Socialization (economics)

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This article is about the socialist concept. For other uses, see Socialization (disambiguation).

Social ownership encompasses the various forms of ownership of the means of production for socialist economic systems. It encompasses public ownership, employee ownership, citizen ownership of equity, and common ownership.[1] Social ownership of the means of production is the common defining characteristic of the various models of socialism.[2]

The two major forms of social ownership include society-wide public ownership and cooperative ownership. The distinction between these two forms lies in the distribution of the surplus product. With public ownership, the surplus belongs to all members of the public; with co-operative ownership the economic surplus of an enterprise belongs to all the worker-members of that specific enterprise.[3]

Historically social ownership often implied the substitution of capital and factor markets with economic planning, under the assumption that market relations would be made redundant in the production process if capital goods were owned by a single entity or network of entities representing society.[4]

Socialization is the process of restructuring an economy on a socialist basis,[5] either in reference to establishing social ownership of the means of production, or in some cases in reference to a more comprehensive process of establishing of a system of production for use in place of the profit system. This comprehensive notion of socialization implies an end to the operation of the laws of capitalism, capital accumulation and an end of the use of money and financial valuation in the production process.[6]

The goal of social ownership is to eliminate the class distinction between passive owners of capital and workers, so that the surplus product, or in the case of market socialism, the economic profits, belong either to society as a whole or to the members of a given enterprise. Social ownership would enable productivity gains and from labor automation to progressively reduce the average length of the working day instead of creating job insecurity and unemployment. The concept of reducing necessary work time is central to the Marxist concept of human freedom.[7]


Social ownership is variously advocated to end the Marxian concept of exploitation, to lay the foundations for an economy that functions on the basis of "production for use", to ensure that income distribution reflects individual contributions to the social product, to eliminate unemployment arising from technological change, and to ensure a more egalitarian distribution of income.

In Karl Marx's analysis of capitalism, social ownership of the means of production emerges in response to the contradictions between socialized production and private appropriation of surplus value in capitalism. Specifically, Marx argued that productivity gains arising from the substitution of variable capital (labor inputs) for constant capital (capital inputs) would lead to a situation where productivity would outstrip the demand for labor. This process would lead to an over-accumulation of capital and rising income for the capitalist class alongside rising unemployment and stagnant wages for the working class.[8] Marx argued that this dynamic would reach a point where social ownership of the highly automated means of production would be necessitated to resolve this contradiction.

For Marx, social ownership would lay the foundations for the transcendence of the capitalist law of value and the accumulation of capital, creating the foundation for socialist planning. The ultimate goal of social ownership of productive property for Marx was to expand the "realm of freedom" by shortening the work hours so that individuals would be able to pursue their genuine and creative interests. Thus the end goal of social ownership is the transcendence of alienation.[9]

The economist David McMullen identifies five major benefits of social ownership, where he defines it as society-wide ownership of productive property: first, workers would be more productive and have greater motivation since they would directly benefit from increased productivity, secondly this ownership stake would enable greater accountability on the part of individuals and organizations, thirdly social ownership would eliminate unemployment, fourth it would enable the better flow of information within the economy, and finally it would eliminate wasteful activities associated with "wheeling and dealing" and wasteful government activities intended to curb such behavior and deal with unemployment.[10]

Criticism of private ownership[edit]

Social ownership is contrasted with the concept of private ownership and private property in the means of production. Social ownership is usually promoted as a solution to what its proponents view are inherent issues to the private holding of the means of production.[11] Market socialists and non-market socialists therefore have slightly different conceptions of social ownership. The former believe that private ownership and private appropriation of property income is the fundamental issue with capitalism, and thus believe that the process of profit-maximizing enterprises and capital accumulation can be retained, with their profits being used to benefit society (or workers) in the form of a social dividend. In contrast, non-market socialists argue that the major problems with capitalism arise from its dynamics and contradictory economic laws which make it unsustainable and historically limited. Therefore, social ownership is seen as a precursor and component of the establishment of non-market coordination and alternative "socialist laws of motion".

