This is a short, intuitive post that answers the question: ‘What is socialism?’. I’ll explore how and why it came about. I’ll explore the economic principles, and how the ideals relate to the world today. I will also give some key points of comparison with the capitalist societies we live in today.
I’m Daniela, I have a great life but sometimes I fell so detached and powerless against all the complicated ways the world works! I want to understand my purpose, my place and my responsibility. I’m creating this community as I go of people who just want to understand more things and engage with the world more consciously. Here we go for this post:
What is Socialism?
Socialism is the idea of a society where there is common ownership of public goods. Wealth created by the society is shared and distributed among the people. Public things, like schools, hospitals and businesses are joint-owned by the people in the society (everyone has a share). This means any profit made is actually a joint profit which gets distributed out.
In a socialist society, ‘value’ doesn’t come from how expensive a product is to produce. It comes from how many hours it has taken to produce that product. This means that someone who contributes to the society by nursing creates the same value for that society in one hour compared with someone who spends one hour being a doctor (or a banker). This contrasts with how we value things today. Today, a nurse produces about £18 value per hour and a General Practitioner doctor produces £40 an hour. Education in a socialists society is public and free.
What is socialism in modern day terms?
What ‘socialism’ means today is more practical than the philosophical (as it was when the concept first came about). It’s more like: ‘how can this philosophical idea merge with the capitalist system we live in?’. Socialism ends up meaning lots of welfare and larger government powers within our capitalist societies. Rather than things being jointly owned and wealth being shared out, people and businesses are taxed. The government collects money from taxes. This money goes into a public pot that gets spent on delivering healthcare, education, social housing and things like that. The people who earn more, pay more in tax which goes towards national spending to benefit everyone. This is how the wealth gets distributed.
Who invented socialism? and why?
The founders of the socialist ideas (most famously Karl Marx) came from Europe. Their thinking would have been influenced by how life looked in the 17 and 1800s. At this time there was very sudden economic growth which came about from industrialisation, global trade and things like that. These sudden changes lead to fresh ideas about how societies should be run.
Before the 1700’s, land owners in Europe controlled little ‘kingdom-like’ areas of of the country. Workers lived on their land, farmed, and ate the food that was grown there. The land owners benefited from strong, healthy workers so it made sense to ensure they had enough food to live on and shelter so they wouldn’t get ill. They lived subsistence life-styles which means they grew enough to live off but didn’t produce much more than necessary.
Where did socialist ideas develop from? (MARX’s time)
By the time Karl Marx’s was born (1800s), the new ‘capitalist’ system has completely shifted the way of life. ‘Now’, mini-kingdoms ran for profit, they produced way more than necessary so they could sell the excess. There was suddenly something called ‘scarcity’- this meant more labourers looking for work than work available. Workers were desperate and had to work super hard to keep their jobs. Landowners could maximise their profits even more by paying very low wages. Land owners got richer and workers got poorer. And some got very poor- many starved and lived in extreme poverty.
How did MARX come up with socialism?
Seeing this huge rise in extreme poverty and a massive separation between ultra-rich and super-poor, many philosophers and economists wanted change. They began looking for ways to create a collective responsibility by society for those people in desperate need. Socialism developed as a way to distribute the extreme wealth that was being created, and in doing so re-framing wealth as commonly owned. It’s worth remembering that ‘wealth’ held by the rich, came from societal value created by the workers. The system was just set out that the rich also had the power to control all of the value being generated on their land.
That was the brief and simplified history lesson, but the context is important. Karl Marx (born 1818), was a German economist and philosopher that developed socialism and later went on to develop communism.
While socialism is more of an economic system and ‘plan’ for distributing wealth and creating fairer, more prosperous societies. Communism includes a lot more philosophy on the value that humans hold (and is a lot more controversial!). The link between socialism and communism is explore more in this post here.
What’s wrong with capitalism? (why does socialism oppose it?)
In capitalism, the owner owns land, property, means of production and the rights to profit from it. For example if Greg owns a piece of land, he can build whatever on it. If he builds a factory or a shop, he has all the right to profit off it. He can employ anyone in any way or charge anything to anyone.
