20 Socialism Pros and Cons

socialism definition examples pros cons, explained below

Socialism has several pros and cons, which is why it remains an extremely controversial political ideology.

Socialism’s strength is that it tends to provide more equitable access to resources, while its weakness is that it often leads to market inefficiencies that decrease the productivity and prosperity of a nation’s economy over time.

Of course, there are many more strengths and weaknesses of socialism, which I’ll explore below.

What is Socialism?

Socialism refers to a political ideology which advocates for government ownership of the means of production in order to prevent exploitation of the working-class by a capitalist class.

A scholarly definition would be:

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

This ideology was one of two competing ideologies in the 20th Century, the other being Capitalism. Most nations today have evolved to embrace some forms of socialism and capitalism, with an approach often called the ‘third way’ or ‘social democracy’.

Note that socialism’s definition will affect what is and isn’t considered ‘socialist’ – see the end of this article for an explanation of the specific definition of socialism used for the following pros and cons.

The Pros of Socialism

1. Economic Equality

Under socialism, the government actively works to redistribute wealth evenly across society, reducing disparities between rich and poor, and limiting social injustices.

Socialists argue this can lead to a more equitable society because no one person can amass extreme amounts of wealth while others suffer in abject poverty (Buchanan, 2000).

We see, for example, that among similar first-world liberal democracies, those that embrace elements of socialism – such as Iceland, Norway, Sweden and Francetend to have lower levels of income inequality than more capitalist-oriented nations like the United States (OECD, 2021).

(Although, it’s worth noting that even the USA has elements of socialism).

2. Universal Healthcare Access

One of the key features of socialist systems is that government controls and operates essential services such as healthcare, which is typically provided free at the point of service and funded through taxation.

Such an approach guarantees that everyone has universal healthcare when they are ill, and access to care becomes a right rather than a privilege afforded only to the wealthy.

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

A prime example of a socialized healthcare system is the National Health Service (NHS) in Britain, where doctors and nurses are directly employed by the government and healthcare is provided free at the point of use for all residents (Department of Health and Social Care, 2022).

There are, of course, downsides to this model, which will be explored in the cons section.

3. Job Security

One of the ideals of socialism is for the government to manage industry, in a model called the command economy. An upside of this is that the government can guarantee employment to citizens, as well as setting wages and conditions centrally.

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

In Cuba, for instance, the socialist state guarantees employment for its citizens, leading to a low unemployment rate (World Bank, 2022). However, at the same time, due to the inefficiency of a centrally-managed economy, governments often cannot pay high wages to citizens.

4. Environmentally Conscious Policies

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

Socialists tend to be more inclined to intervene in markets and set rules around industry and business in order to curtail negative externalities. This includes rules about environmental conditions.

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

See Also: Environmental Injustice Examples

5. Greater Emphasis on Education

A core principle of socialism is that people should be allowed to access essential services regardless of wealth. Generally, education is on that list.

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

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

Similarly, even in the United States, the government pays for teachers and schools, and provides education up to Grade 12 free of charge, demonstrating a feature of a socialist mindset even in a highly capitalist nation.

A downside here is that it often limits parents’ choice about what is taught at school or which school to go to, which is instead a feature of neoliberal education.

6. Reduction of Monopolies

One of the excesses of capitalism occurs when firms develop monopolies over goods and services. Socialism can limit this by nationalizing key industries (Ellerman, 1984).

Take, for example, the railroads industry. Realistically, only one railroad can operate in a specific location. If a private firm operates that railroad, then they will have an effective monopoly, and can charge excessive prices.

So, for socialists, it’s important to nationalize any industry that will cause a natural monopoly. This, in theory, will prevent price gouging and help secure affordable access.

A contemporary example is the electricity market in France, which is predominantly state-owned and regulated (European Commission, 2020).

7. Promotion of Cooperation

Socialism promotes cooperation over competition (Malleson, 2014). In this system, the focus is not on individual gain but rather on collective welfare, leading to a more cohesive society.

One of the criticisms of competition is that it prevents firms from sharing resources, technologies, and market insights. As a result, the competing firms each have to invest separately into each of these areas, meaning overall social costs rise.

Cooperative firms in a non-profit oriented system, on the other hand, can work in unison rather than in competition to achieve results.

8. Focus on Essential Needs

Socialism often prioritizes ensuring that all citizens have their basic needs met before dealing with excesses and luxuries for the few (Wolff, 2012).

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

Here’s an example. Despite being a heavily capitalist system, Singapore embraces a hybrid socialist model in its public housing policy. Around 80% of the population lives in state-built apartments, as the government recognizes the important of affordable compact housing in the city-state (Department of Statistics Singapore, 2022).

