Political Theories for Students. Editor: Matthew Miskelly & Jaime Noce. Volume 1. Detroit: Gale, 2002.


Socialism is a much used and abused term, which spans the political spectrum from the Right (the National Socialists of Hitler’s Germany) to the Left (Stalin’s communists in the Union of Soviet Socialist Republics). It has also described a great variety of regimes that have acquired and used the term for their own purposes, stretching from the poor African socialist states and Arab and Asian military dictatorships, to the wealthy social democracies of Western Europe and Australia and New Zealand.

Generally, we may take the term to describe those doctrines which seek to increase the power of society and the state to determine political, social, and economic processes, as against traditional mechanisms and institutions favored by conservatives, and individuals and the market as advocated by liberals. In common usage, the dividing line between socialism and communism is not always clear or sharp, but may be taken to be between those socialists who subscribe to the basic doctrines of Karl Marx, and those socialists who do not.

Within the boundaries of policy and ideology just described, there are still wide varieties of forms of socialism. There are also a considerable number of philosophers, political practices, and state policies embraced by the doctrine. As with so many modern political philosophies, however, in order to uncover their origins we must look to the emergence of socialist thought in modern Europe.


The Origins of Socialism: Early Utopian Socialism

In nineteenth-century England, then the world’s most-developed state, just as liberalism was being reshaped to converge with the increasing social power and demands of the working class, socialism was also being reshaped to make it not just an idealist, but a real political movement. There was already a tradition of utopian, idealist thought running through the popular philosophy of the country on which to base socialist doctrines.

The roots of socialist thought, whether they be traced to Plato’s Republic, Sir Thomas More’s Utopia (1516), to Rousseau’s Discourses on the Origins of Inequality Among Mankind (1755), or Morelly’s Code of Nature (1755), are invariably idealist. What all these works also have in common is a belief in the fundamental wrongness of private property. In the case of Plato (428-348 B.C.) that wrongness is seen as the cause of war, but at the same time he only envisions that a select group of people should forego private property and possessions and assume as “guardians” the direction of society.

In Utopia, More approvingly cites Plato’s Republic for having argued for “an equal distribution of goods.” But Utopia was written as a response to the break down of village life, the enclosure of lands for sheep pasturing, and the excessive punishments meted out to the large number of beggars, vagabonds, and thieves in the England of the early-sixteenth century. It was an attempt to devise a society in which poverty would be eliminated. In its attempt to eliminate poverty, like most communist attempts, it commences with the vilification of existing wealth and the power that accompanies it: “when I consider any social system that prevails in the modern world, I can’t…see it as anything but a conspiracy of the rich to advance their own interests under the pretext of organizing society.”

Code of Nature (1755) by the obscure Frenchman Morelly, asserts that “where no property exists, none of its pernicious consequences could exist,” and “if you were to take away property, and the blind and pitiless self-interest that accompanies it you would cause all the prejudices and errors that they sustain to collapse.” Like Utopia, this communist vision is frugal, meticulous, tedious, and draconian:

Every citizen between the ages of twenty and twenty-five without exception, will be required to do agricultural work…In every occupational group, there will be one master for every ten or twenty workers, and it will be his task to instruct them, inspect their work…at the age of thirty, every citizen will be allowed to dress according to his taste…The senators and chiefs are authorized by this law to punish all excesses in this manner…Young people between the ages of twenty and thirty will be dressed uniformly with each occupation…every citizen will have both a work suit and holiday suit…Every citizen will be married as soon as he has reached the marriageable age…

During the upheavals of the English Civil War and revolution of the seventeenth century, some of these ideas actively came to the fore. Indeed, Oliver Cromwell, when pursuing his political ascendancy, had to suppress the Levellers (English radicals of the 1640s). But the eclipse of both Cromwell and the radicals permitted the evolution of the constitutional monarchy after the 1688 Restoration and the subsequent development of a prosperous commercial society. In France, however, the absolutist ancien regime survived and in it utopian socialist opposition festered.

The French Revolution of 1789 and Its Aftermath

Morelly’s Code contained many of the core elements of later communists—egalitarianism (belief in equal political, economic, and social rights), a sagacious bureaucracy, principles of rotation, prohibition of private property, and the requirement that all work. But it was Gracchus Babeuf (1760-1797) who is generally heralded as being the first systematic defender of modern communism. Babeuf, who was tried for conspiracy and executed during the French Revolution, saw his communist ideas as the natural progression of the Enlightenment. It was, he said at his trial, the philosophical poisons of Mably, Helvetius, Diderot and, most importantly, Rousseau which had corrupted him. For him, communism was a means for ending injustice.

In the Manifesto of Equals Babeuf wrote, “We declare ourselves unable any longer to tolerate a situation in which the great majority of men toil and sweat in the service and at pleasure of a tiny minority.” “Men of all classes” should “be accorded the same rights in order of succession to property” and “an absolutely equal portion of all the goods and advantages that can be enjoyed in this mean world.” And in the Analysis of the Doctrine of Babeuf, written by his followers, the egalitarianism of the Constitution of 1793 was invoked against the wealthy: “The revolution is not finished, because the rich are absorbing all goods and are exclusively in command, while the poor are toiling in a state of virtual slavery.” The way out of this class division was to make everyone work: “no one has ever shirked this duty without having thereby committed a crime.”

What these thinkers had in common was a failure to present a serious economic analysis of what a communist system would entail. Rather, a moral critique was combined with an economic critique and a solution which entailed a revolution in economic activity was presented as if it were guaranteed to reform human nature. Nevertheless, what they also had in common was an emphasis on relieving the suffering of the poorest classes by restricting property rights. This became the core doctrine of socialism.

Social Democracy

During the earlier part of the twentieth century, all the advanced states experienced the rise of such Social Democratic movements with the achievement of the more or less universal franchise. The result was a transfer of demands from the political sphere concerning representation in the deliberations of the state—much of which was achieved at the end of the First World War—to arguments about the purposes for which the state should be used.

The common form of the expression of Social Democracy was a democratic electoral coalition pursuing social rights to add to the political gains already won for the masses. Social Democratic parties were achieving Parliamentary representation by the 1890s and the first Social Democratic government in the world was formed in the semi-sovereign, self-governing British colony of Queensland (Australia) in 1899. Shortly thereafter, Social Democrats began to seriously influence political agendas everywhere. By bargaining for their electoral support with the reforming British Liberal government of 1906-1911 they achieved a significant part of their social agenda. In Australia, the Labour Party, founded in 1891, formed national governments of its own before the First World War and implemented modest reforming programs that either dismayed or astonished European observers of the day. Elsewhere Social Democrats put pressure on Rightist governments to accommodate to their agenda, as in Germany. That agenda emerged from the social composition of industrial society and included pensions, a decent wage, health care, holiday leave, and education.

Social democracy has no outstanding political theoreticians, although a body of literature derives from a variety of political, economic, and philosophical tracts. In the political sphere, among the most developed came from Britain and the Fabian Socialists, including: William Morris (1834-1896), who wrote Why I Am a Socialist in 1884; Sidney and Beatrice Webb; the playwright George Bernard Shaw (1856-1950), driving force behind the formation of the Fabian Society in 1884 and writer in 1928 of The Intelligent Woman’s Guide to Socialism and Capitalism; the author and novelist H.G. Wells (1866-1946) in Outline of History, 1920; and the academic Harold Laski (1893-1950) who was on the executive at different times, of both the Fabian Society and the British Labour Party, as well as the author of Communism in 1927; and the politicians of the British Labour Party.

In October 1883 a socialist debating group was formed in London and called themselves the Fabian Society, after the Roman General Quintus Fabius Maximus, who advocated weakening the opposition by harassing operations rather than becoming involved in pitched battles. The Fabians came to include intellectuals like Eleanor Marx, J.A. Hobson, George Bernard Shaw, Clement Attlee, Ramsay MacDonald, Emmeline Pankhurst, and H.G. Wells.

These Fabian socialists argued for the pursuit of a vaguely defined form of socialism—which certainly included more state ownership of the economy, higher taxes and more welfare benefits—by using an elected Labour government to legislate for an extension of the egalitarian principle from the political to the economic and social sphere.

The Fabians believed that capitalism had created an unjust and inefficient society and they aimed to reconstruct it more rationally; early discussions included “How Can We Nationalise Accumulated Wealth?” But they rejected revolutionary socialism and wanted society to move to a socialist society painlessly. They tried to convince people by rational argument and they produced pamphlets to this end.

