In general, the goal of socialism in economic terms was to create greater equality and not rely on individuals or private institutions for the means of production. While there were many phases in a variety of socialist attempts, from utopian to Marxian, nearly all socialist-inspired revolutions and movements were geared at creating a balance between the classes, more (and at ties complete) state involvement in the growth of a national economy, and a commitment to the ideals set forth by early thinkers such as the as Karl Marx, author of “The Communist Manifesto” and Das Kapital as well as other movements such as those by the Fabians, for example. In general, a pure theory of socialism involves these elements of creating equality and although the general economic concepts behind many of these movements in countries such as China, Yugoslavia, and the former Soviet Union may have been altered throughout time, the guiding principles remained essentially the same.

In some ways, it is best to begin by not necessarily defining a pure theory of socialism by what it is, but rather by what it is not. While some of the defining factors of socialism would not include private ownership of the means of production, a economic and political system governed and regulated by a ruling elite or aristocracy, nor conversely a welfare state in which all are by default dependent on the state for all aspect of existence, there are a number of engaging arguments made against socialism. For example, one scholar notes, “In the absence of the unhampered markets of a competitive capitalist economy, there can be no possibility of maintaining that rational economic calculus which is essential to the efficient organization of production. Universal chaos and destitution will be the only outcome of following the mirage of a socialist commonwealth” (Lerner 51). Such a view is common in criticisms of socialism, particularly as it relates to economics. There is the belief that without markets, the driving force behind a society is gone and will go on to have a negative impact on the society as whole, turning it into a state that is wholly dependent on the government for everything. While this a perfectly rational fear—one that will be explored in later sections of this paper—this dreaded result is not usually a concern. What does become a concern is when governments step out of the pure theory of socialism and attempt to create mixed markets or phase out old forms of socialism that are no longer economically viable.

Again, these are issues that will be raised and put into context later when exploring the socialism and the economies of different nations but such criticism provides a useful backdrop against which one can view socialism, both in its Marxian and Fabian forms. To go one step further, another economic scholar has broadly defined socialism by stating first what it is not and then moving on to what it is comprised of. “Socialism is not statism, or the collective ownership of the means of production.  It is a judgment on the priorities of economic policy.  The community takes precedence over the individual in the values that legitimate economic policy.  The first lien on the resources of a society therefore should be to establish that ‘social minimum’ which would allow individuals to lead a life of self-respect, to be members of the community” (Bell xii). It is interesting that this critic notes that it is not the collective ownership of the means of production since this is, in essence, what many associate with socialism. This topic of ownership in production will arise later within the context of certain nations and their experiments, both successful and unsuccessful, of turning to economic socialism.

Before embarking on an exploration of two more focused and pure schools of socialist thought, it is useful to gain an ideological grounding for the movement as a whole. While a majority of the early socialist movements were associated with utopianism, especially in the economic sense, there still remains a great deal of idealism inherent in the system today. For example, in Ideas and Opinions, a collection of essays from one the world’s foremost thinkers, Albert Einstein, socialism is not only a political and economic alternative to capitalism, but a definite necessity. He posits, “In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow-men in place of the glorification of power and success in our present society” (Einstein 102). Despite the many treatises and tracts about the nature of socialism in a pure sense, this statement sums up the idealism behind the movement quite succinctly. He states that the very means of production are removed from the hands of an elite or economically privileged sector and thus the entire pattern of work and personal capital changes dramatically. Although there are hundreds of more specialized claims of essentially the same message found throughout actual socialist texts, this vision puts the pure theory of socialism most succinctly.

In other words, Locke was asserting that government had to be fair and equitable in order to be sustainable. In addition to this is the crucial fact that Locke believed citizens had the right to revolt if government was not meeting their needs. Marx and Locke were aligned along these terms although the ideas of Karl Marxdid not have the same implicit trust in the inherent “good” of government, especially if a ruling class were supporting a government. According to Marx, government was not an entity through which change could be brought about. Rather, for change to happen and for the class struggles to be resolved it was necessary for the people to rise up and bring about the necessary adjustments to society.

