Socialism is an economic system in which there is government ownership (often referred to as “state run”) of goods and their production, with an impetus to share work and wealth equally among the members of a society. Under socialism, everything that people produce, including services, is considered a social product. Everyone who contributes to the production of a good or to providing a service is entitled to a share in any benefits that come from its sale or use. To make sure all members of society get their fair share, governments must be able to control property, production, and distribution.
The focus in socialism is on benefitting society, whereas capitalism seeks to benefit the individual. Socialists claim that a capitalistic economy leads to inequality, with unfair distribution of wealth and individuals who use their power at the expense of society. Socialism strives, ideally, to control the economy to avoid the problems inherent in capitalism.
Within socialism, there are diverging views on the extent to which the economy should be controlled. One extreme believes all but the most personal items are public property. Other socialists believe only essential services such as healthcare, education, and utilities (electrical power, telecommunications, and sewage) need direct control. Under this form of socialism, farms, small shops, and businesses can be privately owned but are subject to government regulation.
The other area on which socialists disagree is on what level society should exert its control. In communist countries like the former Soviet Union, China, Vietnam, and North Korea, the national government exerts control over the economy centrally. They had the power to tell all businesses what to produce, how much to produce, and what to charge for it. Other socialists believe control should be decentralized so it can be exerted by those most affected by the industries being controlled. An example of this would be a town collectively owning and managing the businesses on which its residents depend.
Because of challenges in their economies, several of these communist countries have moved from central planning to letting market forces help determine many production and pricing decisions. Market socialism describes a subtype of socialism that adopts certain traits of capitalism, like allowing limited private ownership or consulting market demands. This could involve situations like profits generated by a company going directly to the employees of the company or being used as public funds (Gregory and Stuart 2003). Many Eastern European and some South American countries have mixed economies. Key industries are nationalized and directly controlled by the government; however, most businesses are privately owned and regulated by the government.
Organized socialism never became powerful in the United States. The success of labor unions and the government in securing workers’ rights, joined with the high standard of living enjoyed by most of the workforce, made socialism less appealing than the controlled capitalism practiced here.
Socialism in Practice
As with capitalism, the basic ideas behind socialism go far back in history. Plato, in ancient Greece, suggested a republic in which people shared their material goods. Early Christian communities believed in common ownership, as did the systems of monasteries set up by various religious orders. Many of the leaders of the French Revolution called for the abolition of all private property, not just the estates of the aristocracy they had overthrown. Thomas More's Utopia, published in 1516, imagined a society with little private property and mandatory labor on a communal farm. A utopia has since come to mean an imagined place or situation in which everything is perfect. Most experimental utopian communities had the abolition of private property as a founding principle.
Modern socialism really began as a reaction to the excesses of uncontrolled industrial capitalism in the 1800s and 1900s. The enormous wealth and lavish lifestyles enjoyed by owners contrasted sharply with the miserable conditions of the workers.
Some of the first great sociological thinkers studied the rise of socialism. Max Weber admired some aspects of socialism, especially its rationalism and how it could help social reform, but he worried that letting the government have complete control could result in an "iron cage of future bondage" from which there is no escape (Greisman and Ritzer 1981).
Pierre-Joseph Proudhon (1809−1865) was another early socialist who thought socialism could be used to create utopian communities. In his 1840 book, What Is Property?, he famously stated that “property is theft” (Proudhon 1840). By this he meant that if an owner did not work to produce or earn the property, then the owner was stealing it from those who did. Proudhon believed economies could work using a principle called mutualism, under which individuals and cooperative groups would exchange products with one another on the basis of mutually satisfactory contracts (Proudhon 1840).
By far the most important influential thinker on socialism is Karl Marx. Through his own writings and those with his collaborator, industrialist Friedrich Engels, Marx used a scientific analytical process to show that throughout history, the resolution of class struggles caused changes in economies. He saw the relationships evolving from slave and owner, to serf and lord, to journeyman and master, to worker and owner. Neither Marx nor Engels thought socialism could be used to set up small utopian communities. Rather, they believed a socialist society would be created after workers rebelled against capitalistic owners and seized the means of production. They felt industrial capitalism was a necessary step that raised the level of production in society to a point it could progress to a socialist and then communist state (Marx and Engels 1848). These ideas form the basis of the sociological perspective of social conflict theory.
Sociology in the Real World
Politicians, Socialism, and Changing Perspectives
In most Presidential elections, as well as some state and local contests, one or more of the candidates is likely to be insulted with a term meant to evoke fear and indicate their lack of patriotism: They are called a socialist.
With a few exceptions throughout U.S. history, mainstream politicians would have taken efforts to shed this label. It may have brought to mind failed or totalitarian countries, where people had fewer freedoms and generally less prosperity than in America.
More recently, however, some political figures seem more comfortable with the term. Most notably, Vermont Senator Bernie Sanders has accepted the term "democratic socialist," as has New York Representative Alexandra Ocasio-Cortez. They ascribe to government involvement models similar to those of some European countries. They advocate for policies like student loan forgiveness, free public college, universal healthcare, elimination of for-profit prisons, and so on. In some cases, they advocate for breakups or government involvement in some corporate-dominated industries, such as power utilities. They also note that many semi-socialist societies, such as Germany and the U.K, are among the world's largest economies, with plenty of economic opportunity and – if the ability to become rich is one measure – plenty of millionaires and billionaires.
Beyond the political damage that may be associated with socialism, many people in America do not like the idea of government involvement in private industry. Choice and unlimited opportunity are parts of the fabric of the American story, and large corporations have had positive impacts on our lifestyle. But some of those notions are changing. Many people from different political backgrounds are decrying income inequality, which, as has been described elsewhere in this text, is higher than ever in the U.S.
Another aspect of the U.S. economy is whether it already has socialistic tendencies. One example might be the practice of subsidies, where politicians (of both parties) grant payments or tax breaks to certain businesses or industries. Subsidies were at some points necessary to help people like small farmers remain viable during crises; in many years, farm subsidies of tens of billions of dollars account for over 25 percent of total farm income; in 2003 it was 41 percent, and in 2020 it was 39 percent (Abbott 2020). Subsidies are also common in industries as profitable as oil, and the U.S. government is deeply involved in many companies' work in energy production. The government also has a significant role in the lending practices of private banks, often through action by the Federal Reserve. Add in corporate bail-outs, high levels of military spending, and the fact that the government is by far the largest employer of U.S. citizens, and it's clear that the United States isn't a purely capitalist society. Most economists refer to it as a mixed economy.
Is that such a bad thing? Neither system is perfect. Billionaire hedge fund manager Roy Dallio, who certainly benefited from capitalism before turning his attention to social equality and philanthropy, expresses it this way: "Most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well (Dalio 2019).
The content of this course has been taken from the free Sociology textbook by Openstax