In 1889 they published Fabian Essays—with chapters written by George Bernard Shaw and Sidney Webb, among others—which sold extremely well. Fabian members traveled widely, giving lecturers on “Socialism.” They founded a new university, the London School of Economics (LSE), in 1895, to teach political economy along socialist lines. Later, they decided to establish a distinct Labour group in Parliament.

The Fabians adopted similar attitudes to the German Marxist revisionists but were an upper-middle-class intellectual group. They became famous through publishing. These middle-class Fabians rejected revolutionary tactics and were more interested in practical politics and gains to be made through contacts in the international socialist movement, trade unions, and cooperative movements.

In Germany similar arguments were evolved by the previously mentioned Marxist Social Democratic Party, led by Kautsky and Bernstein, before it was twice destroyed—by the 1914 War and then by the Nazi regime. In France, a similar process witnessed the development of the Popular Front Left government of the 1930s, which was in turn to be destroyed by internal conflict with the Right and between competing socialist groups, and later by the Nazi blitzkreig.

In the economic realm, the dominant Social Democratic theoretician became a British academic, John Maynard Keynes (1883-1946). Keynes had achieved some distinction by warning, in The Economic Consequences of the Peace in 1919, that the punitive peace imposed on Germany, including reparations, would lead to the disruption and dislocation of the international economy, as eventually occurred. By later advocating what amounted to greater state intervention in the running of a capitalist economy in his General Theory of Employment, Interest and Money, 1936, Keynes gave theoretical legitimacy to the political aspirations of the Social Democrats. For a generation after the Second World War, they were to use this to great advantage and construct Social Democratic societies in capitalist Europe and, to a much lesser extent, in North America.

The U.S. had been created as a liberal state and grew rapidly at a time when liberal rather than socialist ideas were in the ascendancy. The resulting popular antagonism towards the state in part explains why no socialist movement of any significance developed in the U.S. In 1906 the German sociologist Werner Sombart asked, “Why is there no socialism in America?” The ethnic divisions among the newly immigrant working class during the rapid industrialization of the late nineteenth century, the strength of religious sentiment, and the high level of geographic and social mobility, all made class solidarity and socialist ideology difficult to achieve in the U.S. The great mass movements in opposition to unbridled capitalism— 1890s’ Populism, then Progressivism, and finally the 1930s’ New Deal—all failed to ignite a mass socialist movement. Socialist candidates by the end of the twentieth century routinely achieved only one percent of the Presidential vote.

National unity for Americans was not constructed on the basis of ethnic solidarity or Social Democratic ideals, but on the ideology of American “particularism,” which stressed liberal values and opposition to an interventionist state. Americanism, and with it the legend of the frontier and then upward social mobility, was an alternative ideology to socialism, which it transcended. The communist party in the U.S. was the result of the amalgamation of even smaller Russian immigrant-based sects. Periodically, small socialist parties existed on the slim pickings of intellectuals, migrants, labor unions and protected industry, but as David Mosler and Bob Catley argued in Global America: Imposing Liberalism on a Recalcitrant World, the U.S. remained determinedly liberal.

In Australia and New Zealand Social Democratic movements had already achieved considerable successes and these were consolidated during the early twentieth century. The Australian Labour Party was founded in 1891 and formed governments in Queensland in the 1890s and nationally before the First World War. The New Zealand Labour Party was created in 1916 and took power in 1935. In both countries the state was expanded deeply into the ownership of capital and the regulation of the economy—arguably to an extent much greater than other capitalist societies by the 1930s. Keynes’ doctrines were quickly adopted by the labor political leaderships in both countries, and were only jettisoned following their inflationary impacts of the 1970s.

In the philosophical sphere, the egalitarian project of the Social Democrats was only to achieve its full expression when the movement itself was mature and arguably past its apogee, in the form of John Rawls’ major work A Theory of Justice in 1971. In this, he influentially argued for a public policy principle, “the original position” which demanded a common status outcome be blindly pursued for all.

Theory in Depth

Classical Socialism

The same focus was found in the work of Claude Henri Saint-Simon (1760-1825), who saw in Christianity the means to call an easing between social divisions. He wrote, in The New Christianity: Dialogues Between a Conservative and an Innovator (1825), that “God gave only one principle to men: that He commanded them to organise their society in such a way as to guarantee to the poorest classes the promptest and most complete amelioration of their physical and moral existence.” Like Jean Marie Condorcet, who wrote Sketch for a Historical Picture of the Progress of the Human Mind(1795), and Anne Robert Jacques Turgot, the physiocrat financial official who authored Reflexions sur la Formation et la Distribution Richesses (1766), Saint-Simon shared the belief that human society was progressing.

But progress for Saint-Simon was not primarily about intellectual evolution and the application of ideas to society, as it largely was in Condorcet, but instead entailed the increasing complexity and productivity of social organization and technology. History was conceived of as a series of stages of technological and sociological advances.

What Saint-Simon brought to this perspective was the promise of social fulfilment in a unified, administrative industrial society: science, industry, and the fine arts were seen as conspiring to form a social unity which if rightly administered would bring peace and prosperity to all. In Saint-Simon, the twentieth century bureaucratic cast of mind with its faith in a planned society found its nineteenth century antecedent, as can be gauged from his phrase, later repeated by German socialist Friedrich Engels (1820-1895): that the government of persons will be replaced by the administration of things.

Pierre-Joseph Proudhon

In France, it was Pierre-Joseph Proudhon (1809-1865) who played the most important intellectual role in contributing to actual working class politics. Proudhon’s What is Property? (1840) formulated what socialists and communists had all in one way or another been saying, when he answered: “It is theft.” But Proudhon also incurred the wrath of communists by arguing:

Communism is oppression and slavery….communism violates the sovereignty of the conscience and equality: the first, by restricting spontaneity of mind and heart, and freedom of thought and action; the second, by placing labor and laziness, skill and stupidity, and even vice and virtue on an equality in point of comfort.

For Proudhon, liberty was to be found by combining communism and property. But that combination, in his hands, became a plea for a society essentially composed of small-scale property holders, enjoying an interest-free credit system, and each working their land. Thus, while he insisted that he (just like Saint-Simon had done and Marx would do) was merely a messenger who knew the direction of history, his vision, as Marx all too easily saw, was built around a fundamental agrarian anachronism, which was more likely to appeal to the then social conditions of a still mostly agrarian France than industrial England or America.

Karl Marx and Nineteenth Century German Socialism

Karl Marx (1818-1883) dominated German intellectual socialist thought. Marx was a German law student whose philosophical studies of politics, history, and political economy became a search for the true meaning of human nature and history. After he had realized that German philosopher Ludwig Feuerbach (1804-1872) had understood that man is a “species being,” and that is the clue to his nature, he went on to find the answer in The Economic and Philosophical Manuscripts of 1844 to “the riddle of history.” It was communism. Only in a communist society could the powers of man’s species be unlocked.

Marx would later dispense with any talk about liberating the whole people, and let the “working class” become the agent of historical destiny. Marx became obsessed with one thing—the elimination of private interests and property. Having discovered that history as it had hitherto been experienced was the expression of class conflict, as he wrote in the Communist Manifesto (1848), he came to see all social relations and institutions as pathologically infected by the existence of private interests. He then fled for refuge to liberal England.

Marx developed his ideas into a theory which came to be known as marxism. He declared that within marxism there would be no division of labor, no property, no law, no money, no state, no religion, and no alienation. That property, law, the division of labor, the state, and religion were not the artefacts of capitalist society but the very elements which emerge wherever there is any moderately large-scale, settled social organization or nation did not bother Marx or his followers. Indeed, when the occasion arose they would denounce the very idea of a nation as a repressive ideological construction.

Marx believed that the elimination of all known forms of social organization, apart from voluntary communal cooperation, would provide so much abundance that alienation stemming from the division of labor, capitalist oppression, and poverty would be eliminated. But he persistently attacked the Saint-Simonians, who were engaging in voluntary non-violent, social cooperative experiments for being utopians and idealists. Marx believed he had proof that capitalism would break down, but before it had done that it would sufficiently socialize and expand the means of production so that socialism, through marxism, would occur. Throughout his life Marx believed that communism is “not an ideal to which reality will have to adjust itself. We call communism the real movement which abolishes the present state of things.”

