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Socialist economics comprises the economic theories, practices and norms of hypothetical and existing
socialist Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the ...
economic systems. A socialist economic system is characterized by
social ownership Social ownership is the appropriation of the surplus product, produced by the means of production, or the wealth that comes from it, to society as a whole. It is the defining characteristic of a socialist economic system. It can take the form o ...
and operation of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
that may take the form of autonomous
cooperative A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-contro ...
s or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize
markets Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...
for allocating
capital goods The economic concept of a capital good (also called complex product systems (CoPS),H. Rush, "Managing innovation in complex product systems (CoPS)," IEE Colloquium on EPSRC Technology Management Initiative (Engineering & Physical Sciences Researc ...
and
factors of production In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilized amounts of the various inputs determine the quantity of output according to the rel ...
among economic units are designated
market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
. When
planning Planning is the process of thinking regarding the activities required to achieve a desired goal. Planning is based on foresight, the fundamental capacity for mental time travel. The evolution of forethought, the capacity to think ahead, is c ...
is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to
value Value or values may refer to: Ethics and social * Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them ** Values (Western philosophy) expands the notion of value beyo ...
resources and goods. Socialist economics has been associated with different
schools of economic thought In the history of economic thought, a school of economic thought is a group of economic thinkers who share or shared a common perspective on the way economies work. While economists do not always fit into particular schools, particularly in modern ...
.
Marxian economics Marxian economics, or the Marxian school of economics, is a heterodox school of political economic thought. Its foundations can be traced back to Karl Marx's critique of political economy. However, unlike critics of political economy, Marxian ...
provided a foundation for socialism based on analysis of capitalism while
neoclassical economics Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...
and evolutionary economics provided comprehensive models of socialism. During the 20th century, proposals and models for both socialist planned and market economies were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or
institutional economics Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the ...
. As a term, socialist economics may also be applied to the analysis of former and existing economic systems that were implemented in
socialist state A socialist state, socialist republic, or socialist country, sometimes referred to as a workers' state or workers' republic, is a sovereign state constitutionally dedicated to the establishment of socialism. The term '' communist state'' is ...
s such as in the works of Hungarian economist János Kornai. 19th-century American
individualist anarchist Individualist anarchism is the branch of anarchism that emphasizes the individual and their will over external determinants such as groups, society, traditions and ideological systems."What do I mean by individualism? I mean by individualism t ...
Benjamin Tucker, who connected the
classical economics Classical economics, classical political economy, or Smithian economics is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam S ...
of
Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
and the Ricardian socialists as well as that of
Pierre-Joseph Proudhon Pierre-Joseph Proudhon (, , ; 15 January 1809, Besançon – 19 January 1865, Paris) was a French socialist,Landauer, Carl; Landauer, Hilde Stein; Valkenier, Elizabeth Kridl (1979) 959 "The Three Anticapitalistic Movements". ''European Socia ...
,
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
and
Josiah Warren Josiah Warren (; 1798–1874) was an American utopian socialist, American individualist anarchist, individualist philosopher, polymath, social reformer, inventor, musician, printer and author. He is regarded by anarchist historians like Jam ...
to socialism, held that there were two schools of socialist thought, namely anarchist socialism and
state socialism State socialism is a political and economic ideology within the socialist movement that advocates state ownership of the means of production. This is intended either as a temporary measure, or as a characteristic of socialism in the transition ...
, maintaining that what they had in common was the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian ...
. Socialists disagree about the degree to which social control or regulation of the economy is necessary; how far society should intervene and whether government, particularly existing government, is the correct vehicle for change are issues of disagreement.


History of socialist economic thought

Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
and
Friedrich Engels Friedrich Engels ( ,"Engels"
'' hunter-gatherer A traditional hunter-gatherer or forager is a human living an ancestrally derived lifestyle in which most or all food is obtained by foraging, that is, by gathering food from local sources, especially edible wild plants but also insects, fung ...
societies and some primitive agricultural societies were communal, and called this primitive communism. Engels wrote about this at length in the book ''
The Origin of the Family, Private Property and the State ''The Origin of the Family, Private Property and the State: in the Light of the Researches of Lewis H. Morgan'' (german: Der Ursprung der Familie, des Privateigenthums und des Staats) is an 1884 philosophical treatise by Friedrich Engels. It is p ...
'', which was based on the unpublished notes of Marx on the work of Lewis Henry Morgan. Values of ''socialism'' have roots in pre-capitalist institutions such as the religious communes, reciprocal obligations and communal charity of medieval Europe, the development of its economic theory primarily reflects and responds to the monumental changes brought about by the dissolution of feudalism and the emergence of specifically capitalist social relations. As such it is commonly regarded as a movement belonging to the modern era. Many socialists have considered their advocacy as the preservation and extension of the radical humanist ideas expressed in Enlightenment doctrine such as
Jean-Jacques Rousseau Jean-Jacques Rousseau (, ; 28 June 1712 – 2 July 1778) was a Genevan philosopher, writer, and composer. His political philosophy influenced the progress of the Age of Enlightenment throughout Europe, as well as aspects of the French Revolu ...
's ''Discourse on Inequality'',
Wilhelm von Humboldt Friedrich Wilhelm Christian Karl Ferdinand von Humboldt (, also , ; ; 22 June 1767 – 8 April 1835) was a Prussian philosopher, linguist, government functionary, diplomat, and founder of the Humboldt University of Berlin, which was named afte ...
's ''Limits of State Action'', or
Immanuel Kant Immanuel Kant (, , ; 22 April 1724 – 12 February 1804) was a German philosopher and one of the central Enlightenment thinkers. Born in Königsberg, Kant's comprehensive and systematic works in epistemology, metaphysics, ethics, and ...
's insistent defense of the
French Revolution The French Revolution ( ) was a period of radical political and societal change in France that began with the Estates General of 1789 and ended with the formation of the French Consulate in November 1799. Many of its ideas are conside ...
.
Capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...
appeared in mature form as a result of the problems raised when an industrial factory system requiring long-term investment and entailing corresponding risks was introduced into an internationalized commercial (mercantilist) framework. Historically speaking, the most pressing needs of this new system were an assured supply of the elements of industry (land, elaborate machinery, and labour) and these imperatives led to the
commodification Within a capitalist economic system, commodification is the transformation of things such as goods, services, ideas, nature, personal information, people or animals into objects of trade or commodities.For animals"United Nations Commodity Tra ...
of these elements. According to influential socialist economic historian Karl Polanyi's classic account, the forceful transformation of land, money and especially labour into commodities to be allocated by an autonomous market mechanism was an alien and inhuman rupture of the pre-existing social fabric. Marx had viewed the process in a similar light, referring to it as part of the process of "primitive accumulation" whereby enough initial capital is amassed to begin capitalist production. The dislocation that Polyani and others describe, triggered natural counter-movements in efforts to re-embed the economy in society. These counter-movements, that included, for example, the
Luddite The Luddites were a secret oath-based organisation of English textile workers in the 19th century who formed a radical faction which destroyed textile machinery. The group is believed to have taken its name from Ned Ludd, a legendary weaver ...
rebellions, are the incipient socialist movements. Over time such movements gave birth to or acquired an array of intellectual defenders who attempted to develop their ideas in theory. As Polanyi noted, these counter-movements were mostly reactive and therefore not full-fledged socialist movements. Some demands went no further than a wish to mitigate the capitalist market's worst effects. Later, a full socialist program developed, arguing for systemic transformation. Its theorists believed that even if markets and private property could be tamed so as not to be excessively "exploitative", or crises could be effectively mitigated, capitalist social relations would remain significantly unjust and anti-democratic, suppressing universal human needs for fulfilling, empowering and creative work, diversity and solidarity. Within this context, socialism has undergone four periods: the first in the 19th century was a period of utopian visions (1780s–1850s); then occurred the rise of revolutionary socialist and communist movements in the 19th century as the primary opposition to the rise of corporations and industrialization (1830–1916); the polarisation of socialism around the question of the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
and adoption of socialist or social democratic policies in response (1916–1989); and the response of socialism in the
neoliberal Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent f ...
era (1970s–present). As socialism developed, so did the socialist system of economics.


Utopian socialism

The first theories which came to hold the term "socialism" began to be formulated in the late 18th century and were termed "socialism" early in the 19th century. The central beliefs of the socialism of this period rested on the exploitation of those who labored by those who owned capital or rented land and housing. The abject misery, poverty and disease to which laboring classes seemed destined was the inspiration for a series of schools of thought which argued that life under a class of masters or "capitalists", as they were then becoming to be called, would consist of working classes being driven down to subsistence wages (see the iron law of wages). Socialist ideas found expression in utopian movements, which often formed agricultural communes aimed at being self-sufficient on the land. These included many religious movements, such as the
Christian socialism Christian socialism is a religious and political philosophy that blends Christianity and socialism, endorsing left-wing politics and socialist economics on the basis of the Bible and the teachings of Jesus. Many Christian socialists believe ca ...
of the
Shakers The United Society of Believers in Christ's Second Appearing, more commonly known as the Shakers, are a millenarian restorationist Christian sect founded in England and then organized in the United States in the 1780s. They were initially ...
in America and the
Hutterites Hutterites (german: link=no, Hutterer), also called Hutterian Brethren (German: ), are a communal ethnoreligious branch of Anabaptists, who, like the Amish and Mennonites, trace their roots to the Radical Reformation of the early 16th cent ...
. The
Zionist Zionism ( he, צִיּוֹנוּת ''Tsiyyonut'' after '' Zion'') is a nationalist movement that espouses the establishment of, and support for a homeland for the Jewish people centered in the area roughly corresponding to what is known in Je ...
kibbutz A kibbutz ( he, קִבּוּץ / , lit. "gathering, clustering"; plural: kibbutzim / ) is an intentional community in Israel that was traditionally based on agriculture. The first kibbutz, established in 1909, was Degania. Today, farming h ...
im and communes of the
counterculture A counterculture is a culture whose values and norms of behavior differ substantially from those of mainstream society, sometimes diametrically opposed to mainstream cultural mores.Eric Donald Hirsch. ''The Dictionary of Cultural Literacy''. H ...
are also manifestations of utopian socialist ideas.
Utopian socialism Utopian socialism is the term often used to describe the first current of modern socialism and socialist thought as exemplified by the work of Henri de Saint-Simon, Charles Fourier, Étienne Cabet, and Robert Owen. Utopian socialism is often ...
had little to offer in terms of a systematic theory of economic phenomena. In theory, economic problems were dissolved by a utopian society which had transcended material scarcity. In practice, small communities with a common spirit could sometimes resolve allocation problems.


Socialism and classical political economy

The first organized theories of socialist economics were significantly impacted by classical economic theory, including elements in
Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
,
Robert Malthus Thomas Robert Malthus (; 13/14 February 1766 – 29 December 1834) was an English cleric, scholar and influential economist in the fields of political economy and demography. In his 1798 book ''An Essay on the Principle of Population'', Mal ...
and
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...
. In Smith there is a conception of a common good not provided by the market, a class analysis, a concern for the dehumanizing aspects of the factory system, and the concept of rent as being unproductive. Ricardo argued that the renting class was parasitic. This, and the possibility of a "
general glut In macroeconomics, a general glut is an excess of supply in relation to demand, specifically, when there is more production in all fields of production in comparison with what resources are available to consume (purchase) said production. This exhi ...
", an over accumulation of capital to produce goods for sale rather than for use, became the foundation of a rising critique of the concept that free markets with competition would be sufficient to prevent disastrous downturns in the economy, and whether the need for expansion would inevitably lead to war.


