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How Socialism Worksby Alia Hoyt

Browse the article How Socialism Works

Is this utopia? Utopian visionaries imagine a society in which peoplework together cooperatively and to the community's benefit.William Kay Blackstock/Fine Art Photographic/Getty Images

Introduction to How Socialism Works

Many people wonder what heaven is like -- so many, in fact, that philosophers and scholars

over the years have hypothesized about how heaven on Earth can be achieved. The term

"utopia" was coined in 1515 by British writer Thomas More. Utopia describes a perfect place

or society, where everyone is equal socially and economically.

The political and economic theory of socialism was created with the vision of a utopian

society in mind. Contrary to other economic systems, there is no real consensus on how the

ideal socialist society should function. Dozens of forms of socialism exist, all with differing

ideas about economic planning, community size and many other factors. Despite the

variations in socialist thought, every version advocates the benefits of cooperation among

the people, steering clear of the "evils" of competition associated with capitalism.

So how does socialism compare to capitalism and communism? And were there ever any

successful socialist societies? Is the movement still alive today? In the next section, we'll

take a look at the principles of the theory.

HELPFUL SOCIALISM-RELATED TERMS:Capitalism: Economic system in which individuals or corporations own land and means of production. Capitalist societies encourage competition and personal

profit.

Communism: This political and economic system advocates equal labor and equal shares of the benefits derived from labor. However, according to Frederick

Engels' "Principles of Communism," the system is more militant than socialism.

Nationalization: The transfer of industry or private property to the control of the government. Under select nationalization, the government takes control of onlysome industries. Complete nationalization transfers total control to the government, as in the case of the Soviet Union, following the Bolshevik Revolution.

Dystopia: The opposite of utopia, dystopia is a fictional place with terrible quality of life, due to oppression, misery and terror.

Mixed economy: An economy that utilizes some capitalist and some socialist principles. The government usually controls some aspects, but private individualsand corporations control others. A mixed economy relies on the law of supply and demand to determine production and prices.

Planned economy: Economic system controlled entirely by the government. Rates of production, incomes and the price of goods and services are regulated bythe government, instead of by demand.

Imperialism: System of beliefs advocating the development of empires, usually to exert political, military or economic domination over other countries or

colonies.



Linda, a former doctor, feeds sheep at Alpha Farm commune in Oregon.

Gilles Mingasson/Getty Images

Theorist Thomas More was an

early advocate of socialism.

Rischgitz/Getty Images

Principles of Socialism

True socialists advocate a completely classless society, where the government controls all means of production and

distribution of goods. Socialists believe this control is necessary to eliminate competition among the people and put everyone

on a level playing field. Socialism is also characterized by the absence of private property. The idea is that if everyone works,

everyone will reap the same benefits and prosper equally. Therefore, everyone receives equal earnings, medical care and other

necessities.

As we've learned, socialism is difficult to define because it has so many incarnations. One of the things socialists agree on is

that capitalism causes oppression of the lower class. Socialists believe that due to the competitive nature of capitalism, the

wealthy minority maintains control of industry, effectively driving down wages and opportunity for the working class. The main

goal of socialism is to dispel class distinctions by turning over control of industry to the state. This results in a harmonious

society, free of oppression and financial instability. Some of the other forms of socialism include these goals:

Guild socialism: Based in early 19th-century England, workers' guilds (similar to unions) were responsible for control and

management of goods.

Utopian socialism: Advocates social ownership of industry and a voluntary, nonviolent surrender of property to the state.

Implemented in communities like Robert Owens' New Lanark.

State socialism: State socialism allows major industries to be publicly owned and operated.

Christian socialism: Developed in England in 1948, this branch was born from the conflict between competitive industry and Christian principles. Christian socialist

societies are characteristically led by religious leaders, rather than socialist groups.

Anarchism: Opposes domination by the family, state, religious leaders and the wealthy. Anarchism is completely opposed to any form of repression and has been

associated with some radical events, including assassinations in Italy, France and Greece. U.S. President William McKinley was assassinated by an anarchist.