Marx’s followers ranged themselves against “idealists” even when, later, Joseph Stalin (1879-1953) made speech after speech declaring communism was an act of will, and of faith; even after the Italian communist Antonioni Gramsci (1891-1937) had said that socialism was a religion; and even when communist states imprisoned and executed people merely for the ideas they held. Marxism became essentially a Last Judgment doctrine that provided moral orientation for a social group, the intelligentsia, who had lost faith in the gods of religion and mere ethics and were themselves largely lacking in political power. When Marx repeatedly pointed to the scientific rigor of his analysis, even though he did not do one single model study of the mechanics of a modern large scale economy under marxism, he was really making a moral point.

Marxism was also the modern way of making philosophers rulers, at least notionally. This helps explain its popularity among them. But they could rule with a clear egalitarian conscience. For the whole enterprise of Marxism was to reproduce in secular society the religious dream of a life including the attainment of equality. The whole moral force of marxism lay in its promise of the elimination of inequalities by its elimination of classes.

In Russia, under Vladimir Lenin (1870-1924), Marx’s political idealism was advanced as scientific and inevitable, in part, so that Marxists could also be free to grab power any way they could in the name of the working class, without moral scruples. The entire legitimacy of the enterprise involved Marxists in a moral substitution racket: the critics and opponents of Marx or the communist party were the enemies of the working class; and the enemies of the working class were the enemies of humanity; and all future generations would live in peace and prosperity if only the communists would be victorious. Since the stakes were so high, Marxists could not be bound by moral scruples. Furthermore, Marx had shown that morals were simply the ideological expression of class interests. Thus, Marxists became extremely ruthless.

Ferdinand Lassalle

While Marx fulminated in exile in London, in Germany, Ferdinand Lassalle (1825-1864), President of the General German Workers Association, lay the foundation for the German Socialist Party. Like Marx, Lassalle identified the interests of humanity with the interests of the working class. This class, he wrote in The Working Class Program of 1862, is:

…the disinterested class of the community, which sets up and can set up no further exclusive condition, either legal or actual, neither nobility nor landed possessions, not the possession of capital, which it could make into a new privilege and force upon the arrangements of society. We are all working men in so far as we have the will to make ourselves useful in any way to the community.

The corollary of the belief that the self-interest of the working class would converge with the interest of society as a whole was the belief that the self interest of the upper class had to be at the expense of the nation’s development. This too was close to Marx.

But there was one significant difference between them: Lassalle saw the state in positive terms and in this respect provided a cornerstone of Social Democracy. He believed that the state could be transformed by the political participation of the working class.

For Lassalle, like Johann Fichte (1762-1814), author of Critique of All Revelation (1792), and Georg W.F. Hegel (1770-1831), the German theorist of the state, the State thus would become the cornerstone of a nation’s economic and moral development. Lassalle argued:

It is the State, whose function is to carry on this development of freedom, this development of the human race until its freedom is attained. The State is this unity of individuals into a moral whole, a unity which increases a million-fold the strength of all the individuals who are comprehended in it, and multiplies a million times the power which would be at the disposal of them all as individuals.

The object of the State, therefore, is not only to protect the personal freedom and property of the individual with which he is supposed according to the idea of the Bourgeoisie to have entered the State. On the contrary, the object of the State is precisely this, to place the individual through this union in a position to attain such objects, and reach such a stage of existence as they never could have reached as individuals; to make them capable of acquiring an amount of education, power, and freedom which would have been wholly unattainable by them as individuals.

This concept of the state, while far removed from laissez-faire liberalism, is not much different from the idealist social liberal conception of the state advanced by English philosopher T.H. Green (1836-1882). By the end of the century, Eduard Bernstein (1850-1932), the leading German socialist politician, had acknowledged that the extremist Marxian roots of social democracy were no longer legitimate. Socialism was a matter of parliamentary democracy and evolution.

English Fabian Socialism

Much the same conclusion had been reached by the English Fabian Socialists, who also believed in the historical inevitability of socialism (but not in either the necessity or desirability of class war). In 1894 the Fabian socialist Sidney Webb (1859-1947) proclaimed in English Progress Toward Social Democracy “that there is no anti-socialist party in England,” and that, “England is already the most Socialist of all European communities.” The Fabians were convinced that they saw the future and that it was socialist. The leading English Fabian intellectuals, like Sidney Webb and his wife Beatrice (1858-1943), as well as playwright George Bernard Shaw, believed, like the Germans Bernstein and Kautsky, that socialism could and would be achieved by peaceful and parliamentary means.

This did not mean they were necessarily opposed to other methods being used, if appropriate. After Stalin had taken complete control of the Soviet Union by 1931, for example, they believed that that future had been realized. In 1935, the Webbs published the laudatory Soviet Communism: A New Civilization. Like many other socialist observers of the Soviet barbarity, the Webbs saw what they were shown and what they wanted to see. The Soviets had a whole industry for showing Western sympathizers what they desired, a Russian industry that started ironically with the Potemkin villages of Catherine the Great (1729- 1796), who used building frontages with nothing behind. The Chinese communists later demonstrated their communes in similar light.

For socialists in Europe and North America at that time, and indeed later, the debate was not really about collectivism or individualism. As the philosophical debates among Western intellectuals swung to the Left in the 1930s and Social Democracy assumed a near dominant position after the Second World War, the issue became whether collectivism could be conducted within a liberal democratic framework. In the 1940s, Left academics argued whether the rights and liberties of people which had been won through political conflict could still be guaranteed by an independent judiciary, or whether the collective will of the socialist state had the power and right to do whatever it willed.

The major argument that emerged concerned the appropriate agency for achieving this transition to the socialist state. The Social Democratic, Fabian, or Labour parties were subjected to two critiques. On the one hand, and deriving from Left critiques of Social Democratic organizations, of which V. Gordon Childe’s (1892-1923) How Labour Governsremains among the best, was the idea of the “embourgeousification” of Social Democratic politicians. In this process, which the Australians call “Duchessing,” the Social Democratic leadership becomes hopelessly corrupted and incapable, and indeed unwilling to make the transition to socialism.

On the other hand, Robert Michels (1876-1936), in Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy, after long observation of the German Socialist Party, then the largest of its kind in the world, concluded that as such organizations were subjected to the “Iron Law of Oligarchy.” They ceased to be agents of socialist transition and became instead bureaucracies with a life form of their own. This proved to be an almost clairvoyant analysis of the forces which were to drive socialist parties in power, and therefore of the kinds of state they would create.


In Das Kapital (1863), Marx believed he had proven there was a central contradiction within capitalism, between capital and labor, which would necessarily lead to the break down of the system. The false premise was that all value derived from one source: the power of labor. The entrepreneurial role of the capitalists and the interplay between consumer and the marketplace were ignored entirely. Marx asserted that the capitalist class could not create value and that value was like a congealment of labor power that could be measured on an homogenous time scale of man/hours. He then argued that while the capitalist class lives off labor power, the drive for profits leads the capitalists to discover labor displacing technologies. The technologies, however, do not generate profits, the workers do. Capitalism is thus a system devouring itself as the capitalists ruthlessly exploit labor which will revolt against and destroy them.

Marx held that the struggle between labor and capital must lead to massive poverty and a technology all geared up and ready to go to progress, but unmanned because it can not be used profitably by the capitalist class. Perceiving this contradiction, the working class will seize power, run the factories, and society will then be governed by need rather than profit. Marx believed that the contradiction would play itself out in the most advanced industrialized countries because that would be where the technologies were most advanced, and thus where the workers would lead the revolution.

This theory was wildly out of line with what actually happened in the industrialized world. Friedrich Engels saw the living conditions of English working men and women improve on a scale unprecedented in history. When writing a new Preface to his The Conditions of the English Working Class (1844), he had to concede this and offered the highly implausible explanation that the discovery of gold in California had a great deal to do with it.

Marx himself, who had always insisted that capitalism was the precondition of socialism, abandoned a semblance of consistency when he conceded to Russian socialists that it might be possible in Russia to bypass the capitalist phase on the way to socialism.

The lack of concern for political organization to Marx and Engels stemmed from their remoteness from any genuine revolutionary struggle. In England, they were largely left alone to get on with their writings and go to small political meetings, where the rhetoric of revolution was strong but they were in a thoroughly secure liberal state. In the less liberal backlands of Russia, revolutionary politics meant something altogether different: it was life and death. The lack of development of civil society in Russia went hand in hand with the lack of development of a tolerant state resting on pluralist institutions. Ideas in Russia had invariably come from France and Germany; but the political ideas that were still being circulated and taken seriously among the Russian intelligentsia were the ideas that were undergoing significant transformation in Europe as the working classes gained increasing economic and political power.