The owner of the land or the factory (owner of the ‘capital’) is at a big advantage. Any capital they own, helps them build more ‘capital’ (ie make more money, buy buying/selling/producing or whatever). Capital leads to capital and less capital leads to less capital. Greg will likely pass his capital onto his children. In other words they will be born with the ability to make more and more capital.
Nowadays ‘Capital’ might not mean ‘shop or factory’, it could mean investments such as property or financial stocks.
The four key problems with capitalism:
- The capitalism model is fundamentally rigged to support people who already own something. They become able to generate more and more (disproportionate) amounts of money
- Capitalists in a capitalist system can disregard the rights of their employees. This creates an even bigger class divide; the vulnerable become even more vulnerable. Workers rights and protection/ minimum wage/ sick leave/ disability allowance are all things that exist because of the government’s involvement in society today.
- The incentive of maximising profit to reinvest for more profit systematically squeezes every last bit of work out of people. I have another post on the systematic problems of capitalism here.
- Capitalism is fundamentally unsustainable. It promotes use of natural resources (which are public, not private). These natural resources can produce high emissions, or that damage the environment by their extraction. Capitalism doesn’t consider the limits to natural resources or cost of emissions in the future (as these costs are also public). The problem is it considers these things ‘free’. The capitalist system say ‘take more than you give’ so taking something for free is winning on that front.
What are the key economic principles of socialism?
In socialism, the government owns the land, the means of production and the rights to profit (on behalf of the people). The government has control over production and consumption (what is made and what is used up). It also has control over what is saved or invested by individuals and businesses by regulating how they businesses operate amongst each other. Regulating is the process of bringing in rules and restrictions to how they operate. By taxation, money is collected from the biggest profiteers to be re-distributed.
Socialism in modern day form
Most western democracies lie somewhere in-between the versions of socialism and capitalism described. The system is fundamentally capitalist, but there is also regulation that prescribes safe working conditions, minimum wage, taxes, laws, things like that. There are also social securities for example benefits for people who can’t find a job, healthcare for those who are unemployed etc. The difference between societies is in how much regulation and welfare exist. Sweden and France have more welfare than the UK and the USA for example.
Does socialism exist today? Does it work?
Socialism exists in many different forms and ways today (some successful and others definitely not). Unfortunately, the biggest most famous examples of countries with complete, traditionally socialist governments were all also brutal dictatorships – generally not considered good at all. See my post on socialism – does it work? .
Modern forms of socialism (in other words socialism that exists within capitalist structures) is extremely successful. Think of the economic powers of Scandinavia, Germany and France among others who all have very strong welfare systems.
How does Covid-19 show the benefits of socialist states?
Covid changed the narrative on welfare and government intervention. A big welfare net proved necessary in 2020 when covid-19 disrupted the status quo. This net was essential to:
- Provide enough money for people who lost their jobs to afford food
- Loan or give money to businesses so that they could keep trading and ‘keep the economy going’
- Invest in massive amount of PPE (face masks, visors, vests) to protect front line workers
- To buy vaccines.
As soon as there’s any disruption to society, socialist states became essential. Without the big safety net of a big government to provide income/food/shelter/business loans in any natural disaster, global pandemic or financial crisis, people will starve. Look at how big the safety net needed to be during the pandemic here. About £400 billion worth!
Those circumstances show that at the end of the day, everyone does rely on a very strong welfare system as security. The government always steps in in times of crisis, so businesses are hypocritical to resent regulation and taxation during ‘good times’. Large multinational corporations, who have grown out of capitalism are so big that they can get away with paying very little tax. This means the money going into the social pot does not come from the richest of the rich but from the ‘fairly’ rich. The taxation system does not work as it should which stunts what socialist measures are able to achieve.
In summary, socialism supports common ownership of public goods, and common ownership of wealth. It doesn’t aim for maximum profit, but for slower improvement of the livelihood of its people. In modern day, western (capitalist) societies, socialism reflects the safety net and the amount of welfare a state provides.
This post has described what socialism is, the ideals and the basic economics and how it developed. I hope this post is helpful? please let me know by commenting on this post! this is a new site, I’d love to ‘meet’ you!