The Socialistic Theory

Directly opposed to laissez faire theory of state functions is what, for lack of a more suitable term, we may call the socialistic theory, which, contends for a maximum rather than a minimum of government. The supporters of this theory, instead of distrusting the state and looking upon it as an evil whose functions should be restricted to the narrowest possible limits, regard it as a supreme and positive good and hence its mission should include the promotion of the common economic, moral, and intellectual interests of the people.

A socialist, says Professor Ely,

“is one who looks to society organized in the state for aid in bringing about a more perfect distribution of economic goods and an elevation of humanity, the individualist regards each man to work out his own salvation, material and spiritual.”

It must not be understood however, that the advocates of state socialism attach any less importance to individual freedom than do the laissez faire theorists. On the contrary, they regard it as all important, and differ from the latter only in holding that it can be better secured through State action than through the lazssez faire policy, which permits competition.

Varieties of Socialistic Conceptions :-

Those Who advocate a Wide extension of state activity may be grouped into several classes according to the nature and extent of the role which in their opinion the state should play. First, there are the extreme socialists, who advocate collective ownership and management of all industries, including land and capital, and the instruments of production and transportation. Under such a system the state would become the principal owner of the wealth of the country, and there would be no private property except perhaps in things actually used by each individual.

Socialism of the present time, says an able writer on the subject, extends the state’s intervention from those industrial undertakings it is best fitted to manage well to all indertakings of whatever character, and from the establishment of those securities for the full use of men’s energies to the attempt to equalize in some way the results of their use of them. It may be less shortly described as aiming at the progressive nationalization of industries with a view to the progressive equalization of incomes.

Some extreme socialists, indeed, would have the state guarantee work to everybody, lend them money without interest, furnish them with the implements of labor, build houses for them, give them farms, strike bargains for them, provide pleasures for them, and in fact supply all their wants, economic, social, intellectual, or otherwise.

The socialists of the United States in their national platform demand that the machinery of production shall be owned by the people in common, that the national government shall obtain possession of the mines,r railroads, canals, telegraphs, telephones, and other means of public transportation and communication, Which shall be operated on a cooperative plan under the control of the federal government that the municipal governments shall obtain possession of the local railways, ferries, waterworks, gas works, electric light plants, and all industries requiring municipal franchises to be operated on a cooperative plan under municipal control that inventions shall be free to all, that education shall be free and compulsory, that the state shall assist poor school children With food, clothing, and books and that employment on the public works shall be provided by the state for the unemployed.

Arguments for Socialism :-

he principal arguments advanced in favor of the socialistic stat are the following:

Under the prev sent system of economic organization, the laboring man does not receive the fruits of his toil. A large part goes to reward capital or to pay for the services of those who direct and supervise the employment of labor, or to speculators and middlemen, and too little to those who are the real producers.

In short, society under the present system is organized in the interests of the rich and leads to grave inequalities of wealth and of opportunity. The means of production are being monopolized by the few Who exploit the masses. The state should therefore take control of all the land and capital or means of production now being used for the exclusive benefit of the owning class.

Under the individualistic regime industrial competition has become so fierce that the industrially weak have no chance of success and cannot survive in competition with the rich they are growing relatively poorer and becoming more dependent upon the employing class, while the rich are growing richer and becoming more independent. The theory of socialism, it is argued, is founded on principles of justice and right.

The land and the mineral wealth contained therein should belong equally to all, not to a few. They are nature’s gift to the human race, and ought not to be appropriated by the few any more than sunlight, air, or water. The same is true as regards the instruments of production.

Competition under the present system not only leads to injustice and the crushing out of the small competitor, but it involves enormous economic waste and extravagance in the duplication of services. The system of unrestricted competition leads to lower wages, overproduction, cheap goods, and unemployed workers.

The only remedy for such a condition, say the socialists, is the abolition of competition and the substitution of the cooperative principle, under which equality of opportunity and equality of reward and economy of production will be secured. Under the socialistic regime, it is asserted, a higher type of individual character will also be produced and a larger degree of real freedom.

Such industrial competition as we have to-day tends to beget materialism, unfairness, dishonesty, and a general lowering of the standard of individual character. Man is naturally weak and inclined to depravity, and the present system of economic individualism serves to accentuate his weakness and dishonesty. He needs, therefore, to be guided and aided by the state and protected against his own inherent frailties.

The doctrine of socialism, moreover, is defended as being in harmony With the organic theory of the nature of the state, Which teaches that society is an organism, not a mere aggregation of individuals, that the good of all is paramount to that of a few, and that in order to secure the good of the greater number the welfare of the individual as such must be subordinated to that of the many.

Finally, it is argued by the socialists that the state has already abolished competition in certain fields and introduced in its place the cooperative principle and has demonstrated its Success as an industrial manager to the entire satisfaction of all candid and thoughtful men. Govemment management and control of the postal service, government coinage, government ownership and operation of railroads, telegraphs, mines, and other industries of a public nature in various countries have all demonstrated the advantages of collective management over private management, and thus fully justified the wisdom of the principle of socialism.

