It is not easy to define a term when different people use it to mean different things. What does democracy look like? What is justice? But we might possibly at least be able to have clearer conversations about these words, and a slightly better sense of the kinds of things people are referring to when they use them. 

“Socialism” is used in a number of ways, and if you ask 10 socialists what it means you’ll get 12 or so different definitions. We’ve discussed what it means before. But here we’d like to talk about the particular economic vision of socialism, and why we contrast it with “capitalism.” This could help make a lot on online arguments more efficient, or at least less heinously repetitive.

Grasping At Straw Men

Critics of socialism often use the word to mean “the government controls the economy.” This is the definition offered by Rand and Kelley Paul in The Case Against Socialism, and the one used by libertarian economist Bryan Caplan in a “Capitalism vs. Socialism” debate. You can already see how this definition is rigged: Authoritarian governments will usually have more control over the economy (because they have control over everything), and so authoritarianism can be pointed to as a case of socialism. But we can see immediately why this can’t possibly be a satisfactory definition: It would mean that a monarchy was socialist as long as it was sufficiently powerful. But socialists hate monarchies, and many socialists are even outright anarchists. There must necessarily be more to it than “government control of production” or “state ownership,” then, at least if we want to use the word to describe what real-world socialists actually believe.

And those beliefs are very easily available for readers who aren’t right-wing phonies looking to score cheap political points like the Pauls, since there are famous socialists whose words are immediately available online. For example, Albert Einstein famously wrote in Monthly Review that “it is necessary to remember that a planned economy is not yet socialism. A planned economy as such may be accompanied by the complete enslavement of the individual.” Likewise, the great socialist writer George Orwell explained:

 “…it has become clear in the last few years that ‘common ownership of the means of production’ is not in itself a sufficient definition of Socialism. One must also add the following: approximate equality of incomes (it need be no more than approximate), political democracy, and abolition of all hereditary privilege, especially in education. These are simply the necessary safeguards against the reappearance of a class-system. Centralized ownership has very little meaning unless the mass of the people are living roughly upon an equal level, and have some kind of control over the government.” 

When hacks like the Pauls breezily say, “socialism=big government ownership,” they’re not just in error, they’re disgracefully delinquent on understanding their political opponents.

We get closer to understanding economic socialism when we rephrase slightly, and instead of saying “government control/ownership,” we say “worker control”/“common ownership.” (Though as Orwell noted, this is still inadequate.) Now, I am sure the Pauls would just say “Ah, this is a euphemism for government.” But notice that we have actually changed the difference in a very fundamental way: If control is not exercised by workers/common people, we do not have a situation of socialism. If we just say “government” ownership, then it doesn’t matter whether the government is a feudal lord or a democratically elected body of workers. But socialism isn’t about giving power to the government, it’s about giving power to the people. 

Why do those two things sound similar? One reason is that the government is theoretically supposed to embody the will of the people. Government is supposed to be “the thing we all own together,” so if a resource is held “in common” that means being administered by the government. Take, say, a public library. It is operated by the government. And socialists might even say that public libraries are socialistic, because they are operated and controlled by the people as a whole through the institution of government. 

But surely, in that case, the Pauls are right that socialism means government ownership? After all, if a library were operated by a private corporation, it would not be socialistic, but if it’s operated by a city, then it is. Socialists are currently advocating a single-payer healthcare system, which “socializes” health insurance by bringing it under government control rather than having it operated by private corporations. Socialists talk of nationalizing Amazon, or bringing Pacific Gas and Electric under control of the state of California. How can we say that socialism isn’t about government ownership when socialists advocate so much government ownership?

Because “government ownership” is not the point. The point is ownership by the people as a whole. This might occur through the government, but if so, it has to be a specific kind of government, namely a government that is democratic. There would be no point to government control if it didn’t actually empower the population as a whole. You might as well have decisions in the hands of unaccountable private corporations as an unaccountable government. The reason socialists want to see PG&E brought under state control is that they believe that under private control, it is being operated in the interests of its shareholders, whereas under state control, it will be operated in the interests of the entire population of California. 

Again, this is not to say that a government will do this—governments betray and oppress the people all the time—but that as the one institution that we all control collectively, it gives us a better shot than an institution owned privately. We can vote for new leaders if the ones we have fail to conduct the business in a way that meets our approval. There is some level of democracy. In the market, on the other hand, the number of “votes” you get is dependent on how much you own. 

The Buck Starts Here 

Here we can have a better understanding of why so many governments that called themselves “socialist” turned out to be authoritarian, and why socialists say that these governments are “not real socialism.” If the principle of socialism is mass popular control of economic matters, then authoritarianism isn’t socialism. If there’s no popular participation, where’s the socialism? What does it even have to do with socialism? Such a government might call itself socialist, and claim to speak for the people. But that’s what North Korea does with the word “Democratic” in DPRK and what China does with Republic in People’s Republic of China. It’s not surprising that, if socialism means worker control, dictators would want to say they were running socialist governments. That’s why the Nazis were “National Socialists.” The word meant something positive, and so it was a good bit of branding. But the Nazis, of course, liquidated the Communists and the Social Democrats, and did not even represent the majority of Germans. If you murder all the people who believe in genuine worker control, you’re probably not actually committed to socialism. 

