President Donald Trump declared that America will never be socialist. He’s beating up a strawman, since there has never been a fully socialist country. That’s because, throughout history, every country, whether it considers itself socialist or capitalist, engages in capitalism to some degree, which is essentially the existence of a marketplace, where goods, services, information, and labor are exchanged.
Regardless of what is exchanged, everything exchanged becomes a commodity whose value shifts in line with the demand for it. The dynamics of the market also result in the gradual accumulation of wealth for some while denying essential items, such as housing and food, to those who cannot afford them.
While Wikipedia identifies two dozen different kinds of socialism, two primary approaches support its goal of upholding a society’s welfare. One approach is to realistically regulate the marketplace to ensure it provides everyone in society with their basic needs, allowing them to lead a satisfactory life. The other is pursuing the ideal communal society without a marketplace that forces competition for obtaining basic needs.
Capitalism is primarily the unavoidable dynamic of the marketplace and socialism is the inevitable response to it.
Capitalism’s active practice is maintaining a marketplace to exchange goods, services, and access to them through a price system. Money has the greatest exchangeability value because it allows for the acquisition of various types of resources, one of the most critical being political power. However, exchanges can be made through a barter system, in which tangible items, including human labor, can be directly exchanged between seller and buyer. This was the dominant system before the advent of written history.
Capitalism’s belief system is limited to preserving the marketplace because it results in greater accumulation of resources that can be used for many purposes. There is no aspiration to create a new society; rather, it is to protect the current market-based one. It is a continuation of Adam Smith’s philosophy, as presented in An Inquiry into the Nature and Causes of the Wealth of Nations, which appeared just as the Industrial Age was dawning in the late 1700s. He believed that individuals pursuing their self-interest in the marketplace would benefit society through increased productivity and wealth.
Socialism as a practice can be seen as a popular response to the marketplace system that replaced the barter system. It aimed to regulate the marketplace so that no concentration of material or social advantages occurred to the extent that it disrupted a community's cohesion.
Socialism, as a pronounced belief system challenging the marketplace, emerged in the 19th century, when the term "socialist” was introduced. It was first used to describe the effort to create cooperative businesses and communities as an alternative to capitalism’s marketplace economy.
The marketplace created civilization.
Although the term “socialist” was not used before 1800, some scholars argue that the marketplace spurred civilization. It also stratified the population along divisions of labor and the ability to obtain resources that could be converted into political power.
Christopher Ryan, author of Civilized to Death – The Price of Progress, argues that the development of agriculture led to the rise of civilization based on individual competition for personal gain through institutions that benefit from expanded commerce. Without directly mentioning marketplace dynamics, he describes them when he notes that the decline in community health resulted from its division into hierarchical groups based on resource accumulation, such as individual land ownership rather than communal ownership.
Ryan is among the philosophers who believe that prehistoric societies were cooperative communities where classless norms and practices prevailed because the marketplace did not exist. That view of pre-historical society supports the socialist ideal that egalitarian societies can exist by adopting economic practices that improve the welfare of everyone.
The rise of socialism has been a natural response to the exponential growth of the marketplace, destabilizing societies.
The first major socialist practice in direct response to capitalism emerged in the 19th century, with Robert Owen, a textile manufacturer. He was the first in this era to establish communities based on cooperative ownership and production, aiming to alleviate poverty and inequality resulting from the marketplace. However, since it was confined to only a small portion of the population, it was never considered a direct threat to the capitalist market and tolerated by capitalist governments.
Philosopher Karl Marx transformed his version of socialism into a belief that communism was an inevitable destination of capitalism. Marx considered Owen and other socialists who advocated for cooperatives as “utopian socialists” because they aimed to achieve a socialist utopia without resorting to a class struggle or revolutionary action to overthrow capitalist governments. However, Marx never provided a plan on how communism would operate, so he too aspired to see a perfect world created much like Owen’s utopia.
Marx concluded that capitalism would inevitably result from internal conflicting forces within the capitalist marketplace that would ultimately bring about its demise. Marx popularized the concept of communism with his 1848 pamphlet, The Communist Manifesto.
V.I. Lenin, the founder of the Russian Communist Party and the Soviet Union, believed that socialism was a transitional stage between capitalism and communism, in line with Marx’s view that it would ultimately lead to a perfect society. However, to reach that stage, a strong centralized government was necessary to continue the process and ultimately arrive at a communist society.
Ironically, one of the first to warn against this enforced transformation of society was the socialist-anarchist revolutionary Mikhail Alexandrovich Bakunin. He argued that applying Marx’s theory would lead to one-party state dictatorships ruling over all workers, but not by the workers.
The governments of Joseph Stalin and Mao Zedong were the most committed to creating a communist society. Soon after gaining power, they became one-party autocracies instead of worker utopias, with the communist party controlling both the government and the market. The most valued asset was party membership, which granted access to material goods and social benefits. The cost was loyalty to the party’s beliefs and practices.
The utopian socialists failed to establish a worldwide cooperative community. However, their ideas and actions contributed to the growth of political parties that worked to regulate the marketplace, addressing the socialist goal of creating a socially conscious economy. Their legacy is reflected in current countries that are social democratic or considered democratic socialist by providing social welfare within the framework of the marketplace economy.
The Roman Senate, dominated by large landowners, refused to make land affordable for the average Roman to buy. As a result, proto-socialist leaders such as Gaius and Tiberius Gracchus emerged to advocate for agrarian reforms that would redistribute land from the wealthiest Romans. They were killed by the rich, and historians see their deaths as the beginning of the Roman Republic’s decline and eventual collapse, as the Senate remained indifferent until Julius Caesar became Consul and gained power as a dictator.
This event is not an outlier. A historical pattern can be observed when a market becomes unable to serve the populace, leading to the decline of the institutions maintaining it and the emergence of a strong central power to meet the populace’s needs. Political economist Karl Polanyi described this process in "The Great Transformation", where unregulated market activity inevitably leads to fascism (or authoritarianism) because it undermines the ties that bind people together in society.
The marketplace promotes the accumulation of wealth, which concentrates political power, to materially benefit the few at the expense of the majority.
The marketplace is the engine for capitalism, and the fewer restrictions on it, the more it is considered an “open market.” The United States, Canada, Western Europe, and Australia are considered prime capitalist countries due to their relatively open markets.
For instance, the US, like other countries, established a central bank, the Federal Reserve System (also known as the Fed), to regulate the open market by setting restrictions. This helps the market operate efficiently. In the US, the Fed is tasked with meeting the social goal of preventing excessive unemployment and the economic goal of keeping inflation stable.
The Fed was created as an independent government agency that does not serve any politician's interests but aims to maintain a functioning capitalist system for the benefit of the public and investors.