11.7.2: Socialism

 11.7.2: Socialism 

Let’s get an overview of the world’s second major economic system. What Socialism Is As you can see from Table 11.3, socialism also has three essential components: (1) public ownership of the means of production, (2) central planning, and (3) the distribution of goods without a profit motive. In socialist economies, the government owns the means of production—not only the factories but also the land, railroads, oil wells, and gold mines. Unlike capitalism, in which market forces—supply and demand—determine both what will be produced and the prices that will be charged, a central committee decides that the country needs X number of toothbrushes, Y toilets, and Z shoes. The committee decides how many of each will be produced, which factories will produce them, what price will be charged for the items, and where they will be distributed. Socialism is designed to eliminate competition: Goods are sold at predetermined prices regardless of the demand for an item or the cost of producing it. The goal is not to make a profit, nor is it to encourage the consumption of goods that are in low demand (by lowering the price) or to limit the consumption of hard-to-get goods (by raising the price). Rather, the goal is to produce goods for the general welfare and to distribute them according to people’s needs, not their ability to pay. In a socialist economy, everyone in the economic chain works for the government. The members of the central committee who set production goals are government employees, as are the supervisors who implement their plans, the factory workers who produce the merchandise, the truck drivers who move it, and the clerks who sell it. Those who buy the items may work at different jobs—in offices, on farms, or in day care centers—but they, too, are government employees. 

 Socialism in Practice

Just as capitalism does not exist in a pure form, neither does socialism. Although the ideology of socialism calls for resources to be distributed according to need and not the ability to pay, socialist countries found it necessary to pay higher salaries for some jobs in order to entice people to take on greater responsibilities. Factory managers, for example, always earned more than factory workers. These differences in pay follow the functionalist argument of social stratification presented in Chapter 9. By narrowing the huge pay gaps that characterize capitalist nations, however, socialist nations established considerably greater equality of income. Democratic Socialism Dissatisfied with the greed and exploitation of capitalism and the lack of freedom and individuality of socialism, Sweden and Denmark developed democratic socialism (also called welfare socialism). In this form of socialism, both the state and individuals produce and distribute goods and services. The government owns and runs the steel, mining, forestry, and energy concerns, as well as the country’s telephones, television stations, and airlines. Remaining in private hands are the retail stores, farms, factories, and most service industries.