In industrialized England, the trade union movement created its own parliamentary Labour party, which at first allied with the Liberals to achieve legislative successes before 1914, and then formed its own government in the late 1920s. But in Russia, the lack of an industrial proletariat meant that there was no strong socio-political base to moderate the radical dreams of the intelligentsia.

The intelligentsia could speak on behalf of the Russian masses precisely because the masses were mostly illiterate peasants whose very livelihoods were not conducive to mass political organization. Thus, the ideas of Marx, twisted and developed by Lenin into Marxism-Leninism, could have more impact. There was less chance of their being dissolved and defused within the actual political experience of the group they purported to represent; and there was less chance of them becoming Social Democratic. Marx and Engels were radical democrats and eschewed secret political organizations because they could openly denounce capitalism in tolerant Britain. In Russia radical political ideas could only exist within clandestine political activity.

What had been instigated as a supposed materialist approach to power revealed itself more and more as an attempt to consolidate the ideas of a people, to control every thought that could be uttered. When Stalin succeeded Lenin, he pulled Russia even further way from socialist ideals into communism. Stalin not only interfered in music and literature, he also determined the truth to be followed in the sciences of linguistics, anthropology, biology, and physics. The extremism of Lenin and Stalin provided a dead end for human emancipation. This posed the issue of whether alternative socialist forms might better serve.

Theory in Action

Social Democracy, 1945-1975

The political rise of the Social Democratic movement was achieved in the developed states in the late 1940s, and was maintained for three decades thereafter. It derived from three main sources: a call for using the state as a re-distributive mechanism; the intellectual ideas of socialism; and the economic ideas of state intervention associated with the doctrines of John Maynard Keynes.

The Great Depression of the 1930s had an impact on political programs everywhere in the developed world. The level of employment became an important issue, and since classical laissez-faire liberalism appeared to have little to alleviate the situation in the short term, it faced political defeat everywhere. In its place, the movements which struggled for supremacy included fascism, communism, and social democracy. The fascists had already triumphed in Italy and the Nazis seized power in Germany. During the next decade much of Europe progressively came under fascist regimes, who used state economic intervention and terror to increase economic activity. Their communist opponents had control only in the Soviet Union, where the state ownership of the economy enabled avoidance of the Depression at great cost to human liberty.

In the other advanced societies some form of social democracy became more influential, although at differing rates of growth. In the U.S., President Franklin Roosevelt (1882-1945) reversed generations of liberal economic doctrines to inaugurate the “New Deal” with its emphasis on public works programs and welfare measures to stimulate economic activity. In Australia and New Zealand the welfare state was extended. In Britain the Depression only started to recede with the rearmament program of the 1930s, but the political impact of mass unemployment later changed the political landscape fundamentally. In France the Popular Front governments also pushed the Social Democratic program in a society close to civil war and soon to be rather easily defeated.

The end of the Second World War heralded the triumph of Social Democracy. The classical liberal ideas about an uncontrolled market economy seemed unsustainable in light of the experience of the depressed 1930s. The fusion of these tendencies produced the post-war dominance of Social Democratic governments.

In Britain, the Labour Party led by Clement Atlee (1883-1967) formed a majority government from 1945 to 1951, and spent those years nationalizing many British industries and creating the welfare state. The principles involved were straightforward. The state would run the commanding heights of the economy which were then defined as being the railways, road transport, electricity, water and gas supplies, and, more controversially, the steel industry. It also increased the rate of progressive taxation—particularly income tax—to pay for a greatly expanded system of welfare services, which included age pensions, a national health system, education, and unemployment benefits. It also adopted Keynes economic ideas to justify a progressive expansion in the size of the state and its anti-cyclical policies of running what should have been occasional deficits, which proved to be almost permanent.

In Australia the Labour governments of 1941-1949, under John Curtin and Ben Chifley, also laid the basis for state-directed industrialization. As Bob Catley described in Globalising Australian Capitalism (1996), in addition to forms of the Social Democratic program which British Labour introduced, in Australia the government also induced forced industrialization. This involved protecting and fostering domestic industry, including a new automobile industry, and building new industries through state financing, like the massive hydro-electricity generating scheme in the Snowy Mountains.

In New Zealand, the Labour government had been in power since 1935 and under Prime Minster Michael Savage introduced the world’s first welfare state. There, again, state ownership of key industries—like the extensive railway system—was augmented by state regulation and protection of industry and a high, progressive level of taxation to finance a wide welfare program.

In liberated Europe, the Anglo-Americans sponsored Social Democratic-style regimes designed at first to crush the social forces which had sustained fascism. In most of Western Europe, Social Democratic parties expanded state intervention in the economy along much the same lines as British Labour. This program sometimes went even further as industries owned by wartime collaborators or bankrupted by war damage, were brought into the public sector. These included banks, automobile manufactures, and even aerospace companies.

Although not all the Social Democratic parties stayed in power—indeed the Conservatives led by Winston Churchill returned in Britain in 1951 and Robert Menzies led the Liberals back in Australia in 1949—the impact of their doctrines remained strong until the late 1970s. In the three decades that followed the war economic growth was strong, the business cycle was minimal, and the role of the state in economic management, redistribution of resources, and the running of welfare programs was extended.

International similarities

The essential characteristics of Social Democracy were similar throughout Europe. The welfare expenditure of the state and its programs were steadily expanded to provide standard services to all citizens regardless of income or other status. These services included: in most countries education at least to secondary and often University level; universal health care; aged pensions and unemployment benefits; training and re-training programs for labor to adjust to economic change; public housing for rental; universal no fault insurance; sick and vocational leave; and, depending on the case, subsidized transport, holidays, sporting, and care facilities for the infirm, abandoned, or aged. These services were funded by a high rate of at first progressive income taxation—which is heaviest on higher incomes—and then by a wide-ranging sales tax in the form of a Value Added Tax (VAT) as the European Union expanded.

These services were often supplemented by an extensive system of State Owned Enterprises (SOEs), which might include employee representation in the management structure at all levels. SOEs were typically operated in the transport, hospital, energy, utility provision, and even major manufacturing sectors like automobile, steel, banking, and aerospace.

In the developed countries outside Europe, these tendencies towards Social Democratic regimes were also evident. In the U.S. the state sector grew, most notably in the welfare services under Democratic administrations in the 1960s, although the U.S. never became a truly Social Democratic society. In Australia and New Zealand the state share also expanded further under labor governments in the mid-1970s.

The effect of the encroachment of the democratic socialist state on the liberal capitalist order was at first positive. Wages and other entitlements for workers who provided the electoral support for these regimes, gradually rose. Unemployment generally fell to almost zero and the trade cycle was flattened by Keynesian demand management techniques involving budget deficits and rapid money supply growth. The size of the state also increased as a proportion of the national economy. In addition, even in those sectors of the economy where SOEs were not evident, the level of state regulation of private enterprise rose progressively to match diverse social democratic demands about labor conditions, employment levels, environmental protection, and product quality. The European Union even devised a Social Charter, which encouraged its member states to pursue these options.

Asian Socialism

Socialist ideas took a wide variety of forms in Asia. These varied from communism in China, after the Revolution of 1949, and North Korea and Vietnam, through a mix of Fabian ideals and indigenous traditions in India, to the heavily Trotskyite- influenced organizations which prospered in Sri Lanka in the 1950s and 1960s.


India adopted a unique socialist model, which involved a commitment to small scale peasant farming along traditional Indian lines as advocated by the independence agitator and mystic Mahatma Gandhi (1869-1948). Alongside this, the more modernist elements in the Indian independence movement, associated with the dominant Congress Party and the ascendant family of Pandit Nehru (1861-1931), also encouraged the development of heavy industry. Much of this was privately owned and state protected, but much also came into the state infrastructure sector as State Owned Enterprises. This hybrid project was strengthened after 1960 by establishing an economic relationship with the Soviet Union. It had a mixed success in terms of both economic growth and political egalitarianism until it was abandoned for more market-oriented structures in 1991 after the Soviet Union collapsed.

Sri Lanka

In Sri Lanka a promising socialist model and welfare state was established in the 1950s, but fell prey first to declining prices for its exported commodities, notably tea, and then a protracted and extremely ferocious civil war in 1975. The vaguely socialist (and extremely corrupt) Guided Democracy of President Sukarno in Indonesia was terminated by a military regime which, after 1966, eliminated the physical presence of socialist forces.