The socialist critique of private ownership is heavily influenced by the Marxian analysis of capitalist property forms as part of its broader critique of capitalism, specifically of alienation and exploitation.[12] Socialists critique the private appropriation of property income on the grounds that, because such income does not correspond to a return on any productive activity and is generated by the working class, it represents exploitation. The property-owning (capitalist) class lives off passive property income produced by the working population by virtue of their claim to ownership in the form of stock, bonds or private equity. This exploitative arrangement exists due to the structure of capitalist society. From this perspective, capitalism is regarded as class system akin to historical class systems like slavery and feudalism.[13]


Social ownership and socialization is categorically distinct from the process of nationalization. In most cases, "socialization" is understood to be a deeper process of transforming the social relations of production within economic organizations as opposed to merely changing titles of ownership. In this sense, "socialization" often involves both a change in ownership and a change in organizational management, including self-management or some form of workplace democracy in place of a strict hierarchical form of control. More specifically, social ownership implies that the surplus product or profits generated by these publicly-owned enterprises accrues to all of society - state ownership does not necessarily imply this.[14]

Fundamentally, there are two major forms of "social ownership". The first is society-wide public ownership by an entity or network of entities representing society.[15] The second major form of social ownership is employee-owned cooperative enterprise, with the members of each individual enterprise being co-owners of their organization.

Additionally, there are two major forms of social control, both of which can exist alongside the two major modes of social ownership. The first variant of social control is public management, where enterprises are run by management held accountable to an agency representing the public either at the level of national, regional or local government. The second form of social control is worker self-management, where managers are appointed by the member-workers of each individual enterprise.[3]

Socialization and planning[edit]

The economist and philosopher Otto Neurath conceptualized a comprehensive view of socialization during the socialization debates. "Total socialization" involved not only a form of ownership but also the establishment of economic planning based on calculation in kind.[16]

David McMullen advocates social ownership of the means of production, believing it to be far more efficient than private ownership. In his proposal, ownership and property titles would be replaced by "usership" rights and exchange of capital goods would no longer be possible as they would be internal transfers of resources rather than market exchanges.

Public enterprise[edit]

Alec Nove defines social ownership as a form of autonomous public ownership.[17]

Social ownership of equity[edit]

In the context of market socialism, various models have been proposed where social ownership is achieved by having a public body or employee-owned funds own corporate equity.

The American economist John Roemer developed a model of market socialism that features a form of public ownership where individuals receive a non-transferable coupon entitling them to a share of the profits generated by autonomous non-governmental publicly owned enterprises. In this model, "social ownership" refers to citizen ownership of equity in a market economy.

James Yunker argues that public ownership of the means of production can be achieved in the same way private ownership is achieved in modern capitalism, using the shareholder system that effectively separates management from ownership. Yunker posits that social ownership can be achieved by having a public body, designated the Bureau of Public Ownership (BPO), own the shares of publicly listed firms without affecting market-based allocation of capital inputs. Yunker termed this model Pragmatic market socialism and argued that it would be at least as efficient as modern-day capitalism while providing superior social outcomes as public ownership would enable profits to be distributed among the entire population rather than going largely to a class of inheriting rentiers.[18]

An alternative form of social ownership of equity is ownership of corporate stock through wage earner funds and pension funds. The underlying concept was first expounded upon in 1976 by the management theorist Peter Drucker, who argued that pension funds could reconcile employees' need for financial security with capital's need to be mobile and diversified, referring to this development as "pension fund socialism". In Sweden during the late 1970s, the Meidner program was advanced by the Swedish Social Democratic Party as a way to socialize enterprises through employee wage earners' funds, which would be used to purchase corporate stock.[19] Rudolf Meidner's original plan was to require Swedish companies over a certain size to issue shares equal to 20 percent of profits, which would be owned by wage-earner funds controlled by employees through their trade unions. This plan was rejected and a watered-down proposal was adopted in 1984, which left corporate decision making just as it was and limited the scope of employee ownership to less than 3.5% of listed company shares in 1990.[20]

Cooperative ownership[edit]

Cooperative ownership of the means of production refers to the organization of economic units into enterprises owned by their workforce, or by customers who use the products of the enterprise (a Consumer cooperative). Cooperatives often involve worker self-management, either in the form of elected managers held accountable to the workforce, or in the form of direct management by the worker-members themselves. Cooperatives are often proposed by proponents of market socialism, most notably by the economists Branko Horvat, Jaroslav Vanek and Richard Wolff.

The model of market socialism promoted in the former Socialist Federal Republic of Yugoslavia was based on what was officially called "social ownership", involving an arrangement where workers of each firm each became members and joint-owners and managed their own affairs in a system of worker's self-management.

Proponents of cooperative ownership cite higher motivation and performance in existing cooperatives. Critics argue that cooperative ownership by itself does not resolve the structural issues of capitalism like economic crises and the business cycle, and that cooperatives have an incentive to limit employment to boost the income of their existing members.

