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Socialism

Updated on January 31, 2024
Article byKhalid Ahmed
Reviewed byDheeraj Vaidya, CFA, FRM

Socialism Definition

Socialism (social democracy) refers to a socio-economic and political system in which the government regulates the ownership of natural resources and the production of goods connected to societal needs. The goal of socialism is to achieve equality between socio-economic classes and a welfare state.

Socialism

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Socialism supports central economic planning and the corresponding allocation of cash. Social democracy allows for the free exercise of religion, private property ownership, and private companies by individuals, as well as demand and supply factors. In this approach, the government owns and manages all production and services connected to education, health care, energy, and housing.

Key Takeaways

  • Socialism is a system in which the government administers and manages resources for producing and distributing products and services related to the public’s basic needs to promote social welfare.
  • A socialism economy encourages social equality by equitable distribution of resources, such as education, healthcare, energy, and housing.
  • The characteristics of social democracy include state-owned enterprises, centralized economic planning, a classless society, equal opportunity for all individuals, and a government-controlled price system.
  • China, Laos, Cuba, and Vietnam are the only nations practicing social democracy in the present state.

Socialism Explained

Socialism is an economic and political system in which the government manages all the means of production and services connected to basic amenities to establish a classless society and egalitarianism. Its philosophical origins may be traced back to Greek philosopher Plato’s book “Republic,” in which he imagined a community based on shared values.

Socialism was the outcome of employees’ exploitation during the industrial revolution. The factory owners exploited their employees by giving them minimal wages and forcing them to labor in brutal, unsanitary, and exhausting circumstances.

In socialism, the government plays a proactive role in the central planning of the economy. It administers both market-based and non-market-based types. However, except for basic facilities, all other elements are managed by private companies.

The primary goal of social democracy is to treat all citizens equally in the sight of the government. Hence government ensures that while obtaining education, healthcare services, electricity, shelter, and job, the categorization of affluent or poor does not exist. The manufactured commodities and services are subsequently dispersed to the population without distinction.

Another fundamental goal of social democracy is to eliminate flaws like the exploitation of workers, the stratification of society into classes based on wealth, the uneven distribution of resources, and the wide prevalence of poverty.

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Characteristics of Socialism

Following are the socialism characteristics that distinguish it from other approaches:

#1 – Public Enterprises

To ensure equity in the distribution of essential commodities and services, the government controls its production aspects in areas like health, energy, education, agriculture, and market pricing.

#2 – Centrally Planned Economy

Economic activities and planning are done centrally. Accordingly, the funds are allocated to facilitate the sensible and fair growth of resources for the benefit of all.

#3 – Societal Classes

Class differentiation like high, medium or low does not exist in society.

#4 – State-Sponsored Basic Amenities for the Public

Food, shelter, clothes, electricity, healthcare, and education, which are fundamental to a good existence, are provided by the government.

#5 – Equal Opportunities

The government provides every citizen equal employment, education, healthcare, wealth, and personal achievement opportunities.

#6 – Minimal Competition

As the government controls the majority of manufacturing of essential items connected to basic comforts of life, there is relatively little competition among the small number of private firms.

#7 – Price Mechanism

The government administers and manages the two types of price mechanisms— market price and accounting price — for products and services.

Examples

Below are real-world socialism examples that can help understand the fundamental principles of socialism:

Example #1

Let us look at the Swedish social democracy model. Although the fundamental nature of Swedish social democracy has evolved from socialism to capitalism, it retains many social democratic characteristics.

Firstly, Sweden is the only European nation with a social democratic government structure. Also, the Swedish healthcare system is wholly funded and administered by the government. The government also oversees the education industry, enabling all classes to get free education.

Example #2

An article by The Guardian highlighted the discussion between U.S. Democrat Senator Bernie Sanders and Republican Senator Lindsey Graham. While discussing progressive politics, Sanders emphasized socialism and called for a free health care system for all Americans.

In the United States, Medicare is the government’s healthcare program for the elderly, and liberals want to expand it to everyone and remove private health insurance. While Lindsey did not agree much with Sanders, the latter expressed his concern about the twisted political system and dominance of affluent campaign contributors, which calls for socialism. 

List Of Socialist Countries

As of 2022, only four nations fall in the category of socialism countries; they are:

#1 – People’s Republic of China

It is the second-oldest country after Vietnam and has maintained social democracy since 1949. It is governed as a unitary one-party socialist republic by the Chinese Communist Party. Since 2013, Xi Jinping, the head of the party, is also heading the state.

#2 – Republic of Cuba

It is the third-oldest country with social democracy, having maintained it since 1961. The Cuban communist party governs it under the unitary one-party socialist republic structure. Since 2018, Miguel Diaz-Cancel, the leader of the Communist Party of Cuba, has been the head of state.

#3 – Lao People’s Democratic Republic

It is the most recent nation to adopt social democracy since 1975, and it continues to do so. The Lao People’s Revolutionary Party governs the country as a unitary one-party socialist republic. Since 2021, Thongloun Sisoulith, the chairman of the Lao People’s Revolutionary Party, is also the head of state.

#4 – Socialist Republic of Vietnam

It has maintained social democracy since 1945, making it the oldest country. The communist party of Vietnam governs it within the framework of a unitary one-party socialist republic. Since 2021, Nguyen Xuan Phu, the leader of the Vietnamese Communist Party, has been serving as the country’s leader.

Frequently Asked Questions (FAQs)

Is socialism good?

Socialism is a system of governance in which the government controls products of fundamental requirements so that goods and services of basic needs are supplied to all, regardless of contribution. It is considered good because it reduces the disparity between social classes. Also, social democracy aims to eliminate poverty.

Is socialism an economic system?

Yes, socialism is both an economic and social structure. The economic part of social democracy calls for public ownership of essential items and distributing them to the public to meet the fundamental economic needs of all social strata.

Why socialism doesn’t work?

The absence of a profit motive for firms is the fundamental cause of the failure of social democracy, resulting in a lack of economic growth and economic collapse.

Is socialism the same as communism?

No, socialism is unlike communism, in which the government owns and controls everything, from land to industries to labor. However, social democracy regulates the production of primary products and services essential for all segments of society, regardless of social class, and permits private ownership of businesses and property.

This has been a guide to Socialism and its definition. Here, we explain its characteristics with examples and a list of countries. You can learn more from the following articles – 

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Comments

  1. Winnie Tshema Ndlovu says

    Thank you. It was helpful. Very informative.

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