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Socialization (economics)

Not to be confused with the sociological concept.
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In socialist economics, socialization is the process of structuring or restructuring an economy on a socialist basis,[1] usually by establishing a system of production for use in place of the profit system, along with the end of the operation of the laws of capitalism. In its most developed form, the concept of socialization entails the end of money and financial valuation in the production process.[2]

More broadly, socialization is social ownership, encompassing all the various models of resource and enterprise ownership proposed for socialist economies. Usually it refers to various types of employee-ownership, cooperatives or public ownership; but in some instances it refers to a form distinct from employee-owned cooperatives, public ownership and private ownership. Economists such as John Roemer and Pat Devine have advocated for socially owned enterprises as a major component for hypothetical socialist economies, defining social ownership as ownership of an enterprise by those affected by the use of the assets involved.[3] In contrast, Alec Nove defines social ownership as a form of autonomous public ownership.[4] Social ownership is usually contrasted with state ownership, and was used in this way to refer to the model of cooperative enterprise established in Yugoslavia.

In the theoretical work of Karl Marx and Friedrich Engels, socialization has a slightly different meaning, where it refers to the transformation of an economic activity from a solitary to a social relationship. Socialization is a process that begins to take place under capitalism and is a hallmark of the capitalist mode of production in the form of socialization of production by transforming the process of producing goods and services into a highly collective and mechanized process. This occurs due to centralization of capital in industries where there are increasing returns to scale. In Marxist theory, a contradiction develops between the socialized production and the private ownership and appropriation of the surplus value and profits, leading to a situation where the expansion of socialization to include surplus value in the form of cooperative ownership over the means of production. This expansion of socialization marks the transition from capitalism to socialism.[5]

The phrase social production has 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.[6]

In economics

Socialist economists have defined social ownership and social property in different ways. In many instances it is used in reference to worker-managed and employee-owned enterprises. It is categorically separate and distinct from public ownership and 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.

"Socialization" often involves both a change in ownership and a change in management, including self-management or some form of workplace democracy in place of a strict hierarchical form of control, and specifically social or public ownership of the profits generated by these collective or publicly owned enterprises.

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 and 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."[3]

John Roemer's model of market socialism features a form of social 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-based economy.

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.

For Otto Neurath, "total socialization" involved not only a form of ownership but also the establishment of economic planning based on calculation in kind.[7]

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.

In Marxist theory

Socialization is a process that begins to take place in capitalism as large-scale manufacturing based on a vertical division of labor displaces "cottage industry" - the small-scale production shops, guilds and family-run businesses that existed in feudal economies. This process transforms the act of production into an increasingly social and collective process involving planning and greater coordination among producers, but appropriation of the social product in the form of private profit continues to be a private affair by investors and owners of the enterprise. Furthermore, exchange of the commodities produced is the private act of a small group of capitalists or an individual owner. As the process of socialization expands, a contradiction between the socialized nature of production and the individual nature of appropriation of the surplus product arises, coinciding with the obsolescence of the functions performed by the capitalists (the private owners).

The socialization and centralization of industry and capital under capitalism lays the foundations for a socialist economy. Socialism entails ownership of the socialized means of production by the workers engaged in the production either in the form of worker ownership or social ownership by all of society. The establishment of social ownership over the means of production resolves the contradiction between social production and private exchange/appropriation under capitalism.[8]

Karl Marx envisioned socialization under socialism as involving an expansion of self-management and workplace democracy in the workplace, in contrast to the rigid hierarchy and bureaucracy that characterizes traditional capitalist enterprises. As workers gain more autonomy, they gain more collective decision-making power and control over their work processes. Socialization of industry is different from nationalization, which can, but usually does not imply the socialization of the workplace; socialization of industry can take place in private or cooperative-owned enterprises. In a capitalist economy, socialization is limited because the socialized enterprise continues to operate in a commodity economy under the capitalist laws of motion.[9] Socialization therefore takes a different form in the capitalist mode of production than in the socialist mode of production.

Misuse of the term

Template:Anarchism sidebar Particularly in the United States, the term "socialization" has been mistakenly used to refer to any state or government-owned industry or service (the proper term for such being either nationalization or Municipalization). It has also been applied to 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).[10]

It is important to note that in economic and Marxist terminology, publicly funded or even state-run, universal healthcare services would not constitute a "socialist" industry because the employees (workers) do not own their means of production and participate in the management of their enterprise. Furthermore, a majority of universal healthcare programs in Western countries are privately owned health and pharmaceutical firms that operate for a profit but receive public subsidies in the form of public insurance plans or tax-financed insurance.[original research?]

See also


  1. "the act or process of making socialistic: the socialization of industry." "Socialization" at
  2. Otto Neurath's concepts of socialization and economic calculation and his socialist critics. Retrieved July 5, 2010:
  3. 3.0 3.1 "Participatory Planning Through Negotiated Coordination" (PDF). Retrieved 2011-10-30. 
  4. 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."
  5. Capital, Volume 1, by Marx, Karl. From "Chapter 32: Historical Tendency of Capitalist Accumulation": "Self-earned private property, that is based, so to say, on the fusing together of the isolated, independent laboring-individual with the conditions of his labor, is supplanted by capitalistic private property, which rests on exploitation of the nominally free labor of others, i.e., on wage-labor. As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the laborers are turned into proletarians, their means of labor into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialization of labor and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers."
  6. Benkler, Yochai (2006). The Wealth of Networks: How Social Production Transforms Markets and Freedom. New Haven, Yale University Press. ISBN 0-300-11056-1. 
  7. Otto Neurath’s Economics in Context, by Nemeth, Elisabeth; Schmitz, Stefan W.; Uebel, Thomas E. 2007.
  8. Socialism: Utopian and Scientific, by Engels, Friedrich. From "Part III: Historical Materialism": "Capitalist Revolution - transformation of industry, at first be means of simple cooperation and manufacture. Concentration of the means of production, hitherto scattered, into great workshops. As a consequence, their transformation from individual to social means of production — a transformation which does not, on the whole, affect the form of exchange. The old forms of appropriation remain in force. The capitalist appears. In his capacity as owner of the means of production, he also appropriates the products and turns them into commodities. Production has become a social act. Exchange and appropriation continue to be individual acts, the acts of individuals. The social product is appropriated by the individual capitalist. Fundamental contradiction, whence arise all the contradictions in which our present-day society moves, and which modern industry brings to light."
  10. "Dorland's Medical Dictionary". 

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