Capitalism is an economic systembased on the private ownership of capital goods and the means of production, with the creation of goods and services for profit.[1][2]Elements central to capitalism include capital accumulation, competitive markets, and a price system.[3]

There are multiple variants of capitalism, including laissez-faire, welfare capitalism, and state capitalism. Capitalism is considered to have been applied in a variety of historical cases, varying in time, geography, politics, and culture.[4]There is general agreement that capitalism became dominant in the Western worldfollowing the demise of feudalism.[5]

Economists (including political economists) and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree to which government does not have control over markets (laissez-faire), as well as the importance of property rights.[6][7]Most political economists emphasize private property as well, in addition to power relations, wage labor, class, and the uniqueness of capitalism as a historical formation.[8]The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy. Many states have what are termed mixed economies, referring to the varying degree of planned and market-drivenelements in an economic system.[8]

In the 20th century defenders of the capitalist system often replaced the terms capitalism with phrases such as free enterprise and private enterprise and capitalistwith investor or rentier in reaction to the negative connotations sometimes associated with capitalism.[9]

The term capitalism, in its modern sense, comes from the writings of Karl Marx.[4][10]

There are a number of different elements in the capitalist socio-economic system.

Capitalism is defined as a social and economic system where capital assets are mainly owned and controlled by private persons, where labor is purchased for money wages, capital gains accrue to private owners, and the price mechanism is utilized to allocate capital goods between uses. The extent to which the price mechanism is used, the degree of competitiveness, and government intervention in markets distinguish exact forms of capitalism.[11]

There are different variations of capitalism which have different relationships to markets and the state. In free-market and Laissez-faireforms of capitalism, markets are utilized most extensively with minimal or no regulation over the pricing mechanism. In interventionistand mixed economies, markets continue to play a dominant role but are regulated to some extent by government in order to correct market failures, promote social welfare, conserve natural resources, and fund defense and public safety. In state capitalist systems, markets are relied upon the least, with the state relying heavily on state-owned enterprises or indirect economic planning to accumulate capital.

Capitalism and capitalist economics is generally considered to be the opposite of socialism, which contrasts with all forms of capitalism in the following ways: social ownership of the means of production, where returns on the means of production accrue to society at large, and goods and services are produced directly for their utility (as opposed to being produced by profit-seeking businesses).

[edit] Factors of production

A product is any good produced for exchange on a market. A commodity refers to any good exchanged in a market, but more recently refers solely to standard products such as raw materials.

There are two types of products:

• Capital goods (or the means of production including intermediate goods, i.e., raw materials, tools, industrial machines, vehicles, and factories)
• consumer goodscapital goods are used to produce consumer goods (e.g., televisions, cars, computers, houses) to be sold to others.

The three inputs required for production are:

• Labor (including human capital)
• Land (i.e., natural resources, which exist prior to human beings) and
• Capital goods

Capitalism entails the private ownership of the latter two — natural resources and capital goods — by a class of owners called capitalists, either individually, collectively or through a state apparatus that operates to maximize profits or that serves the interests of capital owners.

[edit] Money, capital, and accumulation

Money was primarily a standardized medium of exchange, and final means of payment, that serves to measure the value of all goods and commodities in a standard of value. It is an abstraction of economic value and medium of exchange that eliminates the cumbersome system of barter by separating the transactions involved in the exchange of products, thus greatly facilitating specialization and trade through encouraging the exchange of commodities. Capitalism involves the further abstraction of money into other exchangeable assets and the accumulation of money through ownership, exchange, interest and various other financial instruments.

Capital in this sense refers to money used to buy something only in order to sell it again to realize a financial profit.

The accumulation of capital refers to the process of "making money", or growing an initial sum of money through investment in production. Capitalism is based around the accumulation of capital, whereby financial capital is invested in order to realize a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the law of value.

[edit] Capital and financial markets

The defining feature of capitalist markets, in contrast to markets and exchange in pre-capitalist societies like feudalism, is the existence of a market for capital goods (the means of production), meaning exchange-relations (business relationships) exist within the production process. Additionally, capitalism features a market for labor. This distinguishes the capitalist market from pre-capitalist societies which generally only contained market exchange for final goods and secondary goods. The "market" in capitalism refers to capital marketsand financial markets.

Capitalism is the system of raising, conserving and spending a set monetary value in a specified market. There are three main markets in a basic capitalistic economy: labor, goods and services, and financial. Labor markets (people) make products and get paid for work by the goods and services market (companies, firms, or corporations, etc.) which then sells the products back to the laborers. However, both of the first two markets pay into and receive benefits from the financial market, which handles and regulates the actual money in the economic system. This includes banks, credit-unions, stock exchanges, etc. From a monetary standpoint, governments control just how much money is in circulation worldwide, which can play a role on how money is spent in one's own country.

[edit] Wage labor and class structure

Wage labor refers to the class-structure of capitalism, whereby workers receive either a wage or a salary, and owners receive the profitsgenerated by the factors of production employed in the production of economic value. Individuals who possess and supply financial capital to productive ventures become owners, either jointly (as shareholders) or individually. In Marxian economics these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers to an employer of producers, and eventually came to refer to owners of the means of production.[9]The term capitalist is not generally used by supporters of mainstream economics.

"Workers" includes those who expend both manual and mental (or creative) labor in production, where production does not simply mean physical production but refers to the production of both tangible and intangibleeconomic value. "Capitalists" are individuals who derive income from investments.

Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making products or services by applying labor power to the means of production.[12][13]

[edit] Macroeconomics

Macroeconomics keeps its eyes on things such as inflation: the rate at which money loses its value over time; growth: how much money a government has and how quickly it accrues money; unemployment, and rates of trade between other countries. Whereas microeconomics deals with individual firms, people, and other institutions that work within a set frame work of rules to balance prices and the workings of a singular government.

Both micro and macroeconomics work together to form a single set of evolving rules and regulations. Governments (the macroeconomic side) set both national and international regulations that keep track of prices and corporations' (microeconomics) growth rates, set prices, and trade, while the corporations influence what federal laws are set.[14][15][16]

[edit] Types of capitalism

There are many variants of capitalism in existence that differ according to country and region. They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominately market-based allocation of resources, and they are structured upon the accumulation of capital. The major forms of capitalism are listed below:

[edit] MercantilismMain articles: Mercantilism and Protectionism

Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (Britain, France, etc.). Mercantilism holds that the wealth of a nation is increased through a positive balance of trade with other nations, and corresponds to the phase of capitalist development called the Primitive accumulation of capital.

[edit] Free-market capitalismSee also: Free marketand Laissez-faire

Free-market capitalism refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly-competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market capitalism where the role of the state is limited to protecting property rights.

[edit] Social-market economyMain articles: Social market and Nordic model

A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rightsthrough national collective bargaining arrangements. This model is prominent in Western and Northern European countries, albeit in slightly different configurations. The vast majority of enterprises are privately-owned in this economic model.

Rhine capitalism refers to the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.

[edit] State capitalismMain article: State capitalism

State capitalism consists of state ownership of the means of production within a state, and the organization of state enterprises as commercial, profit-seeking businesses. The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth.

According to Aldo Musacchio, a professor at Harvard Business School, it is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy, through either direct ownership or various subsidies. Musacchio also emphasizes the difference between today's state capitalism and its predecessors. Gone are the days when governments appointed bureaucrats to run companies. The world's largest state-owned enterprises are traded on the public markets and kept in good health by large institutional investors.[17]

[edit] Corporate capitalismMain article: Corporate capitalism See also: State monopoly capitalismand Crony capitalism

Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations. State-monopoly capitalism was originally a Marxist concept referring to a form of corporate capitalism in which state policy is utilized to benefit and promote the interests of dominant or established corporations by shielding them from competitive pressures or by providing them with subsidies.[citation needed]

[edit] Mixed economyMain article: Mixed economy See also: Economic interventionism

A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies, such as France under dirigisme, also featured a degree of indirect economic planning over a largely capitalist-based economy.

Most capitalist economies are defined as "mixed economies" to some degree.

