Socialism

Definition
Socialism is a populist economic and political system based on public ownership and it is also known
as collective or common ownership of the means of production. Those means include the machinery,
tools, and factories used to produce goods that aim to directly satisfy human needs. As a simple term
it can be also concluded as a policy or practice based on the political and economic theory of
socialism.

Characteristics
1. Public ownership.
- It has the public ownership of all the means of production and distribution. This is also
known as collective ownership whereby all means are owned, controlled and regulated by
the state. In socialist economic system the basic motive of government is not profit but
targeted objectives.

2. Central planning.
- A centrally planned economy, also known as a command economy, is an economic
system in which a central authority, such as a government, makes economic decisions
regarding the manufacturing and the distribution of products. Centrally planned
economies are different from market economies, in which such decisions are traditionally
made by businesses and consumers.
- As an example, Communist and socialist systems are the most noteworthy examples in
which governments control facets of economic production. Central planning is often
associated with Marxist-Leninist theory and with the former Soviet Union, China,
Vietnam, and Cuba. While the economic performance of these states has been mixed,
they've generally trailed capitalist countries, in terms of growth.

3. Price mechanism of lesser importance.

- Price mechanism is the outcome of the free play of market forces of demand and supply.
However, sometimes the government controls the price mechanism to make commodities
affordable for the poor people too.
- As an example, the Government of India recently passed an order to decontrol the prices
of diesel and remove it from the jurisdiction of the government. Now the prices will be
determined by the demand from consumers and supply from the oil companies.

4. Central control and ownership.

- A centrally planned economy, also known as a command economy, is an economic
system in which a central authority, such as a government, makes economic decisions
regarding the manufacturing and the distribution of products. Centrally planned
economies are different from market economies, in which such decisions are traditionally
made by businesses and consumers.

5. Egalitarian society
 - Socialism rose as an opposition to the economic inequality brought about by early
capitalism. As such, it aims for an egalitarian society where there are no classes. Ideally,
all the people within a socialist economy should have economic equality.

6. Provision of basic needs.

- In a socialist economy, the basic needs are food, shelter, clothing, education, health and
employment which are provided by the government without any discrimination. This is
one of the greatest advantages of socialism. Provision of basic needs by the government
can, however, result in the masses thinking that they cannot survive without the
government, creating a perfect environment for the rise of authoritarian governments.

7. No competition.
- Typically, when you want to buy a car, you are spoilt for choice. There are different
brands and different models with varying features and prices. It’s up to the consumer to
choose the best one for them. The same applies for many other products. In a socialist
economy, there is no competition in the market since the state is the sole entrepreneur.
The state only focuses on provision of necessities, which results in limited consumer
choice.

8. Social welfare.
- Another major reason behind the rise of socialism was to protect the working class from
exploitation. Under socialist systems, there is no exploitation. The state takes care of the
working class through employment protection, minimum wages and trade union
recognition rights.

PROS AND CONS

PROS

1. Production According to Basic Need

 Under socialist economies, production is directed to ensure that the basic needs of the masses
are met first.

2. Equal Distribution of Income and Wealth

 Socialism are dedicated to providing equal opportunities for all. There is no exploitation.
Wealth is distributed to workers based on their input to the economy. This prevents situations
where a few members of society piggyback on the efforts of workers to create and amass
wealth for themselves.
 3. Rapid Economic Development
 Under a socialist economy, there is a central authority in charge of planning for the use of
resources and making quick decisions. Resources are used fully and there is minimal wastage.
This leads to fast economic growth of socialist states. 

4. Social Welfare
 Another advantage of socialism is that it caters for the needs of all members of society. All
the basic needs of an individual are catered for by the state. Imagine a situation where the
state provides you with food, a house, clothing, healthcare, education and employment. If you
get involved in an accident while performing your duties, the state cares and provides for your
family as you recover. In such an economy, people can dedicate themselves to work without a
lot of worry about tomorrow, which leads to increased productivity.

5. Better Allocations of Resources

 Government ownership of resources and control of industries under socialism necessitates
control of allocation decisions. This is often accomplished through central planning. 

6. No serious unemployment and inflation.

 Socialism also minimizes the risk of unemployment and inflation. As an example, under
capitalism economies often undergo fluctuations, which can lead to wastage of resources and
high levels of unemployment. This is very unlikely in a socialism. Since the economy is well
planned, and owing to the fact that there is no private investment.

CONS

1. Lack of Incentives and Initiative of Individuals

 Socialism advocates for communal wellbeing over personal gain or self-interest. Since
socialism is against the accumulation of wealth for yourself, it gets to a point where additional
effort on your part does not result in any gain for yourself. Without the motive for profit,
workers lack the incentive to work hard and be innovative. This ultimately leads to low
productivity and decreases the rate of economic development.

2. Loss of Economic Freedom and Consumer Sovereignty

 Through social ownership, socialism takes away people’s freedom to enterprise, which in turn
takes away people’s free choice of occupation. Unlike in capitalistic economies where you are
free to choose your occupation, workers are assigned jobs by the planning authority in a
socialistic economy. The workers cannot change their jobs without the consent of the
planning authority. Other than that, in socialism The planning authority determines the
products that will be produced as well as the prices for this products. If you don’t like a
product or its price, there is not much you can do. It’s a take-it-or-leave-it situation.
 3. Absence of Competition
 This happens because Under central planning, there is no profit-and-loss system of accounting
to accurately measure the success or failure of various programs. Without profits, there is no
way to discipline firms that fail to serve the public interest and no way to reward firms that
do. There is no efficient way to determine which programs should be expanded and which
ones should be contracted or terminated.

SOCIALIST NATIONS

1. Cuba
2. North Korea
3. Zambia
4. Laos
5. Vietnam
6. Venezuela
7. Syria