One is almost tempted to say "socialisms," for philosophies from Anarchism to Marxism to Social Democracy claim to be socialist. It is the favored definition of G.D.H. Cole, a Guild Socialist, that I usually employ: "democracy and the classless society."

Socialism generally implies that those who labor will democratically control the means of production and the fruits of their own labor. By this logic, one cannot say that many of the states that claimed to be socialistic were; for the factories and industry were not controlled by the workers, even indirectly through a democratic mechanism.

But who am I to say what socialism is? Does it seem sectarian? The term has been used and abused by so many that it has lost much meaning.

Of course, YMMV.

Socialism means many different things to different people. Be very careful when talking to someone about socialism -- odds are that they'll think that you're talking about letting the commies march in and enslave us all. But that's not really what socialism is about...

The main idea behind socialism is that workers should not be oppressed by rich owners of capital (capitalists) who profit through the labor of the workers while doing little work themselves. While a government may do things to enforce this, such as protect workers from the more extreme cases of exploitation (child labor, slave labor, 80 hour work weeks, unpaid overtime, etc.), it's not likely to force all capital to be put under the control the workers (although in some centrally managed economies -- AKA communism -- the government justifies its control by saying that it represents the workers). The same goes for capitalism; the USA is for the most part capitalist, but the government does not demand it, and it would be hard (and pointless) to force all capital into the hands of profiteering individuals.

Various social welfare programs may also be used by governments to support the people in sickness, youth, and old age; this is sometimes considered an aspect of socialism. It should be noted that these could be run for profit (insurance companies do something like this), which would be consistent with capitalism.

A socialist company would be one in which everyone who works in the company is also a part owner, and everyone who owns part of the company works there. While 'capitalist' companies often find it useful to give its workers a personal interest in the company, they rarely give the employees any real power over how the companies' capital is used.

In Europe they have tried to set up some worker co-ops, but they do have some factors that may prevent them from being as competitive as traditional corporations. A socialist company may be slower to respond to a increase in demand, as the owners/workers may be reluctant to bring in new partners. There may also be a problem with deciding who to fire in a down cycle (who's going to vote to fire themselves?).

Both socialism and capitalism are compatible with a free market, at least in the sense that neither require a market regulated by a higher authority. A socialistic company might or might not work for the largest monetary profit, but both socialistic and capitalistic companies want to make a profit. There is nothing in either system to forbid taking full advantage of the demands of the market; the difference is that while a capitalistic company will (almost always) be pushed to make a profit at any cost (by its shareholders), the socialistic company will try to do whatever the workers in the company want (if the employees want to work twenty hours a day, sell at inflated prices, or work to become a monopoly, they can do it {depending on just how free this market is}. More likely, they'll take just enough profit to buy nice cars and then take the rest of the week off. So to speak).


Addendum: Socialism is not against private property, either. Only the private ownership of capital beyond what the individual can use on his own. If you own a factory, you cannot hire wage slaves to work there; you can bring in other people to help with your work, but they need to be given partial ownership in the factory, although this 'ownership' might be limited to the time they work there ('control' might be a better term than ownership in many situations).

Here are the central ideas of my current interpretation of Socialism, largely influenced by The Ragged Trousered Philanthropists.

Firstly, people need some things to live a basic life (e.g. food, clothes, houses; called the Necessities of life in TRTP). There are then products that make life 'better' such as TVs, music and improved standards of clothes and food; these are named the Benefits of Civilization in TRTP.
There are different ways of looking at deprivation. When Marxism/Socialism developed, deprivation of both kinds of product was obviously very common all over the world - only a miniscule percentage of people enjoyed the Benefits of Civilization. These Days it seems that the situation in the Western World is better: nearly everyone in the United Kingdom has life's basics and most indulge in some 'luxuries'. However, one may or may not choose to take the world view and see that the large proportion of the world's billions who remain impoverished dwarves the people of the West who are benefiting from 'progress'.
Back to the theory: All that is needed for the production of any of the products, at a basic level, are the following

