Socialism

AAA

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.

INVESTOPEDIA EXPLAINS 'Socialism'

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.



RELATED TERMS
  1. Capitalism

    A system of economics based on the private ownership of capital ...
  2. Great Leap Forward

    An economic and social campaign that intended to change China ...
  3. Egalitarianism

    A philosophical thought system that emphasizes equality and equal ...
  4. Marxism

    A social, political and economic philosophy that examines the ...
  5. Karl Marx

    A philosopher and economist famous for his ideas about capitalism ...
  6. Equilibrium

    The state in which market supply and demand balance each other ...
Related Articles
  1. Economics

    What is the difference between communism and socialism?

    Learn how some countries are incorporating socialist methods into capitalism.
  2. Economics

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  3. Personal Finance

    The History Of Capitalism: From Feudalism To Wall Street

    Find out how the economic system we now use was created.
  4. Economics

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  5. Investing Basics

    Why Country Funds Are So Risky

    High returns come at a price, but country funds may still be a good bet.
  6. Mutual Funds & ETFs

    Understanding BRIC Investments

    Brazil, Russia, India and China are becoming more popular for investing, but there is still plenty of risk among BRIC countries.
  7. Personal Finance

    State-Run Economies: From Public To Private

    Find out how former Iron Curtain countries used private enterprise to join the world financial markets.
  8. Options & Futures

    Financial Capitalism Opens Doors To Personal Fortune

    The Industrial Revolution introduced a new age of investing and financial self sufficiency.
  9. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  10. Economics

    Can state and local governments in the US run fiscal deficits?

    Discover why most state and local governments do not – or cannot – run fiscal deficits in the same manner as the U.S. federal government.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center