This section is from the "Elementary Principles of Economics" book, by Richard T. Ely and George Ray Wicker. Also available from Amazon: Elementary Principles Of Economics: Together With A Short Sketch Of Economic History
The Relation of Socialism to Distribution. In the fore-going chapters we have explained how in the existing social organization the annual produce of industry the social incomeis distributed. As was stated at the beginning, the method of distribution is intimately dependent upon the legal structure of society, and particularly upon the laws of property. Society, as it exists in all advanced nations, accepts private property as its industrial basis. In other words, in the greater part of goods, private proprietorship or private appropriation is not only permitted but encouraged, and the result is the system of distribution which has been described.
Considerable differences in property laws exist among different nations, and minor changes are constantly being made; and these differences and changes result in corresponding differences and changes in distribution. It would take us too far afield to attempt to treat these in detail. But socialism, which is a plan to overthrow the very foundation of our existing industrial organization, has been so seriously proposed and discussed, and has today so many enthusiastic advocates, that we cannot pass it over in silence in our analysis of economic theory.
Such a fundamental change as socialists propose would, as will appear in the following pages, profoundly affect every one of the four phases of economic activity which we have chosen as the natural divisions of economic analysis,consumption, production, exchange, and distribution. But socialism has been proposed more especially as a remedy for existing evils in the distribution of the social income, and we may therefore properly treat the subject under that head. It may be noted in passing, moreover, that in general discussions of the proposed change, it is a common assumption that labor and wages would be especially affected, and socialism is therefore often treated in direct connection with the subject of wages and plans for improving the status of labor.
General Characterization. In the chapter on Wages and the Labor Problem we have described some of the various changes in the relation of the laborer to the product of his labor that have been tried or proposed. It was there pointed out that one of these plans, cooperation, may be either voluntary or coercive,that is, ordered and controlled by the State, and it was further stated that coercive cooperation is but another name for socialism. What, then, is socialism? It is coercive cooperation, not merely for undertakings of a monopolistic nature, but for all important productive enterprises. Socialists seek the establishment of industrial democracy through the agency of the State, which they hold to be the only means of attaining their end. They would expand the business functions of government until all the dominating kinds of business are absorbed. They would have all such business regulated by the people in their organic capacity, every man and every woman having essentially the same rights that any other man or woman has. Our political organization would become also an industrial organization, with universal suffrage. Private property in profit-producing business and rent-producing land would be abolished, though private property in incomes would in the main be retained. What is desired by the socialist, then, is not, as is supposed by the uninformed, a division or diffusion of property, but rather a further concentration of a very large part of property. The socialists do not complain because productive property is too much concentrated, but because it is not concentrated enough. They therefore rejoice in the formation of trusts and combinations, regarding these as a development in the desired direction.
The Four Elements of Socialism.There are four characteristic elements in pure socialism: first, the common ownership of the means of production; second, the common management of the means of production ; third, the distribution of the product of industry by common authority ; fourth, private property in the greater part of income. Socialists make no war on capital, strictly speaking. What socialists object to is not capital, but the private capitalist. They desire to socialize capital and to abolish capitalists as a distinct class by making everybody, as a member of the community, a capitalist; that is, a part owner of substantially all the capital in the country.
In support of this plan, socialists generally claim that labor creates all wealth. No rational socialist means by this to deny that land and capital are factors of production ; but as these are only passive factors, the socialist holds that the owners of those factors should not receive a share of the product simply through such ownership. Man is the only active factor, and all production is carried on for the sake of man. Socialists admit that with industry organized as at present, the owners of land and capital must receive a return for them; hence they desire that these tools should become social property.
Distributive Justice.The central aim of socialism, its pivotal point, is distributive justice. While it seeks to increase production by more efficient organization and methods, it makes its central thought the just distribution of the product. The ideas of socialists as to what constitutes justice in distribution are not harmonious. Some say that (1) equality meets the demands of justice; others, (2) distribution in proportion to real needs, so that each man may have the economic means for his fullest individuation, or development; while still others say that justice demands distribution (3) in proportion to merit or service rendered but the service of the individual, not of his ancestors.
Socialism an Extension of Existing Institutions. Our government owns and manages the postal service; nearly all governments own the telegraph; nearly all own the wagon roads; some own canals and railways; many even own factories, and probably every national government does at least a little manufacturing; many of them also cultivate forests, and some cultivate arable lands. In brief, we may say that governments already touch the business world in the following ways: (1) they protect person and property ; (2) create and guarantee certain special privileges and franchises; • (3) regulate the terms of contract and of competition; (4) participate in private enterprises by favorable tariffs, bounties, subsidies, land gifts, etc.; (5) carry on certain industrial processes, such as the building and maintenance of roads, parks, lighthouses, telegraph, money coinage, etc. To picture to ourselves socialism pure and simple, therefore, we have only to imagine an extension of what already exists until a point is reached where society, through its government, cultivates the land, manufactures the goods, conducts the exchanges, and in short carries on most productive enterprises. Only such private industry would be permitted as would not threaten the dominating power of society in production and distribution. Thus individuals would probably be permitted to cultivate small areas of land, and there might exist here and there a private press supported from private income.