Socialism

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.

BREAKING DOWN '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.



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