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Modern Ideologies – Socialism We continue our discussion of modern ideologies by examining the ideology of Socialism.

What does Socialism Mean? The word “Socialism” is not always used clearly. People have used the term to mean different things.

• The 19th century communist philosopher Karl Marx used the term socialism to mean the same as communism.

• In contrast, some politicians and media figures call countries like Denmark and Sweden socialist even though neither is socialist.

• When asked, many might say that Socialism means equality. But that doesn’t really help since the term equality can also be used in different ways.

Here is an essential element of socialism: State officials in charge of the economy.

• An economy is the production, distribution, and consumption of goods and services.

• So Socialism is when State officials have large control over the production, distribution, and consumption of goods and services.

• In contrast, in a capitalist system, private businesses and consumers control the production, distribution, and consumption of goods and services.

We began thinking this through in the lecture on Modern Liberalism. That lecture suggested the following: Think of all the goods and services you consume. By reading this lecture, you are consuming a service – education. When you go to the doctor, you consume medical services. By drinking coffee or eating a sandwich, you consume a good. Let’s focus on drinking and eating – i.e., food. Some organizations produce food, some organizations distribute food, and you consume food. Under Socialism, it is State officials who control the production and distribution of food. And even though you consume the food, the State plays a large role in that consumption because State officials control the price of food. With this understanding of Socialism, let’s think historically.

The Failure of Marx and Engels’ Prediction about Capitalism There were various kinds of Socialism in the 19th century. The most influential version of Socialism emerged in response to the failure of Karl Marx and Friedrich Engels’ prediction about capitalism. Let’s remind ourselves what Marx and Engels said about capitalism in The Communist Manifesto (1848).

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• They argued that capitalism would fail within a couple generations.

• They thought capitalism would produce an extremely small class controlling nearly all the wealth (the bourgeoisie), leaving the vast majority of society in subsistence poverty (the proletariat).

• This terrible poverty, in turn, would motivate the proletariat to rise up in a violent communist revolution.

As we noted in discussing Communism, if Marx and Engels were right, violent communist revolutions would have happened in the most advanced industrial societies by 1900 – Great Britain, the United States, and Germany. Yet by 1900 it was clear that violent communist revolutions had not occurred in these countries. Many thinkers began to analyze why. One such thinker was the German philosopher Eduard Bernstein. Bernstein clearly saw that capitalism had not failed. He understood that the overwhelming majority were not falling into subsistence poverty. He saw that the proletariat’s standard of living was going up and, as a result, the proletariat were not motivated to rise up in a violent communist revolution. Because most proletariat were not about to rise up in violence, Bernstein thought it was necessary to revise Marx and Engels’ ideology of Communism. Bernstein called this revision of Communism by the name of “Socialism.” So Socialism is a revised form of Communism, like a sibling of Communism.

Eduard Bernstein, The Preconditions of Socialism (1899) Notice the date of Bernstein’s book – 1899. That’s 51 years after Marx and Engels’ Communist Manifesto (1848). The dates are important because if Marx and Engels’ prediction about the failure of capitalism – terrible poverty for almost all leading to a violent revolution – was to come true, it should have come true by 1899. Or at least it should have seemed close to coming true. But as Bernstein looked at the advanced industrial societies like Great Britain and Germany, he saw what we noted above – the standard of living for many of the proletariat was going up. The proletariat were not rich or what you and I today would call well off. But the vast majority was not falling into subsistence poverty. As a result, most were not motivated to rise up in violence. So Bernstein saw the need to revise Communism. In the revised Communism which Bernstein called Socialism, Bernstein had to come up with a different plan for the proletariat or working class. Since the proletariat was not going to rise up in violence, what exactly would it do?

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Bernstein envisioned a three-step process for what the proletariat or working class would do:

1. Bernstein wanted the proletariat to organize politically, meaning to organize socialist political parties.

• Bernstein was not original with this idea. Socialist political parties were developing in the late 19th century. Many were called social-democratic parties. There was the German Social Democratic Party and the Russian Social Democratic Workers Party. By 1900 there was the British Labour Party (“Labour” is the British spelling of “Labor” in American English).

• The British Labour Party reminds us of the definition of Socialism.

o Remember, Socialism means State officials controlling the production, distribution, and consumption of goods and services.

o This is what the Labour Party meant when it called for “common ownership [i.e., State ownership] of the means of production, distribution, and exchange.”

• But how, we might ask, is the State going to take over and control production, distribution, and consumption? Steps 2 & 3 below answer that question.

2. Bernstein wanted working-class voters to vote socialist parties into government. The idea

was simple: socialist parties use democracy to take control of the State.

• Here we see an important way in which Socialism revises Communism.

• Under Communism, the working class was to act violently – to rise up in violent revolution.

• Under Socialism, the working class was to dominate democracy – to vote socialist parties into government so these parties can control and run the State.

3. Once in power, socialist parties would change many of the laws that protected private

property. They would change private property into State property – a revolution in property ownership.

• Before this change, the businesses which produced and distributed goods and services were privately owned. They were private companies like John D. Rockefeller’s Standard Oil company, J.P. Morgan’s U.S. Steel company, or Henry Ford’s automobile company.

• Once socialist parties run the State, their goal was to change the laws that protected these businesses as private property and, instead, write new laws making these businesses State property. The new laws would take the property away from the private owners and transfer ownership to the State.