A lot of people on the right, when they hear arguments like this, say that it’s cheating: Ah, you’re just defining socialism as the thing that is good, so any bad government will never be socialism, therefore socialism can never be bad! But that is not what is going on. Instead, we are saying: The criterion by which we evaluate whether something is socialist is the degree of common/popular control over economic decisions. That helps us make sense of the concept and the goal. It’s not saying that a socialist government can never be bad—after all, if there was a government with mass popular control of economic decisions, and it was bad, that would be a bad socialist government. But it is to say that because socialism is at its core about empowering ordinary people, if those people are being oppressed instead of empowered, you do not have socialism. At times, it can be more useful to say you favor “worker control of the economy” rather than “socialism,” since these political terms get stretched to kingdom come. But the focus must always be kept on who is in charge, and where decisions originate. Truman was famous for the sign on his desk that sad that “the buck stops here,” but socialists are most concerned with where the buck starts. And it has to start with the mass of ordinary people. 

Now we can start to contrast the economic vision of socialism with the thing called “capitalism” and understand what capitalism might mean. When defenders of capitalism describe its many virtues, usually they talk about “markets,” i.e., people exchanging things with each other, today by using money. But, while there are certainly important socialist critiques of allowing social outcomes to be determined solely by exchange, and of making life more “transactional,” by focusing on markets we miss the most critical thing that socialists are actually criticizing about the existing economic system.

In fact, the biggest problem for socialists about “capitalism” is the structure of who owns what, the interests being served by our institutions, and the inegalitarian way in which wealth and power are distributed. So we look at the typical corporate workplace, and we see that it is a highly undemocratic environment. It does not operate in the interests of its workforce or even of the community, but rather in the interests of its owners, controlled by executives. There are two problems here for socialists: 1. The question of who owns the institution and 2. The question of who controls it. Today’s corporations have a “separation of ownership and control” meaning that executives run the company in the interests of owning shareholders, who reap the benefits and theoretically oversee the executives but do not “control” the company day to day. The relationship of shareholders to corporate executives is kind of like the relationship between voters and a government in a democratic republic. We vote for a government but we leave them to run the institution in our interest. If they do it badly, we throw them out. 

So, the two problems with the modern corporation are: 1. It’s owned by shareholders, who are disproportionately from the upper classes 2. It’s controlled by executives, not the people who do the actual labor to produce the goods and services. It’s “capitalistic” because the profits flow to capitalists; people who make their money by contributing their capital rather than their labor. Socialists advocate rethinking institutions so that they’re owned by their workers or society at large, and they’re controlled democratically. 

Class Ceiling

Defenders of capitalism, besides focusing on markets, always wave off any suggestion of the importance of class analysis, i.e., looking at the power that people in different economic positions have. This is pure intellectual folly, first because major cleavages are visible in society in terms of our wealth and standard of living—some take Greyhound, while some ride private jets, some go bankrupt from medical bills, while others travel overseas for the best possible treatments, some lend money while others borrow it, some pay to get their houses cleaned while others clean houses to get paid. These cleavages originate in hugely polarized household wealth and end with the rich and poor living utterly different lives.

Inequality of wealth is inequality of power, and it’s important for our social relations that the richest 1 percent of the country owns over 35 percent of the wealth, with the richest 10 percent owning over 70 percent (using values from Thomas Piketty’s indispensable book on the subject). That includes most of the traded corporate stock that represents ownership of the gigantic companies that dominate our lives, from Wall Street to Silicon Valley. The wealthiest 1 percent owns over a third of all stock by itself, and the richest 20 percent holds almost all of it, with about 10 percent of market equity left for the other 80 percent of us (based on data from the useful Economic Policy Institute). And of course, holding so much wealth—from the cash for your flashy lifestyle to the stock in monopolist corporations to the bank accounts used to write giant lobbying checks—means the wealthiest families have stupendous control over the world. If markets are thought of as “elections” to decide how resources will be put to use, having more money than everyone else put together means having a vast power to mold the world to fit your desires. 

So we are heading toward a definition of capitalism that is not so much about the presence or absence of “exchange” or even “private property” as about who is in charge and who owns what. In fact, some socialists are “market socialists.” They believe that exchange is perfectly fine and useful, but we need to change who owns and gets the benefits from our giant economic institutions. So, for example, if every American owned an equal number of shares of Apple, Apple would be, in a sense, socialized. Nothing would have changed about the operation of “markets” and there would still be “private property,” but the institution would be owned collectively and the shareholders would be the people at large. In fact, both Bernie Sanders and the U.K. Labor Party have put forth proposals that start to do something like this, by distributing ownership of large corporations more widely, either to workers themselves or society at large. (See also the People’s Policy Project’s social wealth fund proposal for a “market socialist” idea of how wealth could be socialized without eliminating exchange.)

Red Blueprints

Of course, you’d still have a problem if you just redistributed shares: The corporation itself would be run undemocratically. Workers wouldn’t get to vote for their bosses. In fact, you wouldn’t even have altered the “profit motive.” Corporations would still operate for profit, and their executives would presumably act in much the same manner as they do already, but the profits would simply be divided among the people at large. 

