SocialismSocialism

What is SocialismWhat is Socialism

An economic theory or system in An economic theory or system in which the means of production, which the means of production, distribution, and exchange are owned distribution, and exchange are owned by the community collectively, by the community collectively, usually through the state. It is usually through the state. It is characterized by production for use characterized by production for use rather than profit, by equality of rather than profit, by equality of individual wealth, by the absence of individual wealth, by the absence of competitive economic activity competitive economic activity

What is SocialismWhat is Socialism

The ownership of the means of production 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 by all of society with management and control delegated to those who operate/use the means of production.

Economic Planning Economic Planning

Economic planning 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 PlanningEconomic Planning

Economic planning is not synonymous with the concept of a command economy, which existed in the Soviet Union, 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

Economy of Soviet Union Economy of Soviet Union 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. Critics of both left and right persuasions have argued that the economy was plagued by incentive-related problems; claiming, for instance, that the system incentivized enterprise managers to underreport their unit's productive capacities so that their quotas would be easier to achieve, especially since the manager's bonuses were linked to the fulfillment of quotas.

Characteristics Characteristics

Allocation through political control. In contrast with systems where prices determined allocation of resources, in the Soviet Union, allocation, particularly of means of production was determined by the bureaucracy. The prices that were constructed were done so 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.

Characteristics Characteristics

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.

Characteristics Characteristics

Clearing goods by planning : if a surplus of a product was 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.

SocialismSocialism

Ancient roots – Judeo-Christian belief Ancient roots – Judeo-Christian belief in the common good, which takes in the common good, which takes precedence over individual desiresprecedence over individual desires

Term “socialism” coined in 1827 by Term “socialism” coined in 1827 by British socialist Robert Owen to British socialist Robert Owen to describe his view of a cooperative describe his view of a cooperative new society.new society.

Socialism’s emergenceSocialism’s emergence

Liberal political parties in 19Liberal political parties in 19thth century century Europe failed to address the Europe failed to address the desperate needs of working people.desperate needs of working people.– Classical liberalism views poverty as an Classical liberalism views poverty as an

individual choice or failure, not the result individual choice or failure, not the result of social structures. Also suspicious of of social structures. Also suspicious of big government.big government.

– Socialism provides a different conception Socialism provides a different conception of individual responsibility & of of individual responsibility & of government.government.

SocialismSocialism

In England, socialism became a In England, socialism became a political movement in 1884, with the political movement in 1884, with the creation of the Fabians, who provided creation of the Fabians, who provided the basis for the new Labour Party. the basis for the new Labour Party. Many Labour governments since, Many Labour governments since, including the including the

government of exgovernment of ex

Prime Minister Prime Minister

Tony Blair.Tony Blair.

Socialism’s principlesSocialism’s principles

egalitarianismegalitarianism or equality.  Humankind or equality.  Humankind will be unified and cooperative, once will be unified and cooperative, once wealth is owned and used for the common wealth is owned and used for the common good. Capitalism exploits the very people good. Capitalism exploits the very people who create society’s wealth.who create society’s wealth.

Moralism. Moralism. Division of rich & poor is evil; Division of rich & poor is evil; capitalism is fundamentally unjust. capitalism is fundamentally unjust. Instead, the ideal future emphasizes Instead, the ideal future emphasizes peace, social justice and true liberty for peace, social justice and true liberty for all.  all. 

Social democracySocial democracy

A variation on socialism that argues A variation on socialism that argues that socialism and democracy can that socialism and democracy can work together. Example: British work together. Example: British Labour Party.Labour Party.

Change comes through peaceful Change comes through peaceful democratic processes like elections.democratic processes like elections.

Democratic governments should Democratic governments should promote economic - as well as promote economic - as well as political - freedom & equality.political - freedom & equality.

Social democracy’s similarities Social democracy’s similarities with Marxismwith Marxism

Sees capitalism as exploitive, leading Sees capitalism as exploitive, leading to social injustice and extreme to social injustice and extreme income inequality.income inequality.

These economic conditions have These economic conditions have adverse effects on ordinary working adverse effects on ordinary working people – in terms of physical health, people – in terms of physical health, psychological well-being, housing, psychological well-being, housing, education, etc.education, etc.