Market Socialism: Often referred to as a compromise between socialism and capitalism. In this type of society, the government still owns many of the resources,

but market forces determine production and demand. Government workers are also enticed with incentives to increase efficiency.

Agrarianism: Form of socialism that features the equitable redistribution of land among the peasants and self-government similar to that in communal living.

Agrarian ideals were popular in the rural United States well into the 1900s, although increasing government control deterred their growth.

So who came up with these ideas? We'll learn about the history of socialism next.

Launch Video

Spytek: Communism in Russia



Plato, shown here with Aristotle,wrote about a society similar tothe utopia Thomas Moredescribed.Time Life Pictures/Mansell, Time Life

Pictures/Getty Images

Lenin speaks to troops gathered in Red Square.Mansell/Mansell/Time & Life Pictures/Getty Images

COMMUNAL LIVINGCommunal societies are built on the utopian ideal that members work together as equals to achieve harmony. Communes are established by a group of people

who have become dissatisfied living in a society controlled by a government and rules with which they don't agree. Religious communes are the most common of

these societies, and they include Catholic monasteries and communities formed by groups like the Shakers. Many residents of religious communes join to

practice their religious beliefs without persecution. Communes experienced a strong resurgence in the 1960s in the United States and Western Europe, due in

large part to anti-Vietnam War sentiment. They still exist around the world, although they aren't as widespread as they once were.

History of Socialism

Thomas More coined the term "utopia" in 1515 in his treatise titled "Utopia," but utopian imaginings began long before his. Plato

described a similar environment when he wrote the philosophical work "Republic" in 360 B.C. In 1627, Francis Bacon's "New

Atlantis" advocated a more scientific approach, rooted in the scientific method. Bacon envisioned a research-institute-like

society where inhabitants studied science in an effort to create a harmonious environment through their accumulation of

knowledge. In addition to these landmark works, more than 40 utopian-themed novels were published from 1700 to 1850,

cementing its status as a very popular ideal [source: Foner]. Because many social injustices -- such as slavery and oppression

-- were running rampant, the theme was quite popular among embittered and dispirited populations.

While a French revolutionary named François Noël Babeuf is credited with the idea of doing away with private property to create

equality and is often considered the first socialist, the concept wasn't popularized until the late 1700s, when the Industrial

Revolution caused some drastic changes around the world.

The revolution marked a shift from agricultural societies to modern industries, in which tools were eschewed in favor of cutting-

edge machinery. Factories and railways sprung up, resulting in tremendous wealth for the owners of these industries. While

they profited from these changes, workers were thrown into sudden poverty due to a lack of jobs as machines began to replace

human labor. Many people feared that this discrepancy in income would continue to spread, making the rich richer and the poor

poorer.

This fear created unrest among the working class. Poor housing, coupled with bad working conditions and slave labor (which

was still rampant in the United States and other countries), contributed to the desire for a more equal society. As a result,

socialist ideals quickly became popular among the impoverished workers. Communes such as Brook Farm and New Harmonybegan popping up in the United States and Europe. These small communities abided by socialist principles and worked to avoid

the class struggles that controlled the rest of the world. New Harmony was considered a center of scientific thought and

boasted the United States' first free library, public school and kindergarten.

Despite the presence of small communes and the spread of socialist thought, socialism remained largely an idea, rather than

reality. Soviet dictator Vladimir Ilyich Lenin was the first leader to put socialism to the test. Though he was a communist (a

branch of socialism that used militant action to overthrow the upper class and government to achieve a utopian society), Lenin

implemented many socialist initiatives in the Soviet Union after his takeover in 1917. These included forced nationalization of

industry and collectivization of agriculture. Lenin's programs were not profitable, and he eventually resorted to a mixed

economy. Communism is sometimes referred to as revolutionary socialism for its aggressive tactics. Although there are

fundamental differences between the two theories, communism and socialism both aim to eliminate class struggles by

encouraging government or state control of production and distribution.

The post-World War I era saw a rise in democratic socialism in Europe. Socialist parties

became active in the governments of Germany, Sweden, the Netherlands, Belgium and

Great Britain. Socialism also became popular in portions of Africa, Latin America and Asia.

Next, we'll learn about early socialism in the United States.

