Giving one cogent and all-encompassing definition of socialism in relation to economic practice is quite an impossible task since a wide range of governments throughout the world practice different forms. In general, however, the economic basis of nearly all of the socialist movements is founded upon the goal to create greater equality for the average worker and citizen. This usually involves attempting to centralize the means of production within the hands of the worker or to at least limit the role private individuals and companies have. As an alternative to private capital backing the means of production, it is the state that has control and such a socialist state would attempt to create a situation that benefits all sectors of society, particularly the worker (as opposed to a ruling, elite class of property and production owners). As such, one can fairly suggest that socialism, in economic terms, is a revolt against both capitalism as well as the oligarchic structures that were dominant in many regions before about 1850.

In general, the goal of socialism in economic terms was to create greater equality and not rely on individuals or private institutions for the means of production. While there were many phases in a variety of socialist attempts, from utopian to Marxian, nearly all socialist-inspired revolutions and movements were geared at creating a balance between the classes, more (and at ties complete) state involvement in the growth of a national economy, and a commitment to the ideals set forth by early thinkers such as the as Karl Marx, author of “The Communist Manifesto” and Das Kapital as well as other movements such as those by the Fabians, for example. In general, a pure theory of socialism involves these elements of creating equality and although the general economic concepts behind many of these movements in countries such as China, Yugoslavia, and the former Soviet Union may have been altered throughout time, the guiding principles remained essentially the same.

In some ways, it is best to begin by not necessarily defining a pure theory of socialism by what it is, but rather by what it is not. While some of the defining factors of socialism would not include private ownership of the means of production, a economic and political system governed and regulated by a ruling elite or aristocracy, nor conversely a welfare state in which all are by default dependent on the state for all aspect of existence, there are a number of engaging arguments made against socialism. For example, one scholar notes, “In the absence of the unhampered markets of a competitive capitalist economy, there can be no possibility of maintaining that rational economic calculus which is essential to the efficient organization of production. Universal chaos and destitution will be the only outcome of following the mirage of a socialist commonwealth" (Lerner 51). Such a view is common in criticisms of socialism, particularly as it relates to economics. There is the belief that without markets, the driving force behind a society is gone and will go on to have a negative impact on the society as whole, turning it into a state that is wholly dependent on the government for everything. While this a perfectly rational fear—one that will be explored in later sections of this paper—this dreaded result is not usually a concern. What does become a concern is when governments step out of the pure theory of socialism and attempt to create mixed markets or phase out old forms of socialism that are no longer economically viable.

Again, these are issues that will be raised and put into context later when exploring the socialism and the economies of different nations but such criticism provides a useful backdrop against which one can view socialism, both in its Marxian and Fabian forms. To go one step further, another economic scholar has broadly defined socialism by stating first what it is not and then moving on to what it is comprised of. “Socialism is not statism, or the collective ownership of the means of production. It is a judgment on the priorities of economic policy. The community takes precedence over the individual in the values that legitimate economic policy. The first lien on the resources of a society therefore should be to establish that ‘social minimum’ which would allow individuals to lead a life of self-respect, to be members of the community" (Bell xii). It is interesting that this critic notes that it is not the collective ownership of the means of production since this is, in essence, what many associate with socialism. This topic of ownership in production will arise later within the context of certain nations and their experiments, both successful and unsuccessful, of turning to economic socialism.

Before embarking on an exploration of two more focused and pure schools of socialist thought, it is useful to gain an ideological grounding for the movement as a whole. While a majority of the early socialist movements were associated with utopianism, especially in the economic sense, there still remains a great deal of idealism inherent in the system today. For example, in Ideas and Opinions, a collection of essays from one the world’s foremost thinkers, Albert Einstein, socialism is not only a political and economic alternative to capitalism, but a definite necessity. He posits, “In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow-men in place of the glorification of power and success in our present society" (Einstein 102). Despite the many treatises and tracts about the nature of socialism in a pure sense, this statement sums up the idealism behind the movement quite succinctly. He states that the very means of production are removed from the hands of an elite or economically privileged sector and thus the entire pattern of work and personal capital changes dramatically. Although there are hundreds of more specialized claims of essentially the same message found throughout actual socialist texts, this vision puts the pure theory of socialism most succinctly.