Socialist political economy before Marx

A key early socialist theorist of political economy was
Pierre-Joseph Proudhon Pierre-Joseph Proudhon (, , ; 15 January 1809, Besançon – 19 January 1865, Paris) was a French socialist,Landauer, Carl; Landauer, Hilde Stein; Valkenier, Elizabeth Kridl (1979) 959 "The Three Anticapitalistic Movements". ''European Socia ...
. He was the most well-known of nineteenth century mutualist theorists and the first thinker to refer to himself as an anarchist. Others were:
Technocrats Technocracy is a form of government in which the decision-maker or makers are selected based on their expertise in a given area of responsibility, particularly with regard to scientific or technical knowledge. This system explicitly contrasts w ...
like Henri de Saint-Simon, agrarian radicals like Thomas Spence, William Ogilvie and William Cobbett; anti-capitalists like
Thomas Hodgskin Thomas Hodgskin (12 December 1787 – 21 August 1869) was an English socialist writer on political economy, critic of capitalism and defender of free trade and early trade unions. In the late 19th and early 20th centuries, the term ''socialis ...
;
communitarian Communitarianism is a philosophy that emphasizes the connection between the individual and the community. Its overriding philosophy is based upon the belief that a person's social identity and personality are largely molded by community relati ...
and
utopian A utopia ( ) typically describes an imaginary community or society that possesses highly desirable or nearly perfect qualities for its members. It was coined by Sir Thomas More for his 1516 book ''Utopia'', describing a fictional island socie ...
socialists like
Robert Owen Robert Owen (; 14 May 1771 – 17 November 1858) was a Welsh people, Welsh textile manufacturer, philanthropist and social reformer, and a founder of utopian socialism and the cooperative movement. He strove to improve factory working conditio ...
, William Thompson and
Charles Fourier François Marie Charles Fourier (;; 7 April 1772 – 10 October 1837) was a French philosopher, an influential early socialist thinker and one of the founders of utopian socialism. Some of Fourier's social and moral views, held to be radical ...
; anti-market socialists like John Gray and John Francis Bray; the Christian mutualist
William Batchelder Greene William Batchelder Greene (April 4, 1819 – May 30, 1878) was a 19th-century individualist anarchist, Unitarian minister, soldier, and promoter of free banking in the United States. Greene was a member of the First International. Biography ...
; as well as the theorists of the Chartist movement and early proponents of syndicalism. The first advocates of socialism promoted social leveling in order to create a meritocratic or technocratic society based upon individual talent. Count Henri de Saint-Simon was the first individual to coin the term "socialism". Saint-Simon was fascinated by the enormous potential of science and technology, which led him to advocate a socialist society that would eliminate the disorderly aspects of capitalism and which would be based upon equal opportunities. Saint-Simon advocated a society in which people were ranked according to their capacities and rewarded according to their work. This was accompanied by a desire to implement a rationally organized economy based on planning and geared towards large-scale scientific and material progress, which embodied a desire for a semi-
planned economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, ...
. Other early socialist thinkers were influenced by the classical economists. The Ricardian socialists, such as Thomas Hodgskin and Charles Hall, were based on the work of
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...
and reasoned that the equilibrium value of commodities approximated producer prices when those commodities were in elastic supply, and that these producer prices corresponded to the embodied labor. The Ricardian socialists viewed profit, interest and rent as deductions from this exchange-value.


Karl Marx and ''Das Kapital''

Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
employed systematic analysis in an attempt to elucidate capitalism's contradictory laws of motion, as well as to expose the specific mechanisms by which it exploits and alienates. He radically modified classical political economic theories. Marx transformed the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian ...
, which had been worked upon by
Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
and
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...
, into his "
law of value The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic '' The Poverty of Philosophy'' (1847) again ...
", and used it for the purpose of revealing how
commodity fetishism In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things (money and merchandise) and not as relationships that exist among people ...
obscures the reality of capitalist society. His approach, which
Friedrich Engels Friedrich Engels ( ,"Engels"
'' scientific socialism", would stand as the branching point in economic theory. In one direction went those who rejected the capitalist system as fundamentally anti-social, arguing that it could never be harnessed to effectively realize the fullest development of human potentialities wherein "the free development of each is the condition for the free development of all". Marx's ''
Das Kapital ''Das Kapital'', also known as ''Capital: A Critique of Political Economy'' or sometimes simply ''Capital'' (german: Das Kapital. Kritik der politischen Ökonomie, link=no, ; 1867–1883), is a foundational theoretical text in materialist phi ...
'' is an incomplete work of economic theory; he had planned four volumes but completed two and left his collaborator Engels to complete the third. In many ways, the work is modelled on Smith's '' Wealth of Nations'', seeking to be a comprehensive logical description of production, consumption, and finance in relation to morality and the state. The work of philosophy, anthropology, sociology, and economics includes the following topics: *
Law of value The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic '' The Poverty of Philosophy'' (1847) again ...
: capitalist production is the production of "an immense multitude of commodities" or generalised commodity production. A commodity has two essential qualities firstly, they are useful, they satisfy some human want, "the nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference" and secondly they are sold on a market or exchanged. Critically the exchange value of a commodity "is independent of the amount of labour required to appropriate its useful qualities". However, rather depends on the amount of socially necessary labour required to produce it. All commodities are sold at their value, so the origin of the capitalist profit is not in cheating or theft, but in the fact that the cost of reproduction of labour power, or the worker's wage, is less than the value created during their time at work, enabling the capitalists to yield a surplus value or profit on their investments. * Historical property relations: historical capitalism represents a process of momentous social upheaval where rural masses were separated from the land and ownership of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
by force, deprivation, and legal manipulation, creating an urban
proletariat The proletariat (; ) is the social class of wage-earners, those members of a society whose only possession of significant economic value is their labour power (their capacity to work). A member of such a class is a proletarian. Marxist philo ...
based on the institution of wage-labour. Moreover, capitalist property relations aggravated the artificial separation between city and country, which is a key factor in accounting for the
metabolic rift Metabolic rift is Karl Marx's notion of the "irreparable rift in the interdependent process of social metabolism", i.e. Marx's key conception of ecological crisis tendencies under capitalism. Marx theorized a rupture in the metabolic interactio ...
between human beings in capitalism and their natural environment, which is at the root of our current ecological dilemmas. *
Commodity fetishism In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things (money and merchandise) and not as relationships that exist among people ...
: Marx adapted previous value-theory to show that in capitalism phenomena involved with the price system (markets, competition, supply and demand) constitute a powerful ideology that obscures the underlying social relations of capitalist society. "Commodity fetishism" refers to this distortion of appearance. The underlying social reality is one of economic exploitation. * Economic exploitation: workers are the fundamental creative source of new value. Property relations affording the right of usufruct and despotic control of the workplace to capitalists are the devices by which the
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to the owner of that product to manufacture it: i.e. the amount raised through sale of the product minus the cos ...
created by workers is appropriated by the capitalists. *
Capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form ...
: inherent to capitalism is the incessant drive to accumulate as a response to the competitive forces acting upon all capitalists. In such a context the accumulated wealth which is the source of the capitalist's social power derives itself from being able to repeat the circuit of money→commodity→money, where the capitalist receives an increment or "surplus value" higher than their initial investment, as rapidly and efficiently as possible. Moreover, this driving imperative leads capitalism to its expansion on a worldwide scale. * Crises: Marx identified natural and historically specific (i.e. structural) barriers to accumulation that were interrelated and interpenetrated one another in times of crises. Different types of crises, such as realization crises and overproduction crises, are expressions of capitalism's inability to constructively overcome such barriers. Moreover, the upshot of crises is increased centralization, the expropriation of the many capitalists by the few. * Centralization: the interacting forces of competition, endemic crises, intensive and extensive expansion of the scale of production, and a growing interdependency with the state apparatus, all promote a strong developmental tendency towards the centralization of capital. * Material development: as a result of its constant drive to optimize profitability by increasing the
productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
of labour, typically by revolutionizing technology and production techniques, capitalism develops so as to progressively reduce the objective need for work, suggesting the potential for a new era of creative forms of work and expanded scope for leisure. * Socialization and the pre-conditions for social revolution: by socializing the labour process, concentrating workers into urban settings in large-scale production processes and linking them in a worldwide market, the agents of a potential revolutionary change are created. Thus Marx felt that in the course of its development capitalism was at the same time developing the preconditions for its own negation. However, although the objective conditions for change are generated by the capitalist system itself, the subjective conditions for social revolution can only come about through the apprehension of the objective circumstances by the agents themselves and the transformation of such understanding into an effective revolutionary program.


Anarchist economics

Anarchist economics is the set of theories and practices of
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
and economic activity within the political philosophy of
anarchism Anarchism is a political philosophy and movement that is skeptical of all justifications for authority and seeks to abolish the institutions it claims maintain unnecessary coercion and hierarchy, typically including, though not neces ...
. Pierre Joseph Proudhon was involved with the Lyons mutualists and later adopted the name to describe his own teachings. Mutualism is an
anarchist school of thought Anarchism is the political philosophy which holds ruling classes and the state to be undesirable, unnecessary and harmful, The following sources cite anarchism as a political philosophy: Slevin, Carl. "Anarchism." ''The Concise Oxford Dict ...
that originates in the writings of
Pierre-Joseph Proudhon Pierre-Joseph Proudhon (, , ; 15 January 1809, Besançon – 19 January 1865, Paris) was a French socialist,Landauer, Carl; Landauer, Hilde Stein; Valkenier, Elizabeth Kridl (1979) 959 "The Three Anticapitalistic Movements". ''European Socia ...
, who envisioned a society where each person might possess a
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
, either individually or collectively, with trade representing equivalent amounts of labor in the
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
. Integral to the scheme was the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration. Mutualism is based on a
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian ...
that holds that when labor or its product is sold, in exchange, it ought to receive goods or services embodying "the amount of labor necessary to produce an article of exactly similar and equal utility". Receiving anything less would be considered exploitation, theft of labor, or
usury Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is c ...
.
Collectivist anarchism Collectivist anarchism, also called anarchist collectivism and anarcho-collectivism, Buckley, A. M. (2011). ''Anarchism''. Essential Libraryp. 97 "Collectivist anarchism, also called anarcho-collectivism, arose after mutualism." . is an anarchis ...
is a revolutionaryPatsouras, Louis. 2005. Marx in Context. iUniverse. p. 54 doctrine that advocates the abolition of the state and
private ownership Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property and personal property, which is owned by a state entity, and from collective or ...
of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
. Instead, it envisions the means of production being owned collectively and controlled and managed by the producers themselves. Once collectivization takes place,
worker The working class (or labouring class) comprises those engaged in manual-labour occupations or industrial work, who are remunerated via waged or salaried contracts. Working-class occupations (see also " Designation of workers by collar colou ...
s' salaries would be determined in democratic organizations based on the amount of time they contributed to production. These salaries would be used to purchase goods in a communal market. Collectivist anarchism is most commonly associated with
Mikhail Bakunin Mikhail Alexandrovich Bakunin (; 1814–1876) was a Russian revolutionary anarchist, socialist and founder of collectivist anarchism. He is considered among the most influential figures of anarchism and a major founder of the revolutionary s ...
, the anti-authoritarian sections of the First International, and the early Spanish anarchist movement.
Anarcho-communism Anarcho-communism, also known as anarchist communism, (or, colloquially, ''ancom'' or ''ancomm'') is a political philosophy and anarchist school of thought that advocates communism. It calls for the abolition of private property but retains re ...
is a theory of
anarchism Anarchism is a political philosophy and movement that is skeptical of all justifications for authority and seeks to abolish the institutions it claims maintain unnecessary coercion and hierarchy, typically including, though not neces ...
which advocates the abolition of the state,
private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property and personal property, which is owned by a state entity, and from collective or ...
, and
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...
in favor of
common ownership Common ownership refers to holding the assets of an organization, enterprise or community indivisibly rather than in the names of the individual members or groups of members as common property. Forms of common ownership exist in every econom ...
of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
,
direct democracy Direct democracy or pure democracy is a form of democracy in which the electorate decides on policy initiatives without elected representatives as proxies. This differs from the majority of currently established democracies, which are repres ...
and a horizontal network of
voluntary association A voluntary group or union (also sometimes called a voluntary organization, common-interest association, association, or society) is a group of individuals who enter into an agreement, usually as volunteers, to form a body (or organization) to ac ...
s, and
workers' council A workers' council or labor council is a form of political and economic organization in which a workplace or municipality is governed by a council made up of workers or their elected delegates. The workers within each council decide on what thei ...
s with production and consumption based on the guiding principle: "from each according to ability, to each according to need". Unlike mutualism, collectivist anarchism and Marxism, anarcho-communism as defended by
Peter Kropotkin Pyotr Alexeyevich Kropotkin (; russian: link=no, Пётр Алексе́евич Кропо́ткин ; 9 December 1842 – 8 February 1921) was a Russian anarchist, socialist, revolutionary, historian, scientist, philosopher, and activist ...
and
Errico Malatesta Errico Malatesta (4 December 1853 – 22 July 1932) was an Italian anarchist propagandist and revolutionary socialist. He edited several radical newspapers and spent much of his life exiled and imprisoned, having been jailed and expelled from ...
rejected the labor theory of value altogether, instead advocating a
gift economy A gift economy or gift culture is a system of exchange where Anthropological theories of value, valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift ...
and to base distribution on need. As a coherent, modern economic-political philosophy, anarcho-communism was first formulated in the Italian section of the First International by Carlo Cafiero,
Emilio Covelli Emilio Covelli (1846–1915) was an Italian anarchist and socialist who together with Carlo Cafiero was one of the most important figures in the early socialist movement in Italy, a member of the International Workingmen's Association, or "First ...
,
Errico Malatesta Errico Malatesta (4 December 1853 – 22 July 1932) was an Italian anarchist propagandist and revolutionary socialist. He edited several radical newspapers and spent much of his life exiled and imprisoned, having been jailed and expelled from ...
, Andrea Costa, and other ex- Mazzinian Republicans. Out of respect for
Mikhail Bakunin Mikhail Alexandrovich Bakunin (; 1814–1876) was a Russian revolutionary anarchist, socialist and founder of collectivist anarchism. He is considered among the most influential figures of anarchism and a major founder of the revolutionary s ...
, they did not make their differences with collectivist anarchism explicit until after Bakunin's death. By the early 1880s, most of the European anarchist movement had adopted an anarcho-communist position, advocating the abolition of wage labour and distribution according to need. Ironically, the "collectivist" label then became more commonly associated with Marxist state socialists who advocated the retention of some sort of wage system during the transition to full communism. Left-wing market anarchism strongly affirm the classical liberal ideas of self-ownership and free markets, while maintaining that, taken to their logical conclusions, these ideas support strongly anti-corporatist, anti-hierarchical, pro-labor positions and anti-capitalism in economics and anti-imperialism in foreign policy.


