Socialism

Socialism is best defined in contrast with capitalism. Where capitalism rests on private ownership of the means of production and wage labour coordinated by markets, socialism requires, at a minimum, that the bulk of the means of production be under social, democratic control. Socialists argue that this would end exploitation, reduce domination at work and in politics, and allow production to serve human needs rather than profit. Socialism is not the same as statism: social ownership can take the form of co-operatives, municipal enterprises, public investment funds or participatory planning, and many socialists regard concentrated state power as a threat to their goals.

Critique of capitalism

Socialists typically charge capitalism with exploitation (owners appropriate value produced by workers), domination (workers consent to employment under deep vulnerability and asymmetry of power), alienation (work does not allow self-realisation), inequality and inefficiency (crises, unemployment, under-provision of public goods).

Traditions

• Utopian socialism — Robert Owen, Charles Fourier, Henri de Saint-Simon — proposed model communities and reorganised industry.
• Marxism analysed capitalism as a historical stage to be superseded through class struggle, leading eventually to communism.
• Democratic and reformist socialism — the Fabians, Eduard Bernstein, much of the labour movement — sought socialism through elections and legislation.
• Libertarian socialism and anarchism sought socialism without the state, through federations of communes and workers' councils.
• Guild socialism and council communism stressed workers' self-management.

Institutional models

Erik Olin Wright distinguished strategies of smashing, taming, escaping and eroding capitalism, the last combining reforms within the state with alternatives built in civil society.

• Soviet-type economies. The Soviet Union and the states modelled on it achieved rapid industrialisation and universal basic services but, as János Kornai's The Socialist System (1992) documents, suffered chronic shortages, soft budget constraints and weak innovation, alongside one-party rule and mass repression.
• Yugoslav self-management (1950–1991). Worker councils managed enterprises within a market and a one-party state; the system achieved growth for decades but ended in debt crisis, regional inequality and state collapse.
• Kibbutzim. Israel's collective settlements practised common ownership and direct democracy for decades; most have since privatised wages and services.
• Co-operative economies. The Mondragon co-operatives in the Basque Country show that large worker-owned firms can compete in markets, though they also employ non-member workers and have faced closures.
• Cybersyn and planning technology. Chile's Project Cybersyn (1971–73) and the Soviet OGAS proposals attempted computer-assisted coordination of the economy; neither was fully realised.
• Participatory budgeting. Porto Alegre's budget, introduced by the Workers' Party in 1989, is often cited by socialists as a democratic alternative to technocratic allocation.
• Democratic socialist parties. Parties describing themselves as socialist have governed in many democracies, generally pursuing nationalisation of some industries, welfare states and labour rights rather than abolition of markets.

• Information and calculation. Ludwig von Mises and Friedrich Hayek argued that without markets for capital goods planners cannot calculate efficiently or gather knowledge dispersed among producers and consumers; it is very hard for a central authority to collect the relevant information.
• Incentives. Planned and collectively owned firms may face weak incentives to innovate and economise; a system that works only with exceptionally committed individuals works only in exceptional cases.
• Freedom. Central planning in practice trampled civil and political liberties that many socialists value, and concentrating economic and political power in one apparatus removes counterweights to the state.
• Market socialism's problems. Critics argue that worker-managed firms under-invest, restrict membership and expose workers to high financial risk, and that market socialism may reproduce inequality between firms.
• Feasibility of participatory planning. Parecon-style planning is criticised for its information demands and the time it would require of participants.

The historical record of socialism is sharply divided by type. Authoritarian central planning delivered industrialisation, literacy and basic security in several countries but at enormous human cost — famines, mass repression and the suppression of dissent — and stagnated technologically; almost all such economies abandoned planning after 1989 or, as in China and Vietnam, introduced markets under one-party rule. Reformist and democratic socialist traditions, by contrast, shaped the welfare states of Western Europe, which developed with great success in the three decades after the Second World War.

Smaller-scale socialist institutions — co-operatives, kibbutzim, mutuals, municipal enterprises, participatory budgeting — show that democratic control of economic activity can work in particular settings, but they face recurring problems of scaling, capital, membership and competition. Debates about automation and AI have renewed interest in social ownership of capital, public data and computational planning, which proponents argue could overcome the information problem and critics regard as a new version of an old illusion.

• Pablo Gilabert and Martin O'Neill, 'Socialism', Stanford Encyclopedia of Philosophy
• Karl Marx and Friedrich Engels, The Communist Manifesto (1848)
• János Kornai, The Socialist System: The Political Economy of Communism (1992) — DOI
• John E. Roemer, A Future for Socialism (1994)
• Erik Olin Wright, Envisioning Real Utopias (2010)
• Friedrich A. Hayek, 'The Use of Knowledge in Society', American Economic Review (1945)