Socialism is an economic systemcharacterised by social ownership of the means of production and co-operative management of the economy.[1]"Social ownership" may refer to cooperativeenterprises, common ownership, state ownership, or citizen ownership of equity.[2] There are many varieties of socialism and there is no single definition encapsulating all of them.[3] They differ in the type of social ownership they advocate, the degree to which they rely on markets or planning, how management is to be organised within productive institutions, and the role of the state in constructing socialism.[4]

A socialist economic system would consist of a system of production and distribution organized to directly satisfy economic demands and human needs, so that goods and services would be produced directly for use instead of for private profit[5] driven by the accumulation of capital. Accounting would be based on physical quantities, a common physical magnitude, or a direct measure of labour-time in place of financial calculation.[6][7]Distribution would be based on the principle to each according to his contribution.

As a political movement, socialism includes a diverse array of political philosophies, ranging from reformism to revolutionary socialism. Proponents of state socialismadvocate the nationalisationof the means of production, distribution and exchange as a strategy for implementing socialism. In contrast, libertarian socialism proposes the traditional view of direct worker's control of the means of production and opposes the use of state power to achieve such an arrangement, opposing both parliamentary politics and state ownership.[citation needed] Democratic socialism seeks to establish socialism through democratic processes and propagate its ideals within the context of a democratic political system.

Modern socialism originatedfrom an 18th-century intellectual and working classpolitical movement that criticised the effects of industrialisationand private property on society. In the early 19th-century, "socialism" referred to any concern for the social problems of capitalism irrespective of the solutions to those problems. However, by the late 19th-century, "socialism" had come to signify opposition to capitalism and advocacy for an alternative system based on some form of social ownership.[8]Marxists expanded further on this, attributing scientific assessmentand democratic planning as critical elements of socialism.

PhilosophyFurther information: Socialist critique of capitalism

Socialists adhere to a diverse range of philosophical views. Marxian socialism is philosophically materialist as well as having at its centre a commitment to historical materialism. Many forms of socialist theory hold that human behaviour is largely shaped by the social environment. In particular, Marxism and socialists inspired by Marxist theory, holds that social mores, values, cultural traits and economic practices are social creations, and are not the result of an immutable natural law.[10] The ultimate goal for Marxist socialists is the emancipation of labour from alienating work. Marxists argue that freeing the individual from the necessity of performing alienating work in order to receive goods would allow people to pursue their own interests and develop their own talents without being coerced into performing labour for others. For Marxists, the stage of economic development in which this is possible, sometimes called full communism, is contingent upon advances in the productive capabilities of society.

Socialists generally argue that capitalism concentrates power and wealth within a small segment of society that controls the means of production and derives its wealth through a system of exploitation. This creates a stratified society based on unequalsocial relations that fails to provide equal opportunities for every individual to maximise their potential,[11] and does not utilise available technology and resources to their maximum potential in the interests of the public.[12]

EconomicsSee also: Socialist economicsand Production for use

The original conception of socialism was an economic system whereby production was organised in a way to directly produce goods and services for their utility (or use-value in classical and Marxian economics): the direct allocation of resources in terms of physical units as opposed to financial calculation and the economic laws of capitalism (see: Law of value), often entailing the end of capitalistic economic categories such as rent, interest, profit and money.[13] In a fully developed socialist economy, production and balancing factor inputs with outputs becomes a technical process to be undertaken by engineers.[14]

Market socialism refers to an array of different economic theories and systems that utilise the market mechanism to organise production and to allocate factor inputs among socially owned enterprises, with the economic surplus (profits) accruing to society in a social dividendas opposed to private capital owners.[15]Variations of market socialism include Libertarianproposals such as mutualism, based on classical economics, and neoclassical economic models such as the Lange Model.

The ownership of the means of production can be based on direct ownership by the users of the productive property through worker cooperative; or commonly ownedby all of society with management and control delegated to those who operate/use the means of production; or public ownership by a state apparatus. Public ownership may refer to the creation of state-owned enterprises, nationalisation, municipalisationor autonomous collective institutions. The fundamental feature of a socialist economy is that publicly owned, worker-run institutions produce goods and services in at least the commanding heights of the economy.[16]

Management and control over the activities of enterprises are based on self-management and self-governance, with equal power-relations in the workplace to maximise occupational autonomy. A socialist form of organisation 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.[17]

The role and use of money in a hypothetical socialist economy is a contested issue. Socialists including Karl Marx, Robert Owen, Pierre-Joseph Proudhon and John Stuart Mill advocated various forms of labour vouchersor labour-credits, which like money would be used to acquire articles of consumption, but unlike money, they are unable to become capital and would not be used to allocate resources within the production process. Bolshevik revolutionary Leon Trotsky argued that, following a socialist revolution, money could not be arbitrarily abolished. Money had to exhaust its "historic mission" (continue to be used until it became redundant), and then would be transformed into bookkeeping receipts for statisticians, and only in the more distant future would it might not be required even for that role.[18]

"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."

— Albert Einstein, Why Socialism?, 1949[19]

Planned economyMain article: Planned economy

A planned economy is a type of economy consisting of a mixture of public ownership of the means of production and the coordination of production and distribution through economic planning. There are two major types of planning: decentralized-planning and centralized-planning. Enrico Baroneprovided a comprehensive theoretical framework for a planned socialist economy. In his model, assuming perfect computation techniques, simultaneous equations relating inputs and outputs to ratios of equivalence would provide appropriate valuations in order to balance supply and demand.[20]

The most prominent example of a planned economy was the economic system of the Soviet Union, and as such, the centralised-planned economic model is usually associated with the Communist states of the 20th century, where it was combined with a single-party political system. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. (See also: Analysis of Soviet-type economic planning). The economic systems of the Soviet Union and the Eastern Bloc are further classified as command economies, which are defined as systems where economic coordination is undertaken by commands, directives and production targets.[21]Studies by economists of various political persuasions on the actual functioning of the Soviet economy indicate that it was not actually a planned economy. Instead of conscious planning, the Soviet economy was based on a process whereby the plan was modified by localized agents and the original plans went largely unfulfilled. Planning agencies, ministries and enterprises all adapted and bargained with each other during the formulation of the plan as opposed to following a plan passed down from a higher authority, leading some economists to suggest that planning did not actually take place within the Soviet economy and that a better description would be an "administered" or "managed" economy.[22]

Although central planning was largely supported by Marxist Leninists, some factions within the Soviet Union before the rise of Stalinism held positions contrary to central planning. Leon Trotsky rejected central planning in favor of decentralized planning. He argued that central planners, regardless of their intellectual capacity, would be unable to coordinate effectively all economic activity within an economy because they operated without the input and tacit knowledge embodied by the participation of the millions of people who in the economy. As a result, central planners would be unable to respond to local economic conditions.[23]

Various economists and political theorists, including Richard D. Wolff and Stephen Resnick, have criticised the notion that the Soviet-style planned economies represented a type of socialist economy. This analysis highlights the fact that the Soviet economy was structured upon the accumulation of capital and the extraction of surplus value from the working class by the planning agency in order to reinvest the surplus in new production in a perpetual cycle – or to distribute to managers and senior officials in the form of bonuses, indicating the Soviet Union (and other Soviet-type economies) were in reality state capitalist economies.[24]Other socialists have focused their analyses on the lack of self-management, the continued existence of financial calculation and the existence of a bureaucratic elite based on hierarchical and centralised powers of authority in the Soviet model, leading them to conclude that the Soviet system was not socialist, instead categorising it as bureaucratic collectivism, state capitalism or deformed workers' states.

