What is Socialism An economic theory or system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state. It is characterized by production for use rather than profit, by equality of individual wealth, by the absence of competitive economic activity
What is Socialism The ownership of the means of production varies in different socialist theories. It can either be based on public ownership by a state apparatus; direct ownership by the users of the productive property through worker cooperative; or commonly owned by all of society with management and control delegated to those who operate/use the means of production.
Economic Planning Economic planning is a mechanism for the allocation of economic inputs and decision- making based on direct allocation, in contrast to the market mechanism, which is based on indirect allocation. An economy based on economic planning appropriates its resources as needed, so that allocation comes in the form of internal transfers rather than market transactions involving the purchasing of assets by one government agency or firm by another. Decision-making is carried out by workers and consumers on the enterprise-level.
Economic Planning Economic planning is not synonymous with the concept of a command economy, which existed in the Soviet Union, and was based on a highly bureaucratic administration of the entire economy in accordance to a comprehensive plan formulated by a central planning agency, which specified output requirements for productive units and tried to micromanage the decisions and policies of enterprises. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy
Economy of Soviet Union Production quotas for every productive unit. A farm, mine or factory was judged on the basis of whether its production met the quota. It would be provided with a quota of the inputs it needed to start production, and then its quota of output would be taken away and given to downstream production units or distributed to consumers. Critics of both left and right persuasions have argued that the economy was plagued by incentive-related problems; claiming, for instance, that the system incentivized enterprise managers to underreport their units productive capacities so that their quotas would be easier to achieve, especially since the managers bonuses were linked to the fulfillment of quotas.
Characteristics Allocation through political control. In contrast with systems where prices determined allocation of resources, in the Soviet Union, allocation, particularly of means of production was determined by the bureaucracy. The prices that were constructed were done so after the formulation of the economy plan, and such prices did not factor into choices about what was produced and how it was produced in the first place.
Characteristics Full employment. Every worker was ensured employment. However workers were generally not directed to jobs. The central planning administration adjusted relative wages rates to influence job choice in accordance with the outlines of the current plan.
Characteristics Clearing goods by planning : if a surplus of a product was accumulated, then the central planning authority would either reduce the quota for its production or increase the quota for its use. Five Year Plans for the long-term development of key industries.
Socialism Ancient roots – Judeo-Christian belief in the common good, which takes precedence over individual desires Term “socialism” coined in 1827 by British socialist Robert Owen to describe his view of a cooperative new society.
Socialism’s emergence Liberal political parties in 19th century Europe failed to address the desperate needs of working people. – Classical liberalism views poverty as an individual choice or failure, not the result of social structures. Also suspicious of big government. – Socialism provides a different conception of individual responsibility & of government.
SocialismIn England, socialism became a politicalmovement in 1884, with the creation ofthe Fabians, who provided the basis forthe new Labour Party. Many Labourgovernments since, including thegovernment of exPrime MinisterTony Blair.
Socialism’s principles egalitarianism or equality. Humankind will be unified and cooperative, once wealth is owned and used for the common good. Capitalism exploits the very people who create society’s wealth. Moralism. Division of rich & poor is evil; capitalism is fundamentally unjust. Instead, the ideal future emphasizes peace, social justice and true liberty for all.
Social democracy A variation on socialism that argues that socialism and democracy can work together. Example: British Labour Party. Change comes through peaceful democratic processes like elections. Democratic governments should promote economic - as well as political - freedom & equality.
Social democracy’s similarities with Marxism Sees capitalism as exploitive, leading to social injustice and extreme income inequality. These economic conditions have adverse effects on ordinary working people – in terms of physical health, psychological well-being, housing, education, etc.
Social democracy’s similarities with Marxism Both ask the question: why should those who provide the money (capital) receive all the profits, and those who provide the labor receive none of the profits? It is labor, after all, that turns raw materials (including cash) into something with greater value.
Social democracy’s differences from Marxism Private property not abolished, but the public should control the use of property and make necessities available to all. Individual rights not abolished but should complement other important values such as concern for others. Change can occur through an evolutionary process that uses democratic means.
Marx’s view of social democracy Karl Marx said social democrats were naive to think that “enlightened capitalists” would join with workers to form a new society. Violent revolution was inevitable.
Karl Marx German political thinker in 19th century. Did most of his work in Britain. Influenced by German philosopher Hegel. Published Communist Manifesto in 1848 with co-author Frederick Engels. Wrote multi-volume Capital (Das Kapital), starting in 1867.
Karl MarxStudied British economic records for 20years to develop theory that everything isbased on the economic system: politics, law, social structures, family relations, even religious belief.
DefineProletarians: modern wage laborers who sell their labor to live and don’t get any of the profits that they help to create.This includes everyone who is not a stockholder or owner of capital, even professionals who work for a salary.
Karl Marx’s key ideasEconomic systems go through historic cycles.Over time, an economic system becomes rigidand cannot adjust to new technologies, so a newsystem emerges, with new class relations andoppression.Someday, a perfect classless society will emergeand there will be no further cycles.
Marx’s key ideas1. Slave system gave way to feudal economy2. Feudal economy broke down with growth of manufacturing, towns, navigation & transportation, emergence of middle class3. Industrial capitalism emerged, with only two classes: proletariat and bourgeoisie.
Critics of Socialistic Economy Market economists generally criticise socialism for eliminating the free market and its price signals, which they consider necessary for rational economic calculation. They also consider that it causes lack of incentive. They believe that these problems lead to a slower rate of technological advance and a slower rate of growth of GDP.
Critics Austrian school economists, such as Friedrich Hayek and Ludwig Von Mises, have argued that the elimination of private ownership of the means of production would inevitably create worse economic conditions for the general populace than those that would be found in market economies. They argue that without the price signals of the market, it is impossible to calculate rationally how to
Critics The neoclassical view is that there is a lack of incentive, not a lack of information in a planned economy. They argue that within a socialist planned economy there is a lack of incentive to act on information. Therefore, the crucial missing element is not so much information as the Austrian school argued, as it is the motivation to act on information