Commons and peer-to-peer[edit]

The economist Pat Devine defines social ownership as "...ownership by those who are affected by - who have an interest in - the use of the assets involved", distinguishing it from other forms of ownership. Devine argues that this variant of social ownership will be more efficient than the other types of ownership because " enables the tacit knowledge of all those affected to be drawn upon in the process of negotiating what should be done to further the social interest in any particular context."[21]

The phrases "social production" and "social peer-to-peer" production have been used to classify the type of workplace relationships and ownership structures found in the open-source software movement and Commons-based peer production processes.[22]

Misuse of the term[edit]

Particularly in the United States, the term "socialization" has been mistakenly used to refer to any state or government-operated industry or service (the proper term for such being either nationalization or Municipalization). It has also been used to mean any tax-funded programs, whether privately run or government run. The term "socialized" is usually used in a pejorative sense, most commonly in reference to publicly funded health care programs (See: socialized medicine).[23]

See also[edit]


  1. ^ O'Hara, Phillip (September 2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 71. ISBN 0-415-24187-1. In order of increasing decentralisation (at least) three forms of socialised ownership can be distinguished: state-owned firms, employee-owned (or socially) owned firms, and citizen ownership of equity. 
  2. ^ Busky, Donald F. (July 20, 2000). Democratic Socialism: A Global Survey. Praeger. p. 2. ISBN 978-0275968861. Socialism may be defined as movements for social ownership and control of the economy. It is this idea that is the common element found in the many forms of socialism. Yet having stated this as the common definition of socialism, one must necessarily admit that there are a wide variety of views among socialists of various stripes as to just what constitutes social ownership and control of the means of production, distribution and exchange. 
  3. ^ a b Toward a Socialism for the Future, in the Wake of the Demise of the Socialism of the Past, by Weisskopf, Thomas E. 1992. Review of Radical Political Economics, Vol. 24, No. 3-4, pp. 10: "Here again there are two principal variants of such social claims to income, depending on the nature of the community holding the claim: (1) Public surplus appropriation: the surplus of the enterprise is distributed to an agency of the government (at the national, regional, or local level), representing a corresponding community of citizens. (2) Worker surplus appropriation: the surplus of the enterprise is distributed to enterprise workers."
  4. ^ Steele, David Ramsay (September 1999). From Marx to Mises: Post Capitalist Society and the Challenge of Economic Calculation. Open Court. p. 175-177. ISBN 978-0875484495. Especially before the 1930s, many socialists and anti-socialists implicitly accepted some form of the following for the incompatibility of state-owned industry and factor markets. A market transaction is an exchange of property titles between two independent transactors. Thus internal market exchanges cease when all of industry is brought into the ownership of a single entity, whether the state or some other organization...…the discussion applies equally to any form of social or community ownership, where the owning entity is conceived as a single organization or administration. 
  5. ^ "the act or process of making socialistic: the socialization of industry." "Socialization" at
  6. ^ Otto Neurath's concepts of socialization and economic calculation and his socialist critics. Retrieved July 5, 2010:
  7. ^ Peffer, Rodney G. (2014). Marxism, Morality, and Social Justice. Princeton University Press. p. 73. ISBN 9780691608884. Marx believed the reduction of necessary labor time to be, evaluatively speaking, an absolute necessity. He claims that real wealth is the developed productive force of all individuals. It is no longer the labor time but the disposable time that is the measure of wealth. 
  8. ^ Woirol, Gregory R. (July 30, 1996). The Technological Unemployment and Structural Unemployment Debates. Praeger. p. 20. ISBN 978-0313298929. The changing-organic-composition-of-capital argument was based on Marx's claim that technological change constantly increased the ratio of fixed to circulating capital. Since labor demand depended solely on the amount of circulating capital, the demand for labor decreased relative to a rise in total capital. The result was a tendency to increase the level of unemployment. 
  9. ^ Wood, John Cunningham (March 26, 1996). Karl Marx's Economics: Critical Assessments, Volume 1. Routledge. pp. 247–248. ISBN 978-0415087148. It is certainly true that, according to Marx, social ownership does facilitate central planning…But the substitution of commodity production [central planning] for market exchange is not an ‘end’ in Marx’s analysis. The fundamental ‘end’ of Marxist socialism is the supersession of alienation, the ‘emancipation’ of mankind, and the creation of opportunities for the full development of man’s productive and human potentialities. Clearly, Marx perceived both social ownership and supersession of commodity production as a means to this end. 
