This is one of the most common myths about socialism, often trotted out to explain why socialism “doesn’t work,” how it goes against “human nature,” that there is a lack of incentive to work, and so on. As is the case with most mistaken ideas about socialism, this is caused by a basic misunderstanding of what socialism is. This is not surprising, given the fact that today we hear the word socialism tossed around so much.

“Socialism” is used to refer to welfare state policies, progressive taxes, and even countries like France. Not only do these things have little to do with socialism, the same concepts are peddled by both the so-called left just as much as the right. The only difference is that the former says this “socialism” might be good in moderate amounts, while the right sees it as tyranny. In any case, both sides are wrong.

Socialism is a post-capitalist mode of production, meaning it is a mode of production that would eventually replace capitalism some day. A mode of production entails certain means and forces of production, in the form of factories, infrastructure, raw materials, tools, and such, and relations of production, which refers to the property relations between the means of production and their owners.

Under capitalism, the means of production are mostly in the hands of private individuals who depend on a massive army of people who don’t own any means of production. The latter obtains their subsistence by selling their ability to do labor with the means of production owned by a capitalist. According to the property relations in capitalism, the worker does not own anything he or she produces with the means of production provided by the capitalist. They are entitled only to a wage, which must necessarily be significantly lower than the amount of value the worker creates. In short, capitalism is a system wherein production is socialized, which is to say it is carried out by masses of people, and profit, the surplus value that they create by their work, is privatized, meaning it goes to the private individuals who own the means of production.

Now before we contrast the capitalist mode of production with socialism, we have to devote some attention to the way humans have historically produced things. All human societies have had people who work, that is to say perform productive labor, and people who don’t. Even the most primitive societies had people who, usually for physical reasons, could not work. In order to ensure the growth of society, members had to always produce (or simply obtain, in the case of hunter-gatherer societies) more than that which was necessary to sustain the workers themselves. In human society, the product of the laborers, including the surplus, must be distributed somehow. Labor as well, is distributed among different activities. Under capitalism, workers create commodities, which are sold in the market. The market sends signals back to the capitalists, and labor is organized in such as a way as to maximize profit for these wealthy individuals. So if a new technological development turns out to be profitable, more labor will be allocated to the production of that new gadget, to selling it, and even to transporting it from the factory to the point of sale. If a company starts to see losses, they may lay off their employees and find cheaper labor in a foreign country. The market may force a company to adopt more efficient automated production techniques. In short, the market determines how both labor and the products of labor are distributed.

Socialism is, to put it in the simplest words, another way of organizing society. It isn’t simply “redistributing the wealth,” welfare programs, or “equal shares for everyone.” Under socialism, production is still socialized, obviously, but ownership of the means of production is also socialized. This means the means of production, the machines, the server banks, the roads, the infrastructure, the trains, etc., all belong to the working class in common. Here’s where we can start treating the matter of equal distribution.

What would it mean, if the workers of a particular enterprise were also its owners? This question may be simple enough, but the path soon diverges in many directions when we try to work out the details. Many theorists have tackled this question of socialist property, and it has even been put into practice in a number of countries throughout history, to include some capitalist countries, with varying results. Without tumbling down any rabbit holes and to keep this article as brief as possible, let us only stick to the question of whether everyone would get “an equal share,” as in equal wages.

In a text called Critique of the Gotha Programme, Marx explained to some of his contemporaries why communism, defined by the principle of “from each according to his abilities, and to each according to his needs,” could not be achieved immediately upon overthrowing the capitalist ruling class. People do not immediately change from citizens in a capitalist society to citizens of a communist society, wherein people work to the best of their abilities and simply take the goods they need from society’s stores. In fact, even if everyone voluntarily strove to behave according to this maxim, the economic development necessary to eliminate scarcity and make distribution “according to needs” possible would not exist initially.

On one hand, economic development even in the leading industrialized countries today is not designed to simply produce as much as possible, without regard for profitability, and on the other hand, overthrowing the ruling class entails a struggle which will inevitably entail significant economic effects. There was also the issue of capitalist division of labor, whereby people did a variety of different tasks, some “skilled” and others “unskilled.” All of this would mean that rather than simply doing their best at work and taking what they needed on a daily basis, people would need a system which encourages working to the best of one’s abilities and which would reward people according to their productivity. Marx described this mode of production by the slogan “from each according to his needs, to each according to his work.”

It’s also important to point out that when Marx wrote about compensation in this theoretical society, he was not speaking about money wages. Instead, he spoke of labor credit that one would earn based on the amount of hours of labor they performed each day. Using these credits, the bearer would be entitled to the products produced in an amount of time equal to that of the amount of labor credit. In other words, one hour of labor is worth so many shoes, cartons of milk, books, and so on.

Writing in the 19th century, Marx envisioned some kind of paper certificate to represent this labor, and unlike money it would not circulate. Obviously in a modern economy this kind of system for accounting of labor credit would be fraught with problems. Nonetheless, Marxist theorists such as W.P. Cockshott, author of Toward the New Socialism (1), have shown that with the introduction of modern computer technology, labor time accounting is indeed possible and shows great promise. Yet whether via a system of money, or a more futuristic system of labor time credit, the fact remains that under socialism people would not necessarily be paid equally. Differentials in compensation might exist, but they would exist on a far more reasonable and equitable basis; namely, the more work one puts in, and the more productive one is, the more they would be able to draw out of society.

Let us return once more to the idea of a worker-owned enterprise. For a number of reasons, workers might choose to receive equal wages. In a society where one doesn’t need to worry about rent, healthcare, higher education or employment, and where the most necessary goods are always cheap, high salaries lose some of their appeal. We must also keep in mind that enterprises must still generate a surplus, some of which would go toward healthcare, education, infrastructure, etc., in a manner similar to taxes, with some of it left over for the enterprises’ workers to distribute as they see fit. They may choose to raise their salaries, even if they are equal. They may even choose to use part of the surplus to invest in new recreational or living facilities. In any case, they do this collectively, democratically, and success for their enterprise means success for everyone.

Regardless of what our hypothetical socialist workers decide to do with their share of the surplus value their enterprise produces, we can note several key points from this form of ownership. First of all, there is indeed an incentive to work when one is a partial owner of an enterprise; the enterprise’s success means one’s personal success. This point is true whether workers decide to accept equal pay or not. Furthermore, there is no particular reason why socialism would require equal pay or compensation at all. In fact, socialism entails differentials in distribution, the significant difference from a capitalist system being that compensation must be earned via one’s own work, and it differs according to the quality and quantity of that work. Even a worker-owned enterprise would probably have to adopt some system whereby new workers “earn their way” into the company. Whatever the case, we can also conclude that even communist society entails differences in individuals’ contributions and consumption, the only difference is that at that point, differentials are no longer necessary. Socialist property relations, distribution, and future systems of compensation and accounting raise many difficult questions. As complicated as these issues may be, we can certainly lay to rest the myth that socialism or communism mean “everyone gets an equal share.”

Sources, Further Reading

(1) A link to the works of W.P. Cockshott on the Labor theory of value, economic computation, and socialism. http://www.dcs.gla.ac.uk/~wpc/reports/index.html

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