Socialist Economy: Examples of Socialist Countries

Socialist Economy
In the 1840s a new type of economic theory emerged in the literary circles known as “The Communist
Manifesto”. Written by Karl Marx with Fredric Engels it propounded a new and unique concept of an
economy of a country. This came to be known as a socialist economy.
In a socialist economy, the setup is exactly opposite to that of a capitalist economy. In such an economy
the factors of production are all state-owned. So all the factories, machinery, plants, capital, etc. is
owned by a community in control of the State.
All citizens get the benefits from the production of goods and services on the basis of equal rights.
Hence this type of economy is also known as the Command Economy.
So basically in a socialist economy, private companies or individuals are not allowed to freely
manufacture the goods and services. And the production occurs according to the needs of the society
and at the command of the State or the Planning Authorities. The market and the factors of supply and
demand will play no role here.
The ultimate aim of a socialist economy is to ensure the maximization of wealth of a whole community,
a whole country. It aims to have an equal distribution of wealth amongst all its citizens, not just the
welfare of its richest companies and individuals.
Examples of Socialist Countries

There are no countries that are 100% socialist, according to the Socialist Party of the United Kingdom.
Most have mixed economies that incorporate socialism with capitalism, communism, or both.
The five Nordic countries—Norway, Finland, Sweden, Denmark, Iceland—have strongly socialist system.
The state, on behalf of the people, owns a large percentage of the economy. It spends a large portion on
education, housing, and public welfare. A large percentage of its workers are unionized, granting them
greater power. Last but not least, these countries are democracies, allowing the general population
input into decision making.
But these countries also incorporate many aspects of a capitalistic economy. As a result, its inhabitants
are among the happiest in the world, regularly placing among the top 10 on lists of the world's happiest
people.
Communist Countries
Four countries that are self-proclaimed communist, but they have some aspects of socialism.
 China
 Cuba
 Laos
 Vietnam
China, in particular, and Vietnam have strong free-market aspects to their economies, even though their
governments remain under the sole control of their country's Communist Party.
After the collapse of the Soviet Union, Russia changed its constitution to remove references to
communism. It describes itself as a democratic republic.
Features of a Socialist Economy
1] Collective Ownership of Resources
In a socialist economy, the entire foundation is based on socio-economic objectives. The welfare of the
people takes precedence over the profit motive. And so all major factors and resources of production
are in the ownership of the state itself. Only small farms and trading firms are kept under private
ownership.
2] Central Economic Planning
In a socialist economy, there is always a central planning committee. This is the authority who will
decide what is to be produced using the state resources. They will also decide the quantity and the
method of production. The ultimate aim of such authority is to fulfill the socio-economic aims of the
State.
3] No Choice for Consumers
Every coin has two sides. So in a socialist economy, every citizen is guaranteed basic goods like food,
clothing, shelter, etc. But the consumers do not have absolute freedom of choice. They cannot demand
the products they wish, they must choose from the products the state manufactures.
Since there is no free market, there is no concept of preference or demand and supply. Also while every
citizen will get work, he is not able to freely choose his occupation.
4] Equal Distribution of Income
This is one of the main features of a socialist economy. The setup does not allow one person to
accumulate a lot of wealth. So the gap between the rich and the poor is much narrower. And all their
citizens enjoy equal opportunities and facilities like education, public healthcare, etc. So there is no
discrimination between different classes of people.
5] Absence of Market Forces
The motive here is the welfare of the people. Since there is no profit motive price mechanism will not
influence any product decisions. The pricing structure in a socialist economy is ‘administered pricing’
which is set by the planning commission on the basis of their socio-economic objectives.
Demerits of a Socialist Economy
1)Socialism is a breeding ground for corruption, red-tapism, and favouritism. The State and the Central
Planning Authority hold too much of the power which they often abuse for their personal gains.
2)It essentially restricts the freedom of its citizens. They do not have a choice in the products they wish
to buy, or the jobs they want to do. Their freedom is further curtailed by the inability to own any private
property.
3)Every citizen has the guarantee of a job. So socialism does not promote hard work or any creativity in
its citizens.
4)Administered prices are not the most efficient. They are not based on market forces. Thus the
economic and scientific allocation of resources is impossible in this system.
5)Sometimes under socialism, we end up creating state monopolies which can get very dangerous with
time.
Advantages of a socialist economy

A socialist economy does have certain advantages like,
1)Promotes the equitable distribution of wealth and social justice.
2)It minimizes unemployment.
3)Ensures that all citizens have the means to achieve a minimum living standard.
4)It provides comprehensive social security to all its members.

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Socialist Economy

Examples of Socialist Countries

Features of a Socialist Economy

1] Collective Ownership of Resources

3] No Choice for Consumers

4] Equal Distribution of Income

5] Absence of Market Forces

Advantages of a socialist economy

1)Promotes the equitable distribution of wealth and social justice.

2)It minimizes unemployment.

4)It provides comprehensive social security to all its members.

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