In socialist economic theory, the state, rather than private individuals, own the factories and other production facilities. Instead of basing society on individualism and “exploitation” in the free market, as is the case with capitalism, socialists aim to foster a cooperative and beneficial environment for all members of society.
This is the classic explanation of what socialism entails. However, in reality, it is not well-defined, is open to interpretation, and includes a wide variety of economic policies; in certain countries, a kind of socialism that may be called pragmatic even coexists with capitalism.
As society starts to lose its competitive edge because of public ownership of production methods instead of individual and private ownership, socialism is seen as a hindrance to innovation. The foundation for this idea is Adam Smith’s book, “An inquiry into the nature and causes of the wealth of nations.”
This theory holds that people are primarily motivated to increase their material wealth. When people strive for financial success and advance in their fields to stay ahead of the pack, it is seen to help the economy and society through free market principles.
Most capitalists attribute the West’s superior technological and specialized service development to free market economics. However, this prevailing economic worldview alienates specific individuals in the West, particularly in the United States. In 2010, only 29% of Americans responded positively to the word “Socialism,” but the most recent pew study found that 42% of Americans now have positive attitudes towards socialism. According to these polls, the largest demographic of socialist supporters comprises young Democratic Party voters.
It is widely anticipated that Joe Biden’s presidency will usher in a period of left-friendly policies, such as tightening regulations on tech behemoths like Facebook, Amazon.com, Alphabet, Twitter, Tesla, and Apple. Leena Khan, President Biden’s pick to head the Federal Trade Commission (FTC), is a vocal opponent of the tech industry who claims that the US market is “dominated by a relatively small number of corporations.” This choice provides insight into the policies that the IT industry should anticipate from the future administration.
Many respondents who gave positive ratings to socialism cited its ability to distribute wealth fairly as the main reason for their stance. According to recent polls, a slim majority of Americans still identify as capitalists, but that number is shrinking. There are a lot of causes for the rising disillusionment with capitalism in the United States. These include rising income and wealth disparities, unstable employment, and weak social safety nets.
A survey by inequality.org found that the wealthiest 1% of Americans own four times as much as the poorest 50%. At the same time that millions of individuals lost their employment in the first six months of the Covid-19 outbreak, the wealth of the top one percent increased by 29%, according to the same survey.
Does adopting socialist policies, however, offer solutions to these issues? Do they, and if so, do so at the expense of creativity? Can the problems of capitalism and socialism be solved by adopting a hybrid economic model? That question doesn’t have a simple yes or no answer. Various nations have tried out diverse socialist models, each with varying degrees of policy success.
For historical and logistical reasons, no nation has ever tried out full-on socialism. The Soviet Union was the only country to have made any significant progress toward socialism, and it had both significant accomplishments and setbacks in pursuit of economic expansion, technological advancement, and welfare. Eventually, however, the state did fail.
Many other experimental nations, like Cuba, saw gains in only one or two sectors, like healthcare. However, Democratic Socialism has proven successful in nations like Sweden and Norway, which consistently rank at the top of happiness rankings.
While the terms Democratic Socialism and Social Democracy are often used interchangeably due to their shared socio-political-economic frameworks, the key difference between the two is that the latter theory advocates for a more gradual transition to socialism through the transformation of established societal structures rather than a revolutionary upheaval.
Common misconceptions about China’s political system are based on the fact that the country is primarily viewed as a socialist utopia. China is a state-capitalist country that has incorporated socialism and experimental programs into its model. On the other hand, the current leader of China, Xi Jinping, has declared that socialism will be fully implemented in China by the year 2050.
Most nations’ socialist policies are only adapted or modified to fit their economic system. So we’d be evaluating different countries with their different methodologies that have adjusted to socialism in unique ways.
For purposes of this discussion, a socialist country would be one that benefited economically from implementing socialist ideas. This would imply that economic expansion was not stifled, the welfare system was enhanced, and the wealth disparity was narrowed. Following is a list and analysis of 15 “socialist” countries that have achieved economic success, along with comments on how socialist their financial models are.
How we created the list
We use four metrics—innovation index, social achievement index, global competitiveness index, and Gini Coefficient index—to determine which 15 socialist countries have achieved success. As we’ve seen, innovation measures how actively national markets work to create and distribute fresh goods and services that address previously unrecognized needs and boost GDP. The more innovative a country is the higher its innovation score. However, this can only happen in countries with free markets, which is why we’re interested in them.
Healthcare, minimum wage, parental leave, and other metrics of a state’s commitment to its inhabitants’ social and economic well-being are all included in the Social Progress Index. With a high score on the social progress index, the state’s welfare system is likely to be socialist in nature. The GCI evaluates a nation’s economic prowess and competitiveness on a global scale.
