What Is Socialism? Definition and Examples

A march for workers' rights, with a man in a red shirt in the foreground with a sign reading "Socialism is the Cure"
Dozens of people march in May Day protests for workers’ rights on May 1, 2018 in New York City.

Spencer Platt / Getty Images

Socialism is an economic, social, and political theory advocating collective or governmental control and administration of a country’s means of economic production. Means of production include any machinery, tools, farms, factories, natural resources, and infrastructure used in producing and distributing the goods necessary to directly satisfy the needs of the people. Under Socialism, any surplus or profit resulting from these citizen-owned means of production is shared equally by those same citizens.

Key Takeaways: What Is Socialism?

  • Socialism is an economic, social, and political system based on public rather than private ownership of a country’s means of production.
  • Means of production include the machinery, tools, and factories used to produce the goods needed to satisfy human needs.
  • In a socialist system, all decisions regarding production, distribution, and pricing are made by the government.
  • Citizens in socialist societies depend on the government for everything, including food, housing, education, and healthcare.
  • While Socialism is considered the antithesis of capitalism, most modern capitalist economies today, including the United States have some aspects of Socialism.
  • The primary goal of Socialism is the elimination of socioeconomic classes through equal distribution of income. 


While there are several different forms of Socialism, in a purely socialist system, all decisions regarding the legal production and distribution of goods and services, including output and pricing levels are made by the government. Individual citizens rely on the government for everything from food to healthcare.

History of Socialism 

Socialist concepts embracing common or public ownership of production date as far back as Moses and formed a major part of the ancient Greek philosopher Plato’s theory of utopianism. However, Socialism as a political doctrine evolved during the late 18th and 19th centuries in opposition to the abuses of uncontrolled capitalistic individualism arising from the French Revolution and the Industrial Revolution in Western Europe. While some individuals and families quickly amassed vast fortunes, many others fell into poverty, resulting in income inequality and other social concerns.

Utopian Socialism

Outraged at seeing so many workers reduced to poverty, radical critics of industrial capitalism sought to convince the working class “bourgeoisie” to peacefully create a new “perfect” society based on totally equitable distribution of goods. The term socialist was first used around 1830 to describe the more influential of these radicals, who later became known as the “utopian” socialists.

Among the most prominent of these utopian socialists were Welsh industrialist Robert Owen, French author Charles Fourier, French philosopher Henri de Saint-Simon, and French socialist, Pierre-Joseph Proudhon, who famously declared that “property is theft.”

These utopian socialists believed that the working class would ultimately unite against the “idle rich,” including the aristocracy, in creating a more “just” society based on small collective communities, rather than a centralized state. While these utopian socialists greatly contributed to the critical analysis of capitalism, their theories, though deeply moralistic, failed in practice. The utopian communes they established, such as Owen’s New Lanark in Scotland, eventually evolved into capitalistic communities.

Marxist Socialism

Undoubtedly the most influential theorist of Communism and Socialism, Prussian political economist and activist, Karl Marx, dismissed the visions of the utopian socialists as unrealistic and dreamy. Instead, Marx argued that all productive societies would eventually separate into socioeconomic classes and that whenever the upper classes controlled the means of production, they would use that power to exploit the working class.

Some of the 500, one meter tall statues of German political thinker Karl Marx on display on May 5, 2013 in Trier, Germany.
Some of the 500, one meter tall statues of German political thinker Karl Marx on display on May 5, 2013 in Trier, Germany. Hannelore Foerster / Getty Images

In his 1848 book, The Communist Manifesto, Marx, along with offering an early critique of capitalism, put forth the theory of “scientific Socialism ” based on the belief that scientifically quantifiable historical forces—economic determinism and the class struggle—determine, usually by violent means, the achievement of socialist goals. In this sense, Marx argued that all history was a history of class struggles, and that true “scientific Socialism” was possible only after a revolutionary class struggle, in which the working class inevitably triumphs over the capital-controlling class, and by winning control over the means of production, succeeds in establishing in a truly classless communal society.

Marx’s influence on socialist theory only grew after his death in 1883. His ideas were embraced and expanded upon by influential leaders like Russian revolutionary Vladimir Lenin and father of modern China Mao Zedong, as well as various political parties, such as today’s Social Democratic Party of Germany.

