puts 100 million dollars a year toward homeless shelter programs, many people will see this as a net good for the economy. But what they do not see is the diversion of capital from the more productive parts of the economy.
If I have an operating budget for the week of $1000 dollars, to run my small business. And out of that $1000 I have to pay my workers, buy equipment, pay my shop's rent, and so on. Then I will be working in economic confines, and I may only have two or three low-wage employees.
Now say the government comes along with its tax to help the homeless, and takes $100 every week off me. Now I only have $900 to spend. I may have to let one of my workers go, or I may not be able to hire anymore. Or I may just be forced to pay them less and get worse quality work in exchange.
In other words, the government tax has taken real value out of the real economy and diverted it toward these homeless shelters. How many jobs were lost, and how many will now never be created? Who knows... that part is never visible to the public.
But it gets worse when you consider that the $100 per week would have been more productive in my hands. Not only would it have perhaps allowed me to employ an additional worker, but that in turn would allow me to make more profit, which would allow me to invest back into the business in better equipment and so on, increasing my business's productivity.
Ultimately taxation can kill small and medium business, or greatly hamper it. Absolute tax (total tax) levels over about 10% begin to have a seriously bad effect on the real economy and the standard of living of its members.
Leave the charity to the charities, and the business to the businesses, and confine government to its actual role -- if it really has one -- of protecting the people from aggression, and you will have a much more propserous society.