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Understanding Socialism in the U.S.

Written by: Emily Chen, Jenny Dorsey

Edited by: Zandie Brockett, Ines Le Cannelier, Zach Moss, Isla Ng, Anastasiya Smirnova, Kimberly Yang

Last Updated: 1.7.21

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Today, amidst the backdrop of a highly polarized country with income equality in the U.S. at its highest point in tracked history, socialism has been gaining increasing interest and attention. However, confusion and misconceptions are still prevalent in conversations about socialism—in part due to the term being mischaracterized and weaponized by American media and politicians throughout history.

In this piece, we aim to offer a clear foundation of how socialism operates as an economic and political framework. Our goal is to encourage more robust, thoughtful, and accurate discussions about both the benefits and shortcomings of incorporating aspects of socialism in our society today.

This Understanding… piece will:

  1. Provide background on the evolution of socialism, with a focus on the influence of Karl Marx and Friedrich Engels.

  2. Explain major theoretical goals of socialism and examine the limitations of its real-world applications.

  3. Analyze how socialism as a concept and a term has changed over time within the U.S., in particular how it fell out of popular favor and became a tool to stoke fear and advance certain political agendas.

  4. Discuss potential opportunities for integrating beneficial aspects of socialism into U.S. politics, based on prior successful examples.

Table of Contents

What is Socialism?

An overview of socialism from an economic & political perspective

Socialism as a Critique of Capitalism

An overview of capitalism, socialism, communism, major critiques of capitalism, and the ways in which socialism evolved from communism

Issues with Socialism

An analysis of the key issues with socialism

Socialism in the United States

An overview of the evolution of socialism in the U.S., analysis of how socialism has been and continues to be weaponized today, and examples of democratic socialist policies

How Do We Encourage Change?

Ways for individuals to take steps towards a more equitable and democratic society

Further Reading

Relevant resources to read and learn more about socialism

What is Socialism?

Key Takeaways:

  1. Socialism is a philosophy of social organization that includes both economic and political aspects. While there are many different strands of socialism, a unifying theme is that all people share in and benefit from the resources, goods, and services available in their society. The common goal is to reduce inequality and enable all people to lead fulfilling lives.

  2. Economically, socialism generally supports more government intervention and control—especially over necessary resources like water/food, housing, healthcare, and transportation. The level of governmental control deemed appropriate varies between different strands of socialism.

  3. Politically, socialism requires a functioning democracy, where all people have a voice in the policies that affect their lives and the actions of the government accurately reflect the desires of the people. This continues to be a major challenge of socialism, as there exists numerous obstacles to democracy even in “democratic” countries like the U.S.

Socialism encompasses a broad set of both political and economic philosophies on societal organization, with a general goal of giving all citizens “broadly equal access to the necessary...means to live flourishing lives” with minimal class division. There are many, continually evolving strands of socialist philosophy; however, they are generally based on a foundational element of social ownership over the means of production (i.e., the tools and resources needed to produce useful materials for society at large).

In its simplest form, socialism believes all people should be able to jointly use, share, and receive the benefits from both natural resources and the goods and services that are collectively produced. These processes are overseen by an elected body (the government) that is charged with allocating necessary finished products and services for the common good (e.g., public transit, healthcare, housing) while distributing the surplus of other production efforts back to citizens in an equitable manner. The majority of differences in socialism emerge from variation in how this production process is managed, how the government is assembled and maintained, and what is considered equitable distribution.

The term ‘socialist’ first came into use in Europe in the 1830s to describe individuals who advocated for workers’ equality and sought to overturn the exploitative policies brought by industrialization. Socialist thought is fundamentally a rejection of capitalism (read more about capitalism below), which is an economic system that prioritizes private ownership, competition, and profit. Under the basic definition of capitalism, the supply and demand of goods and services are determined by competing private businesses, with minimal (or no) governmental interference, such as setting price floors or ceilings. Businesses and business owners, not workers, own the means of production as well as the final goods and services; thus, owners claim all the profits (or losses) from the sale of these goods.

Socialists argue that this understanding of capitalism creates massive disparities between workers and owners. Even in the case of goods and services that are necessary for survival—like healthcare, housing, and medicine—the free market incentivizes owners to prioritize profit over offering these services or products to the people that need them. To eliminate exploitation of workers and redistribute profits, socialists advocate for high levels of government intervention within economic systems. Different strands of socialist thought may see intervention as anything from setting a minimum wage to the nationalization (ownership or oversight by centralized government) of specific industries, such as railway transportation.

In order for a centralized government to adequately represent the will of the people, the political system under socialism needs the state’s officials to be elected democratically. The all-affected principle defines the baseline of what a democracy should accomplish: that those affected by the outcome of decisions should have a voice in the making of those decisions. However, there have always been substantial issues regarding the accuracy with which democratically elected governments can represent their constituents' wishes.