  1. Raw materials / land - There is no real world (or national) shortage of these as yet.
  2. Tools of production - There is no shortage of these and more could easily be made.
  3. Labour - Most 'developed' nations have millions seeking work and looking back to the world view, well, you get the picture. Socialists would also point out here that a massive proportion of the workforce are employed in unnecessary work. This takes the form either of work that is completely unhelpful in producing and distributing products (e.g. Insurance) or jobs that are only necessary because of the inefficient system of Capitalism, where hundreds of companies compete to carry out the same tasks.
So, there is no shortage of the things essential for production of the Stuff that people need. However, due to the Capitalist system (should I go into technicalities?) neither the Necessities nor Benefits are produced in sufficient quantities. Furthermore, the very people who do the work are deprived of the full 'fruits of their labour'. Those that are employed (think of them as a whole group) produce the Stuff (same again) and are paid enough money to buy back just enough of their products to live a relatively miserable existence. The level of this existence of course depends on when, who at and where in the world you look: Think late 19th Century Industrial Britain, Sweat Shops or fishermen in the 'second world'.

Under Socialism there would be a phenomenally more efficient system of rational planning and all land and tools are owned by the People. Every citizen has a responsibility to do their fair share of work and a right to have all the Benefits of Civilization as well as, of course, the Necessities of Life. Due to the overwhelming superiority of the new system to Capitalism all of these products would be in such abundance that every person would have everything they want, while only having to work for a relatively small proportion of their time.

Remember Marx, like Jesus, cannot be held responsible for actions taken in his name This is an inaccurate quotation of Tony Benn.

Please see Socialism Today
No person to have two dinners until everybody has had one.

As defined by my father-in-law, Roy Wilcox, who died this morning, 13 November 2001.

Socialism is a viable alternative to capitalism. It is more fair, and fits better with democracy than capitalism.

For my purposes, socialism is an economic system in which the means of production are owned and controlled by the community. A means of production is something that produces a salable good or service. So, farms and factories are means of production, an oven is, if used in a commercial sense. A toothbrush is not.

In a capitalistic society, people are what they produce. We are told that anyone is capable of bettering their financial situation if they work hard. The implication is that people who are poor, are lazy. In fact, the highest paid are usually the ones who are either in demand (engineers, for example), or those who can decide their own pay (CEOs), not those who work hard (janitors), and those who are selfless (teachers). In fact, according to the US census bureau, in 1998, the top 20% of income earners made as much as the rest of the population. So, are we to believe that the top fifth of the population does as much work as the other 80%? No, by and large, the selfless and hardworking people are not those who benefit the most. In a socialistic system, the community as a whole benefits from everyone's work, as the fruits of the labor are shared among everyone.

Inherent in competition is waste. When companies compete to find the best product, quite a bit of redundancy happens: multiple factories, multiple R&D labs, multiple market surveys, etc. If the companies cooperate in the first place, the end result of a good product would be discovered sooner, and made more efficiently.

In a democratic system, in order to change one's situation, one must change the whole society. That is to say, if someone doesn't agree with a law, the proper way to go about it is to convince enough people to change it, not to simply ignore it. This idea meshes very well with the socialistic idea of individual change through group change, that is, in order to change ones wealth, one increase the wealth of the whole community. Capitalism, on the other hand fits well with anarchy, in which one can do whatever he or she wants, without regard for the community.

A note on Ludwig von Mises, "SOCIALISM: An Economic and Sociological analysis"
Yale University Press, New Haven; 1962
translated by J. Kahane
LCCN: 51009080; ISBN: 0913966620 (1981 edition)

Prices are the cornerstone of the market and the scale by which all agents measure value. This is admittedly a presumption Mises has made before embarking on his analysis of "Socialism". Yet it is not an altogether preposterous assumption. Mises claims that without the assistance of prices one is at sea in the market; it becomes impossible to effect any rational thought process because such processes presuppose the tools necessary for calculation. Any rational economic process must have some method with which to rank the various means and ends at our disposal, without such an ordering a rational economic system (one which permits agents to make informed, rational decisions) is inconceivable. In the price system Mises finds a highly evolved process which distills the various signals received from all agents in the market and determines the value society ascribes to a particular commodity.