Marx’s original belief in the necessity of a revolutionary struggle between the capital and worker classes dominated socialist thought throughout the remainder of the 19th century. However, other varieties of Socialism continued to evolve. Christian Socialism saw the development of collective societies based on Christian religious principles. Anarchism condemned both capitalism and government as harmful and unnecessary. Democratic Socialism held that instead of revolution, gradual political reform based on total government ownership of production could succeed in establishing socialist societies.

Modern Socialism

Especially following the Russian Revolution of 1917 and the formation of the Union of Soviet Socialist Republics (USSR) under Russian revolutionary Vladimir Lenin in 1922,

democratic Socialism and Communism became established as the world’s most dominant socialist movements. By the early 1930s, Lenin’s moderate brand of Socialism had been replaced by the Communist Party of the Soviet Union and its application of absolute government power under Joseph Stalin. By the 1940s, Soviet and other communist regimes joined with other socialist movements in fighting fascism in World War II. This tenuous alliance between the Soviet Union and its Warsaw Pact satellite states dissolved after the war, allowing the USSR to establish communist regimes across Eastern Europe.

With the gradual dissolution of these Eastern Bloc regimes during the Cold War and the ultimate fall of the Soviet Union in 1991, the prevalence of Communism as a global political force was drastically diminished. Today, only China, Cuba, North Korea, Laos, and Vietnam remain communist states.

Democratic Socialism

Antique poster for the socialist presidential ticket of 1904, with Eugene V Debs and Ben Hanford.
Antique poster for the socialist presidential ticket of 1904, with Eugene V Debs and Ben Hanford. GraphicaArtis / Getty Images

During the remainder of the 20th century, a new less stringent application of democratic Socialism emerged stressing government regulation, rather than ownership of production, along with greatly expanded social welfare programs. By adopting this more centrist ideology, democratic socialist parties took power in many European countries. A growing political movement in the United States today, Democratic Socialism stresses social reforms, such as free public education and universal healthcare, to be achieved through the democratic processes of government and administered in conjunction with the largest capitalist economy.

Key Principles

While Socialism has historically generated a vast number of differing views and theories, the five common characteristics defining a socialist system include:

Collective Ownership: In a pure socialist society, the factors of production are owned equally by everyone in the society. The four factors of production are labor, capital goods, natural resources, and, today, entrepreneurship—the activity of setting up a business. This collective ownership may be acquired through a democratically elected government or through a cooperative public corporation in which everyone owns shares. The government or cooperative uses these factors of production to satisfy the basic needs of the people. The net product generated by the collectively owned means of production is shared equally by all members of the society. In this manner, collective ownership is essential to the core tenet of Socialism holding that the means of production should be used for the interest of social welfare rather than for the growth of individual wealth.

The belief that individuals in a socialist society are not allowed to own personal items is a common misconception. While it prohibits or at least discourages private ownership of the factors of production, Socialism does not prohibit the ownership of personal items.

Central Economic Planning: In contrast to capitalist economies, the decision regarding the management of socialist economies are not driven by the laws of supply and demand. Instead, all economic activities, including production, distribution, exchange, and consumption of goods, are planned and administered by a central planning authority, typically the government. Instead of being dependent on the whims of capitalistic market forces, the distribution of wealth in purely socialist societies is predetermined by the central planning authority.

No Market Competition: Since the government or state-controlled cooperative is the only entrepreneur, there is no competition in the marketplaces of true socialist economies. The state controls the production, distribution, and pricing of all goods and services. While this allows for limited freedom of consumer choice, it allows the state to focus on utilizing marketplace revenues for providing necessities to the people.

As theorized by Marx, socialists assume that the basic nature of people is to cooperate. They believe, however, that this basic human nature is repressed because capitalism forces people to be competitive to survive.

Socioeconomic Equality: Along with collective ownership of production, social equality is another of the defining goals of Socialism. Socialist beliefs grew from the uprising against the economic inequality brought about by feudalism and early capitalism. In a purely socialist society, there are no income classes. Instead, all people in a socialist economy should have full economic equality.