Burma became independent from Britain in 1948. It then adopted a socialist direction and isolated itself from the several military conflicts that ravaged Southeast Asia during the Cold War. It also declined from one of the richest countries of the region to one of the poorest, while similar and neighboring Thailand achieved more rapid growth with a more open economy. During this period Burma’s dominant politician was Ne Win.

Ne Win’s 1962 coup was to establish “Burmese Socialism” by military rule, based on a one-party political system. Ne Win held the chairmanship of the Burma Socialist Programme Party and remained in effective political control of the country until 1988, when he resigned after admitting to economic mismanagement in the face of mounting popular discontent. The reason for Burma’s impoverishment was the implementation of a socialist system of state planning and controls. Foreign trade was closed and foreign investment forbidden in the 1960s. Most industrial enterprises were brought into public ownership. The trade in rice was regulated and the price fixed to satisfy consumers, thereby discouraging increases in production. Ownership of land cultivating rice was strictly controlled. The arbitrary nature of the political and judicial system gave no incentive for private investment, either domestic or foreign, and economic stagnation set in. People knew Burma was missing the Asian economic miracle by retaining a socialistic economy.

In 1988 mass demonstrations for free elections led to a massacre of student activists—in which 20,000 were killed—and a complete military takeover, although Ne Win remained a power behind the scenes. The ruling junta was at first called the State Law and Order Restoration Council (SLORC) but later called itself the State Peace and Development Council (SPDC).

Burma, which was officially renamed Myanmar in 1989, held free multiparty elections in May, 1990. The military junta’s political front overwhelmingly lost the election but refused to hand over power. The opposition leader, Aung San Suu Kyi, who easily won the election, maintained her opposition. She supported a democratic state and a market economy. She was held under house arrest for next six years—until July of 1995—and then re-detained in September of 2000. Her supporters are routinely harassed or jailed. Aung Sang Suu Kyi was awarded the Nobel Peace Prize in 1991.

Nonetheless, SLORC made some efforts to open and liberalize the economy and even joined the Association of South East Asian Nations in 1999. But it stepped back from liberalization as it became clear that this might threaten its already fragile power base. Burma is the world’s second-largest producer of illicit opium (after Afghanistan), with an estimated potential production in 1999 of 1,090 metric tons. This helps sustain its poor still partly socialist economy.

Burma pursued a heavily regulated economic system under Ne Win’s socialist regime. It now has a mixed economy with private activity dominant in agriculture, light industry, and transport, but with substantial state control over activity, mainly in energy, heavy industry, and the rice trade. Government policy in the 1990s aimed at revitalizing the economy after three decades of socialist planning. Private activity increased in the early to mid-1990s, but then began to decline. Published estimates of Burma’s foreign trade are greatly understated because of the volume of black-markets, illicit drugs, and border trade—particularly in opium. It has failed to achieve monetary and fiscal stability or provide a transparent legal system for business to operate. Burma remains a poor Asian country and living standards for the majority of Burmese have not improved over the past several decades.

By the 1990s, indeed, the path to modernization for most Asian societies appeared best illuminated by the economic structures of liberalism, which had displaced socialist doctrine over much of the continent.

African Socialism

Socialism was also taken to Africa by European-educated independence movement leaders and was long linked to Julius Nyerere of Tanzania. He began as an anti-colonial African nationalist, demanding the independence of Tanganyika, a United Nations trusteeship under British administration. Nyerere helped form the Tanganyika African National Union in 1954, and when the country became independent in 1961, Nyerere became Prime Minister and then President in December 1962. In 1964 it united with Zanzibar to form Tanzania, one of the poorest countries in the world.

Nyerere was born of peasants in a remote village, educated by Catholic missionaries, and went to Edinburgh University in Scotland. He was clever, educated, and very articulate. His commitment, then, to nonviolence and socialism made him not just an icon in his own country but in the wider world. Nyerere developed a Christian socialist ideology designed to organize a new society where there were hardly the rudiments of modern physical structures. He believed that poor Tanzanians could transform their country into a new model in which both traditions and British imperial legacies could be jettisoned.

Nyerere had visions of a village-based socialism in which modern techniques, such as the use of tractors and fertilizers, could be managed by village teams and used in communal fields, with the village selling and buying from the wider economy on a cooperative basis. He was inspiring but too often inspired the wrong policies. He was self-righteous and held dogmatically strong convictions. Since his opinions could not be challenged at the ballot or by a free press, his ideas were never effectively challenged. Nyerere inaugurated three platforms: a cultural system based on the Swahili language; a political system based on the one-party state; and an economic system based on an African approach to socialism, ujamaa (familyhood).

The cultural policy based on Kiswahili was the most durable. Tanzania became one of the few African countries to use an indigenous language in parliament and as the primary language of national business. Kiswahili was promoted in politics, administration, education, and the media. It became a major instrument of nation-building, the most lasting of Nyerere’s legacies. Tanzanians hold Swahili, the national language, above other languages, a factor that has helped prevent Tanzania from disintegrating into tribal conflict which has torn other African countries apart.

The political experiment of the one-party state produced exciting political theory but bad political practice. Nyerere tried to unify Tanzanians through the instrument of the one party state, under his Chama Cha Mapinduzi (CCM) party. He thought he knew best and took short cuts in judicial procedures that ended up incarcerating his opponents without trial in miserable conditions. The theory that the one-party state could be as democratic as the multiparty system and was more culturally suited to Africa, was intellectually stimulating but merely excused Nyerere’s long period of rule. Tanzania became a multiparty state only after he left office in 1985.

Nyerere defined ujamaa as the basis of African socialism: “ujamaa is familyhood and an attitude of the mind that is needed to ensure people care for each other’s welfare,” he said. “In traditional African society, the people take care of the community and the community takes care of them, without exploiting each other.” Under ujamaa the people were encouraged to move into “familyhood” villages, which formed the cornerstone of Tanzanian socialism. ujamaa did help Tanzanians to gain access to primary and secondary education irrespective of their religion, ethnicity, or economic status.

Implementation of ujamaa

He began his economic experiments in the early 1960s by making urgent appeals to his people. The economic experiment of ujamaa was launched with the Arusha Declaration on Socialism and Self-Reliance in 1967. It was greatly admired by some Western intellectuals and the governments of such Social Democratic countries as Sweden, Norway, and Denmark. By the early 1970s he decided he had preached enough and ordered peasants to move into collective villages. This uprooted people who had sometimes farmed the same scattered plots of land for hundreds of years. Some moved voluntarily, but others had to be pushed. Villagers were herded together where there was often no running water, good agricultural land, or roads.

By June 1975, 9.1 million people—or 65 percent of Tanzania’s entire population—lived in about 7,000 villages. The implementation of ujamaa was largely completed in 1976. But the rapid rate of imposition of the scheme and the disruption of traditional agriculture caused social and economic problems for the country. For example, “Operation Maduka,” was designed to replace private retailers with cooperatives. This was begun early in 1976, but its implementation caused distribution problems and shortages and the operation was slowed down.

Some problems were the result of ujamaa’s poor implementation. During the villagization program in 1971, people were forced to leave their homes and set up what were more like concentration camps than traditional African villages. But the villagization program did help the provision of social services by the government as the people settled together and shared schools and hospitals. But the ujamaa policy, under which private properties were nationalized, was extremely disruptive and did not produce rapid economic development. One result was that Tanzania soon became riddled with state industries, state banks, state plantations, and state marketing boards, all of which lost money.

Education in the villages, greatly assisted by foreign aid, had some success. Tanzania achieved a literacy rate of about 91 percent, the highest in Africa.

The Arusha Declaration had about twenty years in which to deliver results. By 1985, disenchantment was widespread and the end was near. Far from Tanzania being self-reliant, it was more dependent on aid than ever. Nyerere admitted that even in his home village ujamaa had not taken hold. In the end he was forced to abandon ujamaa, but considerable damage had been done. Since socialist ujamaa had left the country poorer, so liberalization, privatization, and the market were adopted to reform it. Nyerere’s African socialist economic policies were failures. ujamaa and villagization had kept Tanzania backward.