After Marx

Non-revolutionary socialists were inspired by the writings of
John Stuart Mill John Stuart Mill (20 May 1806 – 7 May 1873) was an English philosopher, political economist, Member of Parliament (MP) and civil servant. One of the most influential thinkers in the history of classical liberalism, he contributed widely to ...
, and later
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
and the Keynesians, who provided theoretical justification for state involvement in existing market economies. According to the Keynesians, if business cycles could be smoothed out by national ownership of key industries and state direction of their investment, class antagonism would be effectively tamed.They argue that a compact would form between labour and the capitalist class and that there would be no need for revolution.
Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics. ...
and Michael Kalecki formed the basis of a critical post-Keynesian economics that at times went well beyond liberal reformism. Marxist economists developed different tendencies based on conflicting interpretations of Marx's ideas, such as the 'Law of Value' and crisis theory. The monopoly capitalist school saw
Paul A. Baran Paul Alexander Baran (; 25 August 1909 – 26 March 1964) was an American Marxist economist. In 1951 Baran was promoted to full professor at Stanford University and Baran was the only tenured Marxian economist in the United States until his ...
and Paul Sweezy attempt to modify Marx's theory of capitalist development—which was based upon the assumption of price competition—to reflect evolution to a stage where both economy and state were subject to the dominating influence of giant corporations. World-systems analysis restated Marx's ideas about the worldwide division of labour and the drive to accumulate from the holistic perspective of capitalism's historical development as a global system. In 1979,
Immanuel Wallerstein Immanuel Maurice Wallerstein (; September 28, 1930 – August 31, 2019) was an American sociologist and economic historian. He is perhaps best known for his development of the general approach in sociology which led to the emergence of his wo ...
wrote:
There are today no socialist systems in the world-economy any more than there are feudal systems because there is only ''one'' world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don't see this projection as being in the least utopian but I also don't feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in ''all'' the areas of the world-economy.
Piero Sraffa Piero Sraffa (5 August 1898 – 3 September 1983) was an influential Italian economist who served as lecturer of economics at the University of Cambridge. His book ''Production of Commodities by Means of Commodities'' is taken as founding the n ...
attempted to construct a value theory that was an explanation of the normal distribution of prices in an economy, as well that of income and economic growth. He found that the net product or surplus in the sphere of production was determined by the balance of bargaining power between workers and capitalists, which was subject to the influence of non-economic, presumably social and political, factors. The mutualist tendency associated with
Pierre-Joseph Proudhon Pierre-Joseph Proudhon (, , ; 15 January 1809, Besançon – 19 January 1865, Paris) was a French socialist,Landauer, Carl; Landauer, Hilde Stein; Valkenier, Elizabeth Kridl (1979) 959 "The Three Anticapitalistic Movements". ''European Socia ...
also continued, influencing the development of
libertarian socialism Libertarian socialism, also known by various other names, is a left-wing,Diemer, Ulli (1997)"What Is Libertarian Socialism?" The Anarchist Library. Retrieved 4 August 2019. anti-authoritarian, anti-statist and libertarianLong, Roderick T. (2 ...
,
anarchist communism Anarcho-communism, also known as anarchist communism, (or, colloquially, ''ancom'' or ''ancomm'') is a political philosophy and anarchist school of thought that advocates communism. It calls for the abolition of private property but retains r ...
, syndicalism and distributivism.


Characteristics

A socialist economy is a system of production where goods and services are produced directly for use, in contrast to a capitalist economic system, where goods and services are produced to generate
profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory inter ...
(and therefore indirectly for use). "Production under socialism would be directly and solely for use. With the natural and technical resources of the world held in common and controlled democratically, the sole object of production would be to meet human needs." Goods and services would be produced for their usefulness, or for their use-value, eliminating the need for market-induced needs to ensure a sufficient amount of demand for products to be sold at a profit. Production in a socialist economy is therefore "planned" or "coordinated", and does not suffer from the
business cycle Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examin ...
inherent to capitalism. In most socialist theories, economic planning only applies to the
factors of production In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilized amounts of the various inputs determine the quantity of output according to the rel ...
and not to the allocation of goods and services produced for consumption, which would be distributed through a market.
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
stated that "lower-stage communism" would consist of compensation based on the amount of labor one contributes to the social product. The ownership of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
varies in different socialist theories. It can either be based on public ownership by a state apparatus; direct ownership by the users of the productive property through worker cooperative; or
commonly owned Common ownership refers to holding the assets of an organization, Business, enterprise or community indivisibly rather than in the names of the individual members or groups of members as common property. Forms of common ownership exist in eve ...
by all of society with management and control delegated to those who operate/use the means of production. Management and control over the activities of enterprises is based on self-management and self-governance, with equal power-relations in the workplace to maximize occupational autonomy. A socialist form of organization would eliminate controlling hierarchies so that only a hierarchy based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy objectives. The policies/goals would be carried out by the technical specialists that form the coordinating hierarchy of the firm, who would establish plans or directives for the work community to accomplish these goals.''The Political Economy of Socialism'', by Horvat, Branko. 1982. (p. 197): "The sandglass (socialist) model is based on the observation that there are two fundamentally different spheres of activity or decision making. The first is concerned with value judgments, and consequently each individual counts as one in this sphere. In the second, technical decisions are made on the basis of technical competence and expertise. The decisions of the first sphere are policy directives; those of the second, technical directives. The former are based on political authority as exercised by all members of the organization; the latter, on professional authority specific to each member and growing out of the division of labor. Such an organization involves a clearly defined coordinating hierarchy but eliminates a power hierarchy." However, the economies of the former Socialist states, excluding Yugoslavia, were based on bureaucratic, top-down administration of economic directives and micromanagement of the worker in the workplace inspired by capitalist models of
scientific management Scientific management is a theory of management that analyzes and synthesizes workflows. Its main objective is improving economic efficiency, especially labor productivity. It was one of the earliest attempts to apply science to the engine ...
. As a result, some socialist movements have argued that said economies were not socialist due to the lack of equal power-relations in the workplace, the presence of a new "elite", and because of the commodity production that took place in these economies. These economic and social systems have been classified as being either "
bureaucratic collectivist Bureaucratic collectivism is a theory of class society. It is used by some Trotskyists to describe the nature of the Soviet Union under Joseph Stalin and other similar states in Central and Eastern Europe and elsewhere (such as North Korea). ...
", " state capitalist" or " deformed workers' states" by its critics. The exact nature of the
USSR The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nati ...
''et al.'' remains unresolved within said socialist movements. However, other socialist movements defend the systems that were in place in Eastern Europe and the Soviet Union, remembering, as said above, that public ownership of the means of production can signify many variants. In the case of the Soviet Union and its satellites, it was the State which controlled and managed almost all of the economy as a single huge enterprise. Furthermore, the products that were manufactured in Soviet-type economies were not produced directly for use, given the fact that all of them were sold to the public at below-market prices (i.e. they were sold in deficit to satisfy the needs of the population). In the May 1949 issue of the ''
Monthly Review The ''Monthly Review'', established in 1949, is an independent socialist magazine published monthly in New York City. The publication is the longest continuously published socialist magazine in the United States. History Establishment Following ...
'' titled "
Why Socialism? "Why Socialism?" is an article written by Albert Einstein in May 1949 that appeared in the first issue of the socialist journal '' Monthly Review''. It addresses problems with capitalism, predatory economic competition, and growing wealth inequal ...
",
Albert Einstein Albert Einstein ( ; ; 14 March 1879 – 18 April 1955) was a German-born theoretical physicist, widely acknowledged to be one of the greatest and most influential physicists of all time. Einstein is best known for developing the theor ...
wrote:
I am convinced there is only one way to eliminate (the) grave evils (of capitalism), namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow-men in place of the glorification of power and success in our present society.


Economic planning

Economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...
is a mechanism for the allocation of economic inputs and decision-making based on direct allocation, in contrast to the market mechanism, which is based on indirect allocation. An economy based on economic planning appropriates its resources as needed, so that allocation comes in the form of internal transfers rather than market transactions involving the purchasing of assets by one government agency or firm by another. Decision-making is carried out by workers and consumers on the enterprise-level. Economic planning is not synonymous with the concept of a '' command economy'', which existed in the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
, and was based on a highly bureaucratic administration of the entire economy in accordance to a comprehensive plan formulated by a central planning agency, which specified output requirements for productive units and tried to micromanage the decisions and policies of enterprises. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy. Various advocates of economic planning have been staunch critics of command economies and centralized planning. For example,
Leon Trotsky Lev Davidovich Bronstein. ( – 21 August 1940), better known as Leon Trotsky; uk, link= no, Лев Давидович Троцький; also transliterated ''Lyev'', ''Trotski'', ''Trotskij'', ''Trockij'' and ''Trotzky''. (), was a Russian ...
believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and understand the local conditions and rapid changes in the economy. Therefore, central planners would be unable to effectively coordinate all economic activity because they lacked this informal information. Economic planning in socialism takes a different form than economic planning in capitalist mixed economies (such as
dirigisme Dirigisme or dirigism () is an economic doctrine in which the state plays a strong directive (policies) role contrary to a merely regulatory interventionist role over a market economy. As an economic doctrine, dirigisme is the opposite of ''lai ...
,
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
ing and indicative planning); in the former case planning refers to production of use-value directly (planning of production), while in the latter case planning refers to the planning of capital accumulation in order to stabilize or increase the efficiency of this process.


Anti-capitalism

The goal of socialist economics is to neutralize capital, or in the case of
market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
to subject investment and capital to social planning, to coordinate the production of goods and services to directly satisfy demand (as opposed to market-induced needs) and to eliminate the
business cycle Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examin ...
and crises of overproduction that occur as a result of an economy based on capital accumulation and private property in the means of production. Socialists generally aim to achieve greater equality in decision-making and economic affairs, grant workers greater control of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
and their workplace and to eliminate exploitation by directing the surplus value to employees. Free access to the means of subsistence is a requisite for liberty because it ensures that all work is voluntary and no class or individual has the power to coerce others into performing alienating work. The ultimate goal for
Marxist Marxism is a left-wing to far-left method of socioeconomic analysis that uses a materialist interpretation of historical development, better known as historical materialism, to understand class relations and social conflict and a dialecti ...
socialists is the emancipation of labor from alienating work and therefore freedom from having to perform such labor to receive access to the material necessities for life. It is argued that freedom from necessity would maximize individual liberty as individuals would be able to pursue their own interests and develop their own talents without being coerced into performing labor for others (the power-elite or ruling class in this case) via mechanisms of social control such as the labor market and the state. The stage of economic development in which this is possible is contingent upon advances in the productive capabilities of society. This advanced stage of social relations and economic organization is called ''
pure communism In Marxist thought, a communist society or the communist system is the type of society and economic system postulated to emerge from technological advances in the productive forces, representing the ultimate goal of the political ideology of co ...
''.


