What Is Socialism Simple Definition

“An ideology and method of government that maintains central control over state ownership and regulation of industry, and the allocation of resources, rather than allowing it to be determined by market forces.” (Kelly, 2013)

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Note that the definition of socialism affects what is and is not considered ‘socialist’ – see the end of this article for an explanation of the specific definitions of socialism used for the pros and cons below.

Under socialism, the government works actively to distribute wealth equally in society, reduce inequality between rich and poor, and limit social injustice.

Socialists argue that this can lead to a more just society, because no one can accumulate excessive wealth while others suffer poverty (Buchanan, 2000).

For example, we see that comparable First World liberal democracies that embrace elements of socialism, such as Iceland, Norway, Sweden, and France, have lower income inequality than capitalist-oriented countries such as the United States. (OECD, 2021).

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A key feature of a socialist system is that the government controls and operates essential services such as health care, which are usually provided free of charge at the point of service and financed through taxation.

Such an approach ensures that everyone has access to universal healthcare when they are sick, and that care becomes a right rather than a privilege reserved for the wealthy.

This, in turn, can lead to better public health outcomes and lower levels of healthcare poverty due to healthcare debt (Navarro, 2002).

Great Britain’s National Health Service (NHS) is a good example of a socialized healthcare system, where doctors and nurses are directly employed by the government and healthcare is provided free of charge to all residents (Department of Health and Social Services, 2022).

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One ideal of socialism is government control of industry in a model called a command economy. Its advantage is that the government can guarantee employment for citizens and centralize wages and working conditions.

The idea behind this system is that it will provide job security and lower unemployment rates (Rosen, 2014).

For example, in Cuba, the socialist state guarantees employment to its citizens, which lowers the unemployment rate (World Bank, 2022). At the same time, however, due to the inefficiency of the centrally controlled economy, the government is unable to pay citizens high wages.

Socialism’s focus on long-term social benefits rather than short-term gains may be more conducive to sustainable policies and practices (Foster, 2002).

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Socialists are more likely to intervene in markets and set regulations for industry and business to prevent negative externalities. It also includes regulations regarding environmental conditions.

The Green New Deal, a proposed policy package in the United States, is rooted in socialist principles and aims to simultaneously address climate change, environmental justice, and economic inequality (Roberts, 2019).

A key principle of socialism is that people should have access to essential services regardless of their wealth. Education is usually included in that list.

Therefore, socialists often emphasize free or low-cost education as a way to provide equal opportunity (Bowles & Gintis, 1976).

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For example, the German higher education system is mainly state-funded, with no tuition fees for students at public universities, illustrating how this principle can be applied (Federal Ministry of Education and Research, 2022).

Likewise, in the United States, the government pays for teachers and schools and provides free education up to the twelfth grade, which is a hallmark of a socialist mindset even in a highly capitalist nation.

The disadvantage is that parents’ choice about what is taught in school or which school they attend is often limited, which is typical of neoliberal education.

One extreme of capitalism occurs when corporations develop monopolies on goods and services. Socialism can limit this by nationalizing key industries (Ellerman, 1984).

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Take the railway industry for example. In fact, only one train can run at a given location. If a private company operated that railroad, they would have an effective monopoly and could charge higher prices.

So it is important for socialists to nationalize any industry that creates a natural monopoly. This would, in theory, help prevent price increases and secure affordable access.

A contemporary example is France’s electricity market, which is mainly state-owned and regulated (European Commission, 2020).

Socialism promotes cooperation over competition (Maleson, 2014). In this system, the emphasis is not on individual gain, but on collective welfare, which leads to a more cohesive society.

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One criticism of competition is that it prevents companies from sharing resources, technology and market insights. As a result, competing firms must invest separately in each of these areas, increasing overall social costs.

On the other hand, cooperative businesses in a nonprofit system can collaborate rather than compete to achieve results.

Socialism often prioritizes meeting the basic needs of all citizens before resorting to excesses and luxuries for the few (Wolf, 2012).

For example, instead of wasting money on luxury yachts, society’s money will go to policies that care for people, such as policies that provide housing, food, healthcare and education for all.

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Here is an example. Despite its heavily capitalist system, Singapore has adopted a hybrid socialist model in its public housing policy. About 80% of the population lives in state-built apartments as the government recognizes the importance of affordable compact housing in the city-state (Department of Statistics Singapore, 2022).

In many of the socialist economies of China and Cuba, socialist governments have a monopoly on politics. In other words, they don’t have to worry about early voting. This allows them to think longer.

This argues for more authoritarianism (which I clearly do not support!) but is also characteristic of most self-proclaimed socialist states. There is a one-party socialist government in the constitution.

The result is the freedom to make big infrastructure investments, long-term plans and other decisions that aren’t subject to the short-term whims of voters who only want tax cuts and benefits every budget cycle.

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This approach obviously has its ups and downs, but it will lead to better sustainable development and economic prospects (Kotz, 2017).

For example, the five-year plans implemented by China illustrate the potential for broad and ambitious long-term planning focused on broad economic and social objectives (National Development and Reform Commission, 2021).

Under socialism, wealth is generally distributed equally among citizens, limiting the concentration of wealth and preventing the formation of wealth-based political power that can often distort democracy (Winters, 2011).

This is especially true for socialist-inspired countries that do not allow money in politics, preventing plutocrats from using money to influence agendas and exploit their power.

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Perhaps the biggest disadvantage of socialism is that people, by nature, will work harder and more productively when we are encouraged by additional rewards.

But under socialism we are not encouraged to work hard, because there is no extra financial reward or our extra income is heavily taxed.

This can lead to laziness among employees, lack of public support and general dissatisfaction that reduces overall productivity. A recent example is the economic crisis in Venezuela, characterized by high inflation and shortages of raw materials (Rodriguez, 2018).

Central economic planning can lead to inefficiency and misuse of resources. It can be challenging for a central organization to accurately determine the needs and wants of an entire society, leading to waste and shortages (Hayek, 1945).

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A good example of this is Vietnam, where attempts were made to centralize the agricultural sector after the rise of a socialist government. It was a disaster, leading to low crop yields and even food insecurity as the central government tried to force farmers to grow the wrong crops in the wrong fields.

Economic reform, one of many failed attempts in the 20s, forced the Vietnamese government to once again allow farmers to grow their own crops and sell them for a profit.

Entrepreneurship refers to the practice of starting a business. In socialism, this is discouraged because business ownership is seen as a way to accumulate wealth, which leads to economic inequality.

But entrepreneurs have a better way of creating market efficiency. By competing with each other, small businesses force each other to produce cheap, high-quality goods to attract as many customers as possible (one downside of this is that it puts pressure on wages, which socialists obviously don’t like!).

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Furthermore, entrepreneurs are very good at finding gaps in the market – such as missing goods and services in the financial sector – and filling those gaps, because they know that there is profit in these gaps.

When the state controls the economy and its resources, there is a risk of government abuse or corruption (Holmes, 1995).

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