Socialism

Socialist theory was refined in the writings of Karl Marx and Friedrich Engels. These European radicals were disturbed by the exploitation of the working class that emerged during the industrial revolution. In their view, capitalism forced large numbers of people to exchange their labor for low wages. The owners of an industry profit from the labor of workers primarily because they pay workers less than the value of the goods produced.

As an ideal type, a socialist economic system attempts to eliminate such economic exploitation. Under socialism, the means of production and distribution in a society are collectively rather than privately owned. The basic objective of the economic system is to meet people's needs rather than to maximize profits. Socialists reject the laissez-faire philosophy that free competition benefits the general public. Instead, they believe that the central government, acting as the representative of the people, should make basic economic decisions. Therefore, government ownership of all major industries - including steel production, automobile manufacturing, and agriculture - is a

primary feature of socialism as an ideal type.

In practice, socialist economic systems vary in the extent to which they tolerate private ownership. For example, in Great Britain, a nation with some aspects of both a socialist and a capitalist economy, passenger airline service is concentrated in the government-owned corporation British Airways. Yet private airlines are allowed to compete with it.

Socialist societies differ from capitalist nations in their commitment to social service programs. For example, the U.S. government provides health care and health insurance to the elderly and poor through the Medicare and Medicaid programs. But socialist countries typically offer government-financed medical

care to all citizens. In theory, the wealth of the people as a collectivity is used to provide health care, housing, education, and other key services to each individual and family.

Marx believed that socialist states would eventually "wither away" and evolve into communist societies. As an ideal type, communism refers to an economic system under which all property is communally owned and no social distinctions are made on the basis of people's ability to produce. In recent decades, the Soviet Union, the People's Republic of China, Vietnam, Cuba, and nations in Eastern Europe were popularly thought of as examples of communist economic systems. However, this usage represents an incorrect application of a term with sensitive political connotations. All nations known as communist in the 20th century actually fell far short of the ideal type.

By the early 1990s, Communist parties were no longer ruling the nations of Eastern Europe. The first major challenge to Communist rule came in 1980, when Poland's Solidarity movement - led by Lech Walesa and backed by many workers – questioned the injustices of that society. Though martial law forced Solidarity underground, the movement eventually negotiated the end of Communist Party rule, in 1989. Over the next two years, Communist parties were overthrown by popular uprisings in the Soviet Union and throughout Eastern Europe. The former Soviet Union, Czechoslovakia, and Yugoslavia were then subdivided to accommodate ethnic, linguistic, and religious differences.

As we have seen, capitalism and socialism serve as ideal types of economic system. In reality, the economy of each industrial society - including the United States, the European Union, and Japan - includes certain elements of both capitalism and socialism. Whatever the differences – whether a society more closely fits the ideal type of capitalism or socialism - all industrial societies rely chiefly on mechanization in the production of goods and services.

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