Then why should the state not go further and occupy the entire field. Why should it not organize all labor as it has already done a part, and apportion the products of industry on the basis of ,each man’s rightful share as the principles of justice require ?

Collective ownership and management, it is maintained, is thoroughly democratic indeed, socialism is the economic com lament of democracy, it rests upon both ethical and altruistic principles and is the only system under which efficiency and justice in production can be secured and under which a full and harmonious development of individual character can be realized.

Arguments against Socialism:

(1) The Economic Argument :-

Against the socialistic theory the chief argument advanced is the difficulty,  if not the impossibility, of carrying out in practice the system which it advocates. The ideas of the extreme socialists are in many respects fantastic and would prove impracticable, both on account of reasons of an economic character and for others which are inherent in the constitution of human nature itself.

The socialistic theory, it is argued, starts from a false premise, when it maintains that private property in land and the instruments of production is not only wrong morally but also economically. To substitute generally collective ownership for private ownership, even if it were practicable, would tend to destroy one of the most powerful mainsprings of human endeavor and the chief incentive to individual effort and industry.

Take away the right of the individual to acquire property and to accumulate the product for his own use, say the opponents of socialism, and you make an end of all progress by destroying the incentive to labor. The saying of Sir James F . Stephen that to try to make men equal by altering social arrangements is like trying to make the cards of equal value by shuffling the pack, is hardly less true of all efforts to make men equal in economic matters. Socialism, said Laveleye rests on the principle that the able, industrious, and provide should share with the stupid, the idle, the improvident, whatever may be obtained as the reward of their energy and virtues.

It is a system, says another critic, which requires the state to do work it is unfit to do in order to invest the working classes with privileges they have no right to get. The doctrine that-each man should be rewarded according to his labor, if understood to mean simply work with one’s hands without reference to capital or skill, cannot be defended upon any rational principle of justice.

Even if account should be taken of the difference in the productive capacity and hence of the value of the service of different workers, the practical difficulty in applying any such rule would be insurmountable under a system of socialism. On what principle would it be possible to distribute the rewards of industry to each worker according to his share in producing when he Works side by side with machines, with unskilled and skilled ,laborers and with directors and supervisors? Socialism, in the sense in which the term is generally used, will never be practicable until there is a fundamental change in human nature, to some of whose deepest principles it runs counter.

(2) The Political Argument :-

One error of the socialists that he overestimates the state’s capacity and efficiency. He assumes that every business managed by a joint stock concern can be as well managed by the state and ought therefore be taken over and operated by it in the interest of the public. But experience and reason are against such a view.

Government in most cases is better fitted to restrain the evils of monopoly and regulate the conduct of a business which affects the public interest than it is to -manage the business itself. The more numerous and diverse the functions of government, the greater the difficulties. The business of a joint stock company is usually limited to one or a few activities, while under a socialistic regime the business activities of the state would be legion.

It goes without saying that there are some industries that can be better conducted by private management and to overcharge the government with the conduct of the whole complex volume of industrial activity in a modern society would lead to inefficiency, if not to a complete break down.

The problem of providing all the necessaries of life for the people of a populous state, of managing the labor and distributing the products, would be a task which no government could perform satisfactorily. Under a socialistic regime, moreover, nothing, it is argued by its opponents, would be produced except as it pleased those in authority.

It would be necessary to persuade the state to produce many things that are now produced under private competition. Production would no longer be regulated by the law of supply and demand, but it would determine demand, contrary to every existing principle of political economy.

Besides, the calculations of the government would constantly be up set by various circumstances. Everything would depend on the pleasure of the governors. A diminution in the quantity and quality of production might be expected to result from the withdrawal of the stimulus of private incentive. Government managers would be languid and without interest in the result, and laborers would be without incentive, from which there would result, says one writer, a diminished rate of progress, decreased production of wealth, with, finally, in all probability, a diffused poverty, which, besides being an evil in itself, is one that threatens all the higher human interests.

Finally, its opponents argue, socialism would involve, not an enlargement, but a restriction of individual freedom, and a deterioration of individual character. This point was emphasized by Mill, Spencer, and others. Under a socialistic regime society would have to be organized and controlled to some extent like an army.

In the absence of all self-interest and incentive individuals would have to be disciplined and driven to the discharge of their duties, and in the place of freedom we should, according to some writers, have virtual slavery.  If all industry and commerce must be managed by a central authority which has to calculate and regulate everything, observes McKechnie, it follows that all deviations from the appointed and expected routine on which these calls are based must be strenuously put down.

No travesty of a healthy state, he concludes, is more deplorable than a practical socialism in the form of an absolute government directing with inquisitorial and irresistible sway every detail of human life. Such are some of the arguments that have been advanced by various writers against the theories of socialism as popularly understood.