Theoretically, socialism’s economic system (high levels of government intervention and oversight) and political format (of democracy) should allow its foundational goal to be achieved: collective, socially owned means of production. First, a democratically elected government learns the people’s needs and desires. Next, the government would then manage economic production following the principles of equity and necessity, and allocate production’s surplus (profit) in ways that are useful to its citizens.

For example, the government could regulate the supply and demand of housing to ensure everyone has access to it while also using extra money earned to fund social service programs (e.g., SNAP and Medicaid). However, historically implementing socialism politically and economically on a country-wide scale has proven to be challenging. We will cover some major drawbacks to socialist philosophies in the Issues with Socialism section.

It is also worth noting that socialist policies can exist in any political or economic system. For example, social security in the U.S. is generally considered a socialist policy despite the U.S. being a capitalist country. Workers and corporations pay into the program as part of their annual taxes, the elected government holds onto this lump sum, and later allocates it back to individuals upon their retirement. (We’ll cover additional socialist policies in the section What’s Next for Socialism in the U.S.?).

Socialism as a Critique of Capitalism

Key Takeaways:

  1. The primary difference between socialism and capitalism is who (or what) owns the “means of production,” or resources and tools used to produce the goods and services a society needs. Under socialism, the people own the means of production (through a democratically elected government) while under capitalism, private individuals and businesses do.

  2. Socialism’s primary critiques of capitalism center around the large wealth disparity between workers versus owners, the lack of government control over necessary social resources (e.g., transportation, housing), and how these inequalities undermine an individual’s right to live a fulfilling life.

What is Capitalism?

Capitalism is an economic system based on private ownership and the free market. This means that individuals own the means of production (through their private businesses), and employ workers to produce various goods and services. Prices on the free market are determined by supply and demand, hypothetically in a way that reflects the interests of consumers at large with minimal (or no) governmental interference. In theory, competition between businesses keeps the market moving efficiently. Business owners then reap the profit (or loss) generated from selling their production.

Capitalism arose in 16th century Europe as a reaction against feudalism, a system where kings and nobles owned all the land, and peasants and serfs did all the labor in exchange for protection. After the Black Plague, the shortage of workers raised individual labor power, enabling workers to acquire more agency and control over their economic futures. At the same time, the privatization of once-public lands (known as enclosure) expanded property ownership beyond just aristocrats, and gave these new land owners opportunities to generate wealth.

In contrast to feudalism, capitalism allows everyone to receive money for their labor, own private property and businesses, and accrue wealth. Unlike socialism, however, the goals of capitalism are not tied to improving the lives of participants, but rather to optimizing free market dynamics with “winners” being those that provide the most competitive offerings.

The Internet Encyclopedia of Philosophy (IEP) describes capitalism’s four major tenets:

  1. The means of production are, for the most part, privately owned;

  2. People own their labor power, and are legally free to sell it to (or withhold it from) others;

  3. Production is generally oriented towards profit rather than use: firms don’t necessarily produce to satisfy human needs, but to make money; and

  4. Markets play a major role in allocating inputs to production, and determining the amount and direction of investment.

It is important to note that no capitalist country currently operates in a completely free market where the state has zero influence over the economy. Even in capitalist countries such as the U.S., the state and the economy are intertwined.

Socialist Critiques of Capitalism

In this section we will cover three major critiques of capitalism:

  1. Private ownership over the means of production: This funnels the majority of profits to owners instead of workers, and prioritizes making items that sell and/or make profit over those that are necessary for society.

  2. Outsized prioritization of economic output and minimal governmental interference with the free market: Private ownership over necessary resources comes at the expense of social safety nets and welfare programs that fulfill basic needs for individuals to lead quality lives. This undermines the freedom of individuals and further perpetuates existing class privileges;

  3. The existence of dramatic class inequity as a result of #1 and #2: This demonstrates how inequitable and un-democratic the government is, as those with more money and access have far more influence over the economy (and overall society) than those without.

Socialism fundamentally rejects private ownership over the necessary resources that fuel society (e.g., housing, electricity) because it fuels an ever-widening disparity between owners and the working class. While the working class produces the goods and services sold and is compensated for their labor, they have “no ownership at all over most of what they produce. [This] belongs to the capitalist rather than the worker, and is the source of all profits.” (IEP) Increasingly, workers’ pay is not proportionate with the profits accrued by the business, does not correspond with their productivity, and does not appropriately adjust for rising costs of living.