Nyerere blamed economic difficulties on inherited poverty, appalling weather, world recessions, awful neighboring regimes like Idi Amin in Uganda, and war in southern Africa for such continuous failures. Also, after he started supporting the southern African liberation movements in Angola, Zimbabwe, Namibia, and South Africa and his country paid a heavy price. But the hard task of developing policies that ensured that Tanzania worked well and developed was sacrificed to socialist doctrine. When he stepped down from power in 1985 his experimental socialist system, ujamaa, had clearly failed.

The African National Congress

A more promising socialist experiment has been provided by The African National Congress (ANC), which took power in South Africa in 1994 and overthrew White rule and apartheid. The ANC was formed in 1912 to unite the African people and spearhead the struggle for fundamental political, social, and economic change. The ANC achieved a decisive democratic breakthrough in the 1994 elections, where it was given a firm mandate to negotiate a new democratic Constitution for South Africa. The new Constitution was adopted in 1996. The ANC was re-elected in 1999 to national and provincial government. This was Africa’s best chance for socialist development, since the previous racist regime had used statist methods to create an industrialized economy, an appropriate base for a socialist society.

In 1994 the ANC adopted the Reconstruction and Development Programme (RDP) as the basic policy framework guiding the ANC in the transformation of South Africa. Since the country is easily the most developed in Africa, the ANC had some realistic opportunity to pursue democratic socialist program. In fact, the economy has stalled, social dissonance and violent crime have risen quickly, and the government has had to severely modify its socialist policies with a view to reviving the economy—so far with limited success.

Arab Socialism

In the immediate aftermath of independence, the Arab world was also swept by ideas of socialist development. Arab socialism was heavily influenced by an emphasis on the Government, the Public Sector, and the use of State Owned Enterprises (SOEs). These ideas were first tried in Egypt under Gamel Abdel Nasser (1918-1970) in the 1950s, and then given considerable support from the 1970s by the increases in the revenues of some Arab states provided by hefty oil price increases, as well as the involvement of the Soviet Union during the period of its strategic expansion, 1970-1985. The role of the state in the national economies of the Arab countries was as an economic agency and regulating body.

As an economic agency the state influenced resource allocation and acted as an investor and producer of goods and services. In the production of goods and services, the state often replaced, competed with, or shared with the private sector in these activities. State Owned Enterprises represented the basic instrument of state engagement in the field of economic activities. As a regulatory agent, the state also intervened in the activities of the private sector, mixed sector, cooperatives, and foreign-owned enterprises.

As in many other developing countries, in the Arab countries the state played a central and pivotal role in their national economies from independence until the 1990s. The centrality of the state in the national economies was not peculiar to the Arab countries of the Middle East and North Africa, and it came about gradually as a consequence of the interaction between many international, regional, and national factors.

Influence of the National Charter

After a series of nationalizations from the mid 1950s, including the Suez Canal, Egypt embarked on a program of social reform on the basis of “Arab Socialism,” which was introduced in the “National Charter” of 1962. According to the ideology of Arab Socialism, the whole society was expected to rally behind the government, which would, it was claimed, pursue the interests of all. This was translated into public ownership of public services, commercial activities (such as banking and insurance), communications, heavy, large and medium-sized industries, and of foreign trade. In Egypt the best-known case was the Suez Canal. A set of “socialist laws” were enforced, to put into practice what was envisaged by the Charter and by Arab Socialism.

Soon the influence of such developments in Egypt began to emerge in other Arab countries, namely Syria and Iraq. With the formation of United Arab Republic (UAR) between Syria and Egypt (1958-1961) all Syrian banks and insurance companies and three industrial enterprises were fully nationalized, and twenty four others were partially nationalized in June 1961. Though most of these nationalizations were lifted after the end of the UAR, more nationalizations and re-nationalizations took place in 1964 and 1965.

In Iraq, many “socialist laws” were enforced in July 1964 to increase the role of public sector to facilitate economic planning and implement government policies, and also (it was hoped) to accelerate the economic development of the country. A new “Economic Organization” was created intending to develop the national economy by virtue of its activities in the public sector. All banks, both national and foreign, were nationalized in 1964.

Elsewhere in the Arab World, other regimes and rulers became committed to strong government expansion into the public sector. After Algeria gained independence in July 1962, attention was directed towards the nationalization of banks and of farms formerly owned and managed by the French settlers. The land of Algerians who had collaborated with the French regime prior to independence were confiscated in 1964. Socialist policies expanded elsewhere as the Ba’ath socialist party recaptured power in Iraq in 1968, Muammar Al-Qaddafi (1942-) overthrew the monarchy in Libya in 1969, and a Marxist group came to power in South Yemen in 1969.

These socialist trends were not peculiar to radical regimes. In Tunisia, for example, the 1960s was characterized as the decade of “state-led industrialization” where the state established more than eighty public sector industrial enterprises, producing everything from sugar and clothes to phosphates and tractors. Extensive nationalization of private and industrial enterprises was also undertaken in the Sudan into the 1970s. By the end of the 1960s, the public sector enterprise had consolidated its position in many, but not all, Arab countries. This second stage ended with increased involvement of the state in various aspects of economic life.

The third phase ran during the 1970s to the early 1980s, a period of extreme liquidity in the oil-producing states, and brought with it mixed developments among the Arab countries at large and within some of the new industrial enterprises owned by the state. What emerged were many joint ventures in the oil and other sectors, as well as the establishment of many inter-governmental and non-governmental organizations. This development in itself meant increasing the role and importance of the state even beyond the political boundaries of the particular country concerned.

But by the 1980s many Arab socialist countries, particularly those without oil revenues, found their economies deteriorating, external debt increasing, the balance of payment’s worsening, the budgetary deficit rising, and that they were financially unable to sustain the expansion of the public sector. This had happened in spite of the development boom in the oil rich Arab countries.

Calls for change

One of the first initiatives against the state-dominated economy in the Arab countries took place, again, in Egypt in the mid-1970s, with the development of the Infitah, or policy of the “open door.” The then-President and Nasser’s successor, Anwar el Sadat (1918-1981), issued the October Paper in 1974 according to which legislation was introduced to provide incentives for private investment (domestic and foreign), to open foreign trade to private companies, to eliminate most controls on workers’ emigration, and to reduce government control over the agricultural and industrial sectors. This was designed to end the stagnation into which Arab socialism had taken Egypt.

During this phase, many Arab countries began the process of structural adjustment. But this attempt was abandoned in the following year due to the ensuing price increases and the social unrest that followed those measures. Then, in October 1980, Morocco embarked on a second stabilization program and concluded an agreement with the IMF in which the food subsidies were reduced.

By the early 1980s, the public sector domination phase had reached the end. A privatization and liberalization phase had begun, and this continued until the twenty first century. The public sector and many state-owned enterprises have been on the retreat and Arab socialism went on the defensive. Developments at the international, regional and national levels encouraged the move towards privatization, and consolidated the position of its advocates.

At the international level, the calls for privatization of public enterprise became stronger into the 1980s with Margaret Thatcher (1925-) in power in Great Britain and Ronald Reagan (1911-) in the U.S., and they influenced the IMF and the World Bank. The outbreak of the international and mostly Third World debt crisis in 1982, and the need to re-schedule the debt, made it easier for these institutions to insist on Stabilization and Structural Adjustment Programmes to be implemented by those countries seeking their assistance. Many governments found it impossible to continue with their increasing budgetary deficits. This was coupled with further declines in export revenues due to the deterioration of commodity export prices, terms of trade, and shrinking markets. A continuing decline in foreign aid donations after the Cold War and falling private foreign capital inflows made the situation even worse for many countries with fragile economies.

The collapse of the former Soviet Union furnished advocates of privatization in the Arab countries with an unprecedented argument, and thus provided support for the move toward privatization both there and worldwide. These dramatic developments also had a direct impact on the Arab and other Third World countries, who had relied on the Soviet bloc for economic assistance and cooperation. Assistance ended and their former Soviet bloc aid donors began to compete with them for Western aid, private capital investment, and officially supported export guaranties.

Socialism in Australia and New Zealand

The British colonized Australia and New Zealand in a lengthy process that started in 1788 with a British convict settlement at what is now the city of Sydney. Overland exploration and further coastal settlements then produced seven colonies that became self- governing in the 1850s. In 1901 the six Australian colonies formed the Commonwealth of Australia and in 1907 New Zealand became an independent Dominion. At the beginning of the twentieth century these two countries were famous for the success of their socialist experiments.

Whereas the U.S. Constitution had been written at a time when liberalism was a dominant ideology among English-speaking intellectuals and politicians, Australia and New Zealand formed their political structures when socialism was a doctrine sweeping Britain.

