(This article was originally published in Socialist Viewpoint, November 2002, Vol. 2, No. 10)

When people in the United States are introduced to the concept of socialism – whether in the popular media or in a high school class – they are presented with a simple equation: socialism = a crippled economy that fails to meet people’s basic needs + a totalitarian government. Stalinism, for example, is invoked as a model socialist government, one that brutally murdered anyone who dared oppose it, while the Soviet economy is repeatedly and incessantly visualized in terms of weary consumers standing in endless lines in order to purchase dull, defective products.

Consequently, if the question is raised concerning the relative merits of capitalism versus socialism, we discover that capitalism is the undisputed winner every time, provided that capitalism’s version of socialism is the definition employed. And that is about as far as the investigation proceeds within the few venues for public discourse afforded by capitalist society today.

But with the world economic order in an increasing state of disorder as the U.S. economy falls back into a recession and Japan cannot seem to crawl out of one, a disorder where many countries throughout Asia have just experienced their worst economic crises in recent history and Argentina’s economy has almost ceased to function, a disorder which promotes and intensifies world poverty and world war, it becomes increasingly urgent to raise the question that capitalism always prefers to dodge: Which system is superior, capitalism or socialism? where by socialism we mean the system as originally defined by its founders, Marx and Engels, and as it was elaborated by its supporters. We will argue that when the question is posed in these terms, socialism triumphs decisively. In particular, we will focus on socialism’s ability to raise people’s standard of living to a significantly higher level than what capitalism provides. But first we must have a clear conception of what socialists mean by the term “socialism.”

Marx’s Conception of Socialism

In The Critique of the Gotha Program (1875), Marx distinguished what he termed the “lower” and “higher” stages of communism. Lenin later noted in State and Revolution (1917) that the lower stage came to be referred to as “socialism” while the term “communism” was reserved exclusively for the higher stage. We will adopt Lenin’s terminology in this essay. Here is how Marx drew the distinction:

“What we have to deal with here is a communist society, not as it has developed on its own foundations, but on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birth marks of the old society from whose womb it emerges. Accordingly [in the lower form of communism, i.e. socialism], the individual producer receives back from society – after deductions have been made – exactly what he gives to it… The same amount of labor which he has given to society in one form he receives back in another.

“In the higher form of communist society [i.e., “communism” proper], after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have increased with the all-round development of the individual – only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banner: From each according to his ability, to each according to his needs!”

In other words, Marx argued that a revolution does not immediately transport people into a fully developed form of communism where, because people are more spiritually and socially motivated, they become unconcerned with the amount of material rewards they receive for the work they perform. Rather, because capitalism creates a culture in which individuals are encouraged to pursue their own, isolated self-interest without regard for others, to measure their self-worth in terms of the quantity of their material possessions, and to regard work as something about as desirable as the plague, while some of these impulses largely disappear in the process of organizing and consummating a revolutionary upheaval, others linger and must be acknowledged as factors that demand recognition in the immediate post-revolutionary period. Consequently, one important attribute of socialism is that people are paid commensurately with the amount of work they perform, thereby providing them with a direct incentive to work. No such correlation between the amount of work performed and one’s material rewards exists within capitalism, but we will return to this point later.

A much deeper transformation that socialism introduces in relation to capitalism, however, concerns the fundamental running of society. Under capitalism, businesses, of course, are privately owned, and these owners, who constitute a small percentage of the population, unilaterally determine economic policy. They decide what kind of article their company will produce, how many of these articles will be produced, who will be hired to perform the work, how many workers will be hired, what procedures they will follow, etc. All these decisions are made with a calculating eye fixated on “the bottom line.” All concerns are subordinated to the one supreme concern: the maximization of profits.

But under socialism, the picture is inverted: working people, who constitute the vast majority of the population, will themselves take responsibility for formulating and defining society’s basic economic direction. Of course, such a radical transformation presupposes that workers have created their own democratic institutions in which they can exercise their voice in an organized and effective way, directing the economy through the democratic control of the state. These institutions spontaneously arise in revolutionary periods – workers created Soviets in Russia in the process of overthrowing the czar, and more recently workers in Poland created Solidarity as a vehicle for overthrowing Stalinism. In our society, trade unions are the closest approximation. Through these revolutionary organizations fundamental economic policies can be discussed, debated and determined according to majority vote. In other words, the economy itself will be run, not autocratically where a minority dictates policy as under capitalism, but democratically where the will of the majority rules. And since the majority of the population would wield control, these policies can be reconstituted to reflect the interests of the majority of the members of society.