For example, Walmart employs a vast number of workers who earn minimum wage, which, depending on the state, starts at $11 an hour or roughly $21,000 a year for full-time work. (For context, the poverty line in the U.S. is $26,500 per year for a family of four.) By comparison, the owners of Walmart, the Waltons, are America’s richest family—worth $235 billion. This is not uncommon amongst for-profit businesses in the U.S. In 2019, the typical CEO-to-worker (i.e. “production and nonsupervisory workers”) wage ratio was 320 to 1.

Since the goal of capitalism is to create profit for owners, the ability of an individual to produce profitable items becomes seen as a proxy for that individual’s overall worthiness to society. Thus, people are heavily incentivized to cater to the needs of the wealthy, instead of supporting activities that improve the social welfare of others that result in little profit. Those who are not considered ‘productive’ under existing capitalist structures, like people with disabilities, are also stigmatized and largely left unsupported by social services.

Under capitalism, pricing is left to market forces, even for goods that may be necessary to health and well-being like medicine. For example, Daraprim is an antiparasitic treatment for serious infections that was priced by CEO Martin Shrkeli at over $700 per pill. Insulin is another vital drug that is inexpensive to produce yet continues to increase in price. Historically, free market supply and demand have proven ineffective at appropriately regulating necessary goods like medicine and even clean water (e.g., Chile’s privatized water system, which has caused major access issues for regular citizens). Given these case studies, socialism advocates for higher levels of governmental oversight, regulation, or even full ownership over resources that individuals need.

Capitalism purports to allow everyone to work at will, use those profits to become a business owner if desired, thus achieving the “American Dream.” But in reality, there are many systemic obstacles that prevent the majority of people from generating sustainable wealth for themselves or their families. For example, in the U.S. the ripple effects of slavery contribute to a Black-white wealth gap wherein the average wealth of white families is 6.7 times that of Black families. Pervasive generational privileges—such as access to public versus private education or one’s citizenship status—are amplified under capitalism. As economist John Friedman explains, “In the last three decades, the rate of income growth among very wealthy individuals has accelerated [while the income of] individuals in the bottom half...has not grown at all in real terms.”

It is important to recognize that structural disparities under capitalism are not a defect of the system, but are rather an essential feature for the system to thrive. In order for capitalism to effectively function, there must be some level of unemployment—a “reserve army of labor”—to keep labor power in check. Even in times of low unemployment, it is still debatable if individuals are able to work ‘at will’ and truly free to withhold their labor, since most people in the U.S. live paycheck-to-paycheck and thus must work to survive.

There is also a major power imbalance between what workers can reasonably ask for in wages, versus what owners can demand in terms of output. (For example, many salaried workers are not paid for their overtime hours.) This unhealthy cycle of overwork can also be seen in the fact that the U.S. is the only advanced economy without federally required paid vacation or holidays, and that only half of workers with paid vacation time even take time off. Furthermore, the increasing prevalence of mechanical and autonomous machines being used to replace workers continues to diminish workers’ ability to negotiate higher wages or hold leverage over their employers.

While capitalism is often associated with the ideals of individual freedom and democracy, socialists point out that the very disparities created by capitalist systems undermine the effective freedom (i.e., the capability to achieve a desired outcome) of individuals despite the appearance of formal freedom (i.e., lack of outside interference). For example, although segregation has been outlawed, American children do not have equal access to the same educational opportunities due to structural problems like the generational wealth gap, redlining, environmental racism, and lack of community investment (e.g., public transportation), all of which are issues that require long-term, large-scale governmental intervention to change. In fact, studies show that the zip code where someone grows up in the U.S. has a major and lasting impact on their adult outcomes, which flies in the face of an individual’s supposed ability to move beyond external forces and succeed equally.

With a misguided belief of the myth of meritocracy, or that everyone does have equal opportunity to succeed, capitalism encourages individuals to practice deeply anti-social actions. For example, rejecting measures of community care in favor of creating better scenarios for themselves—even if doing so deepens class divisions. (An oft-cited example of this is the U.S.’s privatized healthcare industry, which leaves over 10% of the population uninsured). Socialists reject capitalism’s idea that everything can, and should, be bought and sold for a price, as it incentivizes people to treat all interactions as a zero-sum game to be won or lost instead of prioritizing collective advancement.

When it comes to democracy, socialists argue that capitalism offers not just economic power to owners amassing far more money than workers, but also grants them political influence. In the U.S., this often comes in the form of campaign giving, PACs, and other dark money contributions, which threaten the efficacy of the country’s hypothetically ‘equally representative’ political system. When wealthy Americans and private corporations contribute billions to certain political candidates, it is only natural that decisions of the state are increasingly aligned with the desires of the rich (e.g., trickle-down economics), instead of the needs or wants of the general public.

Capitalism As A Solution to Capitalism?