While eliminating income equality has long been the rallying cry of socialists in capitalistic states, their meaning of equality is often misunderstood. Socialists advocate for a more equitable distribution of wealth and income within the society. This is in stark contrast to liberals and some progressive conservatives who call for policy creating needs-based equity in the opportunity to achieve wealth, such as affirmative action in education and employment.

Provision of Basic Needs: Often touted as the main advantage of pure Socialism, all basic needs of the people—food, housing, education, health care, and employment—are provided at no or minimal charge by the government without any discrimination.

Socialists believe that everything produced by the people is a social product and that everyone who contributes to that production is entitled to an equal share of it. Or Marx put it in 1875: “From each according to his ability, to each according to his needs.”

Critics, however, argue that by providing the basic needs, socialist governments risk leading the people to believe that they cannot survive without the government, thus creating an environment ripe for the rise of totalitarian or autocratic governments.

Socialism vs. Communism

The basic principles of Socialism are often viewed in contrast and comparison to those of Communism. In both ideologies, the government takes on a larger role in economic planning, investment, and control of institutions. Both also eliminate private business as a producer of goods and services. While Socialism and Communism are similar schools of economic thought, both are inconsistent with the free-market ideals of capitalism. There are also important differences between them. While Communism is a tightly exclusive political system, Socialism is mainly an economic system that can function within a wide range of different political systems including democracies and monarchies.

In a sense, Communism is an extreme expression of Socialism. While many modern countries have dominant socialist political parties, very few are communist. Even in the strongly capitalist United States, social welfare programs like the SNAP, the Supplemental Nutrition Assistance Programs, or “food stamps,” are rooted in socialist principles.

Both Socialism and Communism advocate more equal societies free of socioeconomic class privilege. However, while Socialism is compatible with democracy and individual liberty, Communism creates an “equal society” by establishing an authoritarian state, which denies basic freedoms.

As practiced in Western nations, Socialism seeks to reduce economic inequality through participation in the prevailing democratic process and the cooperation of both the government and private enterprise. Unlike under Communism, individual effort and innovation are rewarded in socialist economies.

Socialism and Other Theories

Though the ideologies and goals of Socialism and capitalism seem incompatible, the economies of most modern capitalist economies display some socialist aspects. In these cases, a free-market economy and a socialist economy become combined into a “mixed economy,” in which both the government and private individuals influence the production and distribution of goods. 

In 1988, Economist and social theorist Hans Hermann Hoppe wrote that regardless of how they label themselves, every viable economic system functions as a combination of capitalism and Socialism. However, because of the inherent underlying differences between the two ideologies, mixed economies are forced to perpetually balance Socialism’s predictable obedience to the state with capitalism’s unpredictable consequences of largely unrestrained individual behavior.

Hand Flips a Dice and Changes the Word "Socialism" to "Capitalism", or Vice Versa

 

Fokusiert / Getty Images 

This merger of capitalism and Socialism found in mixed economies has historically followed one of two scenarios. In the first, individual citizens have constitutionally protected rights to own property, production, and trade—the basic elements of capitalism. Socialistic elements of government intervention develop slowly and openly through the representative democratic process, usually in the name of protecting consumers, supporting industries crucial to the public good (such as energy or communications), and providing welfare or other elements of a social “safety net.” Most Western democracies, including the United States, have followed this path to a mixed economy. 

In the second scenario, purely collectivist or totalitarian regimes slowly incorporate capitalism. While the rights of individuals take a backseat to the interests of the state, elements of capitalism are adopted to promote economic growth, if not survival. Russia and China are examples of this scenario.   

Examples

Due to an extent to the highly competitive nature of today’s increasingly capitalistic global economy, there are no pure socialist countries. Instead, most developed countries have mixed economies that incorporate socialism with capitalism, communism, or both. While there are countries that have aligned themselves with socialism, there is no official process or criteria for being named a socialist state. Some states that claim to be socialist or have constitutions that state that they are based on Socialism may not follow the economic or political ideologies of true socialism.

Today, elements of socialist economic systems—health insurance, retirement support, and access to free higher education—exist in several states, mainly in Europe and Latin America.

Socialism in Europe

The socialist movement in Europe is represented by the Party of European Socialists (PES), comprised of all 28 member states of the European Union plus Norway and the United Kingdom. The PES also includes the Social Democratic Party of Germany, the French Socialist Party, the British Labor Party, the Italian Democratic Party, and the Spanish Socialist Workers’ Party.

