How Socialism Works

Many people wonder what heaven is like -- so many, in fact, that philosophers and
scholars over the years have hypothesized about how heaven on Earth can be achieved.
The term "utopia" was coined in 1515 by British writer Thomas More. Utopia describes
a perfect place or society, where everyone is equal socially and economically.

The political and economic theory of socialism was created with the vision of a utopian
society in mind. Contrary to other economic systems, there is no real consensus on how
the ideal socialist society should function. Dozens of forms of socialism exist, all with
differing ideas about economic planning, community size and many other factors.
Despite the variations in socialist thought, every version advocates the benefits of
cooperation among the people, steering clear of the "evils" of competition associated
with capitalism.

True socialists advocate a completely classless society, where the government controls
all means of production and distribution of goods. Socialists believe this control is
necessary to eliminate competition among the people and put everyone on a level
playing field. Socialism is also characterized by the absence of private property. The
idea is that if everyone works, everyone will reap the same benefits and prosper equally.
Therefore, everyone receives equal earnings, medical care and other necessities.

As we've learned, socialism is difficult to define because it has so many incarnations.

One of the things socialists agree on is that capitalism causes oppression of the lower
class. Socialists believe that due to the competitive nature of capitalism, the wealthy
minority maintains control of industry, effectively driving down wages and opportunity
for the working class. The main goal of socialism is to dispel class distinctions by
turning over control of industry to the state. This results in a harmonious society, free of
oppression and financial instability. Some of the other forms of socialism include these
goals:

• responsible for control and management of goods.

• Utopian socialism: Advocates social ownership of industry and a voluntary,

nonviolent surrender of property to the state. Implemented in communities like
Robert Owens' New Lanark.
• State socialism: State socialism allows major industries to be publicly owned
and operated.

• Christian socialism: Developed in England in 1948, this branch was born from
the conflict between competitive industry and Christian principles. Christian
socialist societies are characteristically led by religious leaders, rather than
socialist groups.

• Anarchism: Opposes domination by the family, state, religious leaders and the
wealthy. Anarchism is completely opposed to any form of repression and has
been associated with some radical events, including assassinations in Italy,
France and Greece. U.S. President William McKinley was assassinated by an
anarchist.

• Market Socialism: Often referred to as a compromise between socialism and

capitalism. In this type of society, the government still owns many of the
resources, but market forces determine production and demand. Government
workers are also enticed with incentives to increase efficiency.

• Agrarianism: Form of socialism that features the equitable redistribution of land

among the peasants and self-government similar to that in communal living.
Agrarian ideals were popular in the rural United States well into the 1900s,
although increasing government control deterred their growth.
Thomas More coined the term "utopia" in 1515 in his treatise titled "Utopia," but
utopian imaginings began long before his. Plato described a similar environment
when he wrote the philosophical work "Republic" in 360 B.C. In 1627, Francis
Bacon's "New Atlantis" advocated a more scientific approach, rooted in the
scientific method. Bacon envisioned a research-institute-like society where
inhabitants studied science in an effort to create a harmonious environment through
their accumulation of knowledge. In addition to these landmark works, more than 40
utopian-themed novels were published from 1700 to 1850, cementing its status as a
very popular ideal [source: Foner]. Because many social injustices -- such as slavery
and oppression -- were running rampant, the theme was quite popular among
embittered and dispirited populations.

While a French revolutionary named François Noël Babeuf is credited with the idea
of doing away with private property to create equality and is often considered the
first socialist, the concept wasn't popularized until the late 1700s, when the
Industrial Revolution caused some drastic changes around the world.

The revolution marked a shift from agricultural societies to modern industries, in

which tools were eschewed in favor of cutting-edge machinery. Factories and
railways sprung up, resulting in tremendous wealth for the owners of these
industries. While they profited from these changes, workers were thrown into
sudden poverty due to a lack of jobs as machines began to replace human labor.
Many people feared that this discrepancy in income would continue to spread,
making the rich richer and the poor poorer.

