Socialism

Socialism is a family of economic and political ideas holding that the means of production, such as land, factories, banks and natural resources, should be owned or controlled collectively rather than by private owners. Collective ownership can mean state ownership, worker cooperatives, municipal enterprises or community trusts. Socialists generally aim to reduce inequality, give workers more say over their working lives, and plan or steer production toward social needs instead of profit.

The word covers a wide spectrum. At one end are Marxist traditions that see socialism as a stage on the way to communism; at the other are democratic socialists and social democrats who accept markets and elections but want strong public services and public ownership of some industries. Socialism is usually contrasted with capitalism, and most real economies sit somewhere between the two as mixed economies.

Picture a large apartment building. In one arrangement, a landlord owns it, sets the rent and keeps whatever is left over. In another, the residents own it together, elect a committee, decide on repairs and share the costs and any surplus. The second arrangement is the socialist idea in miniature: the people who use and work in something own it jointly and decide how it is run.

Applied to a whole economy, socialists argue that railways, hospitals, energy or even most businesses should be run in this shared way, either by the government on everyone's behalf or by the workers themselves. Critics reply that shared ownership weakens incentives and that committees decide less well than markets.

Early nineteenth-century thinkers such as Robert Owen, Henri de Saint-Simon and Charles Fourier proposed cooperative communities as an answer to the hardships of industrialization. Karl Marx and Friedrich Engels, in the Communist Manifesto (1848) and Capital (first volume 1867), built a theory in which socialism follows the overthrow of capitalism by the working class. Their analysis drew on the labor theory of value inherited from classical economics.

By 1900 socialist parties and trade unions were major forces in Europe. They split after the 1917 Russian Revolution between revolutionary communists and reformist social democrats who sought change through parliaments. After 1945 many Western European governments carried out nationalization of coal, steel, rail and utilities and built welfare states; Britain's National Health Service, founded in 1948, is a lasting example. From the 1980s many of those industries were returned to private hands through privatization.

• Marxist and Leninist socialism. Central planning and state ownership of nearly all production, as in the Soviet Union, where the state set output targets and prices.
• Market socialism. Publicly or worker-owned firms that still sell in markets, as tried in Yugoslavia's system of worker self-management; economist Oskar Lange argued in the 1930s that planners could mimic market prices.
• Democratic socialism. Public ownership of key sectors and expanded social programs, achieved through elections. US Senator Bernie Sanders describes himself this way.
• Social democracy. Acceptance of a private sector and markets combined with high taxation, strong welfare systems and collective bargaining, as in the Nordic countries. Many economists classify these as capitalist market economies, and Nordic leaders have said so themselves.
• Cooperative and libertarian socialism. Worker cooperatives and decentralized ownership without a powerful central state, such as the Mondragon cooperatives in Spain's Basque Country.

The best-known critique is the socialist calculation debate. Ludwig von Mises argued in 1920 that without market prices for capital goods, planners cannot calculate which uses of resources are efficient; Friedrich Hayek, of the Austrian school, added that the knowledge needed for planning is scattered among millions of people and is revealed only through prices. Other critics stress weak incentives, the risk of rent-seeking by officials, and the shortages and slow growth of planned economies before 1990. Public choice economists argue that state managers pursue their own interests just as private ones do.

Supporters reply that markets produce market failures, insecurity and concentrations of wealth, and point to the success of public health systems, public utilities and cooperatives. They also note that many countries with large public sectors rank high on measures of well-being and income equality, such as the Gini coefficient. Defenders of central planning acknowledge its record has been poor; most present-day socialists in democracies argue for public ownership of particular sectors, stronger labor rights and redistribution rather than full planning. Policies sometimes associated with the left, such as universal basic income or a wealth tax, are also debated well outside socialist circles.

Several states describe themselves as socialist, including China, Vietnam, Cuba and Laos, though China and Vietnam now run large market sectors under one-party rule, a model sometimes called state capitalism. Venezuela's government under Hugo Chávez and Nicolás Maduro called its program socialism; its economic collapse and hyperinflation in the late 2010s are cited by critics, while supporters blame oil-price falls, mismanagement and sanctions. In democracies, the term remains contested: for some it means a more equal society within markets, for others the abolition of private ownership.

• Stanford Encyclopedia of Philosophy: Socialism
• Nobel Prize: Friedrich August von Hayek, facts