Economic value theories

Socialist economic theories base the value of a good or service on its use value, rather than its cost of production (
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian ...
) or its exchange value (
marginal utility In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a good or service describes how much pleasure or satisfaction is gained by consumers as a result of the increase or decrease in consump ...
). Other socialist theories, such as mutualism and
market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
, attempt to apply the labor theory of value to socialism, so that the price of a good or service is adjusted to equal the amount of labor time expended in its production. The labor-time expended by each worker would correspond to labor credits, which would be used as a currency to acquire goods and services. Market socialists that base their models on
neoclassical economics Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...
, and thus
marginal utility In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a good or service describes how much pleasure or satisfaction is gained by consumers as a result of the increase or decrease in consump ...
, such as Oskar Lange and
Abba Lerner Abraham "Abba" Ptachya Lerner (also Abba Psachia Lerner; 28 October 1903 – 27 October 1982) was a Russian-born American-British economist. Biography Born in Novoselytsia, Bessarabia, Russian Empire, Lerner grew up in a Jewish family, which ...
, have proposed that publicly owned enterprises set their price to equal marginal cost, thereby achieving
pareto efficiency Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engi ...
.
Anarcho-communism Anarcho-communism, also known as anarchist communism, (or, colloquially, ''ancom'' or ''ancomm'') is a political philosophy and anarchist school of thought that advocates communism. It calls for the abolition of private property but retains re ...
as defended by
Peter Kropotkin Pyotr Alexeyevich Kropotkin (; russian: link=no, Пётр Алексе́евич Кропо́ткин ; 9 December 1842 – 8 February 1921) was a Russian anarchist, socialist, revolutionary, historian, scientist, philosopher, and activist ...
and
Errico Malatesta Errico Malatesta (4 December 1853 – 22 July 1932) was an Italian anarchist propagandist and revolutionary socialist. He edited several radical newspapers and spent much of his life exiled and imprisoned, having been jailed and expelled from ...
rejected the labor theory of value and exchange value itself, advocated a
gift economy A gift economy or gift culture is a system of exchange where Anthropological theories of value, valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift ...
and to base distribution on need."Communism is based on free consumption of all while collectivism is more likely to be based on the distribution of goods according to the labour contributed
An Anarchist FAQ


Economic models and systems

Robin Hahnel Robin Eric Hahnel (born March 25, 1946) is an American economist and professor emeritus of economics at American University. He was a professor at American University for many years and traveled extensively advising on economic matters all over ...
and Michael Albert identify five different economic models within socialist economics: * Public enterprise centrally planned economy in which all property is owned by the state and all key economic decisions are made centrally by the state, e.g. the former Soviet Union. * Public enterprise state-managed market economy, one form of
market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
which attempts to use the
price mechanism In economics, a price mechanism is the manner in which the profits of goods or services affects the supply and demand of goods and services, principally by the price elasticity of demand. A price mechanism affects both buyer and seller who n ...
to increase
economic efficiency In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: * Allocative or Pareto efficiency: any changes made to assist one person would harm another. * Productive efficiency: no addi ...
while all decisive productive assets remain in the ownership of the state, e.g. the socialist market economy in China and the
socialist-oriented market economy The socialist-oriented market economy ( Vietnamese: ''Kinh tế thị trường theo định hướng xã hội chủ nghĩa'') is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as ...
in Vietnam after reforms. * A mixed economy, where public and private ownership are mixed and industrial planning is ultimately subordinate to market allocation, e.g. the model generally adopted by
social democrat Social democracy is a political, social, and economic philosophy within socialism that supports political and economic democracy. As a policy regime, it is described by academics as advocating economic and social interventions to promote soc ...
s in the 20th century such as in Sweden. Many different proposals for socialist economic systems call for a type of mixed economy, where multiple forms of ownership over the means of production co-exist with one another. Alternatively, a mixed economy may also be a socialist economy that allows a substantial role for private enterprise and contracting within a dominant economic framework of public ownership. This can extend to Soviet-type planned economies that have been reformed to incorporate a greater role for markets in the allocation of factors of production. * Public enterprise employee managed market economies, another form of
market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
in which publicly owned, employee-managed production units engage in free-market exchanges of goods and services with one another as well as with final consumers, e.g. mid-20th-century Yugoslavia. Two more theoretical models are Prabhat Ranjan Sarkar's progressive utilization theory and
economic democracy Economic democracy is a socioeconomic philosophy that proposes to shift decision-making power from corporate managers and corporate shareholders to a larger group of public stakeholders that includes workers, customers, suppliers, neighbou ...
. * Public enterprise participatory planning, an economy featuring social ownership of the means of production with allocation based on an integration of decentralized democratic planning, e.g. stateless communism and
libertarian socialism Libertarian socialism, also known by various other names, is a left-wing,Diemer, Ulli (1997)"What Is Libertarian Socialism?" The Anarchist Library. Retrieved 4 August 2019. anti-authoritarian, anti-statist and libertarianLong, Roderick T. (2 ...
. An incipient historical forebear is that of Catalonia during the Spanish Revolution. More developed theoretical models include those of Karl Polanyi,
participatory economics Participatory economics, often abbreviated Parecon, is an economic system based on participatory decision making as the primary economic mechanism for allocation in society. In the system, the say in decision-making is proportional to the impa ...
, Inclusive Democracy and the negotiated coordination model of Pat Devine as well as in Cornelius Castoriadis's pamphlet "Workers' Councils and the Economics of a Self-Managed Society". János Kornai identifies five distinct types of socialism: * Classical and Marxist conception, where socialism is a stage of economic development in which wage labour, private property in the means of production and monetary relations have been made redundant through the development of the productive forces, so that capital accumulation has been superseded by
economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...
. Economic planning in this definition means conscious allocation of economic inputs and the means of production by the associated producers to directly maximise use-values as opposed to exchange-values, in contrast to the "anarchy of production" of capitalism. * Walrasian and market socialist which defines socialism as public-ownership or cooperative-enterprises in a market economy, with prices for producer goods set through a trial-and-error method by a central planning board. In this view, socialism is defined in terms of ''de jure'' public property rights over major enterprises. * Marxist–Leninist conception which includes a form of political organisation based on control of the means of production and government by a single political party apparatus that claims to act in the interest of the working class and an ideology hostile toward markets and political dissent, with coordination of economic activity through centralised economic planning, e.g. a command economy in the form of an administrative-command system. * Social-democratic concept based on the capitalist mode of production which defines socialism as a set of values rather than a specific type of social and economic organisation. It includes unconditional support for parliamentary democracy, gradual and reformist attempts to establish socialism and support for socially progressive causes. Social democrats are not opposed to the market or private property and instead they try to ameliorate the effects of capitalism through a welfare state which relies on the market as the fundamental coordinating entity in the economy and a degree of public ownership/public provision of public goods in an economy otherwise dominated by private enterprise. * East Asian model, or socialist market economy, based on a largely free-market, capital accumulation for profit and substantial private ownership along with state-ownership of strategic industries monopolised by a single political party. János Kornai ultimately leaves the classification of this model (as either socialist or capitalist) to the reader. Socialism can be divided into market socialism and planned socialism based on their dominant mechanism of resource allocation. Another distinction can be made between the type of property structures of different socialist systems (public,
cooperative A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-contro ...
or
common Common may refer to: Places * Common, a townland in County Tyrone, Northern Ireland * Boston Common, a central public park in Boston, Massachusetts * Cambridge Common, common land area in Cambridge, Massachusetts * Clapham Common, originally ...
) and on the dominant form of economic management within the economy (hierarchical or self-managed).


Economic democracy

Economic democracy Economic democracy is a socioeconomic philosophy that proposes to shift decision-making power from corporate managers and corporate shareholders to a larger group of public stakeholders that includes workers, customers, suppliers, neighbou ...
is a model of market socialism primarily developed by the American economist David Schweickart. In Schweickart's model, enterprises and natural resources are owned by society in the form of
public banking A public bank is a bank, a financial institution, in which a state, municipality, or public actors are the owners. It is an enterprise under government control.
, and management is elected by the workers within each firm. Profits would be distributed among the workers of the respective enterprise.


Lange–Lerner model

The Lange–Lerner model involves public ownership of the means of production and the utilization of a trial-and-error approach to achieving equilibrium prices by a central planning board. The Central Planning Board would be responsible for setting prices through a trial-and-error approach to establish equilibrium prices, effectively acting as the abstract ''Walrasian auctioneer'' in Walrasian economics. Managers of the state-owned firms would be instructed to set prices to equal marginal cost (P=MC), so that economic equilibrium and
Pareto efficiency Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engi ...
would be achieved. The Lange model was expanded upon by the American economist
Abba Lerner Abraham "Abba" Ptachya Lerner (also Abba Psachia Lerner; 28 October 1903 – 27 October 1982) was a Russian-born American-British economist. Biography Born in Novoselytsia, Bessarabia, Russian Empire, Lerner grew up in a Jewish family, which ...
and became known as the Lange–Lerner theorem, particularly the role of the social dividend. Forerunners of the Lange model include the neoclassical economists Enrico Barone and
Fred M. Taylor Fred Manville Taylor (July 11, 1855, Northville, Michigan – August 7, 1932) was a U.S. economist and educator best known for his contribution to the theory of market socialism. He taught mostly history at Albion College from 1879 to 1892. He t ...
.


Self-managed economy

The self-managed economy is a form of socialism where enterprises are owned and managed by their employees, effectively negating the employer-employee (or
wage labor Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power unde ...
) dynamic of capitalism and emphasizing the opposition to alienation, self-managing and cooperative aspect of socialism. Members of cooperative firms are relatively free to manage their own affairs and work schedules. This model was developed most extensively by the Yugoslav economists
Branko Horvat Branko Horvat (24 July 1928 – 18 December 2003) was a Croatian economist and politician. Horvat was born in Petrinja on 24 July 1928. In 1944 during World War II, Horvat and his father Artur Horvat joined the Partisan movement in Croatia. He w ...
,
Jaroslav Vanek Jaroslav (also written as Yaroslav or Jarosław in other Slavic languages) is a Czech and Slovak first name, pagan in origin. There are several possible origins of the name Jaroslav. It is very likely that originally the two elements of the na ...
and the American economist Benjamin Ward.


Worker self-directed enterprise

Worker self-directed enterprise is a recent proposal advocated by the American Marxian economist Richard D. Wolff. This model shares many similarities with the model of socialist self-management in that employees own and direct their enterprises, but places a greater role on democratically elected management within a market economy.


Democratic planned socialism

Democratic planned socialism is a form of decentralized planned economy.


Feasible socialism

Feasible socialism was the name
Alec Nove Alexander Nove, FRSE, FBA (born Aleksandr Yakovlevich Novakovsky; russian: Алекса́ндр Я́ковлевич Новако́вский; also published under Alec Nove; 24 November 1915 – 15 May 1994) was a Professor of Economics at the ...
gave his outline for socialism in his work ''The Economics of Feasible Socialism''. According to Nove, this model of socialism is "feasible" because it can be realized within the lifetime of anyone living today. It involves a combination of publicly owned and centrally directed enterprises for large-scale industries, autonomous publicly owned enterprises, consumer and worker-owned cooperatives for the majority of the economy, and private ownership for small businesses. It is a market-based mixed economy that includes a substantial role for macroeconomic interventionism and indicative economic planning.


Pragmatic market socialism

The American economist James Yunker detailed a model where social ownership of the means of production is achieved the same way private ownership is achieved in modern capitalism through the shareholder system that separates management functions from ownership. Yunker posits that social ownership can be achieved by having a public body, designated the Bureau of Public Ownership (BPO), owning the shares of publicly listed firms without affecting market-based allocation of capital inputs. Yunker termed this model pragmatic market socialism because it does not require massive changes to society and would leave the existing management system intact, and would be at least as efficient as modern-day capitalism while providing superior social outcomes as public ownership of large and established enterprises would enable profits to be distributed among the entire population in a
social dividend The social dividend is the return on the capital assets and natural resources owned by society in a socialist economy. The concept notably appears as a key characteristic of market socialism, where it takes the form of a dividend payment to eac ...
rather than going largely to a class of inheriting rentiers.


Participatory economy

Participatory economics Participatory economics, often abbreviated Parecon, is an economic system based on participatory decision making as the primary economic mechanism for allocation in society. In the system, the say in decision-making is proportional to the impa ...
utilizes participatory decision making as an economic mechanism to guide the production, consumption and allocation of resources in a given society.


Computer-managed allocation

Proposals for utilizing computer-based coordination and information technology for the coordination and optimization of resource allocation (also known as
cybernetics Cybernetics is a wide-ranging field concerned with circular causality, such as feedback, in regulatory and purposive systems. Cybernetics is named after an example of circular causal feedback, that of steering a ship, where the helmsperson ma ...
) within an economy have been outlined by various socialists, economists and computer scientists, including Oskar Lange, the Soviet engineer
Viktor Glushkov Victor Mikhailovich Glushkov ( rus, Виктор Миха́йлович Глушко́в; August 24, 1923 – January 30, 1982) was a Soviet mathematician, the founding father of information technology in the Soviet Union and one of the foun ...
, and more recently Paul Cockshott and Allin Cottrell.


Peer-to-peer economy and open source

The "networked information age" has enabled the development and emergence of new forms of organizing the production of value in non-market arrangements that have been termed commons-based peer production along with the negation of ownership and the concept of property in the development of software in the form of
open source Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized so ...
and open design.


Negotiated coordination

Economist Pat Devine has created a model of coordination called "negotiated coordination", which is based upon
social ownership Social ownership is the appropriation of the surplus product, produced by the means of production, or the wealth that comes from it, to society as a whole. It is the defining characteristic of a socialist economic system. It can take the form o ...
by those affected by the use of the assets involved, with decisions made by those at the most localised level of production.


Elements of socialism in practice

Although a number of economic systems have existed with various socialist attributes, or have been deemed socialist by their proponents, almost all of the economic systems listed below have largely retained elements of capitalism such as
wage labor Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power unde ...
, the
accumulation of capital Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
, and
commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
production. Nonetheless, various elements of a socialist economy have been implemented or experimented with in various economies throughout history. Various forms of socialist organizational attributes have existed as minor modes of production within the context of a capitalist economy throughout history—examples of this include cooperative enterprises in a capitalist economy, and the emerging free-software movement based on social peer-to-peer production.


