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Socialist economics is a term which refers in its descriptive sense to the economic effects of nations with large state sectors where the government directs the kind and nature of production. In a normative sense, it applies to economic theories which advance the idea that socialism is the best form of economic arrangment, or solution to a particular problem. (See also Capitalism, Communism, Marxism, Leninism, Labor Movement, Social Democrats, Liberalism, Economics, Political Economy)
Kinds of economies
- German model, basis of the Social Democracy's ideal economy, also called Social Economy
- Chinese model, reformed communist, used also in Cuba, Vietnam, adn to some extent North Korea
- Soviet model, nearly extinct
Since the word "socialist" is highly charged politically: everything from Keynesian economics, and post-Keynesian economic theories to Stalinism and Maoism, has been labelled "socialist economics". In the former Soviet Union communist party doctrine and theory was so labelled. Political opponents of a particular policy might label it "socialist" or "communist" as a way of securing its defeat, everything from public medical care to labelling of medicines and foods has been labelled "socialist economics" from time to time.
Adding to the problem is that socialism has been used as both a banner and an epithet, with various groups trying to claim that they and only they represent true socialism and its economic theories, at the same time that others attempt to eradicate or ridicule any policy, idea, or even utterance that they find even vaguely aligned with "socialism". To the Communist Parties around the world, "socialist economics" was synonymous with "the party line", to opponents, socialist economics is "the great failure of the 20th century".
In its most technical sense, a "socialist" economy is defined in terms as absolute as a capitalist economy: "a centrally planned economy in which the government controls all means of production" in the words of Robert Heilbroner. The two features, planning and government control over production are the matter of the most intense debate. If a government purchases an aircraft carrier, and creates demand for spin off products, is it socialism?
Broadly speaking Socialism can be divided into three catagories: revolutionary socialism, which is derrived from the theories of Karl Marx which describes the necessity of a "dictatorship of the proletariat", democratic state socialism, which envisions a democratically elected government with ownership of the "commanding heights" of the economy, and the social democracy which envisions socialism within the context of corporations and specialization of production, often in cohabitation of elements of capitalism.
While socialism is usually associated with the political left, there is an extensive use of state planning and "socialism" by parties of the right, and many nations with large planned or state sectors have governments which identify themselves with the political right, including, most infamously, the "National Socialist Workers Party of Germany", but also including many far more moderate governments which used elements of social welfare, including the institution of social insurance by Otto von Bismarck.
The History of Socialism
Socialism, as with capitalism and communism has deep roots in Western History, from religious communes in the medieval period, through patents of monopoly granted by monarchs, state control or planning of production, or the sharing of the social surplus have been institutionalized in a variety of ways. However, it is with the rise of the ability of technology to make significant strides in production that socialism and capitalism emerged in their modern forms, disagreeing particularly on a single question: could the operation of an unregulated market be sufficient to restrain those who owned capital from excessively exploiting their fellow men, or coming into an alliance with the military power of the state to suppress the legitimate aspirations of the broad majority of the population. Capitalists answered "yes", and socialism, to one degree or another answered "no".
Within this context socialism has undergone four periods: the first in the 19th century of socialism as a political doctrine held largely by the emerging intelligentsia of Europe (1780-1830), the rise of revolutionary socialist and communist movements in the 19th century as the primary opposition to the rise of corporations and industrialization (1830-1916), the polarization of socialism around the question of the Soviet Union, and adoption of socialist or social democratic policies in response (1916-1989), and the response of socialism in the neo-liberal era (1990- ).
The first theories which came to hold the term "socialism" began to be formulated in the late 18th century, and were termed "socialism" early in the 19th century. The central beliefs of the socialism of this period rested on the exploitation of those who labored by those who owned capital or rented land and housing. The abject misery, poverty and disease to which laboring classes seemed destined were the inspiration to a series of schools of thought which argued that life under a class of masters, or "capitalists" as they were then becoming to be called, would consist of working classes being driven down to subsistence wages. (See Iron law of wages).
Socialist ideas found expression in utopian movements, which often formed agricultural communes, which were aimed at being self-sufficient on the land. These included many religious movements, such as the Shakers in America.
