The Economy


At the heart of the socialist approach to the economy is a preference for common or collective ownership over private ownership. Such a view sets socialism apart from liberalism and conservatism, which both regard private ownership as natural and proper. Socialists criticise private property for a number of reasons:

    • Property is unjust: wealth is produced by the collective effort of human labour and should therefore be owned by the community, not by private individuals.

    • It breeds acquisitiveness and so is morally corrupting. Private property encourages people to be materialistic, to believe that human happiness or fulfilment can be gained through the pursuit of wealth. Those who own property wish to accumulate more, while those who have little or no wealth long to acquire it.

    • It is divisive. It fosters conflict in society; for example, between owners and workers, employers and employees, or simply the rich and the poor.

Socialists have therefore proposed that either the institution of private property be abolished and replaced by the common ownership of productive wealth, or, more modestly, that the right to property be balanced against the interests of the community. Fundamentalist socialists, such as Marx and Engels, envisaged the abolition of private property, and hence the creation of a classless, communist society in place of capitalism. Their clear preference was that property be owned collectively and used for the benefit of humanity. However, they said little about how this goal could be achieved in practice. When Lenin and the Bolsheviks seized power in Russia in 1917, they believed that socialism could be built through nationalisation. This process was not completed until the 1930s, when Stalin’s ‘second revolution’ witnessed the construction of a centrally planned economy, a system of state collectivisation. ‘Common ownership’ came to mean ‘state ownership’, or what the Soviet constitution described as ‘socialist state property’. The Soviet Union thus developed a form of state socialism. Social democrats have also been attracted to the state as an instrument through which wealth can be collectively owned and the economy rationally planned. However, in the West, nationalisation has been applied more selectively, its objective being not full state collectivisation but the construction of a mixed economy.

In the UK, for example, the Attlee Labour government, 1945–51, nationalised what it called the ‘commanding heights’ of the economy: major industries such as coal, steel, electricity and gas. Through these industries, the government hoped to regulate the entire economy without the need for comprehensive collectivisation. However, since the 1950s, parliamentary socialist parties have gradually distanced themselves from the ‘politics of ownership’, preferring to define socialism in terms of the pursuit of equality and social justice rather than the advance of public ownership.

Socialists’ view of the economy includes the following:

● Socialists differ in their attitude to capitalism.

● Revolutionary socialists like Marx and Engels argue that capitalism distorts human consciousness and leaves the worker ‘deformed’, with the proletariat exploited by the bourgeoisie.

● Revolutionary and democratic socialists want capitalism abolished and replaced with an economy based on collective ownership of property and the workers controlling the means of production.

● Revolutionary socialists argue that equality can be achieved only with the abolition of private property and the common ownership of the means of production with workers’ control.

● Revolutionary socialists argue that any attempts to reform capitalism will completely undermine the core objectives of socialism. Luxemburg maintains that the exploitative elements within capitalism are too strong.

● Marx and Engels argued that capitalism’s innate contradictions and crises mean that its collapse is inevitable. This is a predominant theme within revolutionary socialism.

● Democratic socialist Beatrice Webb argued that equality of ownership would equate to extensive state nationalisation and not the workers taking direct control. She preferred a paternal socialist governing class.

● Social democrats disagree with revolutionary socialists and democratic socialists and argue that capitalism should not be abolished but reformed.

● Social democrats argue for a mixed economy of state and privately run industries. The state would regulate the economy using Keynesian economics to maintain growth and full employment.

● Social democrats wish to reform the inequalities of capitalism via the welfare state, which would redistribute wealth.

● Social democrats like Anthony Crosland focus on social justice rather than common ownership and emphasise that the state must manage the economy wisely so that its benefits can be shared on an egalitarian basis.

● Social democrats wish to redistribute wealth, resources and opportunities via public ownership and extensive public services that would be financed by progressive taxation.

● The Third Way embraces aspects of the free market and abandons top- down state intervention. It envisages private enterprise being involved in the delivery of public services, as in the private finance initiatives instigated by New Labour.