This fear created unrest among the working class. Poor housing, coupled with bad
working conditions and slave labor (which was still rampant in the United States
and other countries), contributed to the desire for a more equal society. As a result,
socialist ideals quickly became popular among the impoverished workers.
Communes such as Brook Farm and New Harmony began popping up in the
United States and Europe. These small communities abided by socialist principles
and worked to avoid the class struggles that controlled the rest of the world. New
Harmony was considered a center of scientific thought and boasted the United
States' first free library, public school and kindergarten.

Despite the presence of small communes and the spread of socialist thought,
socialism remained largely an idea, rather than reality. Soviet dictator Vladimir
Ilyich Lenin was the first leader to put socialism to the test. Though he was
a communist (a branch of socialism that used militant action to overthrow the upper
class and government to achieve a utopian society), Lenin implemented many
socialist initiatives in the Soviet Union after his takeover in 1917. These included
forced nationalization of industry and collectivization of agriculture. Lenin's
programs were not profitable, and he eventually resorted to a mixed economy.
Communism is sometimes referred to as revolutionary socialism for its aggressive
tactics. Although there are fundamental differences between the two theories,
communism and socialism both aim to eliminate class struggles by encouraging
government or state control of production and distribution.

The post-World War I era saw a rise in democratic socialism in Europe. Socialist
parties became active in the governments of Germany, Sweden, the Netherlands,
 Belgium and Great Britain. Socialism also became popular in portions of Africa,
Latin America and Asia.

By the early 1900s, the disparity of wealth in the United States was growing even more
obvious, and socialist ideology was on the rise. In 1874, a group of socialists formed
the Workingmen's Party, later known as the Socialist Labor Party. The group
advocated the reform of social abuses, labor issues and other equality concerns.

The Socialist Labor Party merged with the Social Democratic Party in 1901 to form the
Socialist Party of America. By 1912, the party had more than 100,000 members. But the
party's growth in the United States was massively hindered in 1917 when the
government enacted the Espionage Act. The Espionage Act originated out of the
government's fear of the communist way of life -- fear incited by the bloody Bolshevik
Revolution in Russia, which resulted in many millions of deaths and the complete
overthrow of the Russian government. The Espionage Act encouraged patriotism above
all else and made it illegal to publicly oppose involvement in World War I.

Supporters of socialism became wary of associating with the controversial communist

system, and the Socialist Labor Party's membership in the U.S. plummeted in the 1950s.
The fear of association with socialism and communism continued through the McCarthy
Era (1950 to 1954), during which Senator Joseph McCarthy fingered suspected
communists. Many people feared that they'd be targets of McCarthy and kept a low
profile by discontinuing their involvement with the party. (You can read more about it
in How McCarthyism Worked.)

But even despite these attacks on communist and socialist ways of life, socialists still
existed in the United States, often supported by respected thinkers of the time. For
example, noted scholar Albert Einstein penned a paper titled "Why Socialism?" in 1949
in which he described the need for a socialist economy to eliminate the "evils" of
unemployment and a competitive economy. He emphasized the need for an educational
system to achieve socialist goals. And, he advocated a planned economy to ensure the
livelihood of every citizen. Other famous socialists include John Lennon of Beatles
fame and Susan B. Anthony, a suffragist leader.

Another example of applied socialism began just after World War II. Great Britain's
storied leader during the devastating war, Prime Minister Winston Churchill, shockingly
was defeated in re-election by Clement Atlee, a virtual unknown outside of Britain.
Atlee was the head of the Labour Party, a democratic socialist party established in
1900, while Churchill was head of the conservative party, also known as the Tory
Party. After World War II, much of Britain was fed up with healthcare concerns and
labor problems, and many people didn't believe that Churchill's Tory party would effect
any change. Atlee's socialist party addressed these issues by nationalizing industry and
creating a free healthcare system.

The Labour Party nationalized Britain's main industries, including

coal, electricity, steel and the railways. Nationalization occurs when the state takes over
the means of production and distribution. The idea is that any profits generated will then
benefit the country, rather than a wealthy few. Some improvements resulted from
nationalization in Britain. For example, coal miners were given paid vacation and sick
leave, and their safety became a greater concern. But nationalizing industry turned out
to be trickier than anyone initially thought. Industries became inefficient and
unprofitable because no competition existed to motivate workers to perform better on
the job.

