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Socialism is a populist economic and political system based on collective, common, or public ownership of the means of production. These means of production include machines, tools, and factories used to produce goods intended to directly satisfy human needs.



Unlike capitalism, where business owners control the means of production and pay workers to use those means, socialism involves shared ownership and control by the working class.

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In a pure socialist system, all decisions about production and distribution are made by a collective controlled by a central planning or government agency. Workers’ cooperatives are also a form of socialized production.

Socialist systems have strong welfare systems and social safety nets, and people rely on the state for everything from food to health care. The state determines the level of production and prices of these products and services.

Socialists argued that common ownership of resources and central planning ensured equal distribution of goods and services and a just society.

In socialism, common property can be formed through technocratic, oligarchic, totalitarian, democratic and even voluntary rule. A prime historical example of a socialist country, albeit ruled by communists, is the former Union of Soviet Socialist Republics (USSR), also known as the Soviet Union.

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Because of its practical difficulties and poor track record, socialism is sometimes referred to as a utopian or “post-scarcity” system, although modern advocates believe it works if implemented properly.

They argue that socialism creates equality and provides security – the value of a worker does not come from the value of what they produce, but from the time they work – while capitalism exploits workers for the benefit of the rich.

Although socialism requires collective or common ownership of the means of production, it does not mean that there is no private ownership of private property. Thus, corporations and factories are distributed among members of society, but individuals and households still own their personal goods.


Socialism dates back to the earliest human civilizations as a system of shared resources and collective production. Tribal or tribe-based societies often work for the common good and work together to produce enough food and supplies for the entire population.

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Collective farming has existed for thousands of years. This was replaced in many places by a kind of feudal system where landless nobles (lords) ruled over landless laboring peasants (serfs).

The intellectual roots of socialism go back to Plato’s Republic, where it describes a collective society. Centuries later, Thomas More’s Utopia reflected Plato’s ideas in his description of an imaginary island where people lived and worked together.

Socialism was a direct response to the Industrial Revolution, which brought great economic and social change to Great Britain and the world. As industrialists grew richer from the labor of increasingly poor workers, socialism emerged as an alternative to capitalism that could improve the lives of the working class.

In the late 18th and early 19th centuries, under capitalist economies, Western European countries experienced high rates of industrial production and complex economic growth. Some individuals and families became rich quickly, while others fell into poverty. Capitalism has created income inequality and exacerbated other social concerns.

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The most famous early socialist thinkers were Robert Owen and Henri de Saint-Simon, later Karl Marx, and then Vladimir Lenin. Lenin was the first to express the ideas of the early socialists and helped bring socialist planning to the national level in Russia after the Bolshevik Revolution in 1917.

After the failure of socialist central planning in the 20th century in the former Soviet Union and Maoist China, many modern socialists have adapted a system of greater regulation and distribution, sometimes called market socialism. or democratic socialism.

Capitalist economies (now often synonymous with free markets or market economies) and socialist economies are distinguished by their rationale for ownership and production structures.


Socialists and free market economists tend to disagree on basic economics, such as the scope of supply and demand, their proper alignment, and how goods are produced.

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In practical terms, socialism and free market capitalism are often divided into two main issues: property rights and control of production. In a capitalist economy, individuals and businesses own the means of production and have the right to profit from them. The right to private property is taken very seriously and applies to almost everything.

In a pure socialist economy, the community owns and controls the means of production; personal property is allowed, but in the form of consumer goods. Basic services such as health, education and public transport are run by the government for free and financed by taxes.

In a socialist economy, government officials, known as central planners, control the behavior of producers, consumers, savers, borrowers, and investors by seizing and regulating trade, regulating capital flows, and other resources. In a free market economy, trade is voluntary or unregulated. However, there are many other ways of coordinating production in a collective way that do not destroy such dominant control and individual autonomy.

The market economy relies on the individual actions of self-determining individuals to determine production, distribution, and consumption. Decisions about what, when, and how to produce are made privately and coordinated through a self-adjusting price system, with prices determined by the laws of supply and demand.

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Proponents argue that freely fluctuating market prices direct resources to the most efficient ends. Profits are encouraged and more production is encouraged.

Socialist economies rely on the government or worker cooperatives to manage production and distribution. Consumption is regulated, but part is left to the discretion of individuals. The state determines how to use basic resources and taxes them to redistribute wealth.

Socialist economic thinkers consider many private economic activities, such as arbitrage or leverage, to be irrational because they do not generate immediate consumption or use. But Marx saw capitalism as full of contradictions, class conflicts, and self-destructive competition. As a result, he saw socialism as the logical next stage in human political economy.


At the center of the debate between socialism and capitalism are many philosophical questions: What is the role of government? What are human rights? What role should equality and social justice play?

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Communism and socialism are umbrella terms for two leftist schools of economic thought. Both are opposed to capitalism, but socialism predates the Communist Manifesto published in 1848 by Marx and Friedrich Engels by several decades.

Both are economic philosophies that emphasize public property, especially the means of production and the distribution and exchange of goods in society.

And both philosophies are opposed to free market capitalism, which exploits workers and creates a gap between rich and poor.

However, there are differences between socialism and communism. In fact, communism can be considered a strict and complete version of socialism.

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In communism, all property is common property; no private property. Even under socialism, individuals can own private property.

Marx predicted that a violent uprising of the workers against the middle and upper classes would create a communist state, while socialists sought change and reform without overthrowing the prevailing social and political order.

And according to communist theory, workers should be given what they need, while in socialist theory, they should be paid for their contribution to the economy.


There are many arguments between socialists and capitalists. Socialists see capitalism and the free market as unfair and potentially unsustainable. Most socialists argue that market capitalism cannot provide adequate livelihoods for the lower classes. They claim that greedy owners withhold wages and try to keep the profits for themselves.

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Proponents of market capitalism argue that socialist economies cannot effectively allocate scarce resources without real market prices. They argue that the resulting scarcity, excess, and political corruption will lead to more poverty, not less. In general, they argue that socialism is impractical and ineffective, and suffers from two main problems in particular.

The first problem with socialism, the so-called “problem of incentives,” is that no one wants to be a sanitation worker or wash windows in skyscrapers. That is, socialist planners cannot induce workers to accept dangerous or inconvenient jobs without violating equality of outcomes.

The calculation problem is more serious, a concept derived from the 1920 article by economist Ludwig von Mises, Economic Calculation in the Socialist Union.

Socialists, Mises wrote, could not make true economic calculations without a price mechanism. No true accounting can be done without proper factor costing. Without futures markets, capital would never be reorganized over time.

Capitalism Vs. Socialism

Although socialism and capitalism seem to be opposites, most capitalist economies today have some socialist aspects. Elements of a market economy and a socialist economy can be combined in a mixed economy.

In fact, most modern countries operate with a mixed economic system; public and private individuals affect production and distribution.

Economist and social theorist Hans-Hermann Hoppe said that there are only two archetypes of economic activity – socialism and capitalism, and


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