• The companies would go from private ownership to State ownership, which again reminds us of our definition of Socialism – State control of the production, distribution, and consumption of goods and services.

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20th Century Socialism Let’s pause here and reflect on what we’ve said. We said that Communism wants the working class to act violently – to rise up in violent revolution.

• We noted in the last lecture that Karl Marx used both terms – Communism and Socialism – to describe this violent approach to revolution.

• We’ve called it Communism, though we could also call it revolutionary Socialism.

• The idea is to overthrow the existing government and seize the power of the State by force of arms.

• We’ll discuss 20th century Communism – revolutionary Socialism – in a later lecture when we explore the Russian Revolution of 1917.

For now, let’s finish our discussion of Bernstein’s type of Socialism.

• The idea here is not to rise up in a violent revolution, not to seize the State by force of arms.

• Rather, the idea is for socialists to use democracy to control and run the State. Think of this as a two-step process:

1. vote socialists into government

2. then socialists in government institute socialist policies – i.e., transfer private businesses to State ownership so the State can control the production, distribution, and consumption of goods and services.

• This type of Socialism is sometimes called evolutionary Socialism. It develops or evolves the more socialists dominate democracy. It can also be called democratic Socialism.

A primary goal of evolutionary Socialism is to transform big industries from private property into State property. Big industries include

• energy – coal, oil, gas, electricity

• durable goods – iron, steel, rubber

• transportation – rail, air

• medical – doctors, hospitals, technology

• financial – banks

• farming and food Great Britain tried evolutionary Socialism in the 20th century. As we noted above, the British Labour Party was founded in 1900. It was an evolutionary Socialist party. The Labour Party won a major election in Britain in 1945. They gained control of the British State democratically. And they began to institute socialist policies, what they called “common ownership of the means of production, distribution, and exchange.” The Labour party thus began the State takeover of

• energy companies – oil, coal, electricity

• transportation companies – railroads and airlines

• durable goods companies – steel

• health care

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Focusing on health care, the British Parliament passed the National Health Service Act in 1946. This law put the State in charge of the production, distribution, and consumption of health care services. But by the 1970s, the British economy was facing serious problems. Under the Socialism that began in the late 1940s, economic growth had slowed dramatically and Britain’s economic ranking in the world was declining. As a result, by the 1980s, Britain began some free market reforms which undid parts – not all – of its socialist policies. The reforms

• decreased State control over energy by allowing private investment – meaning private ownership – in energy companies like coal, oil, electricity.

• allowed private investment in transportation companies like railroads and airlines. But Great Britain – also called the United Kingdom – maintained its socialized health care, the National Health Service. The reforms did increasingly allow citizens to seek private health care, meaning care in privately owned hospitals and facilities, but the State continued to run the National Health Service. This leads us back to an earlier lecture when we discussed a Welfare State with some socialist policies. Great Britain had tried Socialism in the mid-20th century, but by the late 20th century it had become a Welfare State with some socialist policies. The National Health Service continues to this day. It controls the cost of health care by limiting the production of health care services. Other countries had similar experiences with Socialism in the mid-20th century. By the late 20th century, they too were undoing some of their socialist policies. Two examples are Sweden and India. India began Socialist planning of the economy in 1947. Over the next 35 years – 1947 to 1982 – average income in India increased only 43%. That’s only 1.2% per year. As a result, in the late 20th century, India like Great Britain began to institute some free market reforms.

• India reduced its large State bureaucracy and developed greater protections for private property rights.

• As State control of the economy decreased, private investment surged.

• In only 25 years from 1990 to 2015, as the reforms took hold, average income in India increased over 225% — compared to only 43% over the previous 35 years.

Sweden had similar experiences. It instituted Socialist policies in the mid-20th century. Government spending in Sweden doubled in only 20 years. But the Swedish economy fell in economic standing, from 4th highest average income in the world to 20th. Almost unbelievably, the Swedish economy failed to increase the number of jobs in its economy in the 1970s and ’80s. Think about that – no increase in the number of jobs for an entire generation. The Swedish economy was stagnating. As a result, in the 1990s, Sweden like Great Britain and India began to

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reform its socialist system. It cut government spending by a third, reduced regulations on business, reduced the corporate tax rate, and partially privatized its State pension system. In short, by the late 20th century the economic problems with Socialism became difficult to ignore. These problems were noted by The Organization for Economic Cooperation and Development when it described the “disillusionment with the generally poor performance of state-owned enterprises.” Many countries which had practiced Socialism thus transitioned to a Welfare State with some socialist policies. Be clear on the difference:

• Socialism sought to end much of capitalism by having the State control the production, distribution, and consumptions of goods and service.

• A Welfare State depends on capitalism – i.e., mostly private ownership. Private companies and consumers, not the State, control most of the production, distribution, and consumption of goods and services.

The logic of a Welfare State is this:

• Private ownership of most of the economy creates wealth.

• The State taxes a significant part of that wealth in order to redistribute some of the wealth in providing certain services.

Some countries which have transitioned to a Welfare State like Sweden still maintain one socialist element in their economy – State run health care. Hence, they are a Welfare State with some socialist policies. They fund their State health care with broad-based taxes paid by everyone. Sweden, for example, has a 25% national sales tax – paid by everyone at the same rate, meaning most goods and services cost 25% more to buy. Yet even with this high national sales tax, the Swedish State spends less per person on health care than the U.S. State spends per person on healthcare.

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