The new government also established the National Health Service (NHS) in 1948,
which provided free medical care. The system was extremely popular -- to a fault.
Funds allocated for the NHS were used up quickly, having been far under budgeted. But
because the program was so popular among the people, it was kept in place, despite
the debt it incurred. It remains even today as the only major change implemented by
Atlee's Labour Party. Unfortunately, getting medical care under this free system can be
a very tedious process with a long waiting time.

Although nationalization and free healthcare aimed to help its people, Great Britain
began to suffer steep inflation rates -- as high as 24 percent in 1975 -- and
high unemployment rates [source: PBS]. Welfare costs were also draining the economy.
The period of December 1978 through January 1979 became known as the Winter of
Discontent (an expression that originated from Shakespeare's play "Richard III"),
thanks to the many members of the public sector who went on strike, including truck
drivers, medical personnel and teachers. To the British people, the Labour Party seemed
incapable of controlling the strikes that were affecting the public. Due to this strife, the
Conservative Party came back into power when Margaret Thatcher was elected the first
female prime minister in 1979.
Thatcher worked to improve the economy through reduced spending in areas like
education and healthcare. Although inflation went down, unemployment continued to
rise. Under Thatcher's leadership, Britain's government denationalized many important
companies, starting with British Telecom. By selling it off to shareholders, the
company's profitability and efficiency increased. Thatcher also reduced the power of
trade unions to decrease the number of economically devastating strikes.

Though many of her policies may not have been popular, Thatcher managed to resolve
some dicey economic situations in Great Britain. Her election was seen as a great
victory for capitalism and prompted the beginning of a capitalist revolution of sorts.
Countries such as Spain and France began to steer away from socialism and suddenly,
the world's socialist population began to shift. While at the end of the 1970s, socialist
and communist regimes were in control of 60 percent of the world's population, things
were changing fast.

Socialism suffered major setbacks due to the collapse of communism in the Soviet
Union and other Eastern European states. And many other societies followed in Great
Britain's footsteps and denationalized their industries. However, some socialist-inspired
programs exist today. In fact, any program that calls for the redistribution of wealth can
be considered socialist. For example, the tax that the United States imposes on citizens
to support the welfare system, which provides aid to financially unstable citizens, can be
considered a socialist program. Healthcare systems like Medicare and Medicaid fall in
the same category.

Another example of a socialist program is Canada's healthcare system. Proponents of

this system argue that it provides free healthcare to those who would otherwise be
uninsured or underinsured. They also point to the rising cost of health care in places like
the United States, which some believe is caused by profit-driven insurance companies,
for-profit hospitals and pharmaceutical companies.

But the grass isn't always greener on the other side. Canada's free healthcare system
often delays important medical procedures and treatments simply because it doesn't
have the manpower, space and time to handle them. One highly publicized example of
this untimely delay is the case of identical quadruplets born in Montana. The
quadruplets had to be delivered in Great Falls because no hospital in the entirety of
Canada, where their parents reside, could handle their delivery. Every hospital was at
capacity at the time. Other inconveniences include the average waiting time for a
standard Magnetic Resonance Imaging (MRI): three months [source: Fraser Institute].
Critics of the system insist that while the residents may not pay much up front, they
seem to pay for it in terms of delayed care and poor quality of service. The system isn't
even actually free -- roughly 22 percent of Canadian tax dollars are used to fund the
healthcare system [source: Lehr].

Socialist groups around the world continue to push for reform in their societies.
However, they're often counteracted by critics, including the Future of Freedom
Foundation, the Cato Institute and Sons of Liberty, many of whom point to what they
consider to be the fatal error in socialist thought: How could any truly socialist society
succeed without the incentives of profit and constraints of competition to motivate
workers?

At any rate, the quest for a purely socialist -- and for that matter, a purely capitalist --
society has eluded economists thus far. After all, the United States, considered one of
the most successful capitalist economies in the world, utilizes a number of socialist-
inspired programs to help its financially encumbered citizens. For the time being, at
least, it seems that mixed economies, featuring both socialist and capitalist elements, are
much more realistic.