Explain Market Socialism and Evaluate State Socialism
Socialism is generally understood as an economic system where the means of production are either owned or controlled by the state and where the resource allocation, investment pattern, consumption, income distribution, etc., are directed and regulated by the state.
Salient features of socialism:
Government Ownership/Control:
In socialist countries, the major means of production are either owned by the Government or their use is controlled by the Government. In USSR and China, the means of production are mostly owned by the state. In some socialist economies, the private sector also plays a very important role and the Government directs and regulates investment allocation and production pattern in accordance with national priorities. In some countries, including India, some of the basic sectors, including a major part of institutional finance, are in the public sector so that the resource allocation and investment pattern of the private sector may be regulated by regulating the flow of the basic inputs to the private sector. Communist countries like China have now opened their doors to foreign private capitalists to foster development.
Central Authority:
The socialist economies have a central authority like the central planning agency to formulate the national plan for development and to direct resource mobilisation, allocation and investment to achieve the plan targets. Socialist economies are also called command economies because the central planning authority commands the pattern of resource utilisation and development. They are also known as centrally planned economies which include the USSR, China, the German Democratic Republic (East Germany), Poland, Romania, etc.
Restriction on Consumption:
In communist countries, the state decides what may be made available to consumers. The consumers have to content themselves with what the state thinks is sufficient for them.
Restriction on Occupation:
The freedom of occupation is absent or restricted in socialist countries. An individual may not have the freedom to choose any occupation he is qualified for. Individual freedom of enterprise is absent or regulated.
Fixation of Wages and Prices:
The wage rates and prices in a communist economy are fixed by the Government and not by market forces.
Distribution of Income:
An equitable distribution of income is an important feature of the socialist system. However, wage differentials, depending on the nature and requirements of the job, are recognised in socialist countries. The objective of equitable income distribution may be achieved by fixing the wage rates and other economic rewards or by means of fiscal and other appropriate measures.
While the traditional socialism emphasised government ownership of socialist systems are government control of the means of production rather than pure state capitalism. Even the Euro-communism has a more liberal view than the Russian and Chinese systems which are also becoming somewhat liberal. Socialist command economy:
In the words of Jery M Pickersaill and Joyce E. Pickersgill, "The command economy is characterised by public ownership of the means of production, collective determination of economic decisions, and the allocation of resources by commands issued by the planning elite". Again, "primary feature of the command economy is the centralisation of decision-making. There is no horizontal communication between producing and consuming units. All communication is vertical, i.e. between the individual economic unit and the planning agency".
In a command economy, there is no individual freedom of choice of consumption and employment. The state determines what shall be produced in what quantities and by what methods. Similarly, the state determines the assortment and amount of goods and services that may be consumed by individuals.
Just as there is no "pure" capitalist economy in the world, there is no pure command economy. However, some economies, like the Soviet economy come near to this system, and they are generally regarded as command economies. However, as mentioned earlier, changes appear to have begun.
Market Socialism:
According to Pickersgill, "Market socialism is characterised primarily by the public ownership of the means of production. Decisions with reference to the allocation of resources are made both collectively and by individual producing and consuming units. Prices and markets are the primary mechanisms used to facilitate the exchange of products". The Yugoslav economy is an example of market socialism.
Criticism of socialism Socialism is a cap that has lost its shape because so many different people have worn it. There is a large variety of socialism today. Democratic socialism strives to achieve a trade-off between the free enterprise system and state capitalism. State socialism and communism however, suffer from the following drawbacks:
Suppression of Civil Liberties:
Civil liberties are suppressed under" communism. Man becomes a mere cog in the machine. If a free and fair election is conducted in the totalitarian countries, people will not vote for the status quo.
No Consumer Sovereignty:
There is no consumer sovereignty in totalitarian systems. The state decides what and how much the people shall consume.
Authoritarianism:
In socialism the central planning authority commands the resource allocation, investment and development pattern. The authoritarianism need not always be right. As criticism is hardly tolerated, there is a limited scope for accommodating different views and making critical evaluations.
Insufficient Talent Utilised:
The talents of the nation are not fully utilised, as private enterprise is not allowed to operate.
Lack of Incentive: In the absence of private property people may lack incentive to work hard.
Undemocratic: In socialism the absence of freedom of choice of occupation is undemocratic.
Due to the drawbacks of the totalitarian socialism a number of socialist systems are mixed systems having both private enterprise and state enterprise. Liberal democratic socialism strives to achieve the positive results of private enterprise, democratic rights and state regulation, in the centrally planned economies recently.