Self-managed economySee also: Decentralized planningand Workers' self-management

A self-managed, decentralised economy is based upon autonomous self-regulating economic units and a decentralised mechanism of resource allocation and decision-making. This model has found support in notable classical and neoclassical economists including Alfred Marshall, John Stuart Mill and Jaroslav Vanek. There are numerous variations of self-management, including labour-managed firms and worker-managed firms. The goals of self-management are to eliminate exploitation and reduce alienation.[25]

One such system is the cooperative economy, a largely free market economy in which workers manage the firms and democratically determine remuneration levels and labour divisions. Productive resources would be legally owned by the cooperative and rented to the workers, who would enjoy usufructrights.[26]Another form of decentralised planning is the use of cybernetics, or the use of computers to manage the allocation of economic inputs. The socialist-run government of Salvador Allende in Chile experimented with Project Cybersyn, a real-time information bridge between the government, state enterprises and consumers.[27]Another, more recent, variant is participatory economics, wherein the economy is planned by decentralised councils of workers and consumers. Workers would be remunerated solely according to effort and sacrifice, so that those engaged in dangerous, uncomfortable, and strenuous work would receive the highest incomes and could thereby work less.[28] A contemporary model for a self-managed, non-market socialism is Pat Devine's model of negotiated coordination. Negotiated coordination is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localised level of production.[29]

Michel Bauwensidentifies the emergence of the open software movement and peer-to-peer production as a new, alternative mode of production to the capitalist economy and centrally planned economy that is based on collaborative self-management, common ownership of resources, and the production of use-values through the free cooperation of producers who have access to distributed capital.[30]

Anarchist communism is a theory of anarchism which advocates the abolition of the state, private property, and capitalism in favour of common ownership of the means of production.[31][32]

The economy of the former Socialist Federal Republic of Yugoslavia established a system based on market-based allocation, social ownership of the means of production and self-management within firms. This system substituted Yugoslavia's Soviet-type central planning with a decentralized, self-managed system after reforms in 1953.[33]Another practical example of worker's self-management was syndicalism as practiced in Catalonia during the Spanish Civil War.

State-directed economySee also: State socialism

State socialism can be used to classify any variety of socialist philosophies that advocates the ownership of the means of production by the state apparatus, either as a transitional stage between capitalism and socialism, or as an end-goal in itself. Typically it refers to a form of technocratic management, whereby technical specialists administer or manage economic enterprises on behalf of society (and the public interest) instead of workers' councils or workplace democracy.

A state-directed economy may refer to a type of mixed economy consisting of public ownership over large industries, as promoted by various Social democratic political parties during the 20th century. This ideology influenced the policies of the British Labour Party during Clement Attlee's administration. In the biography of the 1945 UK Labour Party Prime Minister Clement Attlee, Francis Beckett states: "the government... wanted what would become known as a mixed economy".[34]

Nationalisation in the UK was achieved through compulsory purchase of the industry (i.e. with compensation). British Aerospace was a combination of major aircraft companies British Aircraft Corporation, Hawker Siddeleyand others. British Shipbuilders was a combination of the major shipbuilding companies including Cammell Laird, Govan Shipbuilders, Swan Hunter, and Yarrow Shipbuilders; the nationalisation of the coal mines in 1947 created a coal board charged with running the coal industry commercially so as to be able to meet the interest payable on the bonds which the former mine owners' shares had been converted into.[35][36]

Market socialismMain article: Market socialism

Market socialism consists of publicly owned or cooperatively owned enterprises operating in a market economy. It is a system that utilises the market and monetary prices for the allocation and accounting of the means of production, thereby retaining the process of capital accumulation. The profit generated would be used to directly remunerate employees or finance public institutions.[37] In state-oriented forms of market socialism, in which state enterprises attempt to maximise profit, the profits can be used to fund government programs and services through a social dividend, eliminating or greatly diminishing the need for various forms of taxation that exist in capitalist systems. The neoclassical economist Léon Walrasbelieved that a socialist economy based on state ownership of land and natural resources would provide a means of public finance to make income taxes unnecessary.[38]Yugoslavia implemented a market socialist economy based on cooperatives and worker self-management.

The current economic system in China is formally referred to as a Socialist market economy with Chinese characteristics. It combines a large state sector that comprises the 'commanding heights' of the economy, which are guaranteed their public ownership status by law,[39] with a private sector mainly engaged in commodity production and light industry responsible from anywhere between 33%[40](People's Daily Online 2005) to over 70% of GDP generated in 2005.[41]Although there has been a rapid expansion of private-sector activity since the 1980s, privatisation of state assets was virtually halted and were partially reversed in 2005.[42] The current Chinese economy consists of 150 corporatisedstate-owned enterprises that report directly to China's central government.[43] By 2008, these state-owned corporations had become increasingly dynamic and generated large increases in revenue for the state,[44][45]resulting in a state-sector led recovery during the 2009 financial crises while accounting for most of China's economic growth.[46]However, the Chinese economic model is widely cited as a contemporary form of state capitalism, the major difference between Western capitalism and the Chinese model being the degree of state-ownership of shares in publicly listed corporations.

The Socialist Republic of Vietnam has adopted a similar model after the Doi Moi economic renovation, but slightly differs from the Chinese model in that the Vietnamese government retains firm control over the state sector and strategic industries, but allows for private-sector activity in commodity production.[47]

Social and Political theory

In this context, socialism has been used to refer to a political movement, a political philosophy and a hypothetical form of society these movements aim to achieve. As a result, in a political context socialism has come to refer to the strategy (for achieving a socialist society) or policies promoted by socialist organisations and socialist political parties; all of which have no connection to socialism as a socioeconomic system.

MarxismMain articles: Marxism and Socialism (Marxism)

"At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms– with the property relations within the framework of which they have operated hitherto. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.“ -Karl Marx, Critique of the Gotha Program[48]

Part of a series on Marxism Theoretical works[show]

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• A Contribution to the
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  Manuscripts of 1844
• Theses on Feuerbach

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The writings of Karl Marx provided the basis for the development of Marxist political theory and Marxian economics.

In the most influential of all economic theories on socialist thought, Karl Marx and Friedrich Engels argued that socialism would emerge out of historical necessity as capitalism rendered itself obsolete and unsustainable from increasing internal contradictions emerging from the development of the productive forces and technology. It was these advances in the productive forces combined with the old social relations of production of capitalism that would generate contradictions, leading to working-class consciousness.[49]

Marx and Engels held the view that the consciousness of those who earn a wage or salary (the working class in the broadest Marxist sense) would be moulded by their conditions of wage slavery, leading to a tendency to seek their freedom or emancipationby overthrowing ownership of the means of production by capitalists, and consequently, overthrowing the state that upheld this economic order. For Marx and Engels, conditions determine consciousness and ending the role of the capitalist class leads eventually to a classless society in which the state would wither away.

The Marxist conception of socialism is that of a specific historical phase that will displace capitalism and precede communism. The major characteristics of socialism (particularly as conceived by Marx and Engels after the Paris Commune of 1871) are that the proletariat will control the means of production through a workers' stateerected by the workers in their interests. Economic activity would still be organised through the use of incentive systems and social classes would still exist, but to a lesser and diminishing extent than under capitalism.

For orthodox Marxists, socialism is the lower stage of communism based on the principle of "from each according to his ability, to each according to his contribution" while upper stage communism is based on the principle of "from each according to his ability, to each according to his need"; the upper stage becoming possible only after the socialist stage further develops economic efficiency and the automation of production has led to a superabundance of goods and services.[50][51]

Marx argued that the material productive forces (in industry and commerce) brought into existence by capitalism predicated a cooperative society since production had become a mass social, collective activity of the working class to create commodities but with private ownership (the relations of production or property relations). This conflict between collective effort in large factories and private ownership would bring about a conscious desire in the working class to establish collective ownership commensurate with the collective efforts their daily experience.[48]

Che Guevara and Mao Zedong sought socialism based on the rural peasantry rather than the urban working class. Che Guevara attempted to inspire the peasants of Bolivia by his own example into a change of consciousness. Guevara said in 1965:

Socialism cannot exist without a change in consciousness resulting in a new fraternal attitude toward humanity, both at an individual level, within the societies where socialism is being built or has been built, and on a world scale, with regard to all peoples suffering from imperialistoppression.[52]

Evolutionary and Institutional economics

Thorstein Veblen, a leading American institutionalistand evolutionary economist, argued that a subset of the working-class, the technical specialists and engineers, would become the driving force behind socioeconomic change within capitalism. There is an antagonism between industry and business, where industry refers to the process of producing goods and services and business is defined as the process of "making money". Thorstein Veblen saw socialism as an immediate stage in an ongoing evolutionary process in economics that would result from the natural decay of the system of business enterprise. In contrast to Marx, he did not believe socialism would be the result of political struggle or political revolution by the working class as a whole and did not believe it to be the ultimate goal of humanity.[53] But like Marx, Veblen saw technology as the underlying force driving social change.

