DEFINITION of 'Socialism'

An economic and political system based on public or collective ownership of the means of production. Socialism emphasizes equality rather than achievement, and values workers by the amount of time they put in rather than by the amount of value they produce. It also makes individuals dependent on the state for everything from food to health care. China, Vietnam and Cuba are examples of modern-day socialist societies. Twentieth-century socialist governments were overthrown in Czechoslovakia, East Germany and the U.S.S.R.


While capitalism is based on a price system, profit and loss and private property rights, socialism is based on bureaucratic central planning and collective ownership. Proponents of socialism believe that it creates equality and provides economic security and that capitalism is an inferior system that exploits workers for the benefit of a small, wealthy class. Critics of socialism believe that it is based on faulty principles and ignores human nature and the role of incentives in economic transactions.

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  1. Why is free enterprise often associated with being politically conservative?

    In abstract political economic terms, classic conservatism is concerned with preserving existing social institutions. One ... Read Full Answer >>
  2. Why do most economists favor capitalism?

    Capitalism is characterized by market production of the goods and services needed in an economy and the private ownership ... Read Full Answer >>
  3. What are the differences between capitalism and socialism?

    The fundamental difference between capitalism and socialism is the scope of government intervention in the economy. The capitalist ... Read Full Answer >>
  4. What is the difference between communism and socialism?

    Communism and socialism are economic and political structures that promote equality and seek to eliminate social classes. ... Read Full Answer >>
  5. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>

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