In order to address the social ills of this system, however, most capitalists will encourage more capitalism as the remedy. The U.S. government has regularly participated in this type of messaging: In President Nixon’s acceptance speech, he advocated for

“[letting] the government use its tax and credit policies to enlist in this battle [the war on poverty] the greatest engine of progress ever developed in the history of man—American private enterprise.”

Instead of investing in social safety nets like “government jobs and government housing and government welfare,” Nixon allocated dollars (and tax incentives) to encourage business and market growth under capitalism in hopes that the benefits would eventually support the working class—something now categorized as trickle-down economics. However, these types of pro-business, pro-wealthy policies have long proven to be ineffective in leveling the playing field for working-class individuals to succeed economically. Despite the policies of Nixon and his successors, the wealth gap in America has more than doubled between 1989 and 2016; those working full-time on minimum wage only make $3,000 above the poverty line, and often still need government-sponsored social aid.

In lieu of appropriately resourced and accessible social welfare programs, corporate social responsibility (CSR) programs have become an increasingly important way to care for and support those in need. CSR programs are lauded for giving private enterprise a path to “do good while doing well,” when in reality they have been largely unable to align for-profit motives with long-term social and environmental good. “We have seen an abject failure of companies to invest in things that may have a longer-term benefit, like health and safety systems. BP was fined a record $1.42M for health and safety offenses in Alaska in 2004, for example, even as…[the] chief executive of BP was establishing himself as a leading advocate for CSR, and the company was winning various awards for its programs.” (Stanford)

Similarly, philanthropy efforts and nonprofits that aim to counteract the issues created by capitalism are at the mercy of the same capitalists’ generosity to fund their programs. As Dr. Marcia Chatelain writes in Franchise about McDonald’s entry and integration in neighborhoods long underserved by the government, what seemed like the choice “between a McDonald’s and no McDonald’s was actually a choice between a McDonald’s or no youth job program.” These communities are not given much of a choice: They must either succumb to a capitalist demand (the presence of a multinational corporation), or forgo an important social benefit.

This vicious cycle of supporting capitalism, so that its profits can be contributed towards PR-friendly CSR and other giving programs, has given rise to what social justice organizations call the nonprofit industrial complex:

"As the [goals of philanthropy and nonprofits] become more and more reliant on a small number of wealthy donors, as well as corporations and private philanthropy, the goals of the movement began to shift to be more in line with what those funders would prioritize."

Often, these focus on the more respectable aspects of a movement, or simply avoid solving the underlying conditions because it would threaten the profits of the donors’ businesses.

Features & Characteristics of Socialism

As mentioned previously, there are many, continually evolving strands of socialist philosophy. In this section, we focus primarily on the propositions and ideas of Karl Marx and Frederick Engels, authors of The Communist Manifesto (1848), and widely regarded as major influencers in the development of socialism. (Note that while Marx and Engels are important figures in understanding socialism, their end goal was not socialism, but communism. We’ll address this further in the Socialism Versus Communism section.)

Marx and Engels’ writings drew from the groundwork laid by revolutionaries such as Jean-Jacques Rousseau, Henri de Saint-Simon, and François-Noël Babeuf. Their Manifesto, in particular, became an important phenomenon in Europe as it came at a time when the Industrial Revolution was rapidly widening the gap between the ruling and serving classes. With the rise of factories and specialization of labor, the Manifesto likened the Industrial Revolution to the force that “converted the little workshop of the patriarchal master into the great factory of the industrial capitalist” and put the working class into a position where they were “daily and hourly enslaved by the machine, by the overlooker, and, above all, by the individual bourgeois manufacturer himself.”

Additionally, Marx and Engels observed that this class of workers is growing in number because the “lower strata of the middle class [like] the small tradespeople, shopkeepers, handicraftsmen, and peasants...sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on.” In other words, the pace of work alongside machines had made the widening gap between workers and the upper class of owners increasingly obvious.

To move beyond such a system, Marx and Engels urged the working class to band together to “raise the proletariat to the position of ruling class to win the battle of democracy,” or, empower the current working class to seize the necessary authority and influence to overtake the political system. After power had been secured, the Manifesto then states “the proletariat [is to] use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State.” That is, putting the means of production in the hands of a democratically-elected government—instead of private corporations—to carry out the needs of the people.

Some important, theoretical propositions that arose through Marx, Engels, and other revolutionaries of the time to combat the issues with capitalism were:

1/ Redirecting power over the means of production to the government. Originally, a centrally planned or “command economy” was seen as the way to remove market forces from the production and distribution of goods and services, and instead allow the state to plan this supply and demand more equitably. Hypothetically, this would mean that:

  • Goods and services produced are those actually needed by society, instead of those desired by the wealthy while ignoring the needs of the poor.