Conversely, the Gini Coefficient indicator assesses a population’s wealth and income disparity. Increases in the Gini Coefficient indicate growing inequality. An Italian statistician named Corrado Gini created the Gini Coefficient. In other words, countries with a socialist orientation that are successful will have high innovation scores (meaning open innovation), high social progress scores (representing strong social safety nets), good scores on measures of global competitiveness (indicating little inequality), and low Gini Coefficient scores (indicating little income inequality). Scores range from 0 to 100.
The Global Economy country rankings are used to gauge innovation levels, and we use SPO data to measure societal improvement. The Global Competitiveness Report’s rankings would be used for this purpose, while the World Population Review’s Gini Coefficient index results would be used to compare countries’ levels of inequality. However, the Gini Coefficient would be the primary indicator since socialism is associated with a narrow wealth divide.
Gini score: 28.8
Sweden is a constitutional monarchy, yet its elected officials have absolute authority. Like other Nordic countries, its social economy is based on the Nordic Model. Regarding innovation, Sweden ranks second (behind only Switzerland) with a score of 62.50, putting it ahead of the United States (which ranks third). Sweden’s social progress rating of 91.62 places it eighth on the global competitiveness rankings.
Gini score: 28.7
As with other Nordic countries, Denmark is among the top 15 prosperous socialist countries. The Nordic Model is already being put into practice in Denmark, and the degree to which it innovates is 57.50. With a 92.11 score for social advancement, it is ranked 10th globally in competitiveness and among the world’s happiest nations.
Gini score: 27.4
Finland is one of the 15 prosperous socialist countries and another Nordic country. Finland’s economy is highly socialist and represented by the Nordic Model. In this context, we consider unions, collective bargaining, paid family leave, public pensions, the minimum wage, public schools, and public healthcare. The level of innovation in Finland is 57. The country has a social progress rating of 91.89, placing it 11th in the world.
Gini score: 27
Norway occupies a position in the far north of Europe. The King of Norway serves as the country’s head of state under the country’s constitutional monarchy system. However, the elected representatives hold real power. In such respects, it is comparable to social democracy. The Nordic Model is in effect, which means the market is free but is regulated through collective bargaining. The innovation score for Norway is 49.30, and it has a social progress rating of 92.73 and is ranked 17th in global competitiveness.
Gini score: 26.8
Iceland is a country in northern Europe that belongs to the Nordic region. Like other nordic countries – it is associated with the Nordic Model, a form of government with strong socialist elements. Market economy with strongly unionized labor; a partnership between businesses, employees, and government in collective bargaining; state pensions; universal healthcare; and a robust social safety net are all hallmarks of the Nordic Model.
The Nordic countries consistently rank at or near the top of the World Happiness Report’s happiness index.
With a high social progress rating of 91.09 and a relatively high innovation score of 49.20, Iceland ranks 26th in global competitiveness.
Gini score: 38.5
Despite having a slightly higher Gini Coefficient and poorer innovation and social advancement than some of the other nations in the list of 15 socialist countries that have prospered, China nonetheless manages to secure one of the best positions. China tops the list for two reasons: its proximity to socialist ideals and the rapidity with which it has risen to the position of the world’s second-largest economy.
Before the opening of its economy to the world at large in the late 1970s, the People’s Republic of China was virtually exclusively socialist. Meritocracy and long-term, experiment-and-strategize-based economic planning are central to China’s one-party system. Unemployment insurance, worker’s comp insurance, publicly funded healthcare, and pension funds are all essential tenets of China’s socialist political economy.
China’s economy cannot be described as a “market economy,” either in the sense of free market capitalism or market socialism. Instead, China uses strategic state capitalism, which regulates the use of strategic production methods. In what is commonly called the China Model or the Beijing Consensus, a meritocratic and public welfare political system is advocated as a means to a gradual transition to an utterly communist system.
The World Bank reports that 800 million Chinese have been pulled out of poverty thanks to these initiatives. The Chinese score for innovation was 53.50, and its score for social development is 66.12. In addition to being home to some of the world’s best innovators, China is also home to the world’s third-largest smartphone maker, Xiaomi Corporation.
Some of the world’s largest publicly traded firms are headquartered in China, including Pinduoduo Inc., Alibaba Group Holding Limited, Yum China Holdings Inc., Tencent Holdings Limited, Xiaomi Corporation, and New Frontier Health Corporation. In 2020, 133 Chinese companies were included in the Fortune 500 list, and companies like Xiaomi Corporation, Tencent Holdings Limited, and Alibaba Group Holding Limited are some examples.
Gini score: 28.5
Western Europe is where you’ll find the Netherlands. There are numerous socialist structures in place. The economy is heterogeneous, and the market is mainly free, yet there are socialist rules in existence. For instance, etuc.org reports that young people’s wages are lower than their elders.
A well-developed healthcare infrastructure is available. Market policies have been enacted to provide for parents to take paid leave in the event of pregnancy or childbirth. The government has mandated minimum wage levels across the country to reduce the number of poor citizens. A 58.80 out of 100 indicates a strong level of innovation in the Netherlands, and it has a high 91.06 social progress score and is ranked #4 on the global competitive index.
