Socialism is an economic and political theory advocating public or common ownership and cooperative management of the means of production and allocation of resources. A socialist society is a social structure organized on the basis of relatively equal power-relations, self-management, dispersed decision-making (adhocracy) and a reduction or elimination of hierarchical and bureaucratic forms of administration and governance; the extent of which varies in different types of socialism. This ranges from the establishment of cooperative management structures in the economy to the abolition of all hierarchical structures in favor of free association.
As an economic system, socialism is a system of production and allocation based on the direct production of use-values by allocating economic inputs, the means of production and investment through planning to directly satisfy economic demand.[clarification needed] Economic calculation is based on either calculation-in-kind, some physical magnitude or a direct measure of labour time.[clarification needed] Output for individual consumption is distributed through markets, and distribution of income is based on individual merit or individual contribution.
As a political movement, socialism includes a diverse array of political philosophies, ranging from reformism to revolutionary socialism. Some currents of socialism advocate complete nationalisation of the means of production, distribution and exchange, while others advocate state control of capital within the framework of a market economy. Libertarian socialists and anarchists reject using the state to build socialism, arguing that socialism will, and must, arise spontaneously. They advocate direct worker-ownership of the means of production alternatively through independent syndicates, workplace democracies, or worker cooperatives.
Modern socialism originated from an 18th-century intellectual and working class political movement that criticised the effects of industrialisation and private property on society. Utopian socialists such as Robert Owen (1771–1858), tried to found self-sustaining communes by secession from a capitalist society. Henri de Saint Simon (1760–1825), who coined the term socialisme, advocated technocracy and industrial planning. Saint-Simon, Friedrich Engels and Karl Marx advocated the creation of a society that allows for the widespread application of modern technology to rationalise economic activity by eliminating the anarchy of capitalist production that results in instability and cyclical crises of overproduction.
Socialists inspired by the Soviet model of economic development, such as Marxist-Leninists, have advocated the creation of centrally planned economies directed by a state that owns all the means of production. Others, including Yugoslavian, Hungarian, East German and Chinese communist governments in the 1970s and 1980s, instituted various forms of market socialism, combining co-operative and state ownership models with the free market exchange and free price system (but not free prices for the means of production).
The socialist perspective is generally based on materialism and the understanding that human behavior is largely shaped by the social environment. In particular, scientific socialism holds that social mores, values, cultural traits and economic practices are social creations, and are not the property of an immutable natural law. The ultimate goal for Marxist socialists is the emancipation of labour from alienating work. Marxists argue that freeing the individual from the necessity of performing alienating work in order to receive goods would allow people to pursue their own interests and develop their own talents without being coerced into performing labour for others. For Marxists, the stage of economic development in which this is possible is contingent upon advances in the productive capabilities of society.
Socialists generally argue that their movement is an attempt to bring social organization up to the level of current technological progress, to fully take advantage of modern technology. They argue that capitalism is either obsolete or approaching obsolescence as a viable system for producing and distributing wealth in an effective manner. Socialists generally argue that capitalism concentrates power and wealth within a small segment of society that controls the means of production and derives its wealth through a system of exploitation. This creates a stratified society based on unequal social relations that fails to provide equal opportunities for every individual to maximize their potential, and does not utilise available technology and resources to their maximum potential in the interests of the public, and focuses on satisfying market-induced wants as opposed to human needs. Socialists argue that socialism would allow for wealth to be distributed based on how much one contributes to society, as opposed to how much capital one holds.
As an economic system, socialism is based on the direct production of use-value to satisfy economic demand by coordinating the use of economic inputs (the means of production) through planning of production. Production is therefore planned and does not suffer from the cyclical fluctuations inherent to economies based on capital accumulation. Accounting for the use of economic inputs is based on calculation in-natura, while final goods and services are distributed through markets.
Market socialism retains the process of capital accumulation, but subjects investment to social control, utilizing the market to allocate the factors of production. The profit generated by publicly owned firms would go to a social dividend, which would be used for public investment or public finance. Market socialist theories range from libertarian theories like mutualism, to theories based on Neoclassical economics like the Lange Model.
The ownership of the means of production can be based on 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; or public ownership by a state apparatus. Public ownership may refer to the creation of state-owned enterprises, nationalisation or municipalisation. The fundamental feature of a socialist economy is that publicly owned, worker-run institutions produce goods and services in at least the commanding heights of the economy.
Management and control over the activities of enterprises is based on self-management and self-governance, with equal power-relations in the workplace to maximize occupational autonomy. A socialist form of organization would eliminate controlling hierarchies so that only a hierarchy based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy objectives. The policies/goals would be carried out by the technical specialists that form the coordinating hierarchy of the firm, who would establish plans or directives for the work community to accomplish these goals.
This form of socialism combines public ownership and management of the means of production with centralised state planning, and can refer to a broad range of economic systems from the centralised Soviet-style command economy to participatory planning via workplace democracy. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. This type of economic system was often combined with a single-party political system, and is thus associated with the Communist states of the 20th century.
In the economy of the Soviet Union, state ownership of the means of production was combined with central planning, in relation to which goods and services to make and provide, how they were to be produced, the quantities, and the sale prices. Soviet economic planning was an alternative to allowing the market (supply and demand) to determine prices and production. The Soviet economy utilized material balance accounting to a limited extent, although this never totally replaced financial accounting. During the Great Depression, many socialists[who?] considered Soviet-style planned economies the remedy to capitalism's inherent flaws – monopoly, business cycles, unemployment, unequally distributed wealth, and the economic exploitation of workers. The lack of self-management in the workplace, the existence of financial calculation and a bureaucratic elite based on hierarchical and centralized powers of authority have led many socialists[which?] to classify this economic model as either Bureaucratic collectivist, Coordinatorist, State capitalist or Deformed workers' states.