Socialism and Political Economy
The foundations of socialism as a theory of political economy would be laid by many of the same people who are considered the basis of all economic theory: Smith, Malthus and Riccardo. In Smith there is a conception of a social good, which should not be, or cannot be provided by the market, and the concept of rent as being unproductive, and therefore taxable. The question of whether the renting class is too great a danger was pondered by Riccardo, who felt them to be parasitic on the economy. This, and the possibility of a "general glut", an over accumulation of capital to produce goods for sale rather than for use, became the foundation of a rising critique of the concept that free markets with competition would be sufficient to prevent diasterous downturns in the economy, and whether the need for expansion inevitably lead to war.
The General glut problem can be phrased this way: is there as labor becomes specialized, if people want a higher standard of living, they must produce more. However, producing more lowers prices (See Adam Smith, Wealth of Nations, Book II) and leads to the need to produce yet more in response. If those who have money choose not to spend it, then it is possible for a national economy to become glutted with all of the goods it produces, and still be producing more in hopes of overcoming the deficit. While Say's Law supposedly dealt with this problem, successive economists came up with new scenarios which could throw an economy out of General equilibrium, or require expansion through conquest, which became termed imperialism
As communist and socialist parties grew through out Europe - part of several general revolutionary waves - the need for a specific theory of socialism became more and more abundant. In 1830 and 1848 the uprisings in France, Germany and Paris created more democratic and republican forms of government, and also a greater sense of the perfectability of social arrangements. It is into this era of Romantic Revolutionary sentiment, which predicated its political action on the idea that there was an historical inevitability to the triumph of a more ideal society, that one of the most controversial individuals in the history of European civilization arrived: Karl Marx.
On the surface, Marx's ideas are a combination of Hegelian dialectical philosophy, materialist political economy, and lucid social critique. He accepts a labor theory of value from Adam Smith, a market conception of capital as money from JS Mill, a theory of exchange from Ricardo. In a sense he is the first socialist to take a capitalist theory of political economy seriously, and rather than simply dismissing it as exploitative, seeks to use its own systematic exploration as the basis for proof that it is internally contradictory.
His approach, which he dubbed "scientific socialism", would stand as the branching point in economic theory: in one direction went those who did not accept that the capitalist system could ever be self-regulating, and in the other, those who believed that while intervention and regulation might be required, that the surplus of people's efforts was best allocated through the free market.
Das Kapital is one of the many famous incomplete works of economic theory: he planned four volumes, completed two, and left his collaborator Engels to complete the third. In many ways the work is modelled on Adam Smith's Wealth of Nations, seeking to be a comprehensive logical description of production, consumption and finance in relation to morality and the state.
Private property in socialist economics
In other instances, where a particular business may be privately owned, it may be largely or wholly controlled by the state, or trade unions, leading to a de facto socialism instead of the de jure one of the Soviet Union. See also syndicalism.
The aims of implementing such ownership structures is to create economies that act in the direct interest of workers, members, or the general populace, rather than a capitalist class. Note that this is subject to the Economic calculation debate, an old argument between socialist and free market / Austrian school economists. Here the Austrian school economists have argued that the denial of private property ownership - as nearly all models of socialist economics promote - would inevitably create worse economic conditions for the general populace than those that would be found in market economies. Socialists, of course, refute this claim and argue that an economy based on private property inevitably benefits the wealthy few in the detriment of the poor and middle classes.
Distinctions with Marxist and Green economics
Note, however, that Socialist economics does not necessarily mean Marxist economics or green economics. Cooperatives or communes have existed, and competed, in countries with market like the United Kingdom and Israel. Similarly, many western economies have had state controlled businesses compete against private companies, or state monopolies in some critical areas of otherwise market economies - for example Telstra in Australia.
Similarly, while green economics can be a form of socialist economics, it is not necessarily so. Economic bodies with socialistic ownership structures are not inherently more environmentally concerned than traditional businesses, instead the massive environmental pollution caused by the communist Soviet Union hints just the opposite.
- Economic calculation debate
- Feminist economics
- History of economic thought
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- Labour economics
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