What is Socialism?


Capitalism has developed the world significantly; however there are limits to how far it can go. For example, capitalism has not provided clean water for 1.2 billion people, or food for the 841 million people who are starving.

Even in developed countries ordinary people face poverty, rising rates of depression, and environmental health problems. As time goes on these problems are getting worse, rather than better.

The alternative to capitalism is socialism, a system that uses the potential of human talent to build a truly fair and democratic society. This society would have an economy that is democratically planned to provide for the needs of everyone.



There are so many problems in the world: environmental destruction, war, poverty and intolerance. Making a difference can seem impossible.

The starting point to solving any problem is to find its cause – and then to undertake a plan to change things. Most of the world’s major problems can be traced back to the system of capitalism we live under. They are caused, or made worse, by the fact capitalism is a system that puts profit before everything else. The key to solving these problems is by changing the system of capitalism itself.

In the 300 or so years of its existence, capitalism has transformed the planet. We have seen technological revolutions in rail, electricity, flight, space travel, telephones and computers. The world economy is 