Here we get to a point of dispute between socialists: If you had a world in which every company above 50 employees was owned either collectively by its workers or collectively by society, and if you had workplace democracy whereby the executives were accountable to the employees rather than the other way around, would you have reached an “economically socialist” society? Some believe that you would—this is basically the kind of model put forth by David Schweickart in After Capitalism. Others believe that you wouldn’t—see this article in Current Affairs by Fredrik deBoer, who argues that “decommodification”—i.e., reducing relationships of exchange, is a key part of it as well. Schweickart’s model sounds feasible, but having common things that are not subject to market exchange is critical, e.g., free public bathrooms, free parks, free libraries, free college, free healthcare.

The socialist critique of market exchange is important. Consider an example of why. You sometimes hear free market libertarians say that “you should be allowed to do anything for money that you can do for free.” They use this principle to argue, for example, that sex work should be legal: You could have sex with someone for free, but you can’t have sex with them for money. That makes no sense. And intuitively, people might sympathize with this principle. What’s wrong with adding an element of exchange? But we can see what might happen when we think of blackmail. If you find out that your neighbor is cheating on his wife, there is nothing illegal about telling her. But if you say to the neighbor “Pay me or I’ll tell her,” you’re blackmailing him. If the libertarian principle “every free choice should be allowed to be turned into an exchange” was followed, we can imagine the following kind of horrible scenario developing: People begin to see blackmail as quite lucrative. They start companies that purchase personal data from other companies and investigate people to learn their secrets. When they find an embarrassing secret, they send you an email offering to keep it “protected,” for a fee. If you don’t pay the fee, the information is released. 

There might be a lot of profit in this. People would probably sign over a good portion of their paycheck to avoid having their secrets released. The new industry would create jobs and boost GDP. It would produce “win-win” transactions: We get your money and you get your secrets withheld. But it would also produce a society where people were constantly scared of being extorted! It would be horrible! 

The problem with this company is not a matter of who owns it. It might be owned entirely by poor people, for all it matters. It might be a worker cooperative. The problem is that a combination of completely free markets and the pursuit of profit have produced something unacceptable. So, socialism has to go beyond just having companies run along the same lines as they are now, but with the benefits flowing to the right people and the institutional structure arranged democratically. 

Or does it? If this hypothetical blackmail company had to be publicly owned, perhaps it wouldn’t exist in the first place. Even if the public received the benefits, their oversight could keep horrible things from happening. That’s the theory behind public ownership of energy suppliers. It might be that destroying the environment reaps lucrative benefits for the company—and if it’s publicly owned, for the public coffers. But we would be able to put our collective interest in preserving the world above our interest in slightly higher returns in the short run—something that would not happen if a company was operated in the interest of a small group of owners who could buy their way out of most climate-related problems.

In place of the market profit motive that could lead to the rise of a blackmail industry, socialists often want the overall goal of “solidarity”—making decisions that support one another, rather than trying to get their sex tapes to extort hush money. Solidarity, as Max Alvarez always reminds us on his essential Working People podcast, is something we can’t always count on in the capitalist world, where we’re discouraged from thinking in those terms. But it represents a human instinct just as strong as greed, and a solidarity framework would rule out hideous enterprises like blackmail as well as a plundering the environment for a quick buck. We can’t just rely on designing the proper kinds of institutions, we also have to strive for a kind of “socialistic ethic” that encourages us to, as Bernie Sanders says, be willing to fight for people even if we ourselves don’t share their problems. 

Questions of institutional structure are unresolved among socialists. A lot of this will probably be trial and error. But let’s not lose sight of what the core principle is: operating institutions in the interests of everyone rather than in the interests of the already-wealthy. This is what we understand the difference to be when Bernie Sanders says he is a socialist and Elizabeth Warren says she is a capitalist. Elizabeth Warren does not have a problem with the basic distribution of ownership and control, while Bernie Sanders does. That, more than “markets,” is the core division. (It also explains why, even though Bryan Caplan thinks “hatred of markets” is the core left principle, when he looks up quotes by Bernie Sanders, they don’t seem that disparaging of markets, but are disparaging of concentrated ownership.) 

There is much more to contemporary socialism than a simple question of the structure of economic institutions. We think socialism is drawn from a set of principles that apply to a wide variety of social and political questions. Socialists are feminists, anti-racists, and deplore the death penalty and mass incarceration. But if we want to think more clearly about what the economic difference between socialists and capitalists is, we should start with those two questions: Who gives the orders? And who owns the stuff? 

So worker control in a framework of solidarity and approximate equality of property ownership—that would be socialism. Public ownership or nationalization won’t get you there without extensive democracy at every level and a framework of actually caring about others. Perhaps, then, libertarians can now stop making the “socialism is government” argument that makes them look like such jackasses to anyone basically conversant in socialist political thought. Perhaps they can even “freely exchange” their hideous hierarchical capitalism for our much better and more efficient socialism! Then we could all free ourselves and give CEOs the pink slips.