Examples of Socialistic Communities :-

The ideas of socialism in the form in which it has been described above have never been successfully carried out in any state. The Amana and Icarian communities in Iowa, the Shakers and the Harmony Society of Pennsylvania, and various others represent attempts to realize in practice communistic principles , but they all resulted in failure and left behind only buried hopes and aspirations. These communities, says Rae, led to a slackening of industry and a deterioration of the general level of comfort.

More recently a communistic regime on a large scale has been introduced in Russia, but it was admittedly not a success from the first and in 1921 it was modified and private management of industry arid trading were restored to a limited extent. Based in on hostility to capital, after a brief experience the Soviet government relented and invited foreign capitalists to enter Russia and engage ‘in manufacturing under concessions. Whether the system under its modified form will endure or go the way of other communistic enterprises remains to be seen.

Socialistic Functions :-

While socialism in its extreme form has never been attempted by any modern state, with the exception of Russia, all states perform various functions that are socialistic in character, some more than others and one of the marked political tendencies of the time has been the drift in this direction.

The movement has been strongest on the continent of Europe, particularly in Germany, since the founding of the empire. There the state operates and controls many businesses that in America are left-to private enterprise, and regulates many of the details of individual conduct that elsewhere are left uncontrolled by the state.

In various‘countries of Europe the state owns and operates railroads, telegraphs, mines, banks, and breweries monopolizes the manufacture of certain commodities like brandy, tobacco, matches, and gunpowder owns and operates or subsidizes theaters and opera houses , aids and encourages literature, science, and art , insures people against sickness, accidents, and old age and through the local governments manages many public utilities such as waterworks, gas and electric light plants, and street railways.

State Socialism in Great Britain :-

In England, until recently, state socialism had made little headway, but in recent years a profound change has come over the spirit of English politics and the state is running fast in the direction of socialism. England is changing from the old trust in individualism and liberty to a new trust in state regulation, and from the French doctrine of laissez faire to the German doctrine of state socialism.

There is, in England a tendency, says Hobhouse,

“to minimize the departure from precedent, but in reality the breach with the past is great, and probably irreparable.”

During the last few years the British parliament has enacted a large volume of social legislation, such as factory acts, health legislation, laws providing dwellings for the poor, employers liability, acts, working men’s compensation acts, old age pension acts, laws for the feeding of school children, relief to the unemployed, etc, while the local governments have gone farther than those of any other country toward the municipalization of public service industries such as the water and light supply and the means of local transportation.

Through out Great Britain to day the cities generally own and operate their own gas, electric light, and water systems in many cases they own and manage the street railway utilities, and own public wash houses, libraries, music halls, etc. The state now Operates not only the postal service but also the telegraph and to a‘large extent the telephone service, operates a parcels post system, conducts postal savings banks, and performs many other services that were formerly left to private enterprise.

Most of the state intervention in England, however, has been in the interest of better moral and social conditions rather than for the promotion at economic interests. Most of it, in short, has been guided by ethical rather than by economic considerations.

In some of the British dominions, particularly in Australia and New Zealand, where private capital has been lacking, the activities of the state have been multiplied to an extent not equaled anywhere else in the world.

There a large part of the tillable land  is owned by the state and rented to tenants the coal mines and forests are likewise under state control so are the railroad, telegraph, and telephone systems, there is also a government parcels post system and there are government savings banks. The state makes loans to farmers at low rates and constructs improved dwellings for workingmen.

There is a system of state insurance, not only against death and old age, but against loss by fire. The government maintains labor bureaus and a system of compulsory arbitration in labor disputes regulates the hours of labor in various occupations, and in some instances undertakes to regulate the wages of labor  constructs public works by~direct labor rather than by contract and through the municipalities, generally owns ,and Operates the public service industries.

In short, in Australia and New Zealand the state approaches more nearly the socialistic ideal than anywhere else in the World. It is a vast landlord and employer, it engages in banking, farming, insurance, the express business, mining, and other industries. As to whether the good exceeds the evil, there is a wide difference of Opinion.

State Socialism in the United States :-

In the United States, where for a long time the individualistic philosophy of government was dominant, there has in late years been a steady and increasing extension of state regulation and of state aid by both the national and the state governments. The legislation has consisted largely of laws for the regulation of banking, insurance, transportation, and labor in factories, the establishment of systems of state insurance, regulation of the payment of wages, arbitration of labor disputes, extensive aid to education and research, laws for the preservation of the public health, for the relief of the poor and other dependent classes, for the construction of roads, etc. Here as in other countries the laissez faire doctrine has been completely abandoned both in theory and in practice.

During the World War state socialism received a tremendous impetus in all the belligerent countries through the assumption by governments of control over various industries, the Operation of which was necessary to the successful prosecution of the War, the direct Operation of‘ certain industries, the fixing of wages and ,prices, and other activities.

Socialists claim (though their opponents deny) that the success achieved demonstrated the practicability of socialism and that what was forced upon the nations as a temporary expedient in time of stress and strain will be revived and carried to complete fruition as soon as the people fully realize what was done and how they have the power themselves to employ their collective force to their own advantage.