Socialism: Types, Pros, Cons, Examples

What It Is, How It Works

socialism
In socialism, the workers are the owners of the factors of production and make decisions about its allocation. Photo: Gabriela Medina PREM/Getty Images

Definition: Socialism is an economic system where the factors of production are owned equally by everyone in the society. The ownership can be through different types. It could be a cooperative, or a democratically-elected government.It could also be a public corporation where everyone in the society has shares of stock.

The four factors of production are labor, entrepreneurship, capital goods, and natural resources.

 These factors are valued for their usefulness to people. This includes individual needs and greater social needs. That might include preservation of natural resources, education, or health care.That requires most economic decisions to be made by central planning, as in a command economy. 

The mantra is, "From each according to his ability, to each according to his contribution." This means everyone in society receives a share of the production based on how much they've contributed. That motivates them to work long hours if they want to receive more. They receive their share after a percent has been deducted for the common good, such as transportation, defense, and education. A society may decide to define the common good as including caring for those who can't directly contribute to production, such as the elderly, children, and their caretakers. (Source: Vladimir Lenin, The State, and Revolution.

 Karl Marx, The Critique of the Gotha Program.)

Socialism assumes that the basic nature of people is cooperative. That nature hasn't yet emerged in full because capitalism or feudalism forced people to be competitive. Therefore, a basic tenet of socialism is that the economic system must support this basic nature for these qualities to emerge.

Types of Socialism

There are many different types of socialism. They mostly disagree on how capitalism can best be turned into socialism, or they emphasize different aspects of socialism. Here are a few of the major branches, according to Socialism by BranchThe Basics of Philosophy:

Democratic Socialism: The factors of production are managed by a democratically-elected government.Central planning distributes common goods, such as mass transit, housing, and energy, while the free market is allowed to distribute consumer goods.  (Source: Democratic Socialists of America.)

Revolutionary Socialism: Socialism will emerge only after capitalism has been destroyed. "There is no peaceful road to socialism." The factors of production are owned by the workers and managed by them through central planning. (Source: Humanist Workers for Revolutionary Socialism.) 

Libertarian Socialism: Libertarianism assumes that the basic nature of people is rational, autonomous and self-determining. Once the strictures of capitalism have been removed, people will naturally seek a socialist society that takes care of all. That's because they see it is the best for their own self-interest. (Source: Alison Edgeley, Chomsky's Libertarian Socialism, Canterbury Christ Church University College.)

Market Socialism: Production is owned by the workers, who decide how to distribute among themselves. They would sell excess production on the free market. Or, it could be turned over to society at large, which would distribute it according to the free market. (Source: "What Is Market Socialism?" Professor Richard D. Wolff.)

Green Socialism: A socialistic economy that highly values the maintenance of natural resources. This will be achieved through public ownership of large corporations, an emphasis on public transit, and locally-sourced food. Production will be focused on making sure everyone has enough of the basics instead of consumer products they don't really need.

Everyone will be guaranteed a livable wage. (Source: General Election ManifestoAlliance for Green Socialism.)

Christian Socialism: Christian teachings of brotherhood are the same values expressed by socialism. (Source: Bertell Ollman, "Socialism Is Practical Christianity," Dialectical Marxism.)

Utopian Socialism: This was more a vision of equality than a concrete plan. It arose in the early 19th century, before industrialization. It would be achieved peacefully through a series of experimental societies. (Source: Utopian SocialismThe Socialist Party of Great Britain.)

Fabian Socialism: A British organization in the late 1900s that advocated a gradual change to socialism through laws, elections, and other peaceful means. (Source: The Fabian Society in Late Victorian Britain," The Victorian Web.)

Difference Between Socialism, Capitalism and Communism

AttributeSocialismCapitalismCommunism
Factors of production are owned byEveryoneIndividualsEveryone
Factors of production are valued forUsefulness to peopleProfitUsefulness to people
Allocation decided byCentral planLaw of demand and supplyCentral plan
From each according to hisAbilityMarket decidesAbility
To each according to hisContributionIncome, wealth and borrowing abilityNeed

Socialism Advantages

Workers are no longer exploited, since they own the means of production. All profits are spread equitably among all workers, according to his or her contribution. The cooperative system realizes that even those who can't work must have their basic needs met, for the good of the whole.

That means poverty is eliminated, everyone has equal access to healthcare and education, and no one is discriminated against. 

Everyone works at what they are best at and what they enjoy. If society needs jobs to be done that no one wants, higher compensation is offered to make it worthwhile.

Natural resources are preserved, again for the good of the whole.

Socialism Disadvantages

The biggest disadvantage of socialism is that it relies on the cooperative nature of humans to work. Therefore, those within society who are competitive, not cooperative, will always seek to overthrow and disrupt it for their own gain. 

A second related criticism is that it doesn't reward people for being entrepreneurial and competitive. Therefore, it won't be as innovative as a capitalistic society.

A third possibility is that the government structure set up to represent the masses may abuse its position and claim power for itself. 

Socialist Countries

There are no countries that are 100% socialist, according to the Socialist Party of the United Kingdom. Most have mixed economies that incorporate socialism with capitalism, communism, or both. Here's a list of countries that are considered to have a strong socialist system:

Norway, Sweden, and Denmark: The state provides healthcare, education, and pensions. However, these countries also have successful capitalists. The top 10% of each nation's people hold more than 65% of the wealth. That's because most people don't feel the need to accumulate wealth since the government provides a great quality of life. (Source:Mike Bird,  "Why Socialist Scandinavia Has Some of the Highest Inequality in Europe," BusinessInsider, October 14, 2014.)

Cuba, China, Vietnam, Russia and North Korea: These countries incorporate characteristics of both socialism and communism.

Algeria, Angola, Bangladesh, Guyana, India, Mozambique, Portugal, Sri Lanka, and Tanzania: These countries all expressly state they are socialist in their constitutions. Their economies are primarily run by the government. All have democratically-elected governments.

Belarus, Laos, Syria, Turkmenistan, Venezuela, Zambia: These countries all have a very strong aspect governance, ranging from healthcare, the media, or social programs, that are run by the government.

Many other countries, such as Ireland, France, Great Britain, Netherlands, New Zealand, and Belguim, have strong socialist parties and a high level of social support provided by the government. However, most businesses are privately-owned, making them essentially capitalist. 

Many traditional economies use socialism, although many still use private ownership.