Centrally planned economies

A centrally planned economy combines public ownership of the means of production with
centralized state planning A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, ...
. This model is usually associated with the Soviet-type command economy. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. In the early years of Soviet central planning, the planning process was based upon a selected number of physical flows with inputs mobilized to meet explicit production targets measured in natural or technical units. This material balances method of achieving plan coherence was later complemented and replaced by value planning, with money provided to enterprises so that they could recruit labour and procure materials and intermediate production goods and services. The Soviet economy was brought to balance by the interlocking of three sets of calculation, namely the setting up of a model incorporating balances of production, manpower and finance. The exercise was undertaken annually and involved a process of iteration (the "method of successive approximation"). Although nominally a "centrally planned" economy, in reality formulation of the plan took place on a more local level of the production process as information was relayed from enterprises to planning ministries. Aside from the Soviet Union and
Eastern Bloc The Eastern Bloc, also known as the Communist Bloc and the Soviet Bloc, was the group of socialist states of Central and Eastern Europe, East Asia, Southeast Asia, Africa, and Latin America under the influence of the Soviet Union that existed du ...
economies, this economic model was also utilized by the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
,
Socialist Republic of Vietnam Vietnam or Viet Nam ( vi, Việt Nam, ), officially the Socialist Republic of Vietnam,., group="n" is a country in Southeast Asia, at the eastern edge of mainland Southeast Asia, with an area of and population of 96 million, making it ...
, Republic of Cuba and
North Korea North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korean Peninsula and shares borders with China and Russia to the north, at the Yalu (Amnok) and T ...
.


Soviet Union

The
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
and some of its European satellites aimed for a fully centrally-
planned economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, ...
. While they dispensed almost entirely with private ownership over the means of production, workers still effectively received a wage for their labour. Some believe that according to Marxist theory this should have been a step towards a genuine workers' state. However, some Marxists consider this a misunderstanding of Marx's views on
historical materialism Historical materialism is the term used to describe Karl Marx's theory of history. Marx locates historical change in the rise of class societies and the way humans labor together to make their livelihoods. For Marx and his lifetime collaborat ...
and of his views on the process of
socialization In sociology, socialization or socialisation (see spelling differences) is the process of internalizing the norms and ideologies of society. Socialization encompasses both learning and teaching and is thus "the means by which social and cul ...
. Characteristics of the Soviet economic model included: * production quotas for every productive unit. A farm, mine or factory was judged on the basis of whether its production met the quota. It would be provided with a quota of the inputs it needed to start production, and then its quota of output would be taken away and given to downstream production units or distributed to consumers. * allocation through political control. In contrast with systems where prices ''determined'' allocation of resources, the Soviet bureaucracy determined allocation, particularly of the means of production. The prices that were constructed were determined ''after'' the formulation of the economy plan, and such prices did not factor into choices about what was produced and how it was produced in the first place. * full employment. Every worker was ensured employment. However workers were generally not directed to jobs. The central-planning administration adjusted relative wages rates to influence job choice in accordance with the outlines of the current plan. * clearing goods by planning: if a surplus of a product accumulated, then the central planning authority would either reduce the quota for its production or increase the quota for its use. * five-year plans for the long-term development of key industries. The planning system in the Soviet Union developed under Stalin between 1928 and 1934. After the end of the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
in 1945, the seven countries with communist governments in Central and Eastern Europe introduced central planning with five- (or six-) year plans on the Soviet model by 1951. The common features included the nationalization of industry, transport and trade, compulsory procurement in farming (but not collectivization) and government monopolies on foreign trade. Prices were largely determined on the basis of the costs of inputs, a method derived from the labour theory of value. Prices did not therefore incentivize production enterprises, whose inputs were instead purposely rationed by the central plan. This "taut planning" began around 1930 in the Soviet Union and only became attenuated after the economic reforms in 1966–1968, when enterprises were encouraged to make profits. According to communist doctrine, planning had the stated purpose of enabling the people - through the communist party and state institutions - to undertake activities that would have been frustrated by a
market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...
, including the rapid expansion of universal education and health care, urban development with mass good-quality housing, and industrial development of all regions of the country. Nevertheless, markets continued to exist in Soviet-type planned economies. Even after the collectivization of agriculture in the Soviet Union in the 1930s, members of
collective farm Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
s and anyone with a private garden plot were free to sell their own produce ( farm workers were often paid in kind). Licensed markets operated in every town and city borough where non-state-owned enterprises (such as cooperatives and collective farms) were able to offer their products and services. From 1956 and 1959 onwards, all wartime controls over manpower were removed and people could apply for and quit jobs freely in the Soviet Union. The use of market mechanisms went furthest in Yugoslavia, Czechoslovakia and Hungary. From 1975, Soviet citizens had the right to engage in private handicraft; collective farmers could raise and sell livestock privately from 1981. Note that households were free to dispose of their income as they chose, and incomes were lightly taxed.


= Dispute that the Soviet model is socialism

= Various scholars and political economists have criticized the claim that the centrally-planned economy - and specifically the Soviet model of economic development - constitutes a form of socialism. They argue that the Soviet economy was structured upon the
accumulation of capital Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
and the extraction of
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to the owner of that product to manufacture it: i.e. the amount raised through sale of the product minus the cos ...
from the working class by the planning agency in order to reinvest this surplus into the economy and to distribute to managers and senior officials, indicating the Soviet Union and other Soviet-style economies were
state-capitalist State capitalism is an economic system in which the state undertakes business and commercial (i.e. for-profit) economic activity and where the means of production are nationalized as state-owned enterprises (including the processes of capital ...
and unplanned administrative-command economies. More fundamentally, these economies were structured around the dynamic of capitalism, i.e. the
accumulation of capital Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
, production for profit (as opposed to being based on production for use—the defining criterion for socialism) and the
law of value The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic '' The Poverty of Philosophy'' (1847) again ...
, having not yet transcended the system of capitalism, but being in fact a variation of capitalism based on a process of state-directed accumulation. On the other side of the argument, economists contend that no surplus value was generated from labour activity or from commodity markets in the socialist planned economies; they therefore claim that there was no exploiting class, even if inequalities existed. Since prices were controlled and set below
market-clearing In economics, market clearing is the process by which, in an economic market, the supply of whatever is traded is equated to the demand so that there is no excess supply or demand. The new classical economics assumes that in any given market, assu ...
levels, there was no element of value added at the point of sale - as occurs in capitalist market economies. Prices were built up from the average cost of inputs, including wages, taxes, interest on stocks and working capital as well as allowances to cover the recoupment of investment and for depreciation, so there was no profit margin in the price charged to customers. Wages did not reflect the purchase price of labour, since labour was not a commodity traded in a market and the employing organizations did not own the means of production. Wages were set at a level that permitted a decent standard of living; they rewarded specialist skills and educational qualifications. In macroeconomic terms, the plan allocated the whole national product to workers in the form of wages for the workers' own use, with a fraction withheld for investment and for imports from abroad. The difference between the average value of wages and the value of national output per worker did not imply the existence of surplus value since it was part of a consciously formulated plan for the development of society. The presence of inequality in the socialist planned economies did not imply that an exploiting class existed. In the Soviet Union, communist-party members were able to buy scarce goods in special shops and the leadership elite took advantage of state property to live in more spacious accommodation - and sometimes in luxury. Although they received privileges not commonly available and some additional income in kind, there was no difference in their official remuneration in comparison to their non-party peers. Enterprise managers and workers received only the wages and bonuses related to the production targets that the planning authorities had set. Outside of the cooperative sector - which enjoyed greater economic freedoms and whose profits were shared among all members of the cooperative - there was no profit-taking class. Other analysts maintain that workers in the Soviet Union and in other Marxist–Leninist states had genuine control over the means of production through institutions such as
trade unions A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...
. Some socialist critics point to the lack of socialist social relations in Soviet-style economies (specifically the lack of self-management), to a bureaucratic elite based on hierarchical and centralized powers of authority as well as to the lack of genuine worker control over the means of production. Such factors lead them to conclude that Soviet economies were not socialist, but examples either of bureaucratic collectivism or of state capitalism. Trotskyists regard mature Soviet systems as neither socialist nor capitalist—but as deformed workers' states. This analysis is consistent with the
April Theses The April Theses (russian: апрельские тезисы, transliteration: ') were a series of ten directives issued by the Bolshevik leader Vladimir Lenin upon his April 1917 return to Petrograd from his exile in Switzerland via Germa ...
of 1917, in which
Lenin Vladimir Ilyich Ulyanov. ( 1870 – 21 January 1924), better known as Vladimir Lenin,. was a Russian revolutionary, politician, and political theorist. He served as the first and founding head of government of Soviet Russia from 1917 to 1 ...
stated that the prospective
Bolshevik revolution The October Revolution,. officially known as the Great October Socialist Revolution. in the Soviet Union, also known as the Bolshevik Revolution, was a revolution in Russia led by the Bolshevik Party of Vladimir Lenin that was a key mom ...
aimed not to introduce socialism (which could only be established on a worldwide scale), but to bring production and the state under the control of the
Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
s of Workers' Deputies. Furthermore, communist states often do not claim to have achieved
socialism Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes th ...
in their countries; on the contrary, they claim to be building and working toward the establishment of socialism in their countries. For example, the preamble to the
Socialist Republic of Vietnam Vietnam or Viet Nam ( vi, Việt Nam, ), officially the Socialist Republic of Vietnam,., group="n" is a country in Southeast Asia, at the eastern edge of mainland Southeast Asia, with an area of and population of 96 million, making it ...
's constitution states that Vietnam only entered a transition stage between capitalism and socialism after the country was re-unified under the Communist party in 1976, and the 1992 Constitution of the Republic of Cuba states that the role of the Communist Party is to "guide the common effort toward the goals and construction of socialism". Stalinists and their followers challenge this view - they claim that socialism was established in the Soviet Union after
Joseph Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet Union, Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as Ge ...
came to power in the late 1920s and instituted the system of five-year plans in 1928. The
1936 Constitution of the Soviet Union Events January–February * January 20 – George V of the United Kingdom and the British Dominions and Emperor of India, dies at his Sandringham Estate. The Prince of Wales succeeds to the throne of the United Kingdom as King E ...
, known as the Fundamental Law of Victorious Socialism, embodied the claim that the foundations for socialism had been laid. In 1924 Stalin introduced the theory of socialism in one country, which argued that socialism can be built in a single country, despite existing within a global capitalist economic system. Nevertheless, it was recognized that the stage during which developed socialism would be built would be a lengthy one and would not be achieved by the Soviet Union on its own. According to the official textbooks, the first stage of the transition period from capitalism to socialism had been completed by the 1970s in the European socialist countries (except Poland and Yugoslavia) and in Mongolia and Cuba. The next stage of developed socialism would not be reached until "the economic integration of the socialist states becomes a major factor of their economic progress" and social relations had been reconstructed on "collectivist principles". Communist writers accepted that during the earlier stages in constructing socialism the exchange of commodities on the basis of the average socially necessary labour embodied within them occurred and involved the mediation of money. Socialist planned economies were systems of commodity production, but this was directed in a conscious way towards meeting the needs of the people and not left to the "anarchy of the market". At the stage of developed socialism, "the state of dictatorship of the proletariat changes into a state of all people reflecting the increasing homogeneity of society" and the "evening out of economic development levels" within and between socialist countries. It would provide the foundations for a further stage of perfected socialist society, where an abundance of goods permitted their distribution according to need. Only then could the world socialist system progress towards the higher phase of
communism Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, ...
.


