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January 10, 2018

People over profit: What is Socialism?

Flickr/401(K) 2012

“Socialism” is one of the most misused political terms in the world, especially in the United States. The second column of my three-part series on it was dedicated to addressing some common misconceptions. In this third and final column, I wish to answer the question I get asked most often in emails: “You keep writing about what socialism isn’t. So, what is it, then?”

As I wrote before, socialism abolishes profit, along with all other unearned income (rent and interest). Thus, it must also abolish the market economy and private companies. To be more exact, socialism abolishes private ownership over the means of production – workplaces, natural resources, and all the machines and equipment used to produce goods and services – and places them under public ownership. They become the property of society, collectively owned by all citizens so that each citizen becomes a kind of “shareholder” in the national economy. In other words, all firms and companies are placed under the collective authority of the people. The people will then be able to decide, democratically, how their new property is to be used. Socialism is economic democracy.

Since there are no separate groups of owners who may compete with each other, the socialist economy cannot be driven by markets. Instead, it is a planned economy. Every year, or every few years, people will vote to decide a new economic plan for the next period. Decisions such as the number of schools and hospitals to build, whether or not to create a high-speed rail network, the number of old factories to close and what to put in their place – all these will be made democratically by the people, instead of being left up to corporations and investment banks. There will be political parties, or something like them, campaigning for different economic plans. Some may think that healthcare should be the priority, while others would like to build green power plants, and so on.

Like all types of democracy, the economic democracy of socialism may be direct or representative. People may vote directly on economic questions – such as the next economic plan – or they may elect representatives to make decisions. The day-to-day running of factories and offices will most likely have to be left to such representatives. This is where the idea of state ownership comes in. Socialist companies may be considered to be owned by the state, in the sense that the state is elected by the people to take care of the day-to-day management of such companies.

It is absolutely essential that the state must be very democratic so it can be a genuine representative of the people. Elections need to be free and fair, they need to happen often, and there cannot be any private money involved. If the state does not represent the wishes of the people, then we don’t have economic democracy, so we don’t have socialism.

I mentioned the closing of old factories as a possibility. In capitalism, this means firing the workers there and creating unemployment. But in socialism, there will be no unemployment. If we have an economic plan, then we can require it to follow a rule saying that for every job eliminated somewhere, a new one must be opened somewhere else. People will be able to decide when and where to close factories and workplaces, so that such closings can be put off until we make new jobs available in the area. Contrary to popular belief, unemployment is not merely bad for the unemployed. It actually makes everyone else poorer. If a person wants to work but cannot find work, that is one person who could be helping society but isn’t. Unemployment is a waste of labor, and it is one of the greatest inefficiencies of capitalism.

There is a very common myth about socialism, which says that socialism would give everyone the same wage, and therefore no one would have a reason to work hard. This is false. First of all, capitalism survives just fine without paying most people according to how hard they work. Most jobs come with a set wage, not with a wage that goes up or down depending on your performance last month.

More importantly, the majority of socialists do not advocate a system of equal wages. Socialism does promote equality of wealth, but it does this by getting rid of profit, interest and rent as opposed to by equalizing wages. Most of the inequality in capitalism does not come from different wage levels, but from the fact that a few people own companies, banks or vast tracts of land, while most people don’t. In socialism, inequality of wages may remain, but that will be the only inequality. Everyone will have a job and work for a wage and some wages will be higher than others, but the highest paid person will only get five or 10 times as much as the lowest paid – not hundreds or even thousands of times more. In addition, the income that currently goes into the pockets of the 1 percent would be distributed equally, so the lowest wages would be much higher than they are today.

There are a number of socialists who do advocate equal wages but they always propose some other type of incentive to replace wage differences. For example, people who work hard could be promoted into jobs that are more enjoyable or more desirable, so that job satisfaction plays the role of an incentive. Or the people who work hard could get the jobs they like best, while people who don’t make an effort are stuck with the jobs that no one wants.

Money would continue to exist under socialism, but its uses would be more limited. You would get paid for your work and use that money to buy consumer goods – anything from food to cars to computer games – but companies and workplaces, being the collective property of the people, would not be for sale. Thus there would be no investment banks, no stock exchange or financial markets … and no financial crises. There would be no need to take on huge loans, either. Education would be free, and the economic plan could include the construction of houses and their sale at low prices. So the two largest sources of debt in America – mortgages and college loans – would no longer exist.

There are many more things that could be said about a socialist society, but ultimately it all comes back to economic democracy. Socialism is a kind of society where people get to vote on what is produced and how it is produced, where income is distributed much more equally than today (but not absolutely equal) and where the laws prevent anyone from getting rich off the labor of others.

Mike Tudoreanu is a Collegian contributor. He can be reached at

66 Responses to “People over profit: What is Socialism?”
  1. Mike says:

    A rebellion against bosses? You basically just believe that nobody has a right to own, start, or run their own business. You believe that nobody deserves to be paid for owning, maintaining, and managing property. You say we insult you because we run out of arguments. We insult you because you are fascists, you want government prohibition on people being able to run their own lives.


  2. Kevin Bush says:

    “You have to obey the boss or else get fired. If you have no other job lined up (and most people don’t), then the words “do what I say or you’re fired” really mean “do what I say or I’ll make sure you can’t pay the bills or support your family.”

    Hello McFly..anybody home?..when you took the job you agreed to do what the “boss” wants exchange for money.. If you don’t do what the boss wants broke the agreement Trotsky..and fired yourself..

  3. Brian D. says:

    Yes, the spirit of socialism can be summed up as a rebellion against bosses. We don’t want government prohibition on people being able to run their own lives, we want government prohibition on people being able to run the lives of others and profit from the work of others. THAT is what bosses do, THAT is what you do when you get paid for owning property, and THAT is the basis of capitalism.
    If you get paid for owning property, then you get paid out of the wealth created by others. Where do you think wealth comes from? How is it created? If I sit around doing nothing, but I own a company and receive an income from that company’s profit, am I creating wealth? Is it possible to create wealth or contribute to society if you’re doing nothing? Of course not. But in capitalism, you can get paid simply for OWNING things, which means getting paid for doing nothing.
    Damn right we believe that should be prohibited. Because wealth is created by human labor, not by holding a piece of paper that says you own a company. So every time you get paid for holding that piece of paper, someone else is working hard and being cheated out of the full income they deserve for their labor.
    Socialism is the radical idea that people do not have a right to be paid for doing nothing.

  4. Brian D. says:

    I just noticed that we are now on the second page of comments, and the link to the first page gets bumped all the way to the bottom of the thread. So I am leaving this here as a notice to all new people reading these comments:

  5. Brian D. says:

    By the way, we are not against people being paid for maintaining and managing property. There will always be a need for janitors, repair staff, and managers. These people are doing wealth, therefore creating wealth, and so they have every right to be paid for their work. But no one has any right to be paid simply for OWNING things. The owners of all businesses should be the working class (which also means that workers should hire and fire managers, not the other way around).
    As for “when you took the job you agreed to do what the boss wants”, remember that we were talking about how capitalist employment is similar to extortion. So tell me, what do you call a situation where you have to sign an agreement saying that you will follow any and all orders from a certain person, because if you don’t sign the agreement you won’t be able to pay the bills or buy food?
    If that’s not extortion, then what is?

  6. vincent paci says:

    This socialist experiment has been tried many times and almost always failed miserably (USSR, China, Cuba, Vietnam). All of these countries have switched to a free market economy. Socialism may sound like a good idea in theory, but it just simply does not work. Competition leads to innovation. Socialism leads to corruption.

  7. Brian D. says:

    This socialist experiment has been tried in the USSR, China, Cuba and Vietnam? Really? You mean those countries had an economic system in which the workers democratically decided what to produce and how to organize production? You mean those countries had open discussion between different political parties or groups, each with their own proposed economic plan, and then held a vote to decide which economic plan to follow?
    Or perhaps you mean that they tried a DIFFERENT thing which they called “socialism”, and THAT thing failed.

  8. Mike says:

    So basically intellectual work isn’t work. The organizational ability, ability to understand supply and demand and various housing markets doesn’t count, because you aren’t doing it with a hammer and sickle?

    I don’t care if a “democracy” of selfish lazy people decide they are going to steal a factory I designed and built for their own gain, they are going to lose, and that is in no way shape or form “fair.”


  9. The Juggernaut says:

    I am a manager in the real world. I hire, train, and fire all my employees (right now about 45 of them). Without me, my workers literally know nothing. They have no skills; so thus they should be able to fire me?

    On another note…

    Socialism will fail because it fails to address something that capitalism makes best of; human greed. There is no way for socialism to solve the problem of scarcity yet, and it conveniently sidesteps any addressing of what to do with anything in extremely rare amounts. When we do get the Star Trek device that allows us to create anything out of thin air socialism will work, but it stands no chance until then.

    Despite what socialists think, workers will continue to vote in favor of their own greed, ironically in the same pattern socialists think managers, capitalists, bankers, and anyone else they stereotype.

    Not convinced? Take a look at the UAW’s golf course, or the SEIU supporting illegal immigration (which undermines fair wages for themselves and legal Americans). Unions do not represent the workers now, and are corrupt as the corporations they fight. Under socialism greed won’t disappear, it will just transfer from corporations to unions.

  10. john says:

    “Without me, my workers literally know nothing.” That makes you sound very arrogant and if that is true, than you must work at a job that requires the least talented and capable of people to work there. A very large mcdonalds?

  11. Mike says:

    Maybe he does, so what?

  12. The Juggernaut says:

    Even if I do, as Mike says, you fail to address any of my points.

    Attack my substance, not me; or can you not?

  13. Jamie says:

    >”So basically intellectual work isn’t work.”

    Eh? What? Did anyone say that? No. Intellectual work – the work of scientists, engineers, architects, doctors, and everyone else who is HIRED and paid a WAGE – absolutely DOES count. You know what doesn’t count? You know what ISN’T work? Buying a company, hiring people to work for you (including intellectual workers), and then sitting back and getting money for nothing. Which is what every single capitalist is doing right now. That’s what the stock market is all about: buying companies (or, to be more exact, parts of companies) and getting money without doing any actual work for those companies.

    Also, FYI: Capitalists don’t design or build factories. Architects, engineers and construction workers do that.

  14. mike says:

    Many design and build their own companies, and then proceed to run them or hire shop managers to run them. They still set up the entire thing, made that employment possible, risked their capital, etc.

    Buying a company, being able to do cost benefit analysis, hiring workers based off what you need, etc is still all work. You clearly have zero understanding about how even the simplest of businesses work, let alone our national or global economy. Try again

  15. Masonic3 says:

    That sounds absolutely horrible. Imagine all of the amazing companies and products that would not exist if not for the drive of capatalism. If you like the idea of socialism then you have never worked for the Gov, taken a economics class or seen the waste of Government bodies.

  16. CriminalMajor says:

    Really. So how do you think not having the ability to own property, a democracy!! This system would drag everyone down. There would be no incentive to create or achieve something that could benefit society. Business owners create jobs which allows workers to earn money making products that people would use. These businesses need other companies for support. You could not achieve financial security under socialism. Capitalism you can own property and use it to borrow money to make improvements or buy more property. How could you retire?

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