As the socialist and social democratic voting bloc within the European Parliament, the current objective of the PES is stated as “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.”

The most strongly socialist systems in Europe are found in the five Nordic countries—Norway, Finland, Sweden, Denmark, Iceland. On behalf of the people, these states own a large percentage of the economy. A large portion of their economies is spent on providing free housing, education, and public welfare. Most workers belong to unions, giving them greater power. Most significantly, all five countries are democracies, allowing the general population extensive input into decision-making. Since 2013, the United Nations World Happiness Report has listed Northern European nations where the Nordic states’ model of socialism is employed as the world’s happiest nations, with Denmark heading the list.

Socialism in Latin America

Perhaps no region of the world has as long a history of populist, socialist, and communist movements as Latin America. For example, the Socialist Party of Chile under eventual Chilean president, Salvador Allende, the National Liberation Army, which has existed in Colombia since 1964, and the regimes of Cuban revolutionaries Che Guevara and Fidel Castro. After the collapse of the Soviet Union in 1991, however, the power of most of these movements had greatly diminished.

Today, Argentina is considered one of the most strongly socialist countries in Central or South America. In 2008, for example, the Argentinian government, under President Cristina Fernández de Kirchner, responded to inflation problems by confiscating private pension plans to bolster the country’s strained Social Security fund. Between 2011 and 2014, the Kirchner government imposed more than 30 new restrictions on capital and monetary freedom, including higher taxes on purchases of foreign product purchases, limits on foreign currency purchases, and new taxes on the sale of airline tickets to foreign destinations.

Other Latin American countries strongly tied to socialist movements include Ecuador, Cuba, Bolivia, and Venezuela. Others, such as Chile, Uruguay, and Colombia are considered to be less strongly socialist leaning.

Much of the spread of socialism throughout Latin America has been attributed to the failure of well-intentioned efforts of multinational organizations such as the International Monetary Fund, the IMF to bolster the economies of the region. During the 1980s and 1990s, many of the Latin American countries depended on foreign loans, printed large quantities of money, and shifted the focus of their economic activity away from ensuring public welfare to improving their balances of trade.

These policies were blamed for declining economic performance, runaway inflation, and rising levels of social inequality. In Argentina, for example, the average annual inflation rate peaked at over 20,000% in 1990. As the nation was forced to default on its foreign loan obligations, its people were left in poverty. The backlash to these irresponsible economic policies played a major role in triggering the Latin American socialist movement. 

Sources

  • “Socialism .” Stanford Encyclopedia of Philosophy, July 15, 2019, https://plato.stanford.edu/entries/Socialism /#SociCapi.
  • Rappoport, Angelo. “Dictionary of Socialism.” London: T. Fischer Unwin, 1924.
  • Hoppe, Hans Hermann. “A Theory of Socialism and Capitalism.” Kluwer Academic Publishers, 1988, ISBN 0898382793.
  • Roy, Avik. “European Socialism: Why America Doesn't Want It.” Forbes, October 25, 2012,
  • ttps://www.forbes.com/sites/realspin/2012/10/25/european-socialism-why-america-doesnt-want-it/?sh=45db28051ea6.Iber, Patrick. “The Path to
  • Democratic Socialism: Lessons from Latin America.” Dissent, Spring 2016, https://www.dissentmagazine.org/article/path-democratic-socialism-lessons-latin-america.
  • Gornstein, Leslie. “What is Socialism? And what do socialists really want in 2021?” CBS News, April 1, 2021, https://www.cbsnews.com/news/what-is-Socialism /.
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Longley, Robert. "What Is Socialism? Definition and Examples." ThoughtCo, Aug. 26, 2021, thoughtco.com/a-definition-of-socialism-3303637. Longley, Robert. (2021, August 26). What Is Socialism? Definition and Examples. Retrieved from https://www.thoughtco.com/a-definition-of-socialism-3303637 Longley, Robert. "What Is Socialism? Definition and Examples." ThoughtCo. https://www.thoughtco.com/a-definition-of-socialism-3303637 (accessed September 26, 2021).