World socialist economic system

By the 1980s, the world economic socialist system embraced one-third of the world's population but generated no more than 15 percent of global economic output. At its height in the mid-1980s, the world socialist system could be said to comprise the following countries with a "socialist orientation", though not all were allies of the Soviet Union: Afghanistan, Albania, Angola, Bulgaria, Cambodia, China, Cuba, Czechoslovakia, Eastern Germany, Ethiopia, Hungary, Mozambique, Nicaragua, North Korea, Laos, Mongolia, Poland, Romania, Vietnam, South Yemen, Yugoslavia and the Soviet Union. The system co-existed alongside the world capitalist system but was founded upon the principles of cooperation and mutual assistance rather than upon competition and rivalry. The countries involved aimed to even-out the level of economic development and to play an equal part in the international division of labour. An important role was played by the Council for Mutual Economic Assistance (CMEA) or Comecon, an international body set up to promote economic development. It involved joint planning activity, the establishment of international economic, scientific and technical bodies and methods of cooperation between state agencies and enterprises, including joint ventures and projects. Allied to the CMEA were the International Development Bank, established in 1971; and the International Bank for Economic Cooperation, founded in 1963, which had their counterparts in the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
, the
Bank for International Settlements The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work th ...
and the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
in the non-socialist world. The main tasks of the CMEA were plan coordination, production specialization and regional trade. In 1961
Nikita Khrushchev Nikita Sergeyevich Khrushchev (– 11 September 1971) was the First Secretary of the Communist Party of the Soviet Union from 1953 to 1964 and chairman of the country's Council of Ministers from 1958 to 1964. During his rule, Khrushchev s ...
, the Soviet
leader Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets v ...
, put forward proposals for establishing an integrated, centrally-planned socialist commonwealth in which each geographic region would specialize production in line with its set of natural and human resources. The resulting document, the "Basic Principles of the International Socialist Division of Labour" was adopted at the end of 1961, despite objections from Romania on certain aspects. The "Basic Principles" were never implemented fully and were replaced in 1971 by the adoption of the "Comprehensive Programme for Further Extension and Improvement of Cooperation and Development of Socialist Economic Integration". As a result, many specialization agreements were made between CMEA member states for investment programmes and
project A project is any undertaking, carried out individually or collaboratively and possibly involving research or design, that is carefully planned to achieve a particular goal. An alternative view sees a project managerially as a sequence of even ...
s. The importing country pledged to rely on the exporting country for its consumption of the product in question. Production specialization occurred in engineering, automotive, chemicals, computers and automation, telecommunications and biotechnology. Scientific and technical cooperation between CMEA member states was facilitated by the establishment in 1969 of the International Centre for Scientific and Technical Information in Moscow. Trade between CMEA member states was divided into "hard goods" and "soft goods". The former could be sold on world markets and the latter could not. Commodities such as food, energy products and raw materials tended to be hard goods and were traded within the CMEA area at world market prices. Manufactures tended to be soft goods—their prices were negotiable and often adjusted to make bilateral payment flows balance. Other countries with privileged affiliation with the CMEA included Algeria, Benin, Burma, Congo, Finland, Madagascar, Mali, Mexico, Nigeria, Seychelles, Syria, Tanzania and Zimbabwe. The Soviet Union also provided substantial economic aid and technical assistance to developing countries including Egypt, India, Iraq, Iran, Somalia and Turkey. It supported developing countries in calling for a
New International Economic Order The New International Economic Order (NIEO) is a set of proposals advocated by developing countries to end economic colonialism and dependency through a new interdependent economy. The main NIEO document recognized that the current international e ...
and backed the UN Charter of Economic Rights and Obligations of States adopted by the
General Assembly A general assembly or general meeting is a meeting of all the members of an organization or shareholders of a company. Specific examples of general assembly include: Churches * General Assembly (presbyterian church), the highest court of pres ...
in 1974.


Achievements of the socialist planned economies

In the officially sanctioned textbooks describing the socialist planned economies as they existed in the 1980s, it was claimed as follows: * Class and national oppression had been totally eradicated. * Unemployment, hunger, poverty, illiteracy and uncertainty about the future had been eliminated. * Every citizen had a guaranteed right to work, rest, education, health care, abode and security in old age and maintenance in the event of disability. * Material standards of living were rising steadily and everyone had free access to knowledge and to the values of world and national culture. * Every citizen had a right in practice to take part in discussing and solving any problems in the life of the enterprise, region, republic and the country they lived in, including the rights to free speech, of assembly and to demonstrate. Data collected by the United Nations of indicators of human development in the early 1990s show that a high level of social development was achieved in the former socialist planned economies of Central and Eastern Europe and the Commonwealth of Independent States (CEE/CIS). Life expectancy in the CEE/CIS area in the period 1985–1990 was 68 years, while for the countries of the Organization for Economic Cooperation and Development (OECD) it was 75 years. Infant mortality in the CEE/CIS area was 25 for every 1,000 live births in 1990, compared to 13 in the OECD area. In terms of education, the two areas enjoyed universal adult literacy and full enrolment of children in primary and secondary schools. For tertiary education, the CEE/CIS had 2,600 university students per 100,000 population, while in the OECD the comparable figure was 3,550 students. Overall enrolment at primary, secondary and tertiary levels was 75 percent in the CEE/CIS region and 82 percent in the OECD countries. On housing the main problem was over-crowding rather than homelessness in the socialist planned economies. In the USSR the area of residential accommodation was 15.5 square meters per person by 1990 in urban areas but 15 percent of the population were without their own separate accommodation and had to live in communal apartments according to the 1989 census. Housing was generally of good quality in both the CEE/CIS region and in the OECD countries: 98 and 99 percent of the population in the OECD countries had access to safe drinking water and improved sanitation respectively, compared to 93 and 85 percent in the CEE/CIS area by 1990. Unemployment did not exist officially in the socialist planned economies, though there were people between jobs and a fraction of unemployable people as a result of illness, disability or other problems, such as alcoholism. The proportion of people changing jobs was between 6 and 13 percent of the labour force a year according to employment data during the 1970s and 1980s in Central and Eastern Europe and the USSR. Labour exchanges were established in the USSR in 1967 to help enterprises re-allocate workers and provide information on job vacancies. Compulsory unemployment insurance schemes operated in Bulgaria, Eastern Germany and Hungary but the numbers claiming support as a result of losing their job through no fault of their own numbered a few hundred a year. By 1988, GDP per person, measured at purchasing power parity in US dollars, was $7,519 in Russia and $6,304 for the USSR. The highest income was to be found in Slovenia ($10,663) and Estonia ($9,078) and the lowest in Albania ($1,386) and Tajikistan ($2,730). Across the whole CEE/CIS area, GDP per person was estimated at $6,162. This compared to the US with $20,651 and $16,006 for Germany in the same year. For the OECD area as a whole estimated GDP per person was $14,385. Thus, on the basis of IMF estimates, national income (GDP) per person in the CEE/CIS area was 43 percent of that in the OECD area.


Economic problems of the socialist planned economies

From the 1960s onwards, CMEA countries, beginning with East Germany, attempted "intensive" growth strategies, aiming to raise the productivity of labour and capital. However, in practice this meant that investment was shifted towards new branches of industry, including the electronics, computing, automotive and nuclear power sectors, leaving the traditional heavy industries dependent upon older technologies. Despite the rhetoric about modernization, innovation remained weak as enterprise managers preferred routine production that was easier to plan and brought them predictable bonuses. Embargoes on high technology exports organized through the US-supported CoCom arrangement hampered technology transfer. Enterprise managers also ignored inducements to introduce labour-saving measures as they wished to retain a reserve of personnel to be available to meet their production target by working at top speed when supplies were delayed. Under conditions of "taut planning", the economy was expected to produce a volume of output higher than the reported capacity of enterprises and there was no "slack" in the system. Enterprises faced a resource constraint and hoarded labour and other inputs and avoided sub-contracting intermediate production activities, preferring to retain the work in-house. The enterprise, according to the theory promulgated by János Kornai, was constrained by its resources not by the demand for its goods and services; nor was it constrained by its finances since the government was not likely to shut it down if it failed to meet its financial targets. Enterprises in socialist planned economies operated within a "soft" budget constraint, unlike enterprises in capitalist market economies which are demand-constrained and operate within "hard" budget constraints, as they face bankruptcy if their costs exceed their sales. As all producers were working in a resource-constrained economy they were perpetually in short supply and the shortages could never be eliminated, leading to chronic disruption of production schedules. The effect of this was to preserve a high level of employment. As the supply of consumer goods failed to match rising incomes (because workers still received their pay even if they were not fully productive), household savings accumulated, indicating, in the official terminology, "postponed demand". Western economists called this "
monetary overhang Monetary overhang is a phenomenon in which people have money holdings because of a lack of ability to spend them. This is a phenomenon often present with repressed inflation and was common in centrally planned economies A planned economy is a typ ...
" or "repressed inflation". Prices on the black market were several times higher than in the official price-controlled outlets, reflecting the scarcity and possible illegality of the sale of these items. Therefore, although consumer welfare was reduced by shortages, the prices households paid for their regular consumption were lower than would have been the case had prices been set at market-clearing levels. Over the course of the 1980s it became clear that the CMEA area was "in crisis", although it remained viable economically and was not expected to collapse. The "extensive" growth model was retarding growth in the CMEA as a whole, with member countries dependent upon supplies of raw materials from the USSR and upon the Soviet market for sales of goods. The decline in growth rates reflected a combination of diminishing returns to capital accumulation and low innovation as well as micro-economic inefficiencies, which a high rate of saving and investment was unable to counter. The CMEA was supposed to ensure coordination of national plans but it failed even to develop a common methodology for planning which could be adopted by its member states. As each member state was reluctant to give up national self-sufficiency the CMEA's efforts to encourage specialization was thwarted. There were very few joint ventures and therefore little intra-enterprise technology transfer and trade, which in the capitalist world was often undertaken by trans-national corporations. The International Bank for Economic Cooperation had no means of converting a country's trade surplus into an option to buy goods and services from other CMEA members.


Transition to market economies

After the dissolution of the Soviet Union and the Eastern Bloc, many of the remaining
socialist state A socialist state, socialist republic, or socialist country, sometimes referred to as a workers' state or workers' republic, is a sovereign state constitutionally dedicated to the establishment of socialism. The term '' communist state'' is ...
s presiding over centrally planned economies began introducing reforms that shifted their economies away from centralized planning. In Central and Eastern Europe and the USSR the transition from a planned economy to a market economy was accompanied by the transformation of the socialist mode of production to a capitalist mode of production. In Asia (China, Laos, North Korea and Vietnam) and in Cuba market mechanisms were introduced by the ruling communist parties and the planning system was reformed without systemic transformation. The transformation from socialism to capitalism involved a political shift: from a people's democracy (see People's Republic and
Communist state A communist state, also known as a Marxist–Leninist state, is a one-party state that is administered and governed by a communist party guided by Marxism–Leninism. Marxism–Leninism was the state ideology of the Soviet Union, the Comint ...
) with a constitutionally entrenched "leading role" for the communist and workers' parties in society to a liberal
representative democracy Representative democracy, also known as indirect democracy, is a type of democracy where elected people represent a group of people, in contrast to direct democracy. Nearly all modern Western-style democracies function as some type of represe ...
with a separation of legislative, executive and judicial authorities and centres of private power that can act as a brake on the state's activity. Vietnam adopted an economic model it formally titled the ''socialist-oriented market economy''. This economic system is a form of mixed-economy consisting of state, private, co-operative and individual enterprises coordinated by the market mechanism. This system is intended to be transitional stage in the development of socialism.


Transition economies

The transformation of an
economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entit ...
from a socialist planned economy to a capitalist market economy in Central and Eastern Europe, the former Soviet Union and Mongolia in the 1990s involved a series of institutional changes. These included: * Control over the means of production was removed from the state through
privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
and private property rights were re-established. In several countries property was restored to its former owners or their legal successors. If the actual property could not be returned the former owners received compensation. This occurred in Eastern Germany, Czechoslovakia, Hungary and Estonia. In all the countries of the Commonwealth of Independent States, the government decided against restoration or compensation on the grounds that too much time had elapsed and in many cases compensation had already been made through bilateral treaties between the USSR and foreign governments representing the former owners. Voucher privatization in which citizens and workers in the enterprises received free or cheap shares was undertaken in most of the transition economies. * The decision-making system was de-centralized through the ending of central planning and the privatization of enterprises. Work collectives and trade unions lost much of their influence in enterprise decision-making. * Markets became the dominant coordination mechanism following price liberalization and the de-control of foreign trade that permitted more or less unrestricted importation of goods in 1990/92. Queues at retail outlets disappeared as did hoarded inventories at factories. Stock exchanges were established between 1990 and 1995. Anti-monopoly legislation was introduced. As workers lost their jobs or found their wages unpaid, informal labour markets sprang up along certain streets, particularly for construction trades. * The incentive system was modified by the legalization of private enterprise and alteration to employment laws. A large informal sphere developed estimated at comprising 21 to 30 percent of official calculations of GDP. * The organizational forms prevailing in the socialist planned economies were restructured by breaking up vertically-integrated industrial and agricultural concerns and closing non-viable undertakings. The hardening of enterprise budget constraints was more significant in driving industrial restructuring than privatization according to some studies. * The distribution system became more unequal as price controls on necessities were removed fuelling the growth of poverty among people on fixed incomes such as pensioners and the unemployed. Redistributive measures through taxation and social safety nets proved unable to counteract the growth of poverty and, at the other end of the income scale, the emergence of a rich business elite (see also
business oligarch A business oligarch is generally a business magnate who controls sufficient resources to influence national politics. A business leader can be considered an oligarch if the following conditions are satisfied: # uses monopolistic tactics to dominat ...
). * The public choice mechanism was overhauled to rescind the communist party's leading role and introduce a liberal constitution entrenching civil rights and representative democracy in almost all transition economies except Belarus, Turkmenistan and Uzbekistan.


