Socialism and Capitalism

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Socialism and Capitalism

by Dan Clore

One must be careful to make one’s intended meaning known when using the terms “socialism” and “capitalism” (as well as related terms) because they have undergone polemic re-definition over the decades that can cause a great deal of confusion.

In the traditional sense, “capitalism” means the ownership and control of the means of production by a class of “capitalists” (in the traditional sense, the owners of capital, or means of production used by workers other than the capitalists/owners themselves) and an economic and political system that favors this.

In the traditional sense, “socialism” means the ownership and control of the means of production by the workers themselves, whether as individuals, cooperatives, collectives, communal groups, or through the state, and an economic and political system that favors this. One should note that this does not necessarily mean by the people as a whole, nor does it necessarily mean state ownership, nor does it necessarily imply a non-market form of organization; historically, anarcho-individualism (e.g., in the free-market form advocated by Benjamin Tucker) has been an important form of socialism.

In the later re-definition, “capitalism” means the private (non-government) ownership of the means of production, and more generally the absence of central planning by the state.

In the later re-definition, “socialism” means the ownership and control of the means of production by the people as a whole, generally by means of the state, or simply the ownership and control of the means of production by the state, or more broadly any form of central planning by the state.

Matters have become especially confused because these terms have been used in ways that include both the traditional sense and the later re-definition of the terms. Thus, Marxist-Leninists will define “socialism” in the traditional sense, but at the same time refer to examples of “socialism” in the later re-definition, in order to gain support for totalitarian Bolshevik regimes that actually destroy any examples of “socialism” in the traditional sense. Likewise, their “capitalist” opponents will do the same, in order to support the belief that There Is No Alternative (TINA) to “capitalism” other than a tyrannic despotism. (In this connection, one should note that according to Marx and Engels, the “dictatorship of the proletariat” is a transitional stage between capitalism and socialism/communism, which will not exist until the state has withered away to nothing.)

In the same way, advocates of “capitalism” will define the term with the later re-definition, but actually refer to concrete examples that instead fit the original sense, even citing dictatorships such as Pinochet’s in Chile as positive examples. And just as with “socialism”, some opponents of “capitalism” will do likewise in order to discredit it in the sense of the later re-definition. At present, state-corporate globalization, in which there is rule by states, corporations, international financial institutions (IFIs), and the like, is the typical form of “capitalism” actually advocated by most avowed capitalists, rather than a truly free market. This effectively means that there are (at the least) three common usages of the terms “socialism” and “capitalism”, and so it behoves one to make clear in what sense one is using these and related terms, and to what empirical examples one refers.

One should also note the term “state-capitalism”, used by socialists (in the traditional sense) to refer to state ownership and control of the means of production in varying degrees ranging from capitalist dictatorships such as Pinochet’s through to Marxist-Leninist dictatorships such as the Bolshevik regimes. This extends the traditional sense of “capitalism”, as the state (at least partially) replaces the traditional “private” capitalist class to varying degrees.


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  1. says

    socialism means the economic and political concept which stipulates that,the means of production,distribution and the exchange of goods and services should be controlled and owned by the role of state or people

    • Richard Ahlgrim says

      Problem with your definition is that the people own nothing. The people elect or allow other people (individuals) to be the power behind the state and thus create a ruling class, that will abuse power (Power does not corrupt, but corrupt people are drawn to power!). This is why socialism (And all other forms of collectivism, communism, fascism, etc…) fail!

      • Ian Slayne. says

        To those that do not own the MOE (Means-Of-Existence, a concept even broader than socialism’s ownership of means-of-production), such generally have no choice but forced collectivization. We generally call these collectives corporations and businesses.

  2. Kevin C Caffrey says

    Socialism was always started by the working man, except when the first arrivals to the New World from England started out with socialism and on a small scale and see the actions of oterhs first hand it becomes evident that socialism will not work. The socialism centered around the storage shed of food. In a short time it had to be locked. When it was locked the people who were once eating and not working because that was how the kind pilgrams felt that people are good so we can have things together and noone will take more than their share. The last sentences explain why socialidm will not work ever by any group of people. American politicians need to be like .leaders of our country before the Cold War ended. Americans need to go back to thinking like realists and treat other nation-states the way we want to be treated, but we want to be treated equally and that would mean tariffs on goods coming into the country because our workers in the Union cost big money. America can have all the technology for manufracting that exists and we still will not be able to compete with China, Mexico, Canada, oh what does that mean we must repeal the NAFTA . One of your best is trying to pass a right to work bill in Congress (Rand paul) socialism is an evil that America needs to get rid of and that is reverse everything Obama has done.

  3. Terryeo says

    I’m glad you wrote this article and it seems accurate to me. But I would be happier had it used dictionary definitions to better narrow the traditional definitions and isolate them from modernly used and commonly used definitions.

  4. Steve J says

    My understanding is that the term “capitalism” was coined by Marx and Proudhon. In a effort, and a successful one to demonize the use of capital as the tool that it is for what is nothing more than a human behavior to trade freely, to barter, a individualistic style action. Something free people have done since I wouldn’t be surprised to find out since before we had spoken language. Socialism is a term to mask yet another human behavior to rule others, a collectivist style action, again something that has gone on since I’m sure before language.

  5. Thindi says

    And then there’s something else, something much much better that would benefit each and every single human being on this planet as well as the environment. Jacque Fresco named it RESOURCE BASED ECONOMY (differs from the Wikipedia article though). Many groups and organisations promote this new train of thought under different names.
    For a short glimpse into the general idea, have a look at the 6mins video on or watch the detailed documentary ZEITGEIST MOVING FORWARD on YouTube for the whys and hows.

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