Early Socialism in the United States

By the early 1900s, the disparity of wealth in the United States was growing even more obvious, and socialist ideology was on

the rise. In 1874, a group of socialists formed the Workingmen's Party, later known as the Socialist Labor Party. The groupadvocated the reform of social abuses, labor issues and other equality concerns.



Susan B. Anthony embraced socialist

ideals

Time & Life Pictures/Time & LifePictures/Getty Images

Albert Einstein was a well-

respected socialist thinker.

E.O. Hoppe/Mansell/Time LifePictures/Getty Images

The Socialist Labor Party merged with the Social Democratic Party in 1901 to form the Socialist Party of America. By 1912, theparty had more than 100,000 members. But the party's growth in the United States was massively hindered in 1917 when thegovernment enacted the Espionage Act. The Espionage Act originated out of the government's fear of the communist way oflife -- fear incited by the bloody Bolshevik Revolution in Russia, which resulted in many millions of deaths and the completeoverthrow of the Russian government. The Espionage Act encouraged patriotism above all else and made it illegal to publiclyoppose involvement in World War I.

Supporters of socialism became wary of associating with the controversial communist system, and the Socialist Labor Party'smembership in the U.S. plummeted in the 1950s. The fear of association with socialism and communism continued through theMcCarthy Era (1950 to 1954), during which Senator Joseph McCarthy fingered suspected communists. Many people feared thatthey'd be targets of McCarthy and kept a low profile by discontinuing their involvement with the party. (You can read more aboutit in How McCarthyism Worked.)

But even despite these attacks on communist and socialist ways of life, socialists still existed in the United States, oftensupported by respected thinkers of the time. For example, noted scholar Albert Einstein penned a paper titled "WhySocialism?" in 1949 in which he described the need for a socialist economy to eliminate the "evils" of unemployment and acompetitive economy. He emphasized the need for an educational system to achieve socialist goals. And, he advocated aplanned economy to ensure the livelihood of every citizen. Other famous socialists include John Lennon of Beatles fame andSusan B. Anthony, a suffragist leader.

Next, we'll take a look at two case studies of socialist societies.

BASIC DIFFERENCES BETWEEN SOCIALISM AND CAPITALISM

For the non-politically minded, all of these "isms" can seem a bit confusing. Keeping in mind that forms of socialism and capitalism may vary across societies,here's a breakdown of their basic differences.

Capitalism: Means of production and distribution of goods are owned by individuals and corporations

Socialism: Means of production are owned by the government or state

Capitalism: Features a class-based society

Socialism: Rejects the necessity of a class-based society in favor of a society of equals

Capitalism: Fosters a competitive atmosphere in which workers and companies are encouraged to work hard to achieve personal success

Socialism: Encourages an atmosphere of cooperation in which no matter how hard a person works, he or she reaps the same benefits as everyone else.

Capitalism: Ownership of private property is encouraged

Socialism: Ownership of private property is largely forbidden

Capitalism: Produces goods based on the law of supply and demand

Socialism: Government mandates production and prices.

Socialism in New Lanark



Tenement buildings in the folds of wooded hills at New Lanark.Hulton Archive/Getty Images

Robert Owen, the socialist visionaryTime Life Pictures/Mansell, Time LifePictures/Getty Images

Clement Atlee on his way to the

After World War II, socialist parties took control in more nations. Many countries nationalizedmajor industries, such as coal and steel. These countries also encouraged governmentplanning to spur economic growth. Societies that took socialism out of its theoretical contextand put it to the test found flaws and successes in the system. We'll examine two of them.

One of the most famous examples of socialism in practice took place in New Lanark,Scotland. The village was founded in 1786, but it wasn't until 1800 that it became worldfamous as a socialist experiment of sorts.

Robert Owen was a philanthropist, successful businessman and dedicated social reformerwho made his fortune during the Industrial Revolution. Known for his benevolence, Owenlonged to create a village in the utopian socialist ideal. He turned the cotton mill-based townof New Lanark into a cooperative society in which everyone abided by the socialist premisesof equal work, equal pay and no ownership of private property. In addition, Owens institutedprogressive labor reforms: reduced work hours, safer working conditions and minimum agerequirements for child labor (although he mandated age 10 as the appropriate age, which isstill very young by today's standards).

