What are the individual conditions of a socialist economic system?

Question

What are the individual conditions of a socialist economic system?

Answer 1

Socialism refers to any of various economic and political concepts of state or collective ownership and administration of the means of production and distribution of goods and services, some of which have been developed into more or less highly articulated theories.

The term socialism is used to refer to an economic system characterized by state ownership or worker ownership of the means of production and distribution. In the Soviet Union, state ownership of productive property was combined with central planning. Down to the workplace level, Soviet economic planners decided what goods and services were to be produced, how they were to be produced, in what quantities, and at what prices they were to be sold . Soviet economic planning was promoted as an alternative to allowing prices and production to be determined by the market through supply and demand. Especially during the Great Depression, many socialists considered Soviet-style planning a remedy to what they saw as the inherent flaws of capitalism, such as monopolies, business cycles, unemployment, vast inequalities in the distribution of wealth, and the exploitation of workers.

In the West, neoclassical liberal economists such as Friedrich Hayek and Milton Friedman argued that socialist planned economies were doomed to failure. They asserted that central planners could never match the overall information inherent in the decision-making throughout a market economy . Nor could enterprise managers in Soviet-style socialist economies match the motivation of private profit-driven entrepreneurs in a market economy.

Following the stagnation of the Soviet economy in the 1970s and 1980s, many socialists have begun to accept some of this critique. Polish economist Oskar Lange, for example, was an early proponent of "market socialism." He proposed a Central Planning Board that sets the prices of producer goods and controls the overall level of investment in the economy. The prices of producer goods would be determined through trial and error. The prices of consumer goods would be determined by supply and demand, with the supply coming from state-owned firms that would set their prices equal to the marginal cost, as in perfectly competitive markets. The Central Planning Board would distribute a "social dividend" to ensure reasonable income equality.

In Western Europe, particularly in the period after World War II, many socialist parties in government implemented what became known as mixed economies. These governments nationalised major and economically vital industries while permitting a free market to continue in the rest. These were most often monopolistic or infrastructural industries like mail, railways, power and other utilities. In some instances a number of small, competing and often relatively poorly financed companies in the same sector were nationalised to form one government monopoly for the purpose of competent management, of economic rescue (in the UK, British Leyland, Rolls Royce), or of competing on the world market. Typically, this was achieved through compulsory purchase of the industry (i.e. with compensation). For example in the UK the nationalization of the coal mines in 1947 created a coal board charged with running the coal industry commercially so as to be able to meet the interest payable on the bonds which the former mine owners' shares had been converted into.

These nationalized industries would frequently be combined with Keynesian economics and incomes policies in order to guide the entire economy  Nevertheless, most economists, and many socialists, consider that these economies were (or are) capitalist economies, and the aspirations of those who believed the mixed economy would abolish boom and slump, mass unemployment, and industrial unrest, were disappointed with the onset of the first world wide recession of 1973–4, the oil crisis of this period, and the monetary instability which followed. Some far left socialists, as well as some workers in the nationalised industries, also criticised the nationalisations for not establishing workers' control of the nationalised industries, through elected representatives, and the amount of compensation paid to the previous owners.

Some socialists propose various decentralized, worker-managed economic systems. One such system is the "cooperative economy," a largely free market economy in which workers manage the firms and democratically determine remuneration levels and labor divisions. Productive resources would be legally owned by the cooperative and rented to the workers, who would enjoy usufruct rights.  Another, more recent, variant is "participatory economics," wherein the economy is planned by decentralized councils of workers and consumers. Workers would be remunerated solely according to effort and sacrifice, so that those engaged in dangerous, uncomfortable, and strenuous work would receive the highest incomes and could thereby work less. Some Marxists and Anarcho-communists also propose a worker managed economy based on workers councils, however unlike participatory economics in Anarcho communism workers are remunerated according to their needs (which are largely self determined in an anarcho communist system). Recently socialists have also been working with the Technocracy movement to promote such concepts as Energy Accounting.