Evolution of the International Economic System - 4 | PSIR Optional for UPSC (Notes) PDF Download

Socialism: Meaning and Features of Socialist Economy

Meaning:

• Socialism refers to an economic system where the government controls and regulates the economy to ensure welfare and equal opportunities for all members of society.
• The concept of socialism was first introduced by Karl Marx and Friedrich Engels in their book The Communist Manifesto.
• The term "socialism" can be understood as aiming to provide for everyone's needs. According to economist Paul Samuelson, socialism involves government ownership of the means of production, government planning, and distribution of income.

Main Features of Socialist Economy:

• Collective Ownership: In a socialist system, all means of production are owned by the community, typically through the government. Individuals have limited private property rights, and the government manages resources for the benefit of social welfare.
• Economic, Social, and Political Equality: Socialism strives for equality among all citizens, reducing the gap between the rich and the poor, and minimizing class struggles.
• Economic Planning: The government sets specific objectives and employs economic planning to achieve these goals. A Central Planning Authority is responsible for making decisions on central economic issues.
• No Competition: In contrast to a capitalist economy, socialism lacks intense competition, as the state is the primary entrepreneur.
• Positive Role of Government: The government plays a crucial role in decision-making and has control over various economic activities, including distribution,exchange,consumption,investment, and foreign trade.
• Work and Wages According to Ability and Needs: Socialism emphasizes that work should be based on individual abilities, and wages should be determined by needs. The principle of "from each according to his ability, to each according to his needs" is fundamental in socialism.
• Maximum Social Welfare: The primary goal of socialism is to maximize social welfare, ensuring that the needs of all citizens, especially the poor and vulnerable, are met without exploiting the labor class.

Council for Mutual Economic Assistance

Comecon Overview

• Comecon, or the Council for Mutual Economic Assistance, was established in January 1949 to promote and coordinate economic development among Eastern European countries within the Soviet bloc.
• Original members included the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. Albania joined briefly, and later members included East Germany, Mongolia, Cuba, and Vietnam.

Formation and Purpose

• Comecon was created by the Soviet Union in response to Western Europe’s economic cooperation efforts.
• Initially, it focused on registering bilateral trade agreements among member countries.

Activities and Goals

• After 1953, Comecon aimed to promote industrial specialization among member countries to reduce redundant production.
• Faced challenges due to differing price systems and reliance on barter trade.

Achievements

• Successes included developing Eastern Europe’s railroad and electric power grids, establishing the International Bank for Economic Cooperation, and constructing the Friendship oil pipeline.

Transition and Decline

• Following the fall of communist regimes in 1989-90, member countries shifted towards private enterprise and market economies.
• Comecon was reformed into the Organization for International Economic Cooperation in 1991, with members gaining more autonomy in trade policies.