  10. ^ McMullen, David (January 2007). Bright Future: Abundance and Progress in the 21st Century. BookSurge Publishing. p. 181. ISBN 978-0646468327. The five categories are: (1) the greater productivity of more motivated workers, (2) the greater accountability of individuals and organizations, (3) the elimination of unemployment, (4) the better flow of information and (5) the elimination of various resource wasting activities associated with wheeling and dealing, and with the activities of government. 
  11. ^ Arnold, Scott (1994). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford University Press. p. 44. ISBN 978-0195088274. First, social ownership is best understood by way of contrast with the characteristic form of ownership in free enterprise systems, namely, full liberal ownership. Second, and perhaps more important, the social vices attributed to existing free enterprise systems are traced to the ownership rights that defined that type of a system. 
  12. ^ Arnold, Scott (1994). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford University Press. p. 50. ISBN 978-0195088274. Though socialists have disagreed with Marx about how to conceptualize the notion of class, about the dynamics of class societies, and indeed about a whole host of other matters, most socialists seem to be broadly sympathetic to his views about what is wrong with the capitalist (free enterprise) economic system and, by implication, capitalist society...Marx’s critique attributes basically two systemic evils to capitalism’s economic system: alienation and exploitation. 
  13. ^ O'Hara, Phillip (September 2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 1135. ISBN 0-415-24187-1. Property income is, by definition, received by virtue of owning property...Since such income is not an equivalent return for any productive activity, it amounts to an entitlement to a portion of the aggregate output of others’ productive activity. The workforce produces output, but surrenders part of it to people who have nothing directly to do with production. Arguably, this occurs by virtue of a social system to which those in the workforce have never given their full consent, i.e. that of private property. Alternatively, it occurs by virtue of a structure of power to which the workforce is subject: property income is the fruit of exploitation. The fact that it is essential to capitalism makes the latter a class system akin to such other historical cases as slavery and feudalism. 
  14. ^ Wolff and Resnick, Richard and Stephen (August 1, 1987). Economics: Marxian versus Neoclassical. The Johns Hopkins University Press. pp. 226–227. ISBN 978-0801834806. For Marxian theory, socialism and communism represent societies built around a different, noncapitalist form of the fundamental class process. That is a very different thing from a society in which the state appropriates surplus value from the productive laborers it hires and exploits...These characteristics imply that any person who participates in the communist fundamental class is both a performer and appropriator of surplus labor…the decision of a state to operate capitalist industrial enterprises has no necessary relation to socialism... 
  15. ^ Arnold, Scott (1994). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford University Press. p. 44. ISBN 978-0195088274. One conception holds that the means of production should be owned by society (or possible the working class) as a whole. By itself, this idea has not clear meaning; some institutional stand-in for society has to be found...the most obvious candidate in modern societies for that role has been the state. 
  16. ^ Otto Neurath’s Economics in Context, by Nemeth, Elisabeth; Schmitz, Stefan W.; Uebel, Thomas E. 2007.
  17. ^ The Economics of Feasible Socialism Revisited, by Nove, Alexander. 1991. (P.212-213): "Radoslav Selucky opts for what he calls 'social ownership', with 'means of production managed by those who make use of them', separated from the state...1) State enterprises, centrally controlled and administered, hereinafter referred to as centralized state corporations. 2) Publicly owned (or socially owned) enterprises with full autonomy and a management responsible to the workforce, hereinafter socialized enterprises."
  18. ^ Yunker, James (April 1992). Socialism Revised and Modernized: The Case for Pragmatic Market Socialism. Praeger. pp. 29–31. ISBN 978-0275941345. 
  19. ^ O'Hara, Phillip (September 2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 71-72. ISBN 0-415-24187-1. This leads us to the third form of social ownership, through a more equal initial distribution of corporate equity...In his Unseen Revolution, published in 1976, the well-known management theorist Peter Drucker claimed that pension funds were reconciling employees’ need for financial security with capital’s need to be mobile and diversified, a form of ‘pension fund socialism’. Contemporary campaigns focusing on this dynamic include the explicitly socialist Meidner program... 
  20. ^ The Social Ownership of Capital, by Minns, Richard. 1996. New Left Review, Vol. 219, pp. 44-45."
  21. ^ "Participatory Planning Through Negotiated Coordination" (PDF). Retrieved 2011-10-30. 
  22. ^ Benkler, Yochai (2006). The Wealth of Networks: How Social Production Transforms Markets and Freedom. New Haven, Yale University Press. ISBN 0-300-11056-1. 
  23. ^ "Dorland's Medical Dictionary". 

Further reading[edit]

  • Minns, Richard (1996). "The Social Ownership of Capital". New Left Review 219. 1: 42-61.
  • O'Neil, John (2002). "Socialist Calculation and Environmental Valuation: Money, Markets and Ecology". Science and Society 66. 1: 137-158.

External links[edit]