Roughly 2,500 people called New Lanark home, including about 500 children whose lot in life Owen was determined to improvethrough education and better labor policies. In fact, in 1816, Great Britain's inaugural pre-school was opened in New Lanark.Owens' society was so successful that it generated substantial profits and attracted the world's attention -- tourists flocked toNew Lanark to see what, exactly, it was like.

Owens' vision became a successful reality in New Lanark but didn't spread throughout Great Britain as he had initially hoped. In1824, Owen decided to throw in the towel on what he considered a closed-minded environment and sailed to the United States.He purchased land in New Harmony, Indiana, where he established a commune with similar standards to New Lanark's. Owensmade even more progressive strides at New Harmony by putting forth the radical idea of equal rights for women. Around theheight of New Harmony's success, 15 other socialist communities sprang up. However, none stood the test of time and they allcollapsed. New Harmony itself folded when one of Owens' business partners left and took the community's profits with him.

In the end, Owen lost much of his personal wealth due to his forays in utopian socialism. He returned to England in 1829, wherehe helped establish Britain's first trade unions. Though this visionary's villages can't be considered completely successful, theycertainly paved the way for labor reform around the world.

Next, we'll examine the socialist party's demise in Great Britain.

Socialism in Post-war Britain

Another example of applied socialism began just after World War II. Great Britain's storied leader during the devastating war,Prime Minister Winston Churchill, shockingly was defeated in re-election by Clement Atlee, a virtual unknown outside ofBritain. Atlee was the head of the Labour Party, a democratic socialist party established in 1900, while Churchill was head ofthe conservative party, also known as the Tory Party. After World War II, much of Britain was fed up with healthcare concernsand labor problems, and many people didn't believe that Churchill's Tory party would effect any change. Atlee's socialist partyaddressed these issues by nationalizing industry and creating a free healthcare system.

The Labour Party nationalized Britain's main industries, including coal, electricity, steel and the railways. Nationalizationoccurs when the state takes over the means of production and distribution. The idea is that any profits generated will thenbenefit the country, rather than a wealthy few. Some improvements resulted from nationalization in Britain. For example, coalminers were given paid vacation and sick leave, and their safety became a greater concern. But nationalizing industry turnedout to be trickier than anyone initially thought. Industries became inefficient and unprofitable because no competition existed tomotivate workers to perform better on the job.

The new government also established the National Health Service (NHS) in 1948, which provided free medical care. Thesystem was extremely popular -- to a fault. Funds allocated for the NHS were used up quickly, having been far under budgeted.



House of Commons, where he

delivered his crisis speech on the

situation in Abyssinia.

Douglas Miller/Keystone/GettyImages

Margaret Thatcher, Britain's first

female prime minister

Scott Barbour/Getty Images

Sen. Hillary Clinton, Gov. Jennifer Granholm and Phyllis Craig

participate in a forum about proposed cuts to Medicaid. Craig delivered

a personal testimony about her experience with Medicaid.

Chip Somodevilla/Getty Images

But because the program was so popular among the people, it was kept in place, despite the debt it incurred. It remains eventoday as the only major change implemented by Atlee's Labour Party. Unfortunately, getting medical care under this freesystem can be a very tedious process with a long waiting time.

Although nationalization and free healthcare aimed to help its people, Great Britain began to suffer steep inflation rates -- ashigh as 24 percent in 1975 -- and high unemployment rates [source: PBS]. Welfare costs were also draining the economy. Theperiod of December 1978 through January 1979 became known as the Winter of Discontent (an expression that originatedfrom Shakespeare's play "Richard III"), thanks to the many members of the public sector who went on strike, including truckdrivers, medical personnel and teachers. To the British people, the Labour Party seemed incapable of controlling the strikesthat were affecting the public. Due to this strife, the Conservative Party came back into power when Margaret Thatcher waselected the first female prime minister in 1979.