The Case For Capitalism

As soon as we are old enough to follow the argument, educational institutions hammer into us the conviction that capitalism is the only sensible economic system that history has, or ever will, produce. If one butcher sells rancid meat while his competitor’s meat is fresh and healthy, customers, in pursuit of their own self-interest, will exclusively patronize the business of the second butcher. Or if two butchers sell meat of the same quality, yet one sells it at a lower price, business will flow in his direction. Consequently, each producer, in defending his own interests, is compelled to maximize the quality and minimize the price in order to remain in business. Adam Smith, who developed this defense of capitalism most eloquently, argued in The Wealth of Nations (1776): “…he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.” In other words, every individual is naturally concerned with his own personal well-being. Capitalism acknowledges and incorporates this basic fact of human nature into the logic of its operations. And because we are most productive when we are pursuing our own interests, in the system that Smith described we unintentionally promote the interests of society as a whole since we continually seek to produce the best products at the lowest cost.

The Case For Socialism

Let us now consider which system, capitalism or socialism, can deliver the higher standard of living for the majority of the population, the working class. Of course, one important measure of people’s standard of living is the amount of money they are paid for their work. Unfortunately, Adam Smith’s argument in support of the virtues of capitalism is valid for everyone but working people, particularly with respect to their wages.

In order to compete effectively, every capitalist must keep production costs to a minimum. Otherwise, a competitor who succeeds in producing the commodity for less money can reduce its price on the market and force the former out of business. But labor costs are one of the most important factors among costs of production, and hence each capitalist strives to minimize wages and benefits. In fact, capitalists are no less than ingenious in concocting creative schemes to reduce these costs. Recently, for example, many full-time workers have been converted into part-timers so that they perform the same work as before but for less money with no job security and no benefits. Since labor unions tend to raise the wages of their members because of collective action, corporations have also turned to “contracting out” work to non-union employers in order to circumvent union wages. The most desirable ploy from the capitalist’s perspective, however, is the total replacement of the worker by the machine, thereby eliminating the wage altogether. Consequently, we have witnessed the proliferation of ATM machines and the disappearance of bank tellers, robots have replaced factory workers, computers, have replaced teachers, accountants, telephone operators, and secretaries, and so on.

But while workers must constantly struggle against this unrelenting downward pressure on their standard of living, capitalists enjoy a windfall of rewards without lifting a finger. During the 1990’s, for example, the wealthiest 10 percent of the population watched their wealth double on the stock market. Meanwhile, the people who work the hardest, the farm workers, maids, etc., make the least amount of money.

But if workers’ organizations were running the economy, this picture could be quickly reversed. After all, trade unions have historically fought for higher wages, pensions, health benefits, a shorter work week and safe working conditions. Rather than rewarding people according to how much they HAVE – the principle that capitalism employs – people would be paid according to how much time they actually WORK. With a minimum wage set at a level that would allow everyone who works to purchase their own house and car, if they want one, everyone would have an incentive to work. Currently one-third of the work force is not paid sufficiently to buy a house anywhere in the country.

But socialism is more than being well paid for the work one does. It truly revolutionizes how society operates. The capitalist system, in which a small number of capitalists are allowed to subordinate everyone else’s interests to their own – sometimes perverse – pleasures, is replaced with a democratic structure in which the working class itself collectively directs the economy according to a conscious plan that was chosen after a full debate with all the relevant information and a democratic vote. In other words, a whole new culture will be created in which all of the members of society will become informed and encouraged to participate in determining the fundamental policies that will guide the direction of society. And such a transformation will allow us to leap forward to a qualitatively better life. It will enable us to create a superior economy by substituting the anarchy of capitalism, where every individual capitalist pursues his own individual self-interest, with an economy that is carefully planned so as to meet the vast majority of the population’s needs efficiently. Here, people will have the opportunity to identify and promote productive enterprises that maximize everyone’s well-being while eliminating sectors of the economy which undermine this goal.

For example, quality education for every single child would be in everyone’s interests. When people are highly educated, they are more productive and hence far more capable of producing quality products in vast quantities as opposed to an entirely uneducated population. Free, quality health care for everyone would represent another logical investment choice. After all, people cannot be productive members of society if they are suffering from an ailment, so we all benefit from a healthy population. Moreover, preventative health care saves society billions each year by treating health problems before they become catastrophic or preventing them altogether. Quality housing for everyone is important since being cramped in overcrowded quarters generally produces social conflict, a pervasive unhappiness, and prevents children from developing their full potential, not to mention the debilitating effects of being homeless altogether. High quality, free, public transportation would also make sense since it would eliminate people wasting hours each week trapped in traffic jams, pollution from cars could be reduced, and families would not have to spend huge portions of their income maintaining multiple cars. Other logical candidates for increased investment might include organic food, since pesticides are known to cause cancer, quality day care facilities, after-school programs, solar energy, nonpolluting automobiles, and a massive campaign to clean up the environment. We already know that most people prefer a clean environment, not only for reasons of health, but also aesthetics.