Joseph Schumpeter viewed intellectuals and the intelligentsia as the group within society that would gradually move society toward socialism. Socialism would be partially a result of socio-economic evolution, the growth of workers' self-management, industrial democracy and social planning, and partially from political pressure on the part of intellectuals in Western society.[54]

Role of the state

Socialists have different perspectives on the state and its role in revolutionary struggles, constructing socialism, and within an established socialist economy.

Preceding the Bolshevik-led revolution in Russia, many socialists, including reformists, orthodox Marxist currents such as council communism and the Mensheviks, and Anarchists / Libertarian socialists criticised the idea of using the state to conduct central planning and own the means of production as a way to establish socialism.[55]

Joseph Schumpeter rejected the association of socialism and social ownership with state ownership over the means of production, because the state as it exists in its current form is a product of capitalist society and cannot be transplanted into a different institutional framework. Schumpeter argued that, just as there were different institutions within feudalism, there will be different institutions with different functions within socialism. The state, along with the concept of property and taxation, are concepts exclusive to commercial society (capitalism); placing them within the context of a future socialist society amounts to a distortion of these concepts.[56]

Utopian versus scientificMain articles: Utopian socialism and Scientific socialism

Utopian socialism is a label ascribed to earlier socialists whose emphasis was on designing or imagining ideal forms of society. A utopian socialist is based on an idealist philosophy, where an ideal is envisioned and then worked towards, in contrast to Marxisms materialist methodology.

For Marxists, the development of capitalism in western Europe provided a material basis for the possibility of bringing about socialism because, according to the Communist Manifesto, "What the bourgeoisie produces above all is its own grave diggers",[57]namely the working class, which must become conscious of the historical objectives set it by society.

Reform versus revolutionMain articles: Revolutionary socialism and Reformism

Revolutionary socialists believe that a social revolution is necessary to effect structural changes to the socio-economic structure of society. Among revolutionary socialists there are differences in strategy, theory and the definition of "revolution". Orthodox Maxists and Left Communists take an Impossibiliststance, believing revolution should be spontaneous as a result of contradictions in society resulting from technological changes in the productive forces. In contrast, Marxist-Leninistsand most Trotskyists advocate Vanguardism: the creation of a democratic centralist revolutionary Vanguard party led by a cadre of professional revolutionaries to overthrow the capitalist state and, eventually, the institution of the state altogether. "Revolution" is not necessarily defined by revolutionary socialists as violent insurrection,[58] but as a complete dismantling and rapid transformation of all areas of class society led by the majority of the masses: the working class.

Reformism is generally associated with social democracy and gradualist democratic socialism. Reformism is the belief that socialists should stand in parliamentary elections within capitalist society, and if elected, utilize the machinery of government to pass political and social reforms for the purposes of ameliorating the instabilities and inequities of capitalism.

Politics

The major socialist political movements are described below. Independent socialist theorists, [utopian socialist] authors, and academic supporters of socialism may not be represented in these movements. Some political groups have called themselves socialist while holding views that some consider antithetical to socialism. The term socialist has also been used by some politicians on the political right as an epithet against certain individuals who do not consider themselves to be socialists, and against policies that are not considered socialist by their proponents.

There are many variations of socialism and as such there is no single definition encapsulating all of socialism. However there have been common elements identified by scholars.[59]Angelo S. Rappoport in his Dictionary of Socialism (1924) analysed forty definitions of socialism to conclude that common elements of socialism include: general criticisms of the social effects of private ownership and control of capital - as being the cause of poverty, low wages, unemployment, economic and social inequality, and a lack of economic security; a general view that the solution to these problems is a form of collective control over the means of production, distributionand exchange (the degree and means of control vary amongst socialist movements); agreement that the outcome of this collective control should be a society based upon social justice, including social equality, economic protection of people, and should provide a more satisfying life for most people.[60]Bhikhu Parekh in The Concepts of Socialism (1975) identifies four core principles of socialism and particularly socialist society: sociality, social responsibility, cooperation, and planning.[61]Michael Freedenin his study Ideologies and Political Theory (1996) states that all socialists share five themes: the first is that socialism posits that society is more than a mere collection of individuals; second, that it considers human welfare a desirable objective; third, that it considers humans by nature to be active and productive; fourth, it holds the belief of human equality; and fifth, that history is progressive and will create positive change on the condition that humans work to achieve such change.[61]

AnarchismMain article: Anarchism

Anarchism is often defined as a political philosophy which holds the state to be undesirable, unnecessary, or harmful.[62][63]However, others argue that while anti-statism is central, it is inadequate to define anarchism.[64]Therefore they argue, alternatively, that anarchism entails opposing authority or hierarchical organization in the conduct of human relations, including, but not only, the state system.[65][66][67][68][69][70][71]Proponents of anarchism, known as "anarchists", advocate stateless societies based on non-hierarchical[66][72][73]voluntary associations.[74][75]Mutualistsadvocate market socialism, collectivist anarchists workers cooperatives and salaries based on the amount of time contributed to production, anarcho-communistsadvocate a direct transition from capitalism to libertarian communism and a gift economy and anarcho-syndicalistsworker's direct action and the general strike.

Libertarian socialismMain article: Libertarian socialism

Libertarian socialism is a non-hierarchical, non-bureaucratic, stateless society without private property in the means of production. Libertarian socialists oppose all coercive forms of social organisation, promote free association in place of government, and oppose the coercive social relations of capitalism, such as wage labor. They oppose hierarchical leadership structures, such as vanguard parties, and most are opposed to using the state to create socialism. Currents within libertarian socialism include Marxist tendencies such as left communism, council communism and autonomism, as well as non-Marxist movements such as social anarchism, Communalism, Participism, and Inclusive Democracy.

Democratic socialismMain article: Democratic socialism

Modern democratic socialism is a broad political movement that seeks to propagate the ideals of socialism within the context of a democratic system. Many democratic socialists support social democracy as a temporary measure to reform the current system, but others support more revolutionary tactics to establish socialism. Conversely, modern social democracy emphasises a program of gradual legislative reform of capitalism in order to make it more equitable and humane, while the theoretical end goal of building a socialist society is either completely forgotten or redefined in a pro-capitalist way. The two movements are widely similar both in terminology and in ideology, although there are a few key differences.

The major difference between social democracy and democratic socialism is the object of their politics: contemporary social democrats support a welfare state and unemployment insurance as a means to "humanize" capitalism, whereas democratic socialists seek to replace capitalism with a socialist economic system, arguing that any attempt to "humanize" capitalism through regulations and welfare policies would distort the market and create economic contradictions.[76]

Democratic socialism generally refers to any political movement that seeks to establish an economy based on economic democracy by and for the working class. Democratic socialists oppose democratic centralism and the revolutionary vanguard party of Leninism. Democratic socialism is difficult to define, and groups of scholars have radically different definitions for the term. Some definitions simply refer to all forms of socialism that follow an electoral, reformist or evolutionary path to socialism, rather than a revolutionary one.[77]

Religious socialismMain articles: Socialism and Islam and Christian socialism

Christian socialism is a broad concept involving an intertwining of the Christian religion with the politics and economic theories of socialism.

Islamic socialism is a term coined by various Muslim leaders to describe a more spiritual form of socialism. Muslim socialists believe that the teachings of the Qur'an and Muhammad are compatible with principles of equality and public ownership drawing inspiration from the early Medina welfare state established by the Prophet Muhammad. Muslim Socialists are more conservative than their western contemporaries and find their roots in Anti-imperialism, anti-colonialismand Arab nationalism. Islamic Socialist leaders believe in Democracy and deriving legitimacy from public mandate as opposed to religious texts.

