The Problem with “Socialism”

October 22nd, 2009

As an attack term, “socialism” packs a lot of wallop. But that’s mainly because it’s used to attack things that aren’t actually socialism.

Socialism, defined: “various theories of economic organization advocating public or direct worker ownership and administration of the means of production.”

But when attackers go after “socialistic” policies, they’re usually imprecating against something else entirely: government redistribution of wealth and income. (Via education, health care, infrastructure, direct transfers, etc.)

“Look at the USSR,” they say. “Socialism failed!” And it did. Government ownership of the means of production has been soundly discredited by history.

But they’re not attacking such systems. They’re attacking redistribution. And that policy has been resoundingly endorsed by history. Of all the thriving, prosperous countries in the world, there is not one that does not have massive doses of redistribution.

By their very usage, the attackers define the “socialism” that they’re attacking as redistribution. But their evidence for its perfidy? Another “socialism” entirely: government ownership of the means of production.

I wish I could redefine words:

“Communism” is government ownership of the means of production.

“Socialism” is government redistribution.

But I don’t think I’m going succeed in revising all those dictionaries out there.

What’s a better word for an economic system that includes significant redistribution? One that doesn’t include the word “social”?

Financial services, by the way (including insurance, including health insurance), are not a “means of production.” They’re a (necessary) catalyst to production.

  1. Bengt Larsson
    October 24th, 2009 at 03:05 | #1

    How about simply saying “socialism not communism”.

  2. rothsf
    October 24th, 2009 at 04:52 | #2

    Bengt: That’s not bad, but it’s three words instead of one, and besides, socialism as formally defined means government (or workers) owning the means of production. Communism is conceived as a subset of some kind.

  3. October 24th, 2009 at 09:01 | #3

    *Redistribution* in pure form is not so bad – and it happens naturally. Will Durant says throughout the history of civilization, wealth has always been redistributed either through taxation or revolution.

    That being said, I submit that using an income tax to redistribute takes/took us down a fatal path.

    By taxing income, it allowed the politicization of every productive activity under the sun. For example, look at our three biggest sh*tstorms out there right now: housing, Wall Street, and healthcare. All three have been severly distorted in form by special income tax treatment. You know Wall Street would be a fraction of its present size if it weren’t for Joe Blow avoiding income tax each month and dumping funds blindly into products he can’t possibly understand. Where would the cost of healthcare be if politicians hadn’t given HMO’s favored tax treatment. Etc.

  4. October 24th, 2009 at 10:46 | #4

    CaptiousNut, I’m pretty much with you on that. (Though I kind of wonder what you mean by “happens naturally”…)

    Which raises the question of what taxes to replace them with. Every economist agrees that Pigovian taxes are the best bet. Think: carbon. Or in some ways better and way easier, a gas-guzzler tax (or what I prefer to call it: a “National Security Tax”).

    But I’m really a fan of land taxes, cause they’re so inherently non-distortionary, efficient, and progressive all at once. Check out the wikipedia entry:

    Just try getting *that* implemented. Think: Prop 13.

  5. October 25th, 2009 at 12:19 | #5

    The Soviet Union was a communist state, not a socialist one. I can dredge out a dozen econ texts from my garage if anyone wants to borrow them to learn about this stuff. Amazing so many keystrokes from so many brainy types and yet the term “market socialism” never appears. Sigh. Words mean things.

  6. October 25th, 2009 at 13:27 | #6

    @Steve Broback
    The definitions here are annoying because it’s hard to know what someone’s saying, but the main point is that you can’t prove the failure of redistribution by pointing to the failure of “means of production” socialism/communism.

  7. Steven Hales
    November 5th, 2009 at 11:11 | #7


    Ah, a Georgist. Being a Georgist has nothing to do with property taxes. Property taxes are a continuing tax on the privilege of living in a particular location and consuming public services that flow to that location. A Georgist tax would simply tax away land value at the time of sale and such a tax falls only on the owner and does not impair productive capacity generally. Land value is a happenstance of ownership and is viewed by Georgists as something that does not flow from the productive capacity of the owner. Modern day Georgists look upon patents and other resources as happenstances of ownership whose existence is the creation of public values not fully associated with the time and effort of the owner of such resources. Of course Georgists ignore property rights but who am I to judge a bunch of nuts.

  8. November 5th, 2009 at 12:05 | #8

    @Steven Hales
    Steven, A georgist believes that all real property is common property. It obviously isn’t. (And I certainly would not choose to make it so.)

    You’re imputing a moral argument on my part, which simply doesn’t exist (here).

    So put that loony idea aside. It’s a distraction, a red herring.

    Are land taxes economically efficient compared to other taxes? Yeah.

    If you want to get on some “fairness” argument, feel free. But make sure your arguments comport with your other beliefs regarding rising boats, larger pies, etc.

  9. Steven Hales
    November 5th, 2009 at 13:44 | #9


    Ok, the bait was not fair, but I thought I was red baiting 🙂 not offering up a plate of red herring. Your notions of redistribution being a saftey valve on wealth concentration is not new and you may have some good points in that regard. I particularly like your argument for redistribution being necessary to support a certain level of aggregate demand. (Though I am unsure why you seem to belive that returns to labor will not grow with more capital investment.) This seems to dovetail with other discussions going on about the effects on work if we get just good enough AI. It is certainly a direction policy debate should entertain if the worst effects of AI are realized. Incentives might not matter in such a world and we need to explore what could happen.

    Overall, I agree with you on the term Socialism it has changed its formal definition and become a catchall for “too much” government whatever that means. But terms do have power as Nancy Pelosi realized with healthcare reform and the “public option.” She has re-christened it the “consumer option” to avoid association with government. It sounds warm and cuddly like a friendly iPod or a MAC, gosh its not evil at all, now. 🙂 The term “Progressive” or Clinton’s “Communitarian” are good alternatives to Socialism but they never got traction. For a meme to be successful it must infect like a virus and the Democrats are not very good at that. Socialism came to America and died on its beaches. It is a tough sell.

  10. November 5th, 2009 at 14:15 | #10

    @Steven Hales: “Though I am unsure why you seem to belive that returns to labor will not grow with more capital investment.”

    I don’t actually understand why it necessarily would. Assuming smart investors (putting their money where it will generate more saleable goods that aren’t currently available and/or could be made more cheaply), more capital investment means more productivity and/or more jobs.

    More jobs means more competition for labor, pushing wages up, so in that case you get increased returns to labor.

    But if the greater result is in productivity, you don’t see those returns to labor; it goes to the owners of the capital stock–unless some of the greater output gets redistributed.

    Even if an increase in true, productive investment did/does/will create jobs/raise wages instead of just raising productivity, there’s a hell of a lot of evidence that shortages of investable funds–in recent years/decades, at least–have *not* been notable restraints on true, productivity-generating capital investment. The world has been awash in liquidity. All cashed up with nowhere to go.

    See here, and the links from here:

    So creating more *money* (a subset of “capital”) and funneling it to rich investors (those who can’t spend all they’ve got) does not seem to greatly increase the productive capital stock, which is the thing that (if needed to increase output and satisfy demand) does improve productivity and/or create more jobs.

    BTW I agree with pretty much everything else you said.

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