Airbus SE, Royal Dutch Shell, Exor N.V., Koninklijke Ahold Delhaize N.V., and ING Groep N.V. are just a few of the largest publicly traded corporations headquartered in the Netherlands.
Gini score: 32.8
Ireland, a country in Western Europe, is a Baltic state. It is the 8th most successful socialist country on our list of 15. It ranks 24th in Global Competitiveness and has a social progress score of 90.35; it is a democratic socialist country. Free market capitalism coexists with massive welfare expenditures.
Gini score: 27.4
Belgium is a western European country. A highly developed democracy and socialist society. It has a good Innovation Index rating of 49.10 and a Social Progress rating of 89.46, placing it in the top 22 globally in terms of competitiveness. There are a few primary drivers of the Belgian economy. Although there is no monopoly on trade, citizens must pay a hefty tax rate to fund the government’s provision of healthcare and other social programs.
The United States continues to lead the world in technological innovation, while Europe lags far behind.
Gini score: 34.7
Spain is a prosperous nation in southwestern Europe. There is a free and fair market economy and a socialist democracy in Spain. The political left enjoys widespread support. Spain scores 45.60 on the innovation index, 75.30 on the global competitive index, and 88.71 on the social progress index. Banco Santander S.A., Repsol S.A., Mapfre S.A., and Telefónica S.A. are just some of Spain’s top publicly traded firms.
Gini score: 33.8
If you’re looking for a country in southern Europe that serves excellent seafood, look no further than Portugal. It’s a socialist democracy. As a whole, Portugal’s economic policies tend to be the center-left, regardless of which party is in power. Right-wing politicians are less liked than their left-wing counterparts since the latter side has allied itself with the country’s organized labor force. The Portuguese socialist party, now in office, was re-elected in 2019 with 36% of the vote, up 4% from their last result.
Over the past six years, the socialist party has enacted several left-leaning socialist measures, such as lowering the unemployment rate and expanding the number of state-owned welfare services available to citizens. Portugal’s economy ranks 34th on the Global Competitiveness Index and has a good innovation score of 43.50 despite the government’s overspending, tax burdens, and market regulation. With a social progress index of 87.79, Portugal is doing quite well.
Gini score: 24.2
Slovenia is located in Eastern Europe, as with many other countries in the region. After the breakup of Yugoslavia into its separate entities in 1991, it declared independence. One of the world’s most egalitarian societies, Slovenia has a very low Gini Coefficient.
According to Heritage, Slovenia has a generally open economy, and specific socialist policies remain, most notably on labor freedom. The market is highly regulated due to the state’s heavy involvement in central planning. With a 42.90 on the innovation scale, Slovenia is in the middle, ranks 35th in global competitiveness, and has an excellent social progress score of 87.71.
Gini score: 30.4
Croatia, another formerly Yugoslav republic, is one of the 15 socialist countries that have achieved economic success. After the fall of Yugoslavia, economic change in Croatia was sluggish, but despite this – it liberalized its economy. A large section of the economy is still regulated for social welfare, and the transition to the market economy was limited. A smaller wealth gap and less inequality have resulted from this rise. While its innovation score is only 37.30, Croatia’s social progress score is an impressive 81.92. When compared to other countries throughout the world, it is ranked 63rd.
Gini score: 25.7
Formerly a member of the Soviet Union, Armenia is now an independent country. After the fall of the Soviet Union, the country declared independence, which marked the beginning of market liberalization and privatization. Still, the economy is mainly controlled by the government. Following the fall of the Soviet Union, Armenia’s focus shifted back to agriculture, despite the country’s robust industrial sector built up during that time.
Armenia has yet to reach its full potential because of the persistent risk of war with Azerbaijan, a neighboring country with which it has longstanding disagreements that have led to border hostilities and the commencement of two wars, the most recent of which was fought in 2020. While Armenia’s Social Progress Score of 76.46 is impressive, its Innovation Score of 32.60 is not. In terms of worldwide competitiveness, it is ranked 69th.
Gini score: 25.7
Moldova is the least prominent of the fifteen socialist countries that have achieved success. After the Soviet Union’s fall in 1991, the communist country of Moldova gained its independence and joined the global economy. It began privatizing state-run businesses and otherwise opening up its economy. However, it did not end the socialist experiment altogether, as it continues to operate alongside the country’s liberal free market. One of its most famous exports is high-quality alcoholic beverages.
While government expenditure and tax rates are relatively low compared to other countries (71 and 94 on Heritage’s Index of Economic Freedom 2021, respectively), Moldova’s financial freedom score is only 50. The government’s strategy of increasing taxes on private wealth while simultaneously spending heavily on public programs like healthcare and education is successful.
Even though Moldova has a high social progress score of 72.58, its innovation score is only 33. For international competitiveness, it comes in at number 86.
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