Buddhist Socialism is another concept that seeks to reduce unnecessary consumption and create harmony while ensuring everyone's basic needs are met.[citation needed]

Social democracyMain article: Social democracy

Social democracy is not itself a socialist system. Rather, traditional social democrats advocated the creation of socialism through political reforms by operating within the existing political system of capitalism. The social democratic movement sought to elect socialists to political office to implement reforms. The modern social democratic movement has abandoned[citation needed] the goal of moving toward a socialist economy and instead advocates for social reforms to improve capitalism, such as a welfare state and unemployment benefits. It is best demonstrated by the economic format which has been used in Sweden, Denmark, Norway, and Finland in the past few decades.[78] This approach has been called the Nordic model.

In the late 20th century, the term "socialist" became used by Third Way social democrats to refer to a set of ethical ideals and values as opposed to a form of socio-economic system. It is used in this way by Anthony Giddens, who rejects conventional definitions and implementations of socialism.[9]Giddens states: "The only common characteristic of socialist doctrines is their ethical content." and says that "Socialism is the pursuit of ideas of social cooperation, universal welfare, and equality - ideas brought together by a condemnation of the evils and injustices of capitalism".[9]However Gidden's Third Way has faced condemnation by left-wing opponents, including anti-Third Way social democrats who denounce Giddens' Third Way for being anti-socialist and pro-capitalist in practice.[79]

SyndicalismMain article: Syndicalism

Syndicalism is a social movement that operates through industrial trade unions and rejects state socialism and the use of establishment politics to establish or promote socialism. They reject using state power to construct a socialist society, favoring strategies such as the General strike. Syndicalists advocate a socialist economy based on federated unions or syndicates of workers who own and manage the means of production.

Some Marxist currents advocate Syndicalism, such as DeLeonism.

HistoryMain article: History of socialism

The term socialism is attributed to Pierre Leroux,[80] and to Marie Roch Louis Reybaud; and in Britain to Robert Owen in 1827, father of the cooperative movement.[81][82]Socialist models and ideas espousing common or public ownership have existed since antiquity. Mazdak, a Persian communal proto-socialist,[83]instituted communal possessions and advocated the public good. And it has been claimed, though controversially, that there were elements of socialist thought in the politics of classical Greek philosophers Plato[84] and Aristotle.[85]

The first advocates of socialism favoured social levelling in order to create a meritocratic or technocraticsociety based upon individual talent. Count Henri de Saint-Simon is regarded as the first individual to coin the term socialism.[86]Saint-Simon was fascinated by the enormous potential of science and technology and advocated a socialist society that would eliminate the disorderly aspects of capitalism and would be based upon equal opportunities.[87][unreliable source?] He advocated the creation of a society in which each person was ranked according to his or her capacities and rewarded according to his or her work.[86]The key focus of Saint-Simon's socialism was on administrative efficiency and industrialism, and a belief that science was the key to progress.[88]

Charles Fourier, influential early French socialist thinker

This was accompanied by a desire to implement a rationally organised economy based on planning and geared towards large-scale scientific and material progress,[86]and thus embodied a desire for a more directed or planned economy. Other early socialist thinkers, such as Thomas Hodgkin and Charles Hall, based their ideas on David Ricardo's economic theories. They reasoned that the equilibrium value of commodities approximated to prices charged by the producer when those commodities were in elastic supply, and that these producer prices corresponded to the embodied labour – the cost of the labour (essentially the wages paid) that was required to produce the commodities. The Ricardian socialists viewed profit, interest and rent as deductions from this exchange-value.[89]

West European social critics, including Robert Owen, Charles Fourier, Pierre-Joseph Proudhon, Louis Blanc, Charles Hall and Saint-Simon, were the first modern socialists who criticised the excessive poverty and inequality of the Industrial Revolution. They advocated reform, with some such as Robert Owen advocating the transformation of society to small communities without private property. Robert Owen's contribution to modern socialism was his understanding that actions and characteristics of individuals were largely determined by the social environment they were raised in and exposed to.[88]On the other hand Charles Fourieradvocated phalanstereswhich were communities that respected individual desires (including sexual preferences), affinities and creativity and saw that work has to be made enjoyable for people.[90] The ideas of Owen and Fourier were tried in practice in numerous intentional communities around Europe and the American continent in the mid-19th century.

Linguistically, the contemporary connotation of the words socialism and communism accorded with the adherents' and opponents' cultural attitude towards religion. In Christian Europe, of the two, communism was believed the atheist way of life. In Protestant England, the word communism was too culturally and aurally close to the Roman Catholic communion rite, hence English atheists denoted themselves socialists.[91]

Friedrich Engels argued that in 1848, at the time when the Communist Manifesto was published, "socialism was respectable on the continent, while communism was not." The Owenites in England and the Fourierists in France were considered "respectable" socialists, while working-class movements that "proclaimed the necessity of total social change" denoted themselves communists. This latter branch of socialism produced the communist work of Étienne Cabet in France and Wilhelm Weitling in Germany.[92]

Etymology

The term "socialism" was created by Henri de Saint-Simon, a founder of utopian socialism. The term "socialism" was created to contrast against the liberal doctrine of "individualism".[93]The original socialists condemned liberal individualism as failing to address social concerns of poverty, social oppression, and gross inequality of wealth.[93]They viewed liberal individualism as degenerating society into supporting selfish egoism and that harmed community life through promoting a society based on competition.[93]They presented socialism as an alternative to liberal individualism, that advocated a society based on cooperation.[93]

First International and Second InternationalMikhail Bakuninspeaking to members of the IWA at the Basel Congress in 1869

The International Workingmen's Association (IWA), also known as the First International, was founded in London in 1864. The IWA held a preliminary conference in 1865, and had its first congress at Geneva in 1866. Due to the wide variety of philosophies present in the First International, there was conflict from the start. The first objections to Marx's came from the Mutualistswho opposed communism and statism. However, shortly after Mikhail Bakuninand his followers (called Collectivistswhile in the International) joined in 1868, the First International became polarised into two camps, with Marx and Bakunin as their respective figureheads.[94] The clearest differences between the groups emerged over their proposed strategies for achieving their visions of socialism. The First International became the first major international forum for the promulgation of socialist ideas.

As the ideas of Marx and Engels took on flesh, particularly in central Europe, socialists sought to unite in an international organisation. In 1889, on the centennial of the French Revolution of 1789, the Second International was founded, with 384 delegates from 20 countries representing about 300 labour and socialist organisations.[95] It was termed the "Socialist International" and Engels was elected honorary president at the third congress in 1893. Anarchists were ejected and not allowed in mainly because of the pressure from marxists.[96]

Jean Jaures Revolutions of 1917–1936Leon Trotsky, Vladimir Lenin, and Lev Kamenev at the Second Communist Party Congress, 1919.

“ If Socialism can only be realized when the intellectual development of all the people permits it, then we shall not see Socialism for at least five hundred years. ”

— Vladimir Lenin, November 1917[97]

By 1917, the patriotism of World War I changed into political radicalismin most of Europe, the United States, and Australia. In February 1917, revolution exploded in Russia. Workers, soldiers and peasants established soviets(councils), the monarchy fell, and a provisional government convoked pending the election of a constituent assembly.