The early years of Australia’s history comprised a parliamentary contest between the growing power of the Australian Labor Party (ALP) and the dominant social liberals led by Alfred Deakin (1856-1919). The result was an interventionist state, which regulated foreign trade through tariffs, set and enforced wage rates for workers, and controlled immigration. Later, the federal and state governments extended their ownership of businesses to encompass ports, banks, utilities, and shops. During the 1930s depression this was further developed into the state’s regulation of many agricultural products, including wheat and wool, by marketing boards.

Not surprisingly, the development of nearby New Zealand took a similar path. While the New Zealand Labour Party was only formed twenty-five years after the ALP in 1916, it arguably became even more dominant. In 1935 the First New Zealand Labour government was formed and, in addition to introducing similar regulatory agencies to Australia, developed what may have become the world’s first welfare state by 1949. Its measures included a complete free education system, universal health care, and pension provisions for the aged, unemployed, and infirm.

These socialist experiments were widely admired in Europe and attracted the attention and visits of socialist intellectuals, including Albert Metin, later French Minister for Labour who wrote the admiring Socialism Without Doctrines, and the Fabian Socialist Webbs, who left behind The Webb’s Australian Diary. Needless to say, Lenin was scathing about the collaborationist nature of these socialist parties and quickly established opposing communist parties in the 1920s, which attracted only limited support. Visiting Americans, like author Mark Twain (1835-1910), were also less impressed by what they regarded as these excessively statist societies, as David Mosler and Bob Catley describe inAmerica and Americans in Australia.

Australia and New Zealand were secure, social democratic societies for their White colonists, with extensive welfare systems and short hours of work. These conditions were underpinned by extremely democratic political systems, which were the first to give the vote to women. They were also rather intolerant of their indigenous communities, to whom socialist doctrines did not extend. In the mid-1970s both countries elected Labour governments, led by Gough Whitlam and Norman Kirk (1923-1974), who in many respects extended these Social Democratic regimes to include indigenous peoples.

The considerable affluence of these societies was underpinned by the efficient production of primary commodities—like wheat, wool, meat, and minerals— on territory newly discovered or conquered from indigenous peoples. During the 1960s and 1970s prosperity was maintained only with increasing difficulty, as the price of these commodities became less assured and markets more difficult to access. Both countries faced difficult economic problems in the 1980s, including stagflation and external trade deficits.

In the 1980s, both countries started to dismantle their statist and social democratic economic structures and joined the movement towards liberalization. In both cases, these reforms were undertaken by Labour governments. International trade was deregulated, economic regulatory agencies were dismantled, and many state-owned enterprises were privatized. Although the two countries often followed different polices, the pursuit of liberalizing reform was common to both. They continued to face difficulties in reorienting their economies to meet the challenges of the global economy of the twenty first century, but neither could be properly described any longer as socialist in structure.

The Neo Liberal Counter-Revolution, 1975-1991

In the mid-1970s the developed countries of the Organisation for Economic Cooperation and Development (OECD) underwent a severe economic dislocation. It was easily the worst since 1945. During the deep recession of 1974-75 the social democracies of Western Europe, Japan, North America and Australasia experienced increased inflation, negative growth, a large jump in unemployment and, for most, a severe imbalance in their domestic fiscal and foreign trade accounts. This became known as the crisis of stagflation.

There ensued a long intellectual debate about the causes of this problem. The OECD officials attributed the crisis to a series of singular events, which coincided and were unlikely to be repeated in that form. In some instances this was true, including the sharp rise in oil prices which the exporting states had been able to achieve by the coincidence of an Arab-Israeli War and a prolonged OECD dependence on that commodity. But there were also criticisms of the policy reactions of the OECD countries and indeed of their policy regime structures, which seemed for long unable to deal with the problems that had emerged. In particular, an old critique of Social Democracy emerged in a new guise.

Liberals had long held that the extension of the state into the economy and its resultant politicization would endanger the operation of economic calculation and damage the maintenance of economic prosperity. They had maintained this critique throughout the long post-war boom during which Social democracy had been extended in the manner previously indicated throughout much of the developed world. While growth was maintained, the liberal critique was broadly ignored. It then re-emerged as an explanation of the problem of stagflation and a policy recommendation for its resolution. Neo-liberalism revived in the Anglophone world and the U.S. economist and Nobel Prize winner Milton Friedman (1912-) became its most-celebrated advocate.

Friedman and the liberals argued that inflation was essentially the product of a rapid growth in the supply of money. Since money was a commodity, if it flooded the market its price would drop and all other prices, expressed in money terms, would rise. This had happened in the mid-1970s throughout the OECD. The solution was to arrest the growth of the money supply. Policy makers gradually took this on board into the 1980s and inflation receded. Corollaries of this policy, however, included stopping the growth of the state sector, abandoning budget deficits, deregulating domestic economies and foreign trade, and, later, privatizing SOEs. All these policies were adopted to varying degrees in the OECD states during the 1980s.

The result was winding back of the Social Democratic regimes. This was not undertaken at a similar pace or with the same intensity in each state. In the English-speaking countries, the liberal reforms of Social Democracy went furthest. In Great Britain, where arguably the crisis of stagflation hit deepest, Margaret Thatcher was elected Conservative Prime Minister in 1979 and while in office during the next eleven years wound back the level of state regulation and subsidies, the size of the state-owned sector, the power of the labor unions, and the commitment to full employment. The next Labour government under Prime Minister Tony Blair, elected in 1997, did not overturn these basic reforms.

In less-populated English-speaking countries— Canada, Australia, Ireland, and New Zealand—similar processes occurred. In each, SOEs were privatized, economies and markets deregulated, trade restrictions abolished, and the size of the state sector reduced. In general, this group of countries entered the twenty-first century with the smallest state sectors and the highest growth rates of the OECD countries. But they mostly retained a modest socialist structure, consistent with providing a social safety net for their citizens.

The developed countries of Western Europe were also influenced by these trends, but did not undertake the reforms nearly as far. They became known as the “Social Charter” capitalist counties who continued to subscribe to the European Union Charter on labor regulation and welfare provision. They retained large welfare systems, many SOEs, a state sector of up to half their economies, and extensive provisions and benefits to labor. Perhaps as a result, at the start of the twenty first century these countries had slower growth rates and higher unemployment levels than their Anglo-Saxon counterparts.

Collapse of the Soviet Union

As the heartland of Social Democracy was undergoing reform, so the countries of Communist socialism effectively collapsed. After the Second World War, Soviet-style communism had expanded into Eastern Europe and east Asia. Centered on the Soviet Union, it then created an alternative system of states based on the model created by Stalin in the 1930s. In the ensuing conflict with the West, known as the Cold War, its doctrines were then extended into many Third World countries, such that by the late 1970s it appeared a formidable social formation indeed. Nonetheless, within a decade it faced economic decline, geographic contraction, and finally, strategic defeat.

The collapse of the Soviet Union and its system took place in three phases. First, the client and allied regimes of the Soviet bloc were abandoned and their subsidies withdrawn in the late 1980s, thereby precipitating an economic crisis in many of them. Secondly, the Soviet garrisons and political guarantees to the puppet regimes of Eastern Europe were withdrawn in 1989, and all of the regimes of the “Peoples Democracies” collapsed almost immediately. Thirdly, the Soviet Union itself disintegrated into fifteen non-communist states in December, 1991.

The collapse of the Soviet Union was accelerated by the strategic confrontation and arms race opened by Ronald Reagan in the early 1980s, which the Soviet Union found itself unable to afford. But it could not compete because its economic and political structures were frozen in the socialist forms of the 1930s, implicitly created by nineteenth-century doctrines. The rigidity of the Soviet planning system made it unable to adapt to new technologies and processes. Its political dictatorship made it unable to change and provide the mechanisms for economic transformation. By the 1980s, Soviet communism was too conservative and rigid to survive. The liberal reforms of Mikhail Gorbachev in the late 1980s were insufficient to save it, but enough to generate its demise.

This marked the end of the long socialist experiment that had begun in 1917. The Soviet Union had effectively and/or ideologically underpinned the other variants of socialism, which had been created throughout the world in the period following the Revolution. The support that the Soviet state had provided—financially for communist parties, ideologically for philosophers, politically for activists, economically for state planners and SOE managers, and militarily for revolutionaries—disappeared. With it went one of the most significant props that the socialist movement had had since its modern incarnation two centuries earlier.

