Is capitalism the best possible economic system? Or can we imagine a better way to run the economyโan alternative that’s fairer, with less poverty, less corruption, less suffering?
Politicians, voters, and philosophers have been debating this question for decades. For progressives, socialism has been a perennially attractive idea. It offers the promise of an economy managed rationally to serve the needs of people rather than leaving human welfare up to the chaos and caprice of markets.
Libertarians and other critics on the right counter that socialism clashes with human nature. Economists going back to Adam Smith have asserted that capitalism, whatever its flaws, is superior at channeling people’s inherent laziness, greed, and self-interest into beneficial avenues. Meanwhile, the argument goes, socialism can never work without an unrealistic degree of cooperation, foresight, and altruistic behavior.
Since I wrote a novel about socialism, you might imagine I have opinions on this. But in this column, instead of grand manifestos or sweeping transformative plans, I want to argue the minimalist case for socialism: a proof of concept, as it were. I want to show that socialism can and does work, and that we can already see proof of this in the world around us.
Getting our terms straight
We can define capitalism as an economic system where businesses are privately owned, funded by private investment, with the goal of generating a profit that they return to investors. They compete with each other in a free market to sell whatever product or service they supply, with prices set by supply and demand.
Socialism, in its most expansive definition, would be any business or economic system that lacks one or more of these characteristics. This could mean a cooperative enterprise that’s collectively owned by its employees, rather than by investors. It could also mean a public venture that’s owned by society as a whole and managed through democratic mechanisms.
These enterprises might be self-funding via sales, with the aim of giving any money they make back to society. Or they might be funded out of tax revenue, providing a service with no expectation of profiting. They might compete with private alternatives to sell products at a market-determined price, or they might be subsidized or even free.
When we cast this broader net, we can see socialist enterprises active in the world right now. Some of them are small, while others are huge, employing hundreds of thousands of people. Many are household names, widely known and even beloved. Many provide services that capitalism can’t or won’t.
Before getting into what they are, we need to clear away some common misconceptions about what socialism is or what it consists of.
What socialism doesn’t mean
Socialism isn’t the same thing as a command economy, where the government assigns people to jobs, sets wages and prices, and decrees how much to produce, with no individual choice in the matter. That’s one special case of socialism, in the same way that a doomsday suicide cult is one kind of religion, but it’s only one point on a broader landscape of possibility.
Socialism need not be the same as communism. In fact, the two economic systems have clashed with each other, such as when Poland’s Solidarity labor union forced the country’s Warsaw Pact rulers to the bargaining table, paving the way for free elections in Poland and other former Soviet satellites.
A command economy is just one special case of socialism, in the same way that a doomsday suicide cult is just one kind of religion.
Socialism isn’t the same thing as a dictatorship where one absolute ruler or a small cabal holds all the levers of power. If anything, that’s an anti-socialist scheme, because it runs contrary to the principle of public or collective ownership.
Socialism is fully compatible with, and arguably works better with, free elections, free speech, and free press. It’s plausible that the reason why the USSR and other communist states collapsed is because they lacked these freedoms. They lacked any safety valve for citizens to express their grievances, short of all-out revolution.
Some successful socialist endeavors
Employee-owned companies. The dictionary definition of socialism is an economy where workers own the means of production. The most basic form of this is a company that’s owned collectively by its employees, rather than by a small number of founders, investors or outside stockholders.
Mondragon in Spain is an association of autonomous cooperatives that operate as an industrial conglomerate, with around eighty thousand employee-owners. Mondragon manufactures industrial components and machinery, runs retail businesses, and offers banking and insurance services.
In the U.S., there are companies that are mostly or wholly owned by their employees, such as Bob’s Red Mill and King Arthur Flour. (Here’s a list of the top 100 employee-owned U.S. companies.)
Single-payer health care systems. The U.S. has the least regulated market for health care among all wealthy democracies. As a direct consequence, we have the most uninsured people, we live shorter lives on average, and we pay more for the health care we do get. It’s a uniquely awful trifecta that shows how badly capitalism fares at solving this problem.
There are alternatives. Many of our democratic allies define health care as a human right and provide it to all their citizens through single-payer systems run by the government: the U.K., Canada, Japan, Taiwan, and Australia among them. Contradicting critics who say it’s impossible to have a planned economy and still get good outcomes, all these countries spend less than the U.S. does, while also attaining better outcomes and longer lives for their citizens.
It’s a particularly clear example of a case where socialism shines, whereas the profit motive of capitalism creates irresolvable conflicts with a system whose notional goal is to help people.
The fire department. Most people take it for granted that the fire department will come to help if your house is on fire, no matter who you are or where you live. It strikes us as the prototypical case of a service that ought to be provided by the government.
However, there’s no reason why firefighters have to be public employees. At various times and places in history, some very recent, people had to rely on private fire companies funded by subscription fees. If you didn’t pay and your house caught on fire, they’d stand by and watch it burn to the ground.
The Post Office. Postal delivery is named in the Constitution as one of the proper functions of government. It’s self-funding, not supported by taxes. It delivers anywhere in the country, from dense megacities to sparse rural areas, for just the cost of a stamp. And Americans love the post office: it gets favorability ratings as high as 91%, higher than any other government agency.
The USPS has private, for-profit competitors, like UPS and FedEx. However, these companies often hand off packages to the Post Office for last-mile delivery, especially to rural areas that they couldn’t profitably deliver to on their own. If not for the Post Office, large regions of the country might not have mail service at all.
Your local public library. Bookstores, for all that I love them, are quintessentially capitalist enterprises. Whatever noble or educational motives their founders might have, they’re driven by profit first and foremost. The only people who get to read their books are those who can afford to pay for them.
Meanwhile, libraries are shockingly socialist. They buy books and lend them out, for free, to anyone who wants to read them! If someone had come up with that concept today, you can guarantee that Republicans would be lining up to outlaw it.
Housing. This might strike Americans as an area where socialism has been tested and failed. The U.S. has experimented with public housing projects, and they have a reputation as sinkholes of crime and urban blight.
But that outcome isn’t inevitable. It’s the toxic fruit of racism; specifically, intentional disinvestment and neglect. After the white residents got subsidized loans to move out to segregated suburbs, urban housing projects were redlined and starved of resources, and the result was predictable.
However, there are countries where this is a common arrangement and works well. It goes by the name of social housing: housing built and provided by the government as a public good, not an investment vehicle. In the city of Vienna, Austria, over 500,000 people across income classes live in publicly owned housing. More than 80% of Singapore’s residents do the same.
The big picture
There are many more items I could have added to this list. The big-picture view is this: If you want to see socialism at work, just look around you. No matter where you live, you can probably spot some examples.
Nowhere on earth has a completely state-controlled command economy, and nowhere on earth has a completely unregulated capitalist economy. Every country, the U.S. included, is a patchwork of capitalism and socialism. Some things are left up to the whim of the market, some things are provided by business but guided by regulation, and some things are provided by the government.
If you’re skeptical of grand revolutionary schemes, that’s fair enough. However, consider the possibility that, instead of redesigning society overnight, we can tweak the balance just a little. Where capitalism has left people suffering in the cold, we can bring them in. Where it’s denied people a voice, we can give them one. Where it’s sowed weeds of corruption and destructive greed, we can chop them back.