Development of Classical Socialism and Capitlism

      Toward  Authoritarianism

Allocation of Capital

A 2020 Watershed Election?

Return to What You Should Know About 12/10/19

Allocation of Capital    A 2020 Watershed Election?

Classical Socialism
has collective ownership of economic factors of production and
state management of equally distributed resulting production.

A Socialist Utopia was Imagined by philosophers
during the 19th Century. Political equality required wealth equality. Production was a common good. Party members,, using a democratic process, controls the state which determines economic strategy and allocates land, labor and profit. This is accomplished  by controlling property and investment capital. Production will be for the common good and not for state officials.

Early Application was based on the Socialism of Marx and Lenin.  Socialism would advances over time into Communism. This 1875 slogan from each according to his ability, to each according to his needs made Communism popular.

Their goal was a classless social system with the means of production under common ownership of and with full social equality of all members.  A communist party-led state dominates the economy, spreads internationally, and leads the opposition
to bourgeois democracy and capitalism.

The Communism of Marxism–Leninism was then synthesized by Joseph Stalin who made it the official ideology of the Soviet Union. He introduces a highly centralized command economy controlled by the state. Under Stalin, Communism never developed although the state, like early capitalists, got almost all surplus production. Authoritarianism became the Soviet Union's political philosophy.

Democratic Socialism developed after WW in war torn  Western Europe. The key characteristics were public ownership of key transportation and communication industries. It also has showed increased concerns and spent additional resources to help the disadvantaged.

Note: Neoliberal economics was used by England's Margaret Thatcher in 1979  to dismantled England's brand of Socialism. She was followed, in much of Europe. In 1981, President Ronald Reagan followed her policies to reverser the social and regulatory concessions being won, often over the object of the Supreme Court. The expensive socialist programs of SS Medicare/Medicate and tax-expenditures were not only not touched- they were expanded. 

19th Century Capitalism  wealth was managed by owners wanting the highest capital return. They neglected the low return of social goods.  Democratic Socialist believe this limited human possibilities.

Classical Early Capitalism centered on Individual profit accumulation Equality of wages was not a consideration because wealth was needed to power the process. Owners selling in a competitive market, determine investments and managing strategy. Profits control property and investment capital. Production will be for owners and not for government.

Early Application was the Capitalism described by Adam Smith.
His observations of the Industrial Revolution as of 1776 were summarized In The Wealth of Nations.


The goal of high profits was met by many and often so large that soon dwarfed that of the European aristocracy. Reinvested of profit just magnified system success. Unlike socialism, capitalist did not contemplate the virtue of wealth or the effects of industrialization on the human condition.

Not an ideology, intellectuals did not defend it until the 20th century when Hayek and Friedman, among others, did so. Smith believed Individual decisions, driven by self-interest, created wealth. Moral development, he argued in “The Theory of Moral Sentiments,” resulted from appropriate management,

Recent Application

Mixed Economy  developed in the United States in the late 19th century. Being a Republic, the people decided the economic the distribution of wealth.

Phase 1 had the people slowly took more control value created  by demanding health, safety and wage concession from Gilded Age capitalists. 

Phase 2 was a response to the Great Depression. FDR forced a public/private partnership to help the unemployed-farmers, began the regulation of banking-finance, and created a safety net system led by social security.

Phase 3 had LBJ adding to Medicare and Medicaid.

Neoliberal economists led the fight to remove many the mixed economy regulations designed to limit middle class suffering and they also cut back on safety net programs. These attempts failed and the Great Recession may begin a new phase.