In April of that year, Vladimir Leninarrived in Russia from Switzerland, calling for "All power to the soviets." In October, after his party, the Bolsheviks, had seized power in an October Revolution it won support of most soviets at the second All-Russian Congress of Soviets. As a matter of political pragmatism, Lenin reversed Marx's order of economics over politics, allowing for a political revolution led by a vanguard party of professional revolutionaries rather than a spontaneous establishment of socialist institutions led by a spontaneous uprising of the working class as predicted by Karl Marx.[98] On 25 January 1918, at the Petrograd Soviet, Lenin declared "Long live the world socialist revolution!"[99] He proposed an immediate armistice on all fronts, and transferred the land of the landed proprietors, the crown and the monasteries to the peasant committees without compensation.[100]

On 26 January 1918, the day after assuming executive power, Lenin wrote Draft Regulations on Workers' Control, which granted workers control of businesses with more than five workers and office employees, and access to all books, documents and stocks, and whose decisions were to be "binding upon the owners of the enterprises".[101]Governing through the elected soviets, and in alliance with the peasant-based Left Socialist-Revolutionaries, the Bolshevik government began nationalising banks, industry, and disavowed the national debts of the deposed Romanov royal régime. It sued for peace, withdrawing from World War I, and convoked a Constituent Assembly in which the peasant Socialist-Revolutionary Party (SR) won a majority.[102]

The Constituent Assembly elected Socialist-Revolutionary leader Victor ChernovPresident of a Russian republic, but rejected the Bolshevik proposal that it endorse the Soviet decrees on land, peace and workers' control, and acknowledge the power of the Soviets of Workers', Soldiers' and Peasants' Deputies. The next day, the Bolsheviks declared that the assembly was elected on outdated party lists,[103]and the All-Russian Central Executive Committee of the Soviets dissolved it.[104][105]

Left wing groups which did not agree with the centralization and abandonment of the soviets by the Bolshevik Party led Left-wing uprisings against the Bolsheviks which were a series of rebellions and uprisings against the Bolsheviks led or supported by left wing groups including Socialist Revolutionaries,[106]Left Socialist Revolutionaries, Mensheviks, and anarchists.[107]Within this left wing discontent the most large scale events were the worker´s Kronstadt rebellion[108][109][110]and the anarchist led Revolutionary Insurrectionary Army of Ukraine uprising which controoled an area known as the Free Territory[111][112][113].

The Bolshevik Russian Revolution of January 1918 engendered Communist parties worldwide, and their concomitant revolutions of 1917-23. Few Communists doubted that the Russian success of socialism depended upon successful, working-class socialist revolutions in developed capitalist countries.[114][115]In 1919, Lenin and Trotsky organised the world's Communist parties into a new international association of workers– the Communist International, (Comintern), also called the Third International.

The Russian Revolution also influenced uprisings in other countries around this time. The German Revolution of 1918–1919 resulted in the replacement of Germany's imperial government with a republic. The revolutionary period lasted from November 1918 until the formal establishment of the Weimar Republicin August 1919 and included an episode known as the Bavarian Soviet Republic[116][117][118][119]and the Spartacist uprising. In Italy the events known as the Biennio Rosso[120][121]was characterized by mass strikes, worker manifestations as well as self-management experiments through land and factories occupations. In Turin and Milan, workers councils were formed and many factory occupations took place under the leadership of anarcho-syndicalistsorganized around the Unione Sindacale Italiana[122].

Rosa Luxemburg, prominent Marxist revolutionary, martyr and leader of the German Spartacist uprising, 1919.

By 1920, the Red Army, under its commander Trotsky, had largely defeated the royalist White Armies. In 1921, War Communism was ended and, under the New Economic Policy (NEP), private ownership was allowed for small and medium peasant enterprises. While industry remained largely state-controlled, Lenin acknowledged that the NEP was a necessary capitalist measure for a country unripe for socialism. Profiteering returned in the form of "NEP men" and rich peasants (Kulaks) gained power in the countryside.[123]

In 1922, the fourth congress of the Communist International took up the policy of the United Front, urging Communists to work with rank and file Social Democrats while remaining critical of their leaders, whom they criticised for betraying the working class by supporting the war efforts of their respective capitalist classes. For their part, the social democrats pointed to the dislocation caused by revolution, and later, the growing authoritarianism of the Communist Parties. When the Communist Party of Great Britain applied to affiliate to the Labour Partyin 1920 it was turned down.

In 1923, on seeing the Soviet State's growing coercive power, the dying Lenin said Russia had reverted to "a bourgeois tsarist machine... barely varnished with socialism."[124]After Lenin's death in January 1924, the Communist Party of the Soviet Union – then increasingly under the control of Joseph Stalin – rejected the theory that socialism could not be built solely in the Soviet Union, in favour of the concept of Socialism in One Country. Despite the marginalised Left Opposition's demand for the restoration of Soviet democracy, Stalin developed a bureaucratic, authoritariangovernment, that was condemned by democratic socialists, anarchists and Trotskyists for undermining the initial socialist ideals of the Bolshevik Russian Revolution.[125][126][self-published source?][unreliable source?]

The Russian Revolution of October 1917 brought about the definitive ideological division between Communists as denoted with a capital "С" on the one hand and other communist and socialist trends such as anarcho-communistsand social democrats, on the other. The Left Opposition in the Soviet Union gave rise to Trotskyism which was to remain isolated and insignificant for another fifty years, except in Sri Lanka, where Trotskyism gained the majority and the pro-Moscow wing was expelled from the Communist Party.

In Spain in 1936 , the national anarcho-syndicalisttrade union Confederación Nacional del Trabajo initially refused to join a popular front electoral alliance, and abstention by CNT supporters led to a right wing election victory. But 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 (1936–1939).[127] In response to the army rebellion, an anarchist-inspiredmovement of peasants and workers, supported by armed militias, took control of Barcelona and of large areas of rural Spain where they collectivisedthe land.[128][129]The events known as the Spanish Revolution was a workers' social revolution that began during the outbreak of the Spanish Civil War in 1936 and resulted in the widespread implementation of anarchist and more broadly libertarian socialist organizational principles throughout various portions of the country for two to three years, primarily Catalonia, Aragon, Andalusia, and parts of the Levante. Much of Spain's economy was put under worker control; in anarchist strongholds like Catalonia, the figure was as high as 75%, but lower in areas with heavy Communist Party of Spain influence, as the Soviet-allied party actively resisted attempts at collectivizationenactment. Factories were run through worker committees, agrarian areas became collectivised and run as libertariancommunes. Anarchist historian Sam Dolgoffestimated that about eight million people participated directly or at least indirectly in the Spanish Revolution,[130]which he claimed "came closer to realizing the ideal of the free stateless society on a vast scale than any other revolution in history."[131]

After World War IIJoseph Stalin, leader of the Soviet Union from 1922 to 1953.

In 1951, British Health Minister Aneurin Bevanexpressed the view that, "It is probably true that Western Europe would have gone socialist after the war if Soviet behaviour had not given it too grim a visage. Soviet Communism and Socialism are not yet sufficiently distinguished in many minds."[132]

In 1951, the Socialist International was re-founded by the European social democratic parties. It declared: "Communism has split the International Labour Movementand has set back the realisation of Socialism in many countries for decades... Communism falsely claims a share in the Socialist tradition. In fact it has distorted that tradition beyond recognition. It has built up a rigid theology which is incompatible with the critical spirit of Marxism."[133]

In the postwar years, socialism became increasingly influential throughout the so-called Third World. Countries in Africa, Asia, and Latin America frequently nationalised industries held by foreign owners. The Soviet Union had become a superpower through its adoption of a planned economy, albeit at enormous human cost. This achievement seemed hugely impressive from the outside, and convinced many nationalists in the former colonies, not necessarily communists or even socialists, of the virtues of state planning and state-guided models of social development.

Union of Soviet Socialist Republics

Prior to its dissolution in 1991, the USSR had the second largest economy in the world after the United States.[134]The economy of the Soviet Union was the modern world's first centrally planned economy. It was based on a system of state ownership of industry managed through Gosplan (the State Planning Commission), Gosbank (the State Bank) and the Gossnab (State Commission for Materials and Equipment Supply). Economic planning was conducted through a series of Five-Year Plans. The emphasis was put on a very fast development of heavy industry and the nation became one of the world's top manufacturers of a large number of basic and heavy industrial products, but it lagged behind in the output of light industrial production and consumer durables.

As the Soviet economy grew more complex, it required more and more complex disaggregation of control figures (plan targets) and factory inputs. As it required more communication between the enterprises and the planning ministries, and as the number of enterprises, trusts, and ministries multiplied, the Soviet economy started stagnating. The Soviet economy was increasingly sluggish when it came to responding to change, adapting cost−saving technologies, and providing incentives at all levels to improve growth, productivity and efficiency.