People's Republic of China

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
embraced a socialist planned economy after the Communist victory in its Civil War. Private property and private ownership of capital were abolished, and various forms of wealth made subject to state control or to workers' councils. The Chinese economy broadly adopted a similar system of production quotas and full employment by fiat to the Russian model. The
Great Leap Forward The Great Leap Forward (Second Five Year Plan) of the People's Republic of China (PRC) was an economic and social campaign led by the Chinese Communist Party (CCP) from 1958 to 1962. CCP Chairman Mao Zedong launched the campaign to reconstr ...
saw a remarkably large-scale experiment with rapid collectivisation of agriculture and other ambitious goals. Results were less than expected (e.g. there were food shortages and mass starvation) and the program was abandoned after three years. In the common program set up by the
Chinese People's Political Consultative Conference The Chinese People's Political Consultative Conference (CPPCC, zh, 中国人民政治协商会议), also known as the People's PCC (, ) or simply the PCC (), is a political advisory body in the People's Republic of China and a central part of ...
in 1949, in effect the country's interim constitution, state capitalism meant an economic system of corporatism. It provided as follows: "Whenever necessary and possible, private capital shall be encouraged to develop in the direction of state capitalism". In recent decades, China has opened its economy to foreign investment and to market-based trade, and has continued to experience strong economic growth. It has carefully managed the transition from a socialist planned economy to a market economy, officially referred to as the '' socialist commodity market economy'' which has been likened to state capitalism by some outside observers. The current Chinese economic system is characterized by state ownership combined with a strong private sector that privately owned enterprises that generate about 33% (People's Daily Online 2005) to over 50% of GDP in 2005, with a BusinessWeek article estimating 70% of GDP, a figure that might be even greater considering the Chengbao system. Some western observers note that the private sector is likely underestimated by state officials in calculation of GDP due to its propensity to ignore small private enterprises that are not registered. Most of the state and private sectors of economy are governed by free market practices, including a stock exchange for trading equity. The free-market is the arbitrator for most economic activity, which is left to the management of both state and private firms. A significant amount of privately owned firms exist, especially in the consumer service sector."The Role of Planning in China's Market Economy"
. Retrieved 7 June 2011.
The state sector is concentrated in the commanding heights of the economy with a growing private sector engaged primarily in commodity production and light industry. Centralized directive planning based on mandatory output requirements and production quotas has been superseded by the free-market mechanism for most of the economy and directive planning is utilized in some large state industries. A major difference from the old planned economy is the
privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of state institutions. 150 state-owned enterprises remain and report directly to the central government, most having a number of subsidiaries. By 2008, these state-owned corporations had become increasingly dynamic largely contributing to the increase in revenue for the state. The state-sector led the economic recovery process and increased economic growth in 2009 after the financial crises. Proponents of this model distinguish themselves from market socialists who believe that economic planning is unattainable, undesirable or ineffective at distributing goods, viewing the market as the solution rather than a temporary phase in development of a socialist planned economy. This type of economic system is defended from a Marxist–Leninist perspective which states that a socialist planned economy can only be possible after first establishing the necessary comprehensive commodity market economy, letting it fully develop until it exhausts its historical stage and gradually transforms itself into a planned economy.


Cuba

The Republic of Cuba under the leadership of Raul Castro began from 2006 to encourage co-operatives, worker-ownership and self-employment in a move to reduce the central role of state enterprise and state management within the economy, with the goal of building a "deeper" or more co-operative form of socialism. By 2018, there were 429 co-operatives in Cuba, many of which were previously state-owned enterprises.


Vietnam

The
Socialist Republic of Vietnam Vietnam or Viet Nam ( vi, Việt Nam, ), officially the Socialist Republic of Vietnam,., group="n" is a country in Southeast Asia, at the eastern edge of mainland Southeast Asia, with an area of and population of 96 million, making it ...
has pursued similar economic reforms to China, though less extensively, resulting in a
socialist-oriented market economy The socialist-oriented market economy ( Vietnamese: ''Kinh tế thị trường theo định hướng xã hội chủ nghĩa'') is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as ...
, a mixed economy in which the state plays a dominant role intended to be a transitional phase in establishment of a socialist economy.


Social democratic mixed economies

Many of the industrialized, open countries of Western Europe experimented with one form of social democratic mixed economies or another during the 20th century. These include Britain (mixed economy and welfare state) from 1945 to 1979, France (state capitalism and indicative planning) from 1945 to 1982 under dirigisme, Sweden (social democratic welfare state) and Norway (state social democratic mixed economy) to the present. They are regarded as
social democratic Social democracy is a political, social, and economic philosophy within socialism that supports political and economic democracy. As a policy regime, it is described by academics as advocating economic and social interventions to promote so ...
and reformist socialist experiments because they universally retained a wage-based economy and private ownership and control of the decisive means of production. Nevertheless, these western European countries tried to restructure their economies away from a purely private capitalist model. Variations range from social democratic
welfare states A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...
such as in Sweden to mixed economies where a major percentage of GDP comes from the state sector such as in Norway which ranks among the highest countries in quality of life and equality of opportunity for its citizens. Elements of these efforts persist throughout Europe, even if they have repealed some aspects of public control and ownership. They are typically characterized by the following features: *
Nationalization Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to p ...
of key industries such as mining, oil, steel, energy and transportation. A common model is for a sector to be taken over by the state and then one or more
state-owned enterprise A state-owned enterprise (SOE) is a government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn profit for the governmen ...
s set up for its day-to-day running. Advantages of nationalization include the ability of the state to direct
investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
in key industries, the distribution of state profits from nationalized industries for the overall national good, the ability to direct producers to social rather than market goals and greater control of the industries by and for the workers as well as the benefits and burdens of publicly funded research and development are extended to the wider populace. * Redistribution of wealth, through both tax and spending policies that aim to reduce economic inequalities. Social democracies typically employ various forms of
progressive taxation A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progr ...
regarding wage and business income, wealth, inheritance, capital gains and property. On the spending side, a set of social policies typically provides free access to public services such as education, health care and child care, while subsidized access to housing, food, pharmaceutical goods, water supply, waste management and electricity is also common. *
Social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
schemes where workers contribute to a mandatory public insurance program. The insurance typically include monetary provisions for retirement pensions and survivor benefits, permanent and temporary disabilities, unemployment and
parental leave Parental leave, or family leave, is an employee benefit available in almost all countries. The term "parental leave" may include maternity, Paternity (law), paternity, and adoption leave; or may be used distinctively from "maternity leave" a ...
. Unlike private insurance, governmental schemes are based on public statutes and not contracts, so that contributions and benefits may change in time and are based on solidarity among participants. Its funding is done on an ongoing basis, without direct relationship with future liabilities. *
Minimum wages A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Bec ...
, employment protection and
trade union A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ...
recognition rights for the benefit of workers. The objectives of these policies are to guarantee living wages and help produce
full employment Full employment is a situation in which there is no cyclical or deficient-demand unemployment. Full employment does not entail the disappearance of all unemployment, as other kinds of unemployment, namely structural and frictional, may remain. F ...
. There are a number of different models of trade union protection which evolved, but they all guarantee the right of workers to form unions, negotiate benefits and participate in strikes. Germany appointed union representatives at high levels in all corporations and had much less industrial strife than the United Kingdom, whose laws encouraged strikes rather than negotiation. * National planning for industrial development. *
Demand management Demand management is a planning methodology used to forecast, plan for and manage the demand for products and services. This can be at macro-levels as in economics and at micro-levels within individual organizations. For example, at macro-lev ...
in a
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
fashion to help ensure economic growth and employment.


State capitalism

Various social democratic mixed economies are state capitalist, consisting of large commercial
state enterprise A state-owned enterprise (SOE) is a government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn profit for the government ...
s that operate according to the laws of capitalism and pursue profits, that have evolved in countries which have been influenced by various elected socialist political parties and their economic reforms. While these policies and reforms did not change the fundamental aspect of capitalism and non-socialist elements within these countries supported or often implemented many of these reforms themselves, the result has been a set of economic institutions that were at least partly influenced by socialist ideology.


= India

= After gaining independence from Britain,
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...
adopted a broadly socialist-inspired approach to economic growth. Like other countries with a democratic transition to a mixed economy, it did not abolish private property in capital. India proceeded by nationalizing various large privately run firms, creating state-owned enterprises and redistributing income through progressive taxation in a manner similar to social democratic Western European nations than to planned economies such as the Soviet Union or China. Today, India is often characterized as having a
free-market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers are ...
that combines economic planning with the
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
. However, it did adopt a very firm focus on national planning with a series of broad five-year plans.


= Norway

= Modern Norwegian state capitalism has its origins in public ownership of the country's oil reserves and in the country's post-World War II
social democratic Social democracy is a political, social, and economic philosophy within socialism that supports political and economic democracy. As a policy regime, it is described by academics as advocating economic and social interventions to promote so ...
reforms. The
government of Norway The politics of Norway take place in the framework of a parliamentary system, parliamentary, representative democracy, representative democratic constitutional monarchy. Executive power is exercised by the Council of State (Norway), Council of St ...
has ownership stakes in many of the country's largest publicly listed companies, owning 37% of the Oslo stockmarket and operates the country's largest non-listed companies including
Statoil Equinor ASA (formerly Statoil and StatoilHydro) is a Norwegian state-owned multinational energy company headquartered in Stavanger. It is primarily a petroleum company, operating in 36 countries with additional investments in renewable energy. ...
and
Statkraft Statkraft AS is a hydropower company, fully owned by the Norwegian state. The Statkraft Group is a generator of renewable energy, as well as Norway’s largest and the Nordic region's third largest energy producer. Statkraft develops and genera ...
. The government also operates a sovereign wealth fund, the Government Pension Fund of Norway, whose partial objective is to prepare Norway for a post-oil future.


= Singapore

= Singapore pursued a state-led model of economic development under the People's Action Party which initially adopted a Leninist approach to politics and a broad socialist model of economic development. Originally, there was also infighting between moderates and radicals, including a left-wing and communist wing in the party which saw many imprisoned. The socialist policies practised the PAP during its first few decades in power were of a pragmatic kind as characterized by its rejection of nationalization. Despite this, the PAP was a member of the
Socialist International The Socialist International (SI) is a political international or worldwide organisation of political parties which seek to establish democratic socialism. It consists mostly of socialist and labour-oriented political parties and organisation ...
and still claimed to be a
socialist party Socialist Party is the name of many different political parties around the world. All of these parties claim to uphold some form of socialism, though they may have very different interpretations of what "socialism" means. Statistically, most of ...
, pointing out its regulation of the private sector, state intervention in the economy and social policies as evidence of this. The prime minister
Lee Kuan Yew Lee Kuan Yew (16 September 1923 – 23 March 2015), born Harry Lee Kuan Yew, often referred to by his initials LKY, was a Singaporean lawyer and statesman who served as Prime Minister of Singapore between 1959 and 1990, and Secretary-General o ...
also stated that he has been influenced by the democratic socialist British Labour Party. Singapore's economy is dominated by state-owned enterprises and government-linked companies through
Temasek Holdings Temasek Holdings (Private) Limited, or simply Temasek, is a Singaporean state holding company owned by the Government of Singapore. Incorporated on 25 June 1974, Temasek owns and manages a total of US$496.59 billion (S$671 billion) in assets u ...
which generate 60% of Singapore's GDP. Temasek Holdings operates like any other company in a market economy. Managers of the holding are rewarded according to profits with the explicit intention to cultivate an ownership mindset. The state also provides substantial public housing, free education and health and recreational services as well as comprehensive public transportation. Today, Singapore is often characterized as having a state capitalist economy that combines economic planning with the free market. While government-linked companies generate a majority of Singapore's GDP, moderate state planning in the economy has been reduced in recent decades. Nonetheless, while being the most right-wing of the Singaporean parties, the PAP has been described as centre-left and adopted a left tack in certain areas in order to remain electorally dominant.


= Taiwan

= Taiwan's economy has been classified as a state capitalist system influenced by its Leninist model of political control, with some Taiwanese economists referring to Taiwan's economy model as
party-state capitalism Party-state capitalism ( zh, t=黨國資本主義, s=党国资本主义) is a term used by some economists and sociologists to describe the contemporary economy of China under the Chinese Communist Party (CCP). The term has also been used to des ...
, a legacy which still lingers in the decision-making process.
Taiwan's economy The economy of Taiwan is a highly developed market economy. It is the 8th largest in Asia and 18th-largest in the world by purchasing power parity, allowing Taiwan to be included in the advanced economies group by the International Monetary ...
includes a number of state-owned enterprises, but the Taiwanese state's role in the economy shifted from that of an entrepreneur to a minority investor in companies alongside the democratization agenda of the late 1980s.


