Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of productionArnold, N. Scott (1998). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford: Oxford University Press. p. 8. "What else does a socialist economic system involve? Those who favor socialism generally speak of social ownership, social control, or socialization of the means of production as the distinctive positive feature of a socialist economic system." that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit.Arneson, Richard J. (April 1992). "Is Socialism Dead? A Comment on Market Socialism and Basic Income Capitalism". Ethics. 102 (3) pp. 485–511.Lawler, James; Ollman, Bertell; Schweickart, David; Ticktin, Hillel (1998). "The Difference Between Marxism and Market Socialism". Market Socialism: The Debate Among Socialists. New York; London: Routledge. pp. 61–63. . "More fundamentally, a socialist society must be one in which the economy is run on the principle of the direct satisfaction of human needs. [...] Exchange-value, prices and so money are goals in themselves in a capitalist society or in any market. There is no necessary connection between the accumulation of capital or sums of money and human welfare. Under conditions of backwardness, the spur of money and the accumulation of wealth has led to a massive growth in industry and technology. [...] It seems an odd argument to say that a capitalist will only be efficient in producing use-value of a good quality when trying to make more money than the next capitalist. It would seem easier to rely on the planning of use-values in a rational way, which because there is no duplication, would be produced more cheaply and be of a higher quality. [...] Although money, and so monetary calculation, will disappear in socialism this does not mean that there will no longer be any need to make choices, evaluations and calculations. [...] Wealth will be produced and distributed in its natural form of useful things, of objects that can serve to satisfy some human need or other. Not being produced for sale on a market, items of wealth will not acquire an exchange-value in addition to their use-value. In socialism their value, in the normal non-economic sense of the word, will not be their selling price nor the time needed to produce them but their usefulness. It is for this that they will be appreciated, evaluated, wanted and produced."" Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.Lawler, James; Ollman, Bertell; Schweickart, David; Ticktin, Hillel (1998). "The Difference Between Marxism and Market Socialism". Market Socialism: The Debate Among Socialists. New York; London: Routledge. pp. 60–64. .
Socialist economics has been associated with different schools of economic thought. Marxian economics provided a foundation for socialism based on analysis of capitalism while neoclassical economics and evolutionary economics provided comprehensive models of socialism. During the 20th century, proposals and models for both socialist planned and market economies were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.Enrico Barone, "Il Ministro della Produzione nello Stato Collettivista", Giornale degli Economisti, 2, pp. 267–93, trans. as "The Ministry of Production in the Collectivist State", in F. A. Hayek, ed. (1935), Collectivist Economic Planning, pp. 245–90.F. Caffé (1987), "Barone, Enrico", The New Palgrave: A Dictionary of Economics, , v. 1, p. 195.János Kornai (1992), The Socialist System: the political economy of communism, Oxford University Press, , p. 476.Mark Skousen (2001), Making Modern Economics, M.E. Sharpe, , pp. 414–15.Robin Hahnel (2005), Economic Justice and Democracy, Routledge, , p. 170
As a term, socialist economics may also be applied to the analysis of former and existing economic systems that were implemented in socialist states such as in the works of Hungarian economist János Kornai.Kornai, János: The Socialist System. The Political Economy of Communism. Princeton: Princeton University Press and Oxford: Oxford University Press 1992; Kornai, János: Economics of Shortage. Munich: Elsevier 1980. A concise summary of Kornai's analysis can be found in Verdery, Katherine: Anthropology of Socialist Societies. In: International Encyclopedia of the Social and Behavioral Sciences, ed. Neil Smelser and Paul B. Baltes. Amsterdam: Pergamon Press 2002, available for download. 19th-century American individualist anarchist Benjamin Tucker, who connected the classical economics of Adam Smith and the Ricardian socialists as well as that of Pierre-Joseph Proudhon, Karl Marx and Josiah Warren to socialism, held that there were two schools of socialist thought, namely anarchist socialism and state socialism, maintaining that what they had in common was the labor theory of value.Brown, Susan Love (1997). "The Free Market as Salvation from Government". In Carrier, James G., ed. Meanings of the Market: The Free Market in Western Culture. Berg Publishers. p. 107. . Socialists disagree about the degree to which social control or regulation of the economy is necessary; how far society should intervene and whether government, particularly existing government, is the correct vehicle for change are issues of disagreement.Docherty, James C.; Lamb, Peter, eds. (2006). Historical Dictionary of Socialism (2nd ed.). Historical Dictionaries of Religions, Philosophies, and Movements. 73. Lanham, Maryland: Scarecrow Press. pp. 1–3. . The goal of socialist economics is to neutralize capital, or in the case of market socialism to apply social planning to investment and capital.