Social democracy’s similarities Social democracy’s similarities with Marxismwith Marxism

Both ask the question: why should Both ask the question: why should those who provide the money those who provide the money (capital) receive all the profits, and (capital) receive all the profits, and those who provide the labor receive those who provide the labor receive none of the profits?none of the profits?

It is labor, after all, that turns raw It is labor, after all, that turns raw materials (including cash) into materials (including cash) into something with greater value.something with greater value.

Social democracy’s differences Social democracy’s differences

from Marxismfrom Marxism Private property not abolished, but the Private property not abolished, but the

public should control the use of property public should control the use of property and make necessities available to all.and make necessities available to all.

Individual rights not abolished but Individual rights not abolished but should complement other important should complement other important values such as concern for others.values such as concern for others.

Change can occur through an Change can occur through an evolutionary process that uses evolutionary process that uses democratic means. democratic means.

Marx’s view of social Marx’s view of social democracydemocracy

Karl Marx said social democrats were Karl Marx said social democrats were naive to think that “enlightened naive to think that “enlightened capitalists” would join with workers capitalists” would join with workers to form a new society. to form a new society.

Violent revolution was inevitable.Violent revolution was inevitable.

Karl MarxKarl Marx

German political thinker in 19German political thinker in 19thth century.century.

Did most of his work in Britain.Did most of his work in Britain. Influenced by German philosopher Influenced by German philosopher

Hegel.Hegel. Published Published Communist ManifestoCommunist Manifesto in in

1848 with co-author Frederick Engels.1848 with co-author Frederick Engels. Wrote multi-volume Wrote multi-volume CapitalCapital ( (Das Das

Kapital)Kapital), starting in 1867., starting in 1867.

Karl MarxKarl Marx

Studied British economic records for Studied British economic records for 20 years to develop theory that 20 years to develop theory that everything is based on the economic everything is based on the economic system: politics,system: politics,

law, social structures, law, social structures,

family relations, family relations,

even religious belief.even religious belief.

DefineDefine

Bourgeois Bourgeois

DefineDefine

Bourgeois: Bourgeois: modern capitalists modern capitalists who own the means of who own the means of production and therefore get to production and therefore get to keep all the profits.keep all the profits.

Today, this would include major Today, this would include major stockholders in corporations.stockholders in corporations.

DefineDefine

ProletariansProletarians

DefineDefine

ProletariansProletarians: modern wage : modern wage laborers who sell their labor to laborers who sell their labor to live and don’t get any of the live and don’t get any of the profits that they help to create.profits that they help to create.

This includes everyone who is not a This includes everyone who is not a stockholder or owner of capital, stockholder or owner of capital, even professionals who work for a even professionals who work for a salary.salary.

Karl Marx’s key ideasKarl Marx’s key ideas

Economic systems go through historic Economic systems go through historic cycles. Over time, an economic system cycles. Over time, an economic system becomes rigid and cannot adjust to new becomes rigid and cannot adjust to new technologies, so a new system emerges, technologies, so a new system emerges, with new class relations and oppression. with new class relations and oppression.

Someday, a perfect classless society will Someday, a perfect classless society will emerge and there will be no further cycles.emerge and there will be no further cycles.

Marx’s key ideasMarx’s key ideas

1. Slave system gave way to feudal 1. Slave system gave way to feudal economyeconomy

2. Feudal economy broke down with 2. Feudal economy broke down with growth of manufacturing, towns, growth of manufacturing, towns, navigation & transportation, navigation & transportation, emergence of middle classemergence of middle class

3. Industrial capitalism emerged, with 3. Industrial capitalism emerged, with only two classes: proletariat and only two classes: proletariat and bourgeoisie. bourgeoisie.

Critics of Socialistic Critics of Socialistic EconomyEconomy

Market economists generally criticise socialism for eliminating the free market and its price signals, which they consider necessary for rational economic calculation. They also consider that it causes lack of incentive. They believe that these problems lead to a slower rate of technological advance and a slower rate of growth of GDP.

Critics Critics

Austrian school economists, such as Friedrich Hayek and Ludwig Von Mises, have argued that the elimination of private ownership of the means of production 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. 

Critics Critics

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