2. What is Socialism
An economic theory or system in which
the means of production, distribution, and
exchange are owned by the community
collectively, usually through the state. It is
characterized by production for use rather
than profit, by equality of individual
wealth, by the absence of competitive
economic activity
3. What is Socialism
The ownership of the means of
production varies in different socialist
theories. It can either be based on public
ownership by a state apparatus; direct
ownership by the users of the productive
property through worker cooperative;
or commonly owned by all of society with
management and control delegated to
those who operate/use the means of
production.
4. Economic Planning
Economic planning is a mechanism for the
allocation of economic inputs and decision-
making based on direct allocation, in contrast to
the market mechanism, which is based on
indirect allocation. An economy based on
economic planning appropriates its resources as
needed, so that allocation comes in the form of
internal transfers rather than market
transactions involving the purchasing of assets
by one government agency or firm by another.
Decision-making is carried out by workers and
consumers on the enterprise-level.
5. Economic Planning
Economic planning is not synonymous with the concept
of a command economy, which existed in the Soviet
Union, and was based on a highly bureaucratic
administration of the entire economy in accordance to a
comprehensive plan formulated by a central planning
agency, which specified output requirements for
productive units and tried to micromanage the decisions
and policies of enterprises. The command economy is
based on the organizational model of a capitalist firm,
but applies it to the entire economy
6. Economy of Soviet Union
Production quotas for every productive unit. A farm,
mine or factory was judged on the basis of whether its
production met the quota. It would be provided with a
quota of the inputs it needed to start production, and
then its quota of output would be taken away and given
to downstream production units or distributed to
consumers. Critics of both left and right persuasions
have argued that the economy was plagued by
incentive-related problems; claiming, for instance, that
the system incentivized enterprise managers to
underreport their unit's productive capacities so that
their quotas would be easier to achieve, especially since
the manager's bonuses were linked to the fulfillment of
quotas.
7. Characteristics
Allocation through political control. In
contrast with systems where
prices determined allocation of resources, in the
Soviet Union, allocation, particularly of means of
production was determined by the bureaucracy.
The prices that were constructed were done
so after the formulation of the economy plan,
and such prices did not factor into choices about
what was produced and how it was produced in
the first place.
8. Characteristics
Full employment. Every worker was
ensured employment. However workers
were generally not directed to jobs. The
central planning administration adjusted
relative wages rates to influence job
choice in accordance with the outlines of
the current plan.
9. Characteristics
Clearing goods by planning : if a
surplus of a product was accumulated,
then the central planning authority would
either reduce the quota for its production
or increase the quota for its use.
Five Year Plans for the long-term
development of key industries.
10. Socialism
Ancient roots – Judeo-Christian belief in
the common good, which takes
precedence over individual desires
Term “socialism” coined in 1827 by British
socialist Robert Owen to describe his view
of a cooperative new society.
11. Socialism’s emergence
Liberal political parties in 19th century
Europe failed to address the desperate
needs of working people.
– Classical liberalism views poverty as an
individual choice or failure, not the result of
social structures. Also suspicious of big
government.
– Socialism provides a different conception of
individual responsibility & of government.
12. Socialism
In England, socialism became a political
movement in 1884, with the creation of
the Fabians, who provided the basis for
the new Labour Party. Many Labour
governments since, including the
government of ex
Prime Minister
Tony Blair.
13. Socialism’s principles
egalitarianism or equality. Humankind will be
unified and cooperative, once wealth is owned
and used for the common good. Capitalism
exploits the very people who create society’s
wealth.
Moralism. Division of rich & poor is evil;
capitalism is fundamentally unjust. Instead, the
ideal future emphasizes peace, social justice and
true liberty for all.
14. Social democracy
A variation on socialism that argues that
socialism and democracy can work
together. Example: British Labour Party.
Change comes through peaceful
democratic processes like elections.
Democratic governments should promote
economic - as well as political - freedom &
equality.
15. Social democracy’s similarities
with Marxism
Sees capitalism as exploitive, leading to
social injustice and extreme income
inequality.
These economic conditions have adverse
effects on ordinary working people – in
terms of physical health, psychological
well-being, housing, education, etc.
16. Social democracy’s similarities
with Marxism
Both ask the question: why should those
who provide the money (capital) receive
all the profits, and those who provide the
labor receive none of the profits?
It is labor, after all, that turns raw
materials (including cash) into something
with greater value.
17. Social democracy’s differences
from Marxism
Private property not abolished, but the
public should control the use of property
and make necessities available to all.
Individual rights not abolished but should
complement other important values such
as concern for others.
Change can occur through an evolutionary
process that uses democratic means.
18. Marx’s view of social democracy
Karl Marx said social democrats were
naive to think that “enlightened
capitalists” would join with workers to
form a new society.
Violent revolution was inevitable.
19. Karl Marx
German political thinker in 19th century.
Did most of his work in Britain.
Influenced by German philosopher Hegel.
Published Communist Manifesto in 1848
with co-author Frederick Engels.
Wrote multi-volume Capital (Das Kapital),
starting in 1867.
20. Karl Marx
Studied British economic records for 20
years to develop theory that everything is
based on the economic system: politics,
law, social structures,
family relations,
even religious belief.
22. Define
Bourgeois: modern capitalists who
own the means of production and
therefore get to keep all the profits.
Today, this would include major
stockholders in corporations.
24. Define
Proletarians: modern wage laborers
who sell their labor to live and don’t
get any of the profits that they help
to create.
This includes everyone who is not a
stockholder or owner of capital, even
professionals who work for a salary.
25. Karl Marx’s key ideas
Economic systems go through historic cycles.
Over time, an economic system becomes rigid
and cannot adjust to new technologies, so a new
system emerges, with new class relations and
oppression.
Someday, a perfect classless society will emerge
and there will be no further cycles.
26. Marx’s key ideas
1. Slave system gave way to feudal
economy
2. Feudal economy broke down with growth
of manufacturing, towns, navigation &
transportation, emergence of middle class
3. Industrial capitalism emerged, with only
two classes: proletariat and bourgeoisie.
27. Critics of Socialistic Economy
Market economists generally criticise
socialism for eliminating the free market
and its price signals, which they consider
necessary for rational economic
calculation. They also consider that it
causes lack of incentive. They believe that
these problems lead to a slower rate of
technological advance and a slower rate of
growth of GDP.
28. Critics
Austrian school economists, such
as Friedrich Hayek and Ludwig Von Mises,
have argued that the elimination of private
ownership of the means of
production would inevitably create worse
economic conditions for the general
populace than those that would be found
in market economies. They argue that
without the price signals of the market, it
is impossible to calculate rationally how to
29. Critics
The neoclassical view is that there is a
lack of incentive, not a lack of information
in a planned economy. They argue that
within a socialist planned economy there is
a lack of incentive to act on information.
Therefore, the crucial missing element is
not so much information as the Austrian
school argued, as it is the motivation to
act on information