Certainly, socialist states continued to exist after 1991, but their utility as a model for continuing progress for the doctrine was greatly diminished by their character. The People’s Republic of China was a poor Third World country, although it demonstrated impressive rates of growth. But by 2001 it was clear that these had been achieved by abandoning socialist doctrines and adopting market mechanisms, deployed in the revealing phrase “socialism with Chinese characteristics.”

Analysis and Critical Response

In theory, socialism is a political theory with the best of intentions—the elimination of private property and the sharing of economic resources. However, it has been difficult to maintain because it goes against the concepts of freedom and individuality. Not many people want to be forced to move into farming villages or turn their crops over to the government instead of selling them on an open market. All forms of socialism run into problems when they are put into action. “The social democracy form of socialism is difficult to maintain because it runs head on into the political pressure of democracy—which replaces abstract issues of fairness with the practical calculations of interest-group politics—and the economic pressure of open markets,” wrote Victoria Postrel in a 1999 issue of Reason magazine. Moreover, socialism has a hard time shaking the negative associations brought on by the experiments in Soviet Russia and Third World countries. Too many versions of socialism take over areas of everyday life beyond economics.

The Problems With African and Arab Socialism

Why did Julius Nyerere’s African Socialist policy of ujamaa fail in Tanzania? The problem essentially stemmed from the fact that Marxist doctrines assumed that socialism would be implemented in already developed societies. Many of the former colonies of the Third World were in fact very poor and often dominated by primary production with low levels of education and labor productivity. In these circumstances, socialist programs deriving from European circumstances had to try to produce a more egalitarian society and develop the economy at the same time. These were often difficult objectives to reconcile. Tanzania was and is one of the poorest countries in the world and faced this dilemma.

Nonetheless, in the 1960s and 1970s Tanzania gained much political respect, chiefly due to Nyerere’s political ideas. He was personally uncorrupted by fame or position and remained throughout his life self-effacing and unpretentious. Since Nyerere’s death in 1999 the positive aspects of ujamaa, particularly enhanced national unity, has received more credit, even from Ali Hassan Mwinyi, Nyerere’s successor who abandoned socialism and began liberalization in 1985. Tanzania is one of the very few African countries that has not experienced serious tribal conflict.

Of course, ujamaa was not the only form of socialism that ran into problems. Egypt was a prime example of an economy ruined largely by its own self-destructive Arab Socialist policies. In 1979, with the conclusion of the Israel-Egypt peace treaty, there were predictions and expectations of large-scale Middle East trade; multinational infrastructure projects; joint ventures involving Egyptian, Israeli, and American or European investors; technology transfers; and a reallocation of resources from the military to civilian pursuits. But for various reasons, many unrelated to the Camp David agreements, since the 1980s the Egyptian economy has stagnated and per capita income has declined.

The poor performance of the economy, especially in the first half of the 1990s, was particularly disconcerting, in view of the massive financial aid which Egypt received in those years. A major part of Egypt’s $50 billion debt was cancelled; interest rates were lowered and payments reduced on the remaining debt; and “Official Development Assistance” from various industrialized countries was raised from $1.8 billion in 1989—before the Gulf War—to $5.7 billion in 1990 and $10 billion in 1992. Egypt’s economic problems stem largely from the legacy of “Arab Socialism” instituted by President Nasser in the 1960s. The state-owned industries, especially in manufacturing, suffered from gross inefficiency, over-manning, and very low productivity and profitability.

The loss-making state-owned firms were a serious drain on the treasury. Nasser guaranteed jobs to all university graduates and demobilized soldiers in the civil service or in state-owned enterprises. This policy was continued by Sadat and by his successor Hosni Mubarak (1929-) during the 1980s. Subsidies were expanded under Sadat and maintained by Mubarak. Price controls, foreign exchange regulations (including multiple-exchange rates), wage policies, and other measures added more distortions to the economy. Egyptian corruption did not begin with Arab Socialism, but Nasser’s policies multiplied the opportunities and inducements. And the wide gap between the few rich and the many poor widened to dangerous dimensions, fuelled by widespread corruption.

Since 1991 Egypt has made some important monetary and fiscal changes in addition to alterations in its foreign exchange controls but it has been reluctant to embark on a large-scale privatization program to get rid of the bloated and very costly public sector enterprises. Politically powerful interests who benefit from “milking” the public sector oppose privatization plans. The public sector workers and managers fear that privatization would be followed by massive dismissals. As a result, about two-thirds of industrial production, together with oil extraction and refining remains in the public sector. Egyptian efforts to liberalize the economy have been very limited.

There was a similar problem in the Soviet Union, as well in other socialist countries. In the early twenty-first century, China faces the daunting prospect of either privatizing its SOEs, with the resulting labor shedding and fear of political destabilization, or having the rest of the economy carry a socialist and inefficient millstone around its neck. Another problem is the massive public payroll common to socialist economies, involving literally millions of employees with little or nothing to do. Egypt has four million public servants comprising 23 percent of the labor force and another eight percent employed by public sector enterprises. In the public sector it is virtually impossible to sack anybody and labor laws also make it very difficult to dismiss private sector employees. This results in low productivity, financial losses, and depressed incomes. In the years since the conclusion of the peace agreements between Israel and Egypt in 1979, economic progress has been slight. Egypt is a modernized and more populous, but stagnant, Pharaonic state.

Socialism in the Third World has proven to be a difficult project. The Again, Marxist-Socialist doctrine assumed that capitalism would develop a country before socialism took it over, and socialists found their own doctrines only partly useful for providing a model for rapid development in undeveloped Third World countries. Indigenous socialism fell back on public ownership and collectivized land, which often impeded economic growth. The state forms which Third World socialists utilized, were almost uniformly dictatorial. By the twenty first century socialist regimes in the Third World were commonly reverting to the market as a means of escaping the problems their doctrines had devised. A similar pattern was evident in the more developed societies.

The Future: Socialism under Globalization

At the end of the Cold War in 1991 the doctrines of socialism faced considerable problems. The Soviet bloc had disintegrated because of its own failures to produce a viable alternative structure to democratic liberal capitalism. In the social democracies of Europe and elsewhere they had been exposed to a vigorous attack by the revival of the liberal critique. The remaining communist states were adopting liberal oriented reforms. In the Third World privatization and de-regulation was replacing statist, socialist development models almost everywhere. It seemed that the high tide of socialism had passed.

This process was accompanied by the evolution of a substantial international economy in a process often referred to as “globalization.” The global economy was the manifestation of international market transactions increasingly overtaking those that had been nation based. A growing section of national economies become locked into a global trading structure rather than being confined to their own domestic market. States found that a growing proportion of their economies were devoted to foreign trade; that more of their capital markets were derived from foreign investors; that more of their own investments went into other economies; that more of their commodities were international brand name products; and that a growing proportion of their labor forces were internationally mobile.

This was a process that derived form three sources. First, the U.S. had been a determined sponsor of an international regime designed to produce a free market in capital, products, and culture for most of the twentieth century and after 1991 pursued it energetically as the only remaining superpower. Next, technological change increasingly permitted the global organization of production, distribution and exchange. This was evident in cheaper transport systems, including bulk carriers, containerization, and wide-bodied jetliners; in better data transmission, which created a global finance market; and in enhanced communications involving the fax, mobile phones, and the Internet. And finally, the only alternative economic system collapsed with the Soviet Union and its major successor state, the Russian Federation, became an advocate of liberal capitalism, not social democracy.

By 2001 these processes were creating a global economy. The institutional agencies of globalization, particularly the U.S. Treasury, the World Trade Organization, the World Bank and the IMF, promoted a state regime policy structure which was known as the “Washington Consensus.” As David Mosler and Bob Catley describe in Global America, this involved free trade, deregulation, privatization of government assets, free movement for capital and investment, and, by the late 1990s, transparent representative government. This program contrasted sharply with the doctrines of socialism which—whatever its claims to internationalism—had evolved as an intellectual guideline for state policy makers.

At the dawn of the twenty-first century, it appears that socialism is an idea whose time has come and gone. However, many writers remind us that history comes and goes in cycles, and it was not even a century ago that philosophers and world leaders spoke of the coming death of capitalism. “The thesis that the end of socialism does not have a historical basis,” states James Petras in a 1992 issue of Canadian Dimension. “At best, it is a reflection on a moment of retreat and reversals.” And yet, it remains to be seen if and how socialism can adapt and survive into its third century as a serious competitor to other political ideas and social formations.