One of the key features of socialism is the collective ownership of the factors of production such as land, labor, and capital. Like other economic systems such as free enterprise, liberal, and coordinated economies, socialism has distinctive features that distinguish it from all other economic systems. Hence, our focus here shall be on discussing the various features of socialism but before we do that, let us understand what socialism means.
Read about: Features of capitalism
What is socialism?
Socialism is most commonly seen as a type of economic system that is the opposite of capitalism. In a socialist economy, the means of production are owned and operated by the government with the aim of maximizing social welfare and ensuring equal opportunities for the citizens.
This means that the government is in charge of all economic activities that occur within the society such as production, distribution, and consumption. Government has absolute control over the means of production and takes responsibility for meeting the needs of individuals. Thus all factories and companies are usually nationalized and production is done in the public sector. Individuals are generally assigned jobs based on their capabilities and for the greater good of the community.
The concept of socialism was introduced by Fredric Engles and Karl Marx in their book, the communist manifesto. Socialism is sometimes referred to as a centrally planned economy or a communist economy. The government in a socialist economy is usually made up of representatives of the people and the proceeds from the nationalized factories and companies are distributed to the people on the basis of equality. This is done to ensure that every member of society is adequately taken care of. Some countries that practice socialism include North Korea, Vietnam, Russia, Laos, China, and Cuba.
Read about: Characteristics of a good market
Features of socialism
- Active cooperation of citizens
- Central planning of the economy
- Communal ownership of resources
- Definite aims and objectives
- Equal distribution of income
- Long-term planning
- Maximum social welfare
- No consumer freedom
- One party system
- Price control
- Production is not profit-driven
- Work and wages are assigned
Now that we have listed out the features of socialism, let us discuss each one of them below:
Active cooperation of citizens
Socialism’s existence in a community goes hand in hand with the active cooperation of the people that make up the community. This is because although the government is in charge of the economy, and makes plans on how the economy should operate, if the people do not cooperate and actively participate in areas where it is needed, challenges will arise. The government usually encourages active participation by providing certain benefits to its citizens. This spurs individuals towards keying in to mobilizing resources and aiding the smooth implementation of the various government plans.
Central planning of the economy
One of the key features of socialism is the central planning of the economy. Generally, a central economic planning committee is formed and they are saddled with the responsibility of planning the direction and economic events that take place in the society. Thus every economic decision emanates from the central committee that is saddled with this responsibility and all regions or states within the country adhere to it.
The committee has the authority to decide how resources will be utilized and what products or services will be available to the citizenry. They also decide the methods that will be employed in the production, the quantity, as well as where and when it will be produced. Licensing is another method used in curbing production. Hence all long-term and short-term economic decisions are made by the central authority. An example of central planning can be seen in Russia as most economic decisions are made in Kremlin by its central planning committee known as Gosplan.
This committee further lays down plans for the various economic targets to be achieved within the period of its tenure. They also utilize and organize the resources available in a defined direction that will aid in the attainment of the set economic targets.
The major distinguishing feature of socialism is the common or communal ownership of resources. All means of production and distribution are collectively owned. By this, all the companies, financial institutions, mines, malls, transportation, communication, service sectors, etc are controlled, regulated, operated, and owned by the government in the interest of the citizens. Certain individuals are either elected or appointed to head the various departments that comprise the various sectors. They manage the production and distribution that occurs on behalf of the citizens. Communal ownership is geared at achieving full and efficient utilization of the country’s resources as well as equal distribution and opportunities for all individuals in society.
Although the private sector sometimes exists in socialist economies, their existence is usually in the form of small enterprises that carry out little production based on what is allowed by the central planning committee. These small enterprises usually comprise local artisans who produce for consumption within their localities.
Definite aims and objectives
Socialism is often associated with societies that have definite aims and objectives. The aims and objectives may include the allocation of the factors of production, economic development, the satisfaction of communal needs, employment, aggregate demand, distribution of national income, healthcare, infrastructural development, etc. These aims and objectives are usually included in the country’s constitution; they are clearly and quantitatively defined such that definite steps toward actualizing them can be easily followed and implemented. Furthermore, complementary and competitive areas are also well noted to ensure the plan is as realistic as possible.