History of socialist economic thought
Karl Marx and Friedrich Engels believed that hunter-gatherer societies and some primitive agricultural societies were communal, and called this primitive communism. Engels wrote about this at length in the book The Origin of the Family, Private Property and the State, which was based on the unpublished notes of Marx on the work of Lewis Henry Morgan.
Values of socialism have roots in pre-capitalist institutions such as the religious communes, reciprocal obligations and communal charity of medieval Europe, the development of its economic theory primarily reflects and responds to the monumental changes brought about by the dissolution of feudalism and the emergence of specifically capitalist social relations.Wallerstein, Immanuel Historical Capitalism As such it is commonly regarded as a movement belonging to the modern era. Many socialists have considered their advocacy as the preservation and extension of the radical humanist ideas expressed in Enlightenment doctrine such as Jean-Jacques Rousseau's Discourse on Inequality, Wilhelm von Humboldt's Limits of State Action, or Immanuel Kant's insistent defense of the French Revolution.Chomsky, Noam Perspectives on Power
Capitalism appeared in mature form as a result of the problems raised when an industrial factory system requiring long-term investment and entailing corresponding risks was introduced into an internationalized commercial (mercantilist) framework. Historically speaking, the most pressing needs of this new system were an assured supply of the elements of industry (land, elaborate machinery, and labour) and these imperatives led to the commodification of these elements.Karl Polanyi Primitive, Archaic and Modern Economies.
According to influential socialist economic historian Karl Polanyi's classic account, the forceful transformation of land, money and especially labour into commodities to be allocated by an autonomous market mechanism was an alien and inhuman rupture of the pre-existing social fabric. Marx had viewed the process in a similar light, referring to it as part of the process of "primitive accumulation" whereby enough initial capital is amassed to begin capitalist production. The dislocation that Polyani and others describe, triggered natural counter-movements in efforts to re-embed the economy in society. These counter-movements, that included, for example, the Luddite rebellions, are the incipient socialist movements. Over time such movements gave birth to or acquired an array of intellectual defenders who attempted to develop their ideas in theory.
As Polanyi noted, these counter-movements were mostly reactive and therefore not full-fledged socialist movements. Some demands went no further than a wish to mitigate the capitalist market's worst effects. Later, a full socialist program developed, arguing for systemic transformation. Its theorists believed that even if markets and private property could be tamed so as not to be excessively "exploitative", or crises could be effectively mitigated, capitalist social relations would remain significantly unjust and anti-democratic, suppressing universal human needs for fulfilling, empowering and creative work, diversity and solidarity.
Within this context, socialism has undergone four periods: the first in the 19th century was a period of utopian visions (1780s–1850s); then occurred 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 polarisation 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 neoliberal era (1970s–present). As socialism developed, so did the socialist system of economics.
Socialist political economy before Marx
A key early socialist theorist of political economy was Pierre-Joseph Proudhon. He was the most well-known of nineteenth century mutualist theorists and the first thinker to refer to himself as an anarchist. Others were: Technocrats like Henri de Saint-Simon, agrarian radicals like Thomas Spence, William Ogilvie and William Cobbett; anti-capitalists like Thomas Hodgskin; communitarian and utopian socialists like Robert Owen, William Thompson and Charles Fourier; anti-market socialists like John Gray and John Francis Bray; the Christian mutualist William Batchelder Greene; as well as the theorists of the Chartist movement and early proponents of syndicalism.Noel Thomson The Real Rights of Man: Political Economies for the Working Class 1775–1850, 1998, Pluto Press
The first advocates of socialism promoted social leveling in order to create a meritocratic or technocratic society based upon individual talent. Count Henri de Saint-Simon was the first individual to coin the term "socialism". Saint-Simon was fascinated by the enormous potential of science and technology, which led him to advocate a socialist society that would eliminate the disorderly aspects of capitalism and which would be based upon equal opportunities. Saint-Simon advocated a society in which people were ranked according to their capacities and rewarded according to their work. This was accompanied by a desire to implement a rationally organized economy based on planning and geared towards large-scale scientific and material progress, which embodied a desire for a semi-planned economy.