I have written twice about socialism without taking the effort to define my terms. That shortcoming needs to be corrected.
Briefly, socialism describes a society in which the means of production are controlled by the government, or the state. This distinguishes socialism from capitalism—in which the means of production are privately owned—and communism—in which the means of production are commonly owned without control from the government or the state. Based on nineteenth century European philosophy and its aftermath, the idea of socialism can be further divided into three categories.
Means of production include any source of wealth and any production of items that are needed and wanted by members of the community. Farms are the primary means of production for most of history. Factories and businesses have become means of production in more recent times. A shoemaker’s shop, a pharmacy, and a railroad are all examples of means of production. If the government owns and operates these means, socialism is present. Mere regulation by the government of these means is not, strictly speaking, socialism (but see further development of this thought below).
Utopian socialism occurs when a group of people establishes a business or a set of businesses within a community and places them under a governing authority. Several small-scale attempts to establish utopian socialism were tried in the nineteenth century. Even some twenty-first century companies retain elements of utopian socialism—when workers are given stock in the company or other ways of receiving a share of the company’s profits, and when workers are invited to take part in the decision-making process of the company’s boards.
In many cases, utopian socialism remained dominated by the owners of the company, leading to the further subjugation of the workers. In the Pullman neighborhood of Chicago, the Lee Wilson & Company plantations of northeast Arkansas, and various other establishments and businesses, the company owners not only built factories and storehouses. They also built homes for the workers, stores where the workers shopped, schools for the children of the workers, and even churches for the workers and their families. Company owners controlled prices charged in the stores and messages delivered in the schools and churches. Company currency was paid to the workers instead of money that could be spent off company property. The detriment to workers is illustrated by the song “Sixteen Tons,” in which a worker sings, “Saint Peter, don’t you call me, ‘cause I can’t go—I owe my soul to the company store.”
Revolutionary socialism sought to prevent that lack of control by overthrowing the company owners and placing control of the companies directly into the government’s hands. A class of capitalist businessmen, politicians, and other leaders was to be attacked and stripped of power so the workers could gain full control of the means of production. The government, it was thought, would run the farms and factories and other businesses more fairly, giving more of the wealth to the workers since it was keeping less of the wealth to itself. Some revolutionary socialists, including Karl Marx, viewed revolutionary socialism as a temporary condition, one that would become communism (see below) as the government withered away, granting more control of the means of production to the workers. Other revolutionary socialists expected the government to remain, to continue to control the means of production, but to treat the workers more kindly than the capitalists had done in earlier times.
Gradual socialism hoped that the government could assume such control over the means of production without a violent uprising by the working class, and without a violent overthrow of businessmen and politicians. Through increasing government regulation, advocates of gradual socialism hoped, the government could strip capitalist businessmen of their control of the means of production, effectively placing that control in the hands of the government. Not all regulation of businesses is done with the goal of gradual socialism; much legislation has intentions that are not at all related to socialism. But proponents of gradual socialism use government regulation as a means to remove control of the means of production from business owners and to give the government full control of the national economy.
Communism differs from socialism in that the workers directly control the means of production without a government interfering with their control or making decisions on their behalf. Karl Marx wrote that revolutionary socialism would be a temporary step on the road to full communism. Because of his theories, revolutionary socialists in Russia, China, Cuba, and other places identified themselves as a Communist Party, holding out the promise that their government would concede control to the workers over time. That never happened in any of those places.
Communism can be practiced by a small group of people who combine their resources to meet all of their needs. The early Christian Church practiced that kind of communism. Wide-scale communism on a national level has never been achieved. When a revolutionary government established control of the means of production, it retained that control unless and until it was overthrown by a second revolution.
Capitalism teaches that control of the means of production must remain in the hands of the investors, who conduct their businesses for their own profit, but who compete to offer the best conditions for both workers and customers. Capitalism was historically expressed by Adam Smith in his Wealth of Nations. People used to believe that wealth was limited, that one person could gain wealth only if other people lost wealth. Smith demonstrated that labor increases value and wealth is not stagnant. If a person finds a diamond, that person has received wealth. If a person pays a jeweler to cut and shape that diamond, the gem is smaller but much more valuable. Both the finder and the jeweler become more wealthy.
Smith wrote that capitalism thrives when governments do not interfere with the economy. He defended the idea of laissez-faire, or “leave it alone.” Pure capitalism would insist that the government exercise no form of control over the means of production in the national economy. But even Smith understood that some government regulation is good, beneficial, and necessary. The result of a capitalist economy with some government participation is called free market capitalism.
In the free market, the government does regulate the means of production to a certain extent. Pollution of the air, land, and water is limited through regulation. Safety of the products sold to consumers is regulated through inspections. Safety at the workplace and other benefits for the workers are also regulated by the government. Workers and consumers both benefit from some government regulation, while investors continue to benefit from their part in the means of production and the growth of the economy.
In free market capitalism, business owners and investors benefit from competing with each other for workers and for customers. They choose how much to pay their workers and what other benefits to offer their workers. They choose how much to charge for their products, and they also make choices about the quality of their products. All of these choices are shaped by the availability and cost of raw materials, the availability of workers, and the interest of customers in their products. Workers and customers also make choices among the options offered to them. As long as businesses compete for customers and for workers, good jobs continue to be offered, and affordable, good-quality products continue to be bought and sold.
To preserve the free market, governments sometimes act to prohibit or break apart monopolies, trusts, and cartels. Such business practices limit choices for workers and customers by placing control of the means of production into the hands of too few people. Standard Oil and AT&T were divided by the government for the benefit of workers and customers; social media providers may face similar legislation in the near future. The government acts slowly and deliberately when it considers challenging a monopoly in free market capitalism. On the other hand, no agency exists to police the government when it holds control of the means of production in a socialist system. J.