On the other hand, once everyone has all the relevant information, they might choose to eliminate certain branches of the economy because they are either no longer desirable or because they are actually harmful. If people concluded, for example, that the U.S. military actually undermined our safety and security because it was aggressively and unlawfully defending U.S. corporate interests abroad, it might be eliminated altogether and the $350 billion it is presently budgeted could be reallocated into more productive channels. Moreover, there are numerous domestic businesses which produce huge profits for their owners at the expense of the well-being of everyone else. For example, the tobacco industry might be another target for dismantling. Under capitalism these “merchants of death” have been allowed to sell a product that is a known killer, and lie about it; they have been allowed to target youth in a massive advertising campaign, and lie about it; and they have been allowed to spike cigarettes to increase their addictive potency, and lie about it, all with impunity. It’s the power of money in a capitalist society. In fact, advertising, which attempts to manipulate people, particularly the young, into buying products that they do not need and into measuring their self-esteem by the number of commodities they own, might be eliminated altogether, thereby freeing up a sector of the population to seek more gainful, socially acceptable employment. Most working people truly hate advertisements that interrupt television programs, radio programs and the internet, not to mention the billboards that litter the landscape. And telemarketers could be outlawed before they drive us all crazy.

Moreover, through rational planning some of the gratuitous frustrations attached to our current products could be eliminated. For example, under capitalism computers proliferate but are often incompatible with one another. Documents cannot be transferred and e-mail attachments cannot be opened without additional major expenses. Computer companies have chosen to do this intentionally in order to lock customers in to a single brand or to force them to buy expensive accessories. But under socialism, computers could be designed with compatibility in mind, thereby eliminating an array of unnecessary costs.

Finally, one’s standard of living should not simply be measured by material well-being but by mental well-being as well. Under capitalism, businesses strive to replace workers by machines in order to reduce production costs, thereby suspending workers in a perpetual state of stress, as each one wonders when he or she will be the next victim on the workforce guillotine list. Under socialism, however, everyone will be guaranteed a job, and the opportunity to work will be considered a basic right. Consequently, when new technology is developed for the work process, rather than laying people off, as capitalists relish, everyone will remain, but work less. Rather than dreading the introduction of machines, workers for the first time in history will have cause to celebrate their arrival. And by immediately drawing in the millions of workers who are currently unemployed in capitalist society, but want to work, into the work force, the work week can be reduced without endangering productivity, thereby freeing up more time for rest and relaxation and a real enjoyment of life. Moreover, since the goal is to reduce the work week, everyone will have an incentive to raise productivity. Once work is regarded as a right rather than something you have to crawl for, one tremendous source of relentless stress that every worker within capitalist society endures will be removed. When health care is viewed as a basic right, another layer of stress will be eliminated. And as the work week is progressively reduced by introducing even more technology into the work process, people will have more time to spend with friends and family, thereby escaping from the capitalist nightmare where all one does is work, eat and sleep.


Hence, socialism sets into motion a process that begins by enriching – both materially and spiritually – the lot of the working class and ends by raising humanity to a higher level of civilization. It aims at a progressive reduction of the work week, a just redistribution of society’s wealthy and the replacement of a despotic system of government by minority dictatorship with a system of rational dialogue where all members of society discuss, debate, and democratically determine society’s direction, thereby raising individual consciousness from exclusive fixation on one’s individual needs to a genuine concern for the common good. Public education will be revolutionized so that, instead of training the young to perform repetitive, meaningless, rote exercises in preparation for an adult job, they are provided with a rich curriculum, ranging from science and literature to music and the other arts, as well as athletics. And by linking science directly to its potential to liberate humanity from the drudgery of work and the rest of life’s afflictions, students, who previously found it abstract and irrelevant, might be inspired to engage in diligent study in order to unlock its secrets. With this kind of education, children will be encouraged to become well-rounded, self-motivated, and critically-minded members of society, eager to use their knowledge to create a better world.

With a reduced work week, universal quality education, and a system where everyone contributes to the running of society, a new culture will gradually emerge in which “…the enslaving subordination of the individual to the division of labor … has vanished; … labor has become not only a means of life but life’s prime want;” and “… the productive forces have increased the all-round development of the individual.” Thus, we will finally be in a position to inscribe on our banner: “From each according to his ability, to each according to his needs!” A better world is indeed possible.