Paris Commune

The Paris Commune was considered to be a prototype mode of economic and political organization for a future socialist society by Karl Marx. Private property in the means of production was abolished so that individuals and co-operative associations of producers owned productive property and introduced democratic measures where elected officials received no more in compensation than the average worker and could be recalled at any time. Anarchists also participated actively in the establishment of the Paris Commune.
George Woodcock George Woodcock (; May 8, 1912 – January 28, 1995) was a Canadian writer of political biography and history, an anarchist thinker, a philosopher, an essayist and literary critic. He was also a poet and published several volumes of travel wri ...
manifests that "a notable contribution to the activities of the Commune and particularly to the organization of public services was made by members of various anarchist factions, including the mutualists Courbet, Longuet, and Vermorel, the libertarian collectivists Varlin, Malon, and Lefrangais, and the bakuninists Elie and Elisée Reclus and Louise Michel".
George Woodcock George Woodcock (; May 8, 1912 – January 28, 1995) was a Canadian writer of political biography and history, an anarchist thinker, a philosopher, an essayist and literary critic. He was also a poet and published several volumes of travel wri ...
. ''Anarchism: A History of Libertarian Ideas and Movements'' (1962)


Social ownership and peer-to-peer production

Various forms of socialist organization based on co-operative decision making,
workplace democracy Workplace democracy is the application of democracy in various forms (examples include voting systems, debates, democratic structuring, due process, adversarial process, systems of appeal) to the workplace. It can be implemented in a variety ...
and in some cases, production directly for use, have existed within the broader context of the capitalist mode of production since the Paris Commune. New forms of socialist institutional arrangements began to take form at the end of the 20th century with the advancement and proliferation of the internet and other tools that allow for collaborative decision-making. Michel Bauwens identifies the emergence of the open software movement and peer-to-peer production as an emergent alternative mode of production to the capitalist economy that is based on collaborative self-management, common ownership of resources, and the (direct) production of use-values through the free cooperation of producers who have access to distributed capital. Commons-based peer production generally involves developers who produce goods and services with no aim to profit directly, but freely contribute to a project relying upon an open common pool of resources and software code. In both cases, production is carried out directly for use—software is produced solely for their use-value.
Wikipedia Wikipedia is a multilingual free online encyclopedia written and maintained by a community of volunteers, known as Wikipedians, through open collaboration and using a wiki-based editing system. Wikipedia is the largest and most-read refer ...
, being based on collaboration and cooperation and a freely associated individuals, has been cited as a template for how socialism might operate. This is a modern example of what the Paris Commune—a template for possible future organization—was to Marx in his time.


Socialist Federal Republic of Yugoslavia

The
Socialist Federal Republic of Yugoslavia The Socialist Federal Republic of Yugoslavia, commonly referred to as SFR Yugoslavia or simply as Yugoslavia, was a country in Central and Southeast Europe. It emerged in 1945, following World War II, and lasted until 1992, with the breakup of Yu ...
pursued a socialist economy based on autogestion or worker self-management. Rather than implementing a centrally planned economy, Yugoslavia developed a market socialist system where enterprises and firms were socially owned rather than publicly owned by the state. In these organizations, the management was elected directly by the workers in each firm, and were later organized according to
Edvard Kardelj Edvard Kardelj (; 27 January 1910 – 10 February 1979), also known by the pseudonyms Bevc, Sperans and Krištof, was a Yugoslav politician and economist. He was one of the leading members of the Communist Party of Slovenia before World War II ...
's theory of associated labor.


Self-managed enterprises

The
Mondragon Corporation The Mondragon Corporation is a corporation and federation of worker cooperatives based in the Basque region of Spain. It was founded in the town of Mondragon in 1956 by José María Arizmendiarrieta and a group of his students at a technic ...
, a federation of cooperatives in the Basque region of Spain, organizes itself as an employee-owned, employee-managed enterprise. Similar styles of decentralized management which embrace cooperation and collaboration in place of traditional hierarchical management structures have been adopted by various private corporations such as
Cisco Systems Cisco Systems, Inc., commonly known as Cisco, is an American-based multinational digital communications technology conglomerate corporation headquartered in San Jose, California. Cisco develops, manufactures, and sells networking hardware, ...
. Unlike Mondragon, Cisco remains firmly under private ownership. More fundamentally, employee-owned, self-managed enterprises still operate within the broader context of capitalism and are subject to the accumulation of capital and profit-loss mechanism.


Anarchist Spain

In Spain, the national anarcho-syndicalist trade union
Confederación Nacional del Trabajo The Confederación Nacional del Trabajo ( en, National Confederation of Labor; CNT) is a Spanish confederation of anarcho-syndicalist labor unions, which was long affiliated with the International Workers' Association (AIT). When working ...
initially refused to join a popular front electoral alliance and abstention by CNT supporters led to a right wing election victory. In 1936, the CNT changed its policy and anarchist votes helped bring the popular front back to power. Months later, the former ruling class responded with an attempted coup causing the
Spanish Civil War The Spanish Civil War ( es, Guerra Civil Española)) or The Revolution ( es, La Revolución, link=no) among Nationalists, the Fourth Carlist War ( es, Cuarta Guerra Carlista, link=no) among Carlism, Carlists, and The Rebellion ( es, La Rebeli ...
(1936–1939). In response to the army rebellion, an anarchist-inspired movement of peasants and workers, supported by armed militias, took control of
Barcelona Barcelona ( , , ) is a city on the coast of northeastern Spain. It is the capital and largest city of the autonomous community of Catalonia, as well as the second most populous municipality of Spain. With a population of 1.6 million within c ...
and of large areas of rural Spain where they
collectivised Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
the land. Even before the fascist victory in 1939, the anarchists were losing ground in a bitter struggle with the Stalinists, who controlled the distribution of military aid to the Republican cause from the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
. The events known as the Spanish Revolution was a workers'
social revolution Social revolutions are sudden changes in the structure and nature of society. These revolutions are usually recognized as having transformed society, economy, culture, philosophy, and technology along with but more than just the political sys ...
that began during the outbreak of the
Spanish Civil War The Spanish Civil War ( es, Guerra Civil Española)) or The Revolution ( es, La Revolución, link=no) among Nationalists, the Fourth Carlist War ( es, Cuarta Guerra Carlista, link=no) among Carlism, Carlists, and The Rebellion ( es, La Rebeli ...
in 1936 and resulted in the widespread implementation of
anarchist Anarchism is a political philosophy and movement that is skeptical of all justifications for authority and seeks to abolish the institutions it claims maintain unnecessary coercion and hierarchy, typically including, though not necessar ...
and more broadly libertarian socialist organizational principles throughout various portions of the country for two to three years, primarily
Catalonia Catalonia (; ca, Catalunya ; Aranese Occitan: ''Catalonha'' ; es, Cataluña ) is an autonomous community of Spain, designated as a '' nationality'' by its Statute of Autonomy. Most of the territory (except the Val d'Aran) lies on the no ...
, Aragon,
Andalusia Andalusia (, ; es, Andalucía ) is the southernmost autonomous community in Peninsular Spain. It is the most populous and the second-largest autonomous community in the country. It is officially recognised as a "historical nationality". The ...
, and parts of the Levante. Much of
Spain's economy The economy of Spain is a highly developed social market economy. It is the world's sixteenth-largest by nominal GDP and the sixth-largest in Europe. Spain is a member of the European Union and the eurozone, as well as the Organization for Ec ...
was put under worker control and in anarchist strongholds such as
Catalonia Catalonia (; ca, Catalunya ; Aranese Occitan: ''Catalonha'' ; es, Cataluña ) is an autonomous community of Spain, designated as a '' nationality'' by its Statute of Autonomy. Most of the territory (except the Val d'Aran) lies on the no ...
, the figure was as high as 75%, although it was lower in areas with heavy Communist Party of Spain influence as the
Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
-allied party actively resisted attempts at
collectivization Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
enactment. Factories were run through worker committees, agrarian areas became collectivised and run as
libertarian Libertarianism (from french: libertaire, "libertarian"; from la, libertas, "freedom") is a political philosophy that upholds liberty as a core value. Libertarians seek to maximize autonomy and political freedom, and minimize the state's en ...
communes. Anarchist historian Sam Dolgoff estimated that about eight million people participated directly or at least indirectly in the Spanish Revolution which he claimed "came closer to realizing the ideal of the free stateless society on a vast scale than any other revolution in history".


Criticism

Criticism of socialist economics comes from market economists such as the classicals, neoclassicals and
Austrians , pop = 8–8.5 million , regions = 7,427,759 , region1 = , pop1 = 684,184 , ref1 = , region2 = , pop2 = 345,620 , ref2 = , region3 = , pop3 = 197,990 , ref3 ...
as well as from some anarchist economists. Besides this, some socialist economic theories are criticized by other socialists. Libertarian socialist, mutualist and other market socialist economists criticize centralized economic planning and propose
participatory economics Participatory economics, often abbreviated Parecon, is an economic system based on participatory decision making as the primary economic mechanism for allocation in society. In the system, the say in decision-making is proportional to the impa ...
and decentralized socialism. Market economists generally criticize socialism for eliminating the free market and its price signals which they consider necessary for rational economic calculation. They also consider that it causes a lack of incentive and believe that these problems lead to a slower rate of technological advance and a slower rate of growth of GDP. Austrian School economists such as
Friedrich Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...
and
Ludwig von Mises Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberalism. He is ...
have argued that the elimination of private ownership of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
would inevitably create worse economic conditions for the general populace than those that would be found in market economies. They argue that without the price signals of the market it is impossible to calculate rationally how to allocate resources. Mises called this the economic calculation problem. Polish economist Oskar Lange and
Abba Lerner Abraham "Abba" Ptachya Lerner (also Abba Psachia Lerner; 28 October 1903 – 27 October 1982) was a Russian-born American-British economist. Biography Born in Novoselytsia, Bessarabia, Russian Empire, Lerner grew up in a Jewish family, which ...
responded to Mises' argument by developing the Lange Model during the economic calculation debate. The Lange model argues that an economy in which all production is performed by the state, where there is a functioning price mechanism, has similar properties to a market economy under perfect competition in that it achieves
Pareto efficiency Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engi ...
. The neoclassical view is that there is a lack of incentive, not a lack of information in a planned economy. They argue that within a socialist planned economy there is a lack of incentive to act on information. Therefore, the crucial missing element is not so much information as the Austrian School argued as it is the motivation to act on information.


See also

*
Basic income Universal basic income (UBI) is a social welfare proposal in which all citizens of a given population regularly receive an unconditional transfer payment, that is, without a means test or need to work. It would be received independently of ...
*
Complexity economics Complexity economics is the application of complexity science to the problems of economics. It sees the economy not as a system in equilibrium, but as one in motion, perpetually constructing itself anew.Beinhocker, Eric D. The Origin of Wealth: E ...
*
Fair trade Fair trade is an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and envir ...
*
Feminist economics Feminist economics is the critical study of economics and economies, with a focus on gender-aware and inclusive economic inquiry and policy analysis. Feminist economic researchers include academics, activists, policy theorists, and practitio ...
*
Gandhian economics Gandhian economics is a school of economic thought based on the spiritual and socio-economic principles expounded by Indian leader Mahatma Gandhi. It is largely characterised by rejection of the concept of the human being as a rational actor alway ...
*
History of economic thought History (derived ) is the systematic study and the documentation of the human activity. The time period of event before the invention of writing systems is considered prehistory. "History" is an umbrella term comprising past events as well ...
*
Job guarantee A job guarantee is an economic policy proposal that aims to provide a sustainable solution to inflation and unemployment. Its aim is to create full employment and price stability by having the state promise to hire unemployed workers as an emp ...
* Labour economics * List of socialist economists * Post-capitalism * Welfare economics


References


Further reading

* Albert, Michael; Hahnel, Robin:
The Political Economy of Participatory Economics
', Princeton University Press, 1991. ''(Available online)'' * Amin, Samir: ''Spectres of Capitalism: A Critique of Current Intellectual Fashions'', 1998, Monthly Review Press * Carson, Kevin, '' Studies in Mutualist Political Economy'' (BookSurge Publishing, 2007). * Cole, G. D. H. ''Socialist Economics'', 1950, London: Victor Gollancz Ltd. * Cohen, G. A. ''If you're an Egalitarian, How Come You're So Rich?'': Harvard UP * Horvat, Branko: ''The Political Economy of Socialism'', 1982, M.E. Sharpe, Inc. * Kaser, Michael C: ''Soviet Economics'', 1970 London: World University Library/ Weidenfeld & Nicolson. * Kennedy, Liam (ed.): ''Economic Theory of Co-operative Enterprises: Selected Readings'', 1983, The Plunkett Foundation for Co-operative Studies. * Lebowitz, Michael A.: ''Beyond Capital, Marx's Political Economy of the Working Class'', 1992, 2003, Palgrave. * Noel Thompson ''Left in the Wilderness: The Political Economy of British Democratic Socialism since 1979'' 2002, Acumen Publishing * Sweezy, Paul M.: ''The Theory of Capitalist Development'', 1942, Monthly Review Press. * Veblen, Thorstein: ''The Theory of the Leisure Class: An Economic Study of Institutions'', 1899, New York Macmillan Company. * Von Mises, Ludwig, ''Socialism''. * Makoto Itoh, ''Political Economy of Socialism''. * Various authors.
The Accumulation of Freedom: Writings on Anarchist Economics.
' AK Press. (2012) {{DEFAULTSORT:Socialist Economics Schools of economic thought
Economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...