Most information in the Soviet economy flowed from the top down and economic planning was often done based on faulty or outdated information, particularly in sectors with large numbers of consumers. As a result, some goods tended to be under-produced, leading to shortages, while other goods were overproduced and accumulated in storage. Some factories developed a system of barter and either exchanged or shared raw materials and parts, while consumers developed a black market for goods that were particularly sought after but constantly under-produced.

Conceding the weaknesses of their past approaches in solving new problems, the leaders of the late 1980s, headed by Mikhail Gorbachev, were seeking to mould a program of economic reform to galvanise the economy. However, by 1990 the Soviet government had lost control over economic conditions. Government spending increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies to continue operations.

The industrial production system in the Soviet Union suffered a political and economic collapse in 1991, after which two transitions occurred: first from centrally planned to market-based economies, and secondly, from state-ownership to private-ownership of economic enterprises. With the collapse of the Soviet Union, the economic integration of the Soviet republics was dissolved, and overall industrial activity declined substantially.[135] A lasting legacy remains in the physical infrastructure created during decades of combined industrial production practices.

Social democrats in powerMain articles: Social democracy, Welfare state, and Nordic model

The Australian Labor Party, the first social democratic labour party in the world, was formed in 1891. In 1904, Australians elected the first Labor Party prime minister in the world: Chris Watson. In 1945, the British Labour Party, led by Clement Attlee, was elected to office based upon a radical socialist programme. Social Democratic parties dominated post-war politics in countries such as France, Italy, Czechoslovakia, Belgium and Norway. In Sweden, the Social Democratic Party held power from 1936 to 1976, 1982 to 1991, and 1994 to 2006. At one point, France claimed to be the world's most state-controlled capitalist country. The nationalised public utilities included Charbonnages de France (CDF), Electricité de France (EDF), Gaz de France (GDF), Air France, Banque de France, and Régie Nationale des Usines Renault.[136]Post-World War II social democratic governments introduced social reform and wealth redistribution via state welfare and taxation.

United Kingdom Clement Attlee, U.K. Prime Minister, Labour Partygovernment, 1945–51.

In the UK, the Labour Party was influenced by the British social reformer William Beveridge, who had identified five "Giant Evils" afflicting the working class of the pre-war period: "want" (poverty), disease, "ignorance" (lack of access to education), "squalor" (poor housing), and "idleness" (unemployment).[137]Unemployment benefits, national insurance and state pensions were introduced by the 1945 Labour government. Aneurin Bevan, who had introduced the Labour Party's National Health Service in 1948, criticised the Attlee government for not progressing further, demanding economic planning and criticising the implementation of nationalisationfor not empowering the workers with democratic control of operations.

The UK Labour Government nationalised major public utilities such as mines, gas, coal, electricity, rail, iron, steel, and the Bank of England. British Petroleum, privatised in 1987, was officially nationalised in 1951,[138]and there was further government intervention during the 1974–79 Labour Government[139]Anthony Crosland said that in 1956, 25 per cent of British industry was nationalised, and that public employees, including those in nationalised industries, constituted a similar percentage of the country's total employed population.[140]The Labour government, however, did not seek to end capitalism, and the "government had not the smallest intention of bringing in the 'common ownership of the means of production, distribution, and exchange'",[141]Labour re-nationalised steel (1967, British Steel) after the Conservatives denationalised it, and nationalised car production (1976, British Leyland).[142] In 1977, major aircraft companies and shipbuilding were nationalised.

The National Health Service provided taxpayer-funded health care to everyone, free at the point of service.[143]Working-class housing was provided in council housingestates, and university education became available via a school grant system. Ellen Wilkinson, Minister for Education, introduced taxpayer-funded milk in schools, saying, in a 1946 Labour Party conference: "Free milk will be provided in Hoxton and Shoreditch, in Eton and Harrow. What more social equality can you have than that?" Clement Attlee's biographer argued that this policy "contributed enormously to the defeat of childhood illnesses resulting from bad diet. Generations of poor children grew up stronger and healthier, because of this one, small, and inexpensive act of generosity, by the Attlee government".[144]

The "Nordic model" Main article: Nordic model

The Nordic model refers to the economic and social models of the Nordic countries (Denmark, Iceland, Norway, Sweden and Finland). This particular adaptation of the mixed market economy is characterised by more generous welfare states(relative to other developed countries), which are aimed specifically at enhancing individual autonomy, ensuring the universal provision of basic human rights and stabilising the economy. It is distinguished from other welfare states with similar goals by its emphasis on maximising labour force participation, promoting gender equality, egalitarian and extensive benefit levels, large magnitude of redistribution, and liberal use of expansionary fiscal policy.[145]This has included high degrees of labour unionmembership. In 2008, labour union density was 67.5% in Finland, 67.6% in Denmark, and 68.3% in Sweden. In comparison, union membership was 11.9% in the United States and 7.7% in France.[146]The Nordic Model, however, is not a single model with specific components or rules; each of the Nordic countries has its own economic and social models, sometimes with large differences from its neighbours.

Social democrats adopt free market policiesMain article: Third Way (centrism)

Many social democratic parties, particularly after the Cold war, adopted neoliberal-based market policies that include privatisation, liberalisation, deregulation and financialisation; resulting in the abandonment of pursuing the development of moderate socialism in favour of market liberalism. Despite the name, these pro-capitalist policies are radically different from the many non-capitalist free-market socialist theories that have existed throughout history.

In 1959, the German Social Democratic Party adopted the Godesberg Program, rejecting class struggleand Marxism. In 1980, with the rise of conservative neoliberalpoliticians such as Ronald Reagan in the U.S., Margaret Thatcher in Britain, and Brian Mulroney in Canada, the Western welfare state was attacked from within. Monetarists and neoliberalismattacked social welfare systems as impediments to private entrepreneurship at public expense.

In the 1980s and 1990s, western European socialists were pressured to reconcile their socialist economic programmes with a free-market-based communal European economy. In the UK, the Labour Partyleader Neil Kinnock made a passionate and public attack against the party's Militant Tendency at a Labour Party conference, and repudiated the demands of the defeated striking miners after the 1984–1985 strike against pit closures. In 1989, at Stockholm, the 18th Congress of the Socialist International adopted a new Declaration of Principles, saying:

Democratic socialism is an international movement for freedom, social justice, and solidarity. Its goal is to achieve a peaceful world where these basic values can be enhanced and where each individual can live a meaningful life with the full development of his or her personality and talents, and with the guarantee of human and civil rights in a democratic framework of society.[147]

In the 1990s, released from the Left's pressure, the British Labour Party, under Tony Blair, posited policies based upon the free market economy to deliver public services via private contractors. In 1995, the Labour Party re-defined its stance on socialism by re-wording clause IV of its constitution, effectively rejecting socialism by removing any and all references to public, direct worker or municipal ownership of the means of production. In 1995, the British Labour Party revised its political aims: "The Labour Party is a democratic socialist party. It believes that, by the strength of our common endeavour we achieve more than we achieve alone, so as to create, for each of us, the means to realise our true potential, and, for all of us, a community in which power, wealth, and opportunity are in the hands of the many, not the few."[148]

The objectives of the Party of European Socialists, the European Parliament's socialist bloc, are now "to pursue international aims in respect of the principles on which the European Union is based, namely principles of freedom, equality, solidarity, democracy, respect of Human Rights and Fundamental Freedoms, and respect for the Rule of Law." As a result, today, the rallying cry of the French Revolution – "Egalité, Liberté, Fraternité" – which overthrew absolutism and ushered industrialisation into French society, are promoted as essential socialist values.[149]

Early 2000s

Those who championed socialism in its various Marxist and class struggle forms sought out other arenas than the parties of social democracy at the turn of the 21st century. Anti-capitalismand anti-globalization movements rose to prominence particularly through events such as the opposition to the WTO meeting of 1999 in Seattle. Socialist-inspired groups played an important role in these new movements, which nevertheless embraced much broader layers of the population, and were championed by figures such as Noam Chomsky. The 2003 invasion of Iraq led to a significant anti-war movement in which socialists argued their case.