9. Encourages Long-Term Planning

In many socialist economies such as China’s and Cuba’s, the socialist government holds a monopoly over politics. In other words, they don’t have to worry about getting voted out any time soon. As a result, they can think more long-term.

This is more a pro of authoritarian dictatorships (which, of course, I do not endorse!). But, it also tends to be characteristic of most self-proclaimed socialists states. The constitution enshrines a single-party socialist government.

The result is freedom to make big infrastructure investments, long-term plans, and other decisions that aren’t going to be subject to the short-term whims of an electorate that just wants tax cuts and handouts every budget cycle.

This approach, while clearly also having its downsides, may lead to better sustainable development and economic foresight (Kotz, 2017).

For example, the Five-Year Plans implemented by China illustrate the potential for detailed and ambitious long-term planning that addresses broad economic and societal goals (National Development and Reform Commission, 2021).

10. Prevention of Wealth-based Political Power

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

In other words, it theoretically should prevent a plutocracy.

This is particularly true in socialist-inspired nations that disallow money in politics, ensuring the plutocrats can’t use their money to influence the agenda and exploit their power.

Cons of Socialism

1. Lack of Economic Incentive

Perhaps the greatest downside of socialism is that, by human nature, humans will work harder and more productively when we are incentivized by extra rewards.

But under socialism, we’re often not incentivized to work harder because of either no extra financial reward, or higher taxes on our extra earnings.

This can lead to laziness among the workforce, lack of buy-in among the population, and general discontent that leads to lower productivity overall. The economic crisis in Venezuela, characterized by high inflation and shortages of goods, serves as a recent example (Rodriguez, 2018).

See More: Economic Incentives Examples

2. Central Planning Inefficiencies

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

A prime example of this is in Vietnam, when after the rise of the socialist government, there was an attempt to centrally plan agriculture. This was a disaster, leading to lower crop yields and even food insecurity, because the central government tried to force farmers to grow the wrong crops in the wrong fields.

Eventually, under the doi moi economic reforms, the Vienamese government had to revert back to allowing farmers to grow their own crops, and allowing them to sell crops for profit, demonstrating one of many failed attempts at 20th Century socialist ideology.

3. Lack of Entrepreneurship

Entrepreneurship refers to the practice of starting businesses. In socialism, this tends to be discouraged because ownership of business is seen as a way to amass wealth, causing economic inequality.

But entrepreneurs have a great way of creating market efficiencies. By competing against one another, the small businesses force each other to produce higher-quality goods for cheaper to attract the most customers (a downside of this is it puts downward pressure on wages, which socialists clearly don’t like!).

Furthermore, entrepreneurs are very good at finding holes in the market – such as missing goods and services in an economic area – and filling those holes, because they know there’s profit in the gaps.

4. Potential for Government Abuse

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

And we regularly see that, when socialism is implemented out of ideals for fairness and equality, the political class become the self-indulgent oligarchs.

Aldous Huxley demonstrates this in his Animal Farm analogy, where the animals who enforce communism in their farm end up living a rich, indulgent life, while the rest work like slaves.

And we see it in real life as well. There are countless examples where socialist states have suppressed dissent, implemented policies that favor elites, and committed human rights violations.

Notably, North Korea, a socialist state, has been criticized for widespread human rights abuses (Amnesty International, 2022).

5. Lack of Competition

In a socialist economy, the state often controls industries and production, which may lead to a lack of competition.

This can result in inefficiencies, lack of choice for consumers, and potential stagnation (Lindbeck, 1991). An example can be found in the healthcare sector in the Soviet Union, where a lack of competition led to inefficiencies and a lower quality of care compared to countries with competitive healthcare markets (Balabanova, McKee, & Pomerleau, 2004).

6. Poorer Productivity

Productivity is stimulated by competition. And competition is eliminated in a socialist economy. As a result, productivity is often decreased.

For example, if everyone receives equal remuneration regardless of effort or results, high performers may feel unmotivated to strive, and overall productivity could decrease (Mankiw, 2010).

Similarly, if the government holds a monopoly over goods and services, there’s less incentive for the government-run industries to innovate and achieve greater productivity.

One real-life example is in Cuba, where Cuba’s agricultural sector has seen productivity issues related to the lack of incentive for hard work and efficiency (Deere, 1991).

7. Lower Overall Wealth in Society

If productivity is curtailed, gaining wealth is discouraged, and there are rampant market inefficiencies, then social wealth overall is likely to decline.

This will lead to economic recession and financial hardship.