Equal distribution of wealth
The elimination of private ownership of resources in socialism aids the equal distribution of wealth. Since all the means of production are owned, controlled, and operated by the government in socialism, it prevents the tendency of a few individuals to amass all the wealth while the vast majority are left poor. Instead of taxation, the government mostly uses income from rent, interests on loans, and profits from production to provide certain public goods such as education, healthcare, security, infrastructure, and emergency services.
The wide provision of social amenities by the government and the communal ownership of resources also aid in this equal distribution of wealth. This, in turn, contributes to bridging the gap between all individuals in society such that it becomes harder to classify people based on social status as almost everyone in society has the same level of wealth. Hence, discrimination based on wealth or poverty is generally nonexistent.
One of the distinguishing features of socialism is that countries that have this type of economy usually have a well-developed long-term plan for the country. This plan usually outlines specific national goals and the projected timelines for achieving them. The plans generally range between 20 to 30 years and are the blueprints that steer state activities. They are made with explicit inputs, outputs, and far-reaching analyses that clearly outline how to achieve them. These plans could be modified in time to align with changes in aims, objectives, and the basic structure of the nation. Hence, a socialist economy is usually a fully planned economy.
Maximum social welfare
A characteristic of socialism that ensures its continued existence is the maximum social welfare plans and programs that are built into the economic blueprint. The government generally keeps close tabs on the needs of the vulnerable members of society and formulates plans that are aimed at meeting those needs. Thus, unlike in the free economy where the vulnerable members of the society are at the mercy of the benevolence of their relatives and friends, in socialism, the government fully makes provisions to cater to the needs of its vulnerable members. As a result of this, social welfare programs abound which ensures maximum social welfare of the society as a whole.
The government provides all social security measures such as health insurance, retirement homes, unemployment benefit, etc.
No consumer freedom
Although socialism strives to provide citizens with their needs which ensures the freedom of consumption, there is generally a lack of consumer freedom. The freedom of consumption ensures that citizens get provided with their basic necessities such as water, food, shelter, and clothing. However, the goods and services that are made available and sold in various government-run stores are confined to only socially useful commodities. Hence consumers lack the freedom of choice that is often the case when there is a variety of products and services to choose from.
Consumption is usually indirectly controlled through production. Thus people cannot demand the goods or services they want, instead, they have to make do with whatever has been produced and made available by the government. As a result of this, the market forces of demand and supply which are prevalent and part of the driving force of a free market are said to be nonexistent in socialism.
One party system
The one-party system is another distinct feature of socialism. Through the one-party system, only one party operates in the country. Hence the leaders stay in power for very long periods with change in leadership rarely occurring. Most times, opposing views are silenced and the state controls the media, hence only what the state approves gets broadcasted and heard outside the country.
Another feature of socialism is that market forces of demand and supply do not determine the price of products or services. Instead, prices are fixed through various guiding rules and regulations that exist within the country. Accounting prices are the basis on which managers decide about the production of investment and consumer goods as well as the choice of production methods. Administered and market prices are fixed by the government. The market prices are the price at which consumer goods are sold.
Prices are determined in a way that makes products and services affordable to all citizens. Specific plans based on citizens’ needs guide the process of allocation. Thus, the public interest is given top priority as the general welfare of citizens is considered important.
Production is not profit-driven
When goods and services are made available in socialism, the main focus is not to get a profit from the provision of these goods and services. The main focus of production is the satisfaction of communal needs. Therefore, the central planning committee decides on production based on socio-economic welfare. This means that products and services are made available based on the people’s welfare and not necessarily for profit.
Work and wages are assigned
An important feature of socialism is that generally, the choice of work and the amount paid as wages are determined by the government. Work is assigned to individuals based on their perceived abilities. Wages are set for different sectors and industries in an equitable manner that ensures sufficiency for the worker. A common mantra under socialism is “from each according to his ability, to each according to his needs.”
Read about: Ordoliberalism definition and characteristics
The features of socialism such as central planning of the economy, communal ownership of resources, definite aims and objectives, maximum social welfare, etc. are the basic distinguishing factors between socialism and other economic systems such as mercantilism. In a socialist economy, the welfare of citizens is considered a top priority, and the provision of goods and services is done to meet the collective needs of citizens and not necessarily to make profits. Furthermore, work and wages are assigned based on ability and needs. The key feature of socialism is that the government is in control of all the means of production and takes major economic decisions on behalf of the citizens.
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