With the assistance of the price system, all actors in the market can make decisions that promote the general good and assist in the satisfaction of the desires of all. Guided by their own self-interest, producers and consumers can make decisions that reconcile their subjective values with those of all other individuals. Prices provide us with an invaluable table of costs that accurately reflects the desires of all other individuals. Without prices no agent has accurate and succinct data on which to base her decisions, consequently such a system cannot sustain rational behaviour. Mises' fundamental critique of Socialism is that with the abolition of private property and the disappearance of the price system, it will become impossible to calculate.

Unless we are free to bid for products, based on the value we believe they have, the market is unable to arrive at a price for the product. An alternative system, short of one that has direct access to the minds and hearts of all individuals, will not provide us with information that accurately reflects the desires of society. This is not of course a claim that goods will be cheaper or more expensive under Socialism, non-monetary costs will substitute to make up for under-priced commodities. Yet a system that relies on long lines and overflowing warehouses as the only signals on which to revise production decisions is wholly inefficient since it does not provide the appropriate incentives for producers to change behaviour. Mises argues that Socialism is exactly such a system.

Since no one under a Socialist state will have access to prices it is entirely reasonable to suppose that inaccurate decisions will be made due to lack of appropriate measures of value. This not only destroys the much vaunted "rationality" of Socialism, it also suggests that a Socialist economy may be unable to perform as well as a Capitalist market system. If we are aware that redistribution of the present wealth of society will not in itself be sufficient to ensure for each individual the standard of living the Socialists promise, it is difficult to see how an economy that is more prone to "persist in error" (see Reuven Brenner, Labyrinths of Prosperity) can create enough wealth to enhance our individual positions so dramatically. Mises assures us that the Socialist system is hardly an "improvement" on the Capitalist structure and as such will produce an inferior result.

Once "the fundamental question whether the socialist order of society promises a higher productivity than Capitalism" has been answered in this manner, little remains of the material rationale for socialism. The Socialist is then forced to evoke other forms of reasoning to support his agenda. One of these is an appeal to an acquisitive urge that is present among most of us, and which is sparked when we are presented with the opportunity to "take from the rich what is rightly ours". Proponents of such actions, quite apart from the fact that they lack any respect or understanding of rights, assume that they can redistribute in such a manner without affecting the total value of the economy's product. Such a position fails to comprehend the subtle relationship between production, distribution and consumption. Yet this is not surprising when we realize that these claims are forwarded by authoritarians who presume to free us from all cares by replacing the capitalist's "monopoly" over these three functions with their own. It is clear that any tampering with either of these processes will radically change the end result of an economic process.

Yet any process that fails to acknowledge the nature of the human agent in the economic sphere and fails to create an incentive structure that forces us to weigh the benefits of consumption and saving can hardly be called economic (pg. 458). After demonstrating the impotency of the socialist scheme in the economic sphere, Mises has to retaliate to the alleged "materialism" of the bourgeoisie. At this point however, it is rather futile to argue about the merits of poverty and Mises rests his case after drawing various parallels between socialism and a particular interpretation of Christianity.

There are more problems in the discourse on Socialism than would otherwise be imagined. One of the points Mises highlights is the apparent ease with which Socialists (and particularly Marx) use words in different ways, imposing on them a variety of contexts and connotations, till the very logic of the argument has been lost in what Mises calls "word-play". This happens, Mises argues, in Marx's writing where the terms rebellion and society are used at different times to mean different things. It is not clear whether this is done intentionally, to obscure the argument or whether it is accidental. In either case, it is clear that such verbal acrobatics simply make it even more difficult to conduct this discourse since one is never completely certain of the arguments advanced by others. These issues become crucial in Friedrich von Hayek's work, where the very word "Law" is imbibed with a halo that the legislature attempts to acquire by cloaking legislative decisions in an exterior of legality. A similar conception of language is at work in Hayek's The mirage of Social Justice, where he claims that the term "justice" is abused when employed in referring to an outcome that is not generated by an authority, but which is the outcome of an impersonal process. Oddly, Mises does not seem to have stressed this mode of thought, and claims that "on this (the relative justice of the outcome produced by these two orders) point science can give no judgement" pg. 273, also pg 436. Yet, this has to be reconciled with Mises' insight that "one is not permitted to ask whether a particular price is justified or not" pg. 435. The issue becomes a little clearer when we notice the value Mises has ascribed to the term "science", and why he would wish to keep away from issues that could "only be evaluated subjectively" (pg. 436), or those that appear to require the application of a particular value structure.