Thatcher worked to improve the economy through reduced spending in areas like education and healthcare. Although inflationwent down, unemployment continued to rise. Under Thatcher's leadership, Britain's government denationalized many importantcompanies, starting with British Telecom. By selling it off to shareholders, the company's profitability and efficiency increased.Thatcher also reduced the power of trade unions to decrease the number of economically devastating strikes.

Though many of her policies may not have been popular, Thatcher managed to resolve some dicey economic situations inGreat Britain. Her election was seen as a great victory for capitalism and prompted the beginning of a capitalist revolution ofsorts. Countries such as Spain and France began to steer away from socialism and suddenly, the world's socialist populationbegan to shift. While at the end of the 1970s, socialist and communist regimes were in control of 60 percent of the world'spopulation, things were changing --fast [source: PBS].

In the next section, we'll take a look at socialism in today's world.

Socialism Today

Socialism suffered major setbacks due to the collapse of communism in the Soviet Unionand other Eastern European states. And many other societies followed in Great Britain'sfootsteps and denationalized their industries. However, some socialist-inspired programsexist today. In fact, any program that calls for the redistribution of wealth can be consideredsocialist. For example, the tax that the United States imposes on citizens to support thewelfare system, which provides aid to financially unstable citizens, can be considered asocialist program. Healthcare systems like Medicare and Medicaid fall in the same category.

Another example of a socialist program is Canada's healthcare system. Proponents of thissystem argue that it provides free healthcare to those who would otherwise be uninsured orunderinsured. They also point to the rising cost of health care in places like the UnitedStates, which some believe is caused by profit-driven insurance companies, for-profithospitals and pharmaceutical companies.

But the grass isn't always greener on the other side. Canada's free healthcare system oftendelays important medical procedures and treatments simply because it doesn't have themanpower, space and time to handle them. One highly publicized example of this untimelydelay is the case of identical quadruplets born in Montana. The quadruplets had to be

delivered in Great Falls because no hospital in the entirety of Canada, where their parents reside, could handle their delivery. Every hospital was at capacity at thetime. Other inconveniences include the average waiting time for a standard Magnetic Resonance Imaging (MRI): three months [source: Fraser Institute]. Critics of thesystem insist that while the residents may not pay much up front, they seem to pay for it in terms of delayed care and poor quality of service. The system isn't evenactually free -- roughly 22 percent of Canadian tax dollars are used to fund the healthcare system [source: Lehr].

Socialist groups around the world continue to push for reform in their societies. However, they're often counteracted by critics, including the Future of FreedomFoundation, the Cato Institute and Sons of Liberty, many of whom point to what they consider to be the fatal error in socialist thought: How could any truly socialistsociety succeed without the incentives of profit and constraints of competition to motivate workers?

At any rate, the quest for a purely socialist -- and for that matter, a purely capitalist -- society has eluded economists thus far. After all, the United States, consideredone of the most successful capitalist economies in the world, utilizes a number of socialist-inspired programs to help its financially encumbered citizens. For the timebeing, at least, it seems that mixed economies, featuring both socialist and capitalist elements, are much more realistic.

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Sources

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The Fraser Institute. "Wait times for Canadians needing surgery hit an all time high of more than 18 weeks in 2007." 15 October 2007.https://www.fraserinstitute.org/commerce.web/newsrelease.aspx?nid=4967

Foner, Philip S. "History of the Labor Movement in the United States." International Publishers Co, New York: 1975.

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Herndon, Peter. "Utopian Communities, 1800 to 1890." Yale-New Haven Teachers Institute. 2008.http://www.yale.edu/ynhti/curriculum/units/1989/1/89.01.04.x.html#g

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Legge, Jerry, Ph.D., Associate Dean, School of Public and International Affairs, University of Georgia. Personal interview conducted by Alia Hoyt. 27 February2008.

Lehr, Jay, Ph.D. "Canadian Health Care is No Model for U.S." Health Care News. 1 June 2004. http://www.heartland.org/Article.cfm?artId=15034

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HowStuffWorks 'History of Socialism' · 1/2/13 HowStuﬀWorks "History of Socialism" ... Is this utopia? Utopian ... equality and is often considered the first socialist, the concept