The capitalists argue that one person gaining wealth isn’t at the expense of anyone else, because of the “rising tides lift all boats” philosophy. In this philosophy, it’s good to have wealthy people in society, because they spend a lot of money, stimulating economic growth.

By contrast, wealth in socialist societies tends to be curtailed by market inefficiency and disincentives for entrepreneurship. The opposite of the “rising tide” analogy then occurs: there’s less money overall in the economy, making it hard for the government to collect enough money to then redistribute it to the poor.

8. High Tax Burden

To support extensive public services, socialist economies often require high taxes, which can be burdensome for citizens (Alesina, Glaeser, & Sacerdote, 2005).

By definition, socialist societies have larger governments that collect more revenue. That revenue has to come from wither the workers or industry in the form of value-added products and exports.

Even in capitalist countries with some socialist elements, like Sweden and Denmark which are known for their comprehensive welfare states, higher tax rates are imposed to achieve those socialist welfare policies (Svallfors, 2011).

9. Potential for Brain Drain

High achievers and ambitious individuals might emigrate to seek better financial opportunities and escape the limits of an economy where wealth is distributed evenly (Borjas, 1987).

This phenomenon, termed “brain drain,” was experienced by East Germany during the Cold War, where a significant number of educated citizens moved to the West (Fertig, 2003).

They knew that by working in East Germany, they would earn lower wages than their West German capitalist counterparts, who could bargain with employers for higher wages for their high expertise.

10. Reduced Personal Freedoms

In a socialist society, the state often has greater control over various aspects of life, including work and property, potentially leading to reduced personal freedoms (Hayek, 1944).

The most obvious of these is limited capacity to build a large business or compete in areas where the government has mandated that they should have a monopoly.

In the extreme case of North Korea, the state exerts control over many aspects of citizens’ lives, including travel, employment, and information (Human Rights Watch, 2022). Although, I would contend that this is a feature of autocratic dictatorships which tends to be an eventuality of socialism, but doesn’t necessarily have to be (Nepal, for example, often freely elects socialist and communist governments).

Can you Even Define Socialism?

Socialism is generally defined as government control over the means of production. But there is debate over how socialist choose to define “the means of production.”

This may strictly only refer to public ownership of factories, farms, and other industries that produce goods. Here, water, for example, may be considered a good that is government-owned and sold.

Other definitions include goods and services in “the means of production,” which would bring healthcare, fire services, police services, and even government-maintained public parks under the banner of socialism.

But in fact, most socialists argue that anything that may produce profit should not be privately owned because it will lead to social inequality and a class system.

As Edmundson (2020) argues:

“the means of production [comprises] anything that is or can be put to productive use … the means of production consist of anything that enables or could enable the extraction of surplus value (exploitation)”

Simiarly, Socialist Jean Proudhon (1970) goes further, arguing anything “whose accumulation might introduce social inequality“ (good or service) should be collectivized.

Still further, a definition of “means of production” can also include means of production and distribution, which Mohan (1975) argued was generally accepted as a socialist concept:

“There is general agreement however, that it [socialism] aims at ‘the control by the state’ of the means of distribution like railways, etc. and also banks and similar institutions”

This definition also brings public roads and other infrastructure under the banner of socialism, or at least socialized programs. In the knowledge economy, this may even include internet and telecommunications services.

Nevertheless, hardened socialists like Proudhon would still look at the following examples with skepticism because the following government-operated organizations tend not to be run as workers’ cooperatives.

As you can see, the definition of socialism is extremely contested even by socialists themselves.

Conclusion

One of the difficulties in writing this article was that there are so many different versions of socialism that many of the above pros and cons of socialism are evident in some socialist economies but not others. Many of the above examples therefore represent potential strengths and weaknesses, but ones I think have played out in some of the major socialist nations of the 20th and 21st centuries.

Overall, I do genuinely believe there are pros and cons of socialist-inspired approaches, and I tend to err on the side of social democracy where capitalism reigns but socialist approaches are sometimes necessary where capitalism fails. I worry that some of my ‘cons’ of socialism create a strawman argument, because many nations with socialist elements (France, the Scandianvian nations, etc.) tend to be both very wealthy and also don’t shy away from government intervention in the market to protect workers and ensure accessibility of essential services.

At the end of the day, we each will have our own preferences, and the most important thing is to maintain a free and fair democracy where we as a society can freely choose socialism, capitalism, or a mix.

References

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Balabanova, D., McKee, M., & Pomerleau, J. (2004). Health service utilization in the former Soviet Union: Evidence from eight countries. Health Services Research, 39(6p2), 1927-1950. Link

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Chris
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Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education. [Image Descriptor: Photo of Chris]

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