If the picture didn’t already explain what socialism is then I guess I’ll have to do it. Imagine a shoe factory. There’s 100 workers, 10 managers and an owner. The factory makes and sells $100,000 worth of shoes per week on average.
It pays about $40,000 towards the workers’ salaries, $40,000 towards the managers’ salaries, while the remaining $20,000 become dividends*. The workers will probably earn a little above the minimum wage, the managers will earn about $200,000 per year, and the owner pockets about $1,000,000 per year doing absolutely nothing. The workers will do all the work, but are still basically paid with peanut shells all while having no say in the matter; the managers, on the other hand, are paid tons more to keep them in line. The market price of shoes shifts up and down randomly until we get to “recession”, when the price of said product falls for a long time, forcing the factory to make a choice to save money at the cost of firing some workers and cutting pay for others. Laid off workers wound up homeless and unable to feed their family. That’s capitalism.Let’s say we kick the owner out, nationalize the factory, and cut salaries of managers while raising salaries for workers.
Now the workers earn $20 an hour, managers earn $75,000 a year, and there’s no owner. We then figure out how many shoes are needed in the country per year, and set the national price of shoes. The factory keeps on making $100,000 per week regardless of actual short-term demand. Since all stores are also nationalized, we can make sure that the company is still paid, and excess shoes are to be stored away until further use; which will be soon.
All the while, we adjust the prices and production levels every year. The money that originally went into the owner’s pocket now goes to provide amazing benefits for workers like free healthcare and pension*. Finally, we put in extra effort to make sure that there is a paying job for anyone who wants to work. That’s socialism.Eventually the system works so well that everyone is well fed, paid, and all wearing our shoes that it becomes pointless to even set monetary value to the shoes.
We simply remove price tags and give shoes to anyone who wants a pair. This is where the stored shoes come back. (Obviously, subject to some reasonable constraints, e.g. no more than 100 pairs per year per person.) To prevent people from “mooching” (unlimited access to free goods is an incentive not to work), we require all able people to work and make voluntary joblessness a crime. That’s communism.
(For my personal opinions on communism, comment aye.)There are two major obstacles that prevent the two systems, capitalism and socialism, from working correctly. One, central planning in an economy, as complex as what we have today, is insanely difficult. Imagine that it’s 2005 and you need to allocate engineering and manufacturing resources for the next five years, and you need to predict the relative demand for the Blackberry, Palm Pilot and iPhone. The Soviet Union was failing miserably at far easier allocation tasks. The other reason is that removal of monetary aspects weakens workers’ motivation. If you can’t be fired and you’re paid a fixed amount no matter how well you work, or if you’re not paid at all, you may not work as hard as if your livelihood was on the line.
*Dividend: Basic payments to a companies shareholders. *Pension: a regular payment made during a person’s retirement from an investment fund to which that person or their employer has contributed during their working life.