What is State Socialism?
State socialism is an approach in which the government owns the main means of production and plans the economy. Instead of markets setting prices and deciding what to produce, state agencies set targets for output, investment and wages. Supporters see the state as the best tool to end private ownership, guarantee jobs and basic needs, and develop industry quickly. The term is used in two ways. In the nineteenth century it described reformers who wanted the existing state to take over industries. In the twentieth century it came to describe the planned economies of the Soviet Union and similar states.
Core beliefs
- The state should own major industries, banks, land and natural resources.
- A central plan should guide production and investment instead of market prices.
- Everyone should be guaranteed work, housing, education and health care.
- Rapid industrial and scientific development can be directed by the state.
- Private profit from owning capital should be ended or tightly limited.
History
In the 1860s, Ferdinand Lassalle in Germany argued that workers should use the state to build cooperative production, and Karl Rodbertus wrote about state-led reform. In France, Louis Blanc had earlier proposed state-funded social workshops. In the 1880s, critics used the label state socialism for the German government's new social insurance laws. In Britain, Sidney and Beatrice Webb of the Fabian Society promoted public ownership through the state. After 1917, the Soviet Union nationalized industry, and from 1928 it adopted Five-Year Plans. After 1945, similar systems were set up in Eastern Europe, China, North Korea, Vietnam and Cuba.
Variants
Democratic versions, such as the Fabian approach, aimed to expand public ownership through elected parliaments. Soviet-type systems combined central planning with one-party rule and are often called Marxist-Leninist. Some developing countries in the mid-twentieth century adopted state-led models with large public sectors and five-year plans, sometimes described as African or Arab socialism. Later reform models introduced some market prices, which moved them closer to market socialism.
Criticisms
Economists in the free-market tradition, such as Ludwig von Mises and Friedrich Hayek, argued that central planners cannot gather enough information to set prices efficiently, leading to shortages and waste. Liberal critics argue that putting all economic power in the state removes independent sources of power and threatens civil liberties. Critics on the anarchist and libertarian left, such as Mikhail Bakunin, warned that state ownership would create a new ruling class of officials. Historians also document famines and repression in several state socialist countries, while some scholars point to rapid industrialization and gains in literacy.
In practice
The Soviet Union used central planning from the late 1920s until its collapse in 1991. Eastern European states followed similar models until 1989 to 1991. China used central planning before market reforms began in 1978. Cuba and North Korea still keep large planned sectors. In many other countries, state ownership of railways, energy or banks was influenced by state socialist ideas, even under mixed economies.