Perhaps what comes out most clearly in this book, is that the structures described in Socialist literature cannot be accepted as they are. As such these visions of Socialist societies are Utopias (ou + topos, no place), in the sense that they prophecy circumstances that Economic analysis tells us cannot be sustained with the institutions under consideration. These visions are imaginary places because their structure fails to take into account the nature of the human animal and the way in which we make decisions. We cannot reconcile Socialist Utopia with our Economic and Sociological knowledge of the nature of human action.


This review was originally written as an assignment for Israel Kirzner's class The Foundations of Capitalism during the fall of 1995 at NYU.

Sure, socialism is not a system in itself. It's an umbrella term encompassing several different but similar political and economic systems. They can be divided simply between two groups: the Marxists and the non-Marxists (both of which are derivatives of Utopian socialism to some extent).

I. Marxist socialism (Marx, Engels)
 A. Revolutionary Marxism (Lenin)
   1. Stalinism-Maoism (Stalin, Mao)
   2. Trotskyism (Trotsky)
 B. Revisionist Marxism (Bernstein)
   1. Critical Western Marxism (Marcuse, Habermas)
   2. Social Democracy
II. Non-Marxist socialism
 A. Anarcho-communism/Anarcho-socialism (Bakunin, Goldman)
 B. Fabian socialism (Shaw, Russell)
 C. Religious socialism (Bellamy)
 D. Market socialism

I'm not going to go into detail about these; it's rather tangential to my point. What I will say is that all of these are systems in which the control of the economy is collective. In some (such as market socialism), this means the economy operates similarly to traditional capitalism, but with stronger controls and often with public money funding ventures. In others, such as Marxism-Leninism, it may mean a command economy, where everything is ultimately under the control of the state. And under anarcho-communism and anarcho-socialism, this means everyone in a given community gets together and decides on what the economy will be like. They also all include progressive tax plans and welfare-like programs (excepting, of course, the anarchist modes - taxes and welfare programs don't exist without a government).

Socialism is not merely, "being nice to each other". That is, properly, simple human decency. It is a definite term dealing with definite political views. I leave it up to the reader as to whether they are beneficial or not.

Partial source: Ball, Terence and Richard Dagger. Political Ideologies and the Democratic Ideal (3rd edition). New York: Longman, 1999.

So"cial*ism (?), n. [Cf. F. socialisme.]

A theory or system of social reform which contemplates a complete reconstruction of society, with a more just and equitable distribution of property and labor. In popular usage, the term is often employed to indicate any lawless, revolutionary social scheme. See Communism, Fourierism, Saint- Simonianism, forms of socialism.

[Socialism] was first applied in England to Owen's theory of social reconstruction, and in France to those also of St. Simon and Fourier . . . The word, however, is used with a great variety of meaning, . . . even by economists and learned critics. The general tendency is to regard as socialistic any interference undertaken by society on behalf of the poor, . . . radical social reform which disturbs the present system of private property . . . The tendency of the present socialism is more and more to ally itself with the most advanced democracy.
Encyc. Brit.

We certainly want a true history of socialism, meaning by that a history of every systematic attempt to provide a new social existence for the mass of the workers.
F. Harrison.

 

© Webster 1913


Socialism, n. --
Socialism of the chair [G. katheder socialismus], a term applied about 1872, at first in ridicule, to a group of German political economists who advocated state aid for the betterment of the working classes.

 

© Webster 1913

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