The Financial crisis of 2007–2010 led to mainstream discussions as to whether "Marx was right".[150][151]Time magazineran an article 'Rethinking Marx' and put Karl Marx on the cover of its European edition in a special for the 28 January 2009 Davos meeting.[152][153]A Globescan BBC poll on the twentieth anniversary of the fall of the Berlin Wall (2009) found that 23% of respondents believe capitalism is "fatally flawed and a different economic system is needed", with that figure rising to over 40% of the population in France; while a majority of respondents including over 50% of Americans believe capitalism "has problems that can be addressed through regulation and reform". Of the 27 countries polled, majorities in 22 of them expressed support for governments to distribute wealth more evenly.[154]

AfricaMain article: African socialism Kwame Nkrumah, the first President of Ghana and theorist of African socialism on a soviet postage stamp

African socialism has been and continues to be a major ideology around the continent. Julius Nyererewas inspired by Fabian socialist ideals.[155] He was a firm believer in rural Africans and their traditions and ujamaa, a system of collectivisation that according to Nyerere was present before European imperialism. Essentially he believed Africans were already socialists. Other African socialists include Jomo Kenyatta, Kenneth Kaunda, and Kwame Nkrumah. Fela Kuti was inspired by socialism and called for a democratic African republic. In South Africa the African National Congress (ANC) abandoned its partial socialist allegiances after taking power, and followed a standard neoliberal route. From 2005 through to 2007, the country was wracked by many thousands of protests from poor communities. One of these gave rise to a mass movement of shack dwellers, Abahlali baseMjondolo that, despite major police suppression, continues to work for popular people's planning and against the creation of a market economy in land and housing. Today many African countries have been accused of being exploited under neoliberal economics.

In his classic, "How Europe Underdeveloped Africa" Walter Rodney says that Africa`s development can only be possible through its delinking with international capitalism and embracing a socialist template.

[156]

Asia

The People's Republic of China, North Korea, Laos and Vietnam are Asian countries remaining from the wave of Marxism-Leninist implemented socialism in the 20th century. States with socialist economies have largely moved away from centralised economic planning in the 21st century, placing a greater emphasis on markets. Forms include the Chinese socialist market economy and the Vietnamese socialist-oriented market economy. They utilise state-owned corporate management models as opposed to modelling socialist enterprise on traditional management styles employed by government agencies.

In the People's Republic of China, the Chinese Communist Party has led a transition from the command economy of the Mao period to an economic program they term the socialist market economy or "socialism with Chinese characteristics". Under Deng Xiaoping, the leadership of China embarked upon a programme of market-based reform that was more sweeping than had been Soviet leader Mikhail Gorbachev's perestroika program of the late 1980s. Deng's programme, however, maintained state ownership rights over land, state or cooperative ownership of much of the heavy industrial and manufacturing sectors and state influence in the banking and financial sectors.

Elsewhere in Asia, some elected socialist parties and communist parties remain prominent, particularly in India and Nepal. The Communist Party of Nepal in particular calls for multi-party democracy, social equality, and economic prosperity.[157] In Singapore, a majority of the GDP is still generated from the state sector comprising government-linked companies.[158] In Japan, there has been a resurgent interest in the Japanese Communist Party among workers and youth.[159][160]In Malaysia, the Socialist Party of Malaysia got its first Member of Parliament, Dr. Jeyakumar Devaraj, after the 2008 general election.

Europe

In Europe, the socialist Left Party in Germany grew in popularity[161]due to dissatisfaction with the increasingly neoliberal policies of the SPD, becoming the fourth biggest party in parliament in the general election on 27 September 2009.[162]Communist candidate Dimitris Christofias won a crucial presidential runoff in Cyprus, defeating his conservative rival with a majority of 53%.[163] In Greece, in the general election on 17 June 2012, Coalition of the Radical Left (Syriza) won 26.89% of the votes and became the second largest party in parliament.

In Ireland, in the 2009 European election, Joe Higgins of the Socialist Party took one of three seats in the capital Dublin European constituency. In Denmark, the Socialist People's Party (SF or Socialist Party for short) more than doubled its parliamentary representation to 23 seats from 11, making it the fourth largest party.[164] In 2011, the socialist parties of Social Democrats, Socialist People's Party and the Danish Social Liberal Party formed government, after a slight victory over the liberal parties. They were led by Helle Thorning-Schmidt, and had the Red-Green Alliance as a supporting party.

In the UK, the National Union of Rail, Maritime and Transport Workers put forward a slate of candidates in the 2009 European Parliament elections under the banner of No to EU – Yes to Democracy, a broad left-wing alter-globalisationcoalition involving socialist groups such as the Socialist Party, aiming to offer an alternative to the "anti-foreigner" and pro-business policies of the UK Independence Party.[165][166][167]In the following May 2010 UK general election, the Trade Unionist and Socialist Coalition, launched in January 2010[168]and backed by Bob Crow, the leader of the National Union of Rail, Maritime and Transport Workers union (RMT), other union leaders and the Socialist Party among other socialist groups, stood against Labour in 40 constituencies.[169][170]The Trade Unionist and Socialist Coalition plans to contest the 2011 elections, having gained the endorsement of the RMT June 2010 conference.[171]

In France, the Revolutionary Communist League (LCR) candidate in the 2007 presidential election, Olivier Besancenot, received 1,498,581 votes, 4.08%, double that of the Communist candidate.[172]The LCR abolished itself in 2009 to initiate a broad anti-capitalist party, the New Anticapitalist Party, whose stated aim is to "build a new socialist, democratic perspective for the twenty-first century".[173]

Latin AmericaMain article: Pink tide Hugo Chávez, former president of Venezuela. "Every factory must be a school to educate, like Che Guevara said, to produce not only briquettes, steel, and aluminum, but also, above all, the new man and woman, the new society, the socialist society." — Hugo Chávez, at a May 2009 socialist transformation workshop[174]

Venezuelan President Hugo Chávez, Nicaraguan President Daniel Ortega, Bolivian President Evo Morales, and Ecuadorian president Rafael Correarefer to their political programmes as socialist. Chávez has adopted the term socialism of the 21st century. After winning re-election in December 2006, Chávez said, "Now more than ever, I am obliged to move Venezuela's path towards socialism."[175]Hugo Chávez was also reelected in October 2012 for his third six-year term as President.

"Pink tide" is a term being used in contemporary 21st century political analysis in the media and elsewhere to describe the perception that Leftist ideology in general, and Left-wing politics in particular, are increasingly influential in Latin America.[176][177][178]

North America

In Canada, the Co-operative Commonwealth Federation, the precursor to the New Democratic Party, had some significant success in provincial politics. In 1944, the Saskatchewan CCF formed the first socialist government in North America. On the federal level, the social democratic New Democratic Party now forms the Official Opposition after winning 103/308 seats[179](up from 37) in the 2011 Canadian federal election.

Socialist parties in the United States reached their peak in the early 20th century. Current active parties and organisations include the Socialist Party USA, the Socialist Workers Party and the Democratic Socialists of America, the latter having approximately 10,000 members.[180]

Criticism of socialismMain article: Criticisms of socialism

Economic liberals and pro-capitalist libertarians see private ownership of the means of production and the market exchange as natural entities or moral rights, which are central to their conceptions of freedom and liberty; they therefore perceive public ownership of the means of production, cooperatives and economic planning as infringements upon liberty. Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals,[181][182]results in reduced incentives,[183][184][185]causes reduced prosperity,[186][187]has low feasibility,[181][182][188]and that it has negative social and political effects.[189][190][191][192][193]

Critics from the neoclassical school of economics criticise state-ownershipand centralisation of capital on the grounds that there is a lack of incentive in state institutions to act on information as efficiently as capitalist firms do because they lack hard budget constraints, resulting in reduced overall economic welfare for society.[194]Economists of the Austrian school argue that socialist systems based on economic planning are unfeasible because they lack the information to perform economic calculation in the first place, due to a lack of price signals and a free price system, which they argue are required for rational economic calculation