In the words of John Locke, Karl Marx is also suggesting and affirming the idea that, “As usurpation is the exercise of power which another has a right to, so tyranny is the exercise of power beyond right, which nobody can have a right to” (Locke 95). While Marx was not advocating anarchy or calling for an abolition of government itself, he was wary of the problems associated with government, particularly when it was based on uneven notions of class. He saw that there were inherent problems in a government where there was an upper class or ruling elite and advocated a government that was part of the people—a government that was not based on the principles and revolution-inspiring problems class inequity.

Despite the problems Marx had with government he was willing to look toward it as a chance for hope if his party could be in power. At one point he states, in one of the important quotes from “The Communist Manifesto”, “The immediate aim of the Communists is the same as that of all other proletarian parties: Formation of the proletariat into a class, overthrow of the bourgeoisie society, conquest of political power” (Marx 288). Locke and Marx are similar in that they wish for fairness to be at the heart of government but differ on how they believe in their government—Locke is far more optimistic about the powers of government. Still, without Locke Marx might not have had groundwork for his ideas on government, especially in terms of natural rights and the right to revolt.

Where Locke and Marx seem at first to differ most significantly is on the issue of private property. Locke saw ownership of property as fundamental to a good government and society and believed that all citizens had a right, if they had the means, to acquire and own property. For Marx on the other hand, the abolition of ownership of private property is one of the central aspects to the theories of Marx as expressed in “The Communist Manifesto”. This is not simply meant in terms of owning a home or a piece of land, but more importantly it refers to the means of production. This is true in the case of a factory owner just as it is true for a large landholder who owns several acres that need worked. To Marx, this was a timeless imbalance that harkens back to the feudal days and doing away with the whole notion could happen through revolution. Without an uprising the issue of private property and the associated inequities would only continue unchecked. In many ways it can be suggested that to Marx, private property was at the center of almost all problems he saw in human society since it contributed to and signaled unequal distribution of wealth. Interestingly though, Marx and Locke had more in common in terms of property than it may seem. Since Marx believed that everyone had natural rights, he felt that there should be property owned, but only in common rather than in the more capitalist sense.

Related to the issue of property is that of labor. Locke felt that ownership of property was the fruit of labor and wished to see more equity in terms of the amount of labor expended and how it was rewarded. While he was before the Industrial Revolution, Locke still saw the opportunity for workers to be exploited and this of course violated his idea of a social contract and the notion that everyone is entitled to natural rights. In terms of labor, Marx felt that there were many inequities between the bourgeoisie and the proletariat. In his view, these two groups were constantly at odds, especially since the bourgeoisie owned the means of production. Because of this ages-old system of production and labor, it was only natural that there would be a working class who would be constantly exploited by an overseeing upper class. As a result of their ownership of the means of production these upper class were also given special positions within government and thus two systems, labor and government, were tarnished by class inequity. Only through attempting to even out the system and put an end to the upper class owning the means of production could there be fairness in terms of labor. On another note, Marx saw that labor itself was where the power of the proletariat was. The working classes possess strength in numbers and have the power to affect great change, both for the better or worse and Marx encouraged the worker to understand his position in the scheme of society.

Other essays and articles in the Main Archives related to this topic include : Analysis and Summary of General Theory of Employment, Interest, and Money by John Maynard Keynes   •  Analysis and Summary of Principles of Political Economy by John Stuart Mill   •   The Economics of Socialism: An Historical Perspective   •   Summary and Analysis ofThe Essential Adam Smith by Robert L. Heilbroner  •   Summary and Analysis of Das Kapital by Karl Marx  •  The Impacts of the Industrial Revolution on the New England Family  •  The Historical and Societal Functions of World Revolutions

Works Cited

Locke, John. Second Treatise on Government. New York; Dover, 1965.

Marx, Karl and Fredrich Engels. Communist Manifesto. New York; Signet Classics, 1999.

In his introduction, Heilbroner puts Smith in the context of other famous economists and thinks about his contributions to the field. “Smith and Marx were embarked in projects of entirely different and generally diametrically opposed kinds, but the ability to bestow a near-religious blessing by the mere invocation of their names is a privilege they share in common to a degree enjoyed by very few writers in the field” (1). It is important that Heilbroner mentions these mentions these two ideas. First of all, by stating that he is “diametrically opposed” to the works of Karl Marx, in Das Kapital and others, it situates him not only within his time period, but also within modern scholarship on the subject of economics. For a first time reader of Smith’s texts, it would be extremely useful to understand that he and Marx were not advocating the same set of ideas. Although Marx would not come along for another one hundred years, this difference in the eras is of the utmost importance. This is partially because Smith was truly a product of the lofty notions and ideas embodied by the Enlightenment. He was invested in the ideals of natural rights and equality as well as other ideas about the nature of mankind. While Marx was coming out of an age that was growing far more industrialized and unequal, Smith was writing just as the industrial revolution was making its first strong appearance. One must wonder if he would have seen the “evil” of capitalism as Marx, but then again, Smith never would have guessed the extent to which his theories could be used for personal gain. As Heilbroner astutely points out in one of the important quotes from “The Essential Adam Smith”, “Smith could speak in these seemingly radical and certainly critical term because neither he nor any of his contemporaries imagined a society in which exploitation and oppression would not be present, although their excesses might be reduced” (3). This is an excellent point and it is part of the explanation for why Smith and Marx were so different. Although they had different theories simply because they were different people, it seems that the time period that contributed to the works of both men is more significant than it may seem at first. One of the central features of Enlightenment thought that seemed to most influence Smith in his writing was the idea that human beings were (or at least should be) equal and that all were able to be educated. In this vein, it is remarkable that he wrote an extensive tract such as An Inquiry into the Wealth of Nations in relatively simple language. He was not only the father of modern economic thought, but also of writing about complex issues related to commerce in an approachable manner. This is a far cry from the thousand-page complexities of Marx’s Kapital and although it is certainly a seminal work of economic genius, it far less easy to comprehend, especially to the layman, than is Smith’s work. Again, this is an example of how the time period had a profound effect on the work that was produced and without the Enlightenment, one must consider the idea that Smith’s works might not have remained so timeless.

According to Heilbroner, Smith did not suffer a long period of anonymity. With the publication of “Smith’s first great work, The Theory of Moral Sentiments, [which] was published in 1759. Written in a highly polished, florid style, rich in anecdote, analytic and didactic by turn, the book made an immense impression” (5). This begins the first of many thoughts that will recur throughout other works such asWealth of Nations. In short, Smith examines the nature and motives of morality. While this piece does not necessarily expound many of his economic beliefs, it is important that Heilbroner made certain this was included in its entirety since it provides a window into the “soul” of Enlightenment as well as Smith’s thinking. His knowledge of Hume is clear and he sets forth his own ideas about morality that begin with the idea, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it” (65). This idea will go on to influence his ideas about political economy and how it relates to human nature since he believes that oftentimes human beings react emotionally without a thought about themselves. While one would not normally associate altruism with capitalism, this is an important idea to all of the texts in this compilation. In sum, this work is also vital to an understanding of Smith because it expresses his ideas that man was interested in himself and his own preservation and was free to make his own decisions guided by these desires. While natural law may be the guiding hand in these free actions, in essence, man’s need to act according to self-reliance is the basis for all of his actions. In some ways this would seem like the perfect excuse to back up the idea of capitalism—even “rampant” capitalism that is akin in nature to the “monster” Karl Marx and some others paints it to be. It will always continue seeking more and more to replenish its ever-growing demand for greater in the way of self-interest and thus is difficult to halt. Still, this is an impression one gets so many years later. To Smith, the years before rapid and massive industrialization and capitalism he lived in would not have offered him so grim an image and in some respects, The Theory of Moral Sentiments is a highly optimistic if not somewhat outdated (in the context of his other works) piece that is useful to understanding the assumed ethics behind the principles he lays out later in Wealth of Nations. This idea of morality expressed can be seen in “Wealth” when Smith states, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest” (166).

The text of The Wealth of Nations takes up well over half of Heilbroner’s compilation, which is only fitting because of the scope and importance of the work. In his introduction, Heilbroner mentions that his text was immediately well received and its publication brought Smith a great deal of fame and notoriety. Furthermore, it is only natural that this work persists as it does into our modern times. Although some of the more minor points explored are not quite as relevant today as they were for those in Smith’s time, certain key ideas such as those related to the idea of “the invisible hand” as well as mercantilism are still quite important. Without meaning to skip over large portions of the text, this study will focus on these two aspects since they are both relevant today and given a great deal of attention by Smith. To preface this analysis of Smith’s greatest work, it should be noted that the reason so much attention was given to foregrounding this book is because these two ideas have changed the course of economic history. What does set this work apart from others in the field is its remarkable ability to relate complex ideas in simple uncluttered language. It is easy to imagine that part of the reason why Smith’s wide and appreciative readership was so vast was because he did he not attempt to alienate readers by thick philosophical jargon. Rather, his ideas are clearly presented and he illustrates his most complex sentiments, such as the idea of the invisible hand, with images that help the reader envision a concept rather than attempt to think abstractly about it.

The concept of the Invisible Hand comes up frequently throughout the text, although it is not mentioned explicitly. It is not until one has finished reading the entirety of the text that all of the references begin to come together and make sense.  In order to simplify this analysis, there are two different ways the analogy or image of the invisible hand is used. First of all, it is a concept that can be applied to morality (such as is discussed above). This idea makes a more general statement about the individual within society. The second sense the concept is used is in relation to actual economics, which will be explored after this first point is demonstrated. In term s of the moralistic sense, in essence, the principle behind the invisible hand is that people benefit their peers simply by acting out of their own selfish interest instead of acting according to some deep sense of altruistic motivation. In other words, it is the self-interest of individuals that almost by default creates the general interest. This is not always a popular idea, even today, since there are many who believe that it is right and natural to do the right thing for the good of the whole rather than according to base self-interest. What seems to be missing in this modern moralist’s argument, however, is that it does not seem as though Smith is actually saying that people should act out of self-interest, but rather that this is something inherent to human nature and is just a “fact of life” instead of a base decision. What is also slightly confusing about Smith’s assertions that people act of self-interest is the idea that he does not think that this it is always a great thing for people to act on their own selfish desires, even if the majority of this behavior goes to benefit the community. In fact, Smith was not supportive of those who were greedy or overtly selfish. There is a fine distinction built into Wealth of Nations that is not immediately clear becomes more so throughout a close reading of the text.

          The second and most recognized meaning of the invisible hand in Smith’s Wealth of Nations concerns the ability for a particular market or economy to regulate itself without the aid of an outside influence, most notably, the government. Interestingly, this is a more interpretative form of the invisible hand since Smith did not appear to use this as part of his definition. Still, the idea went on to form the basis for laissez-faire economics, which was based on Smith’s notions of “natural price.” In short, this refers to the idea that if there was a lack of a certain item that was in demand, the price of that product would rise. This would mean that there would be increased competition among manufacturers and the increase in supply would lower the price to its normal production cost (with a small amount of profit factored in) and this would constitute the “natural price” of an item. Because of human self-interest, this kind of competition would be beneficial for society as a whole. It is clear how this would later form the basis for modern economic systems and rationality and in sum, it sounds like an excellent ideal for any economy to work towards. What is interesting to note, however, is that Adam Smith was not quite as optimistic as it might seem. Even though he had a firm faith in human beings, simply by acting on their own motivations, this was by no means a completely idealistic theory. Although commerce may regulate itself through the simple act of natural market stabilization, this does not mean that there are not problems inherent in the system of political economy Smith presents. He recognizes what Marx would later go on to realize and states, “Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity… The violence and injustice of kings and ministers is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit a remedy. But the mean rapacity, the monopolizing spiting of merchants and manufacturers, who neither are, nor ought to be the rulers of mankind, thought it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquility of anybody but themselves.” He recognizes the flaws that would later come as a result of growing industrialization and it almost seems for a moment as if he is able to predict the problems rapid industrialization and capitalism might cause—even with a human nature that was overall working to help the good of the whole. In sum, while Adam Smith may have been slightly idealistic, his ideas about the future market and economic systems were very accurate and Heilbroner did an excellent job of showing modern readers how he fits into the larger spectrum of academic and economic thought and history.

Other essays and articles in the Main Archives related to this topic include : Summary and Analysis of Das Kapital by Karl Marx  •  Marx and Locke: Comparison of Views on Government, Property and Labor  •    Analysis and Summary of Principles of Political Economy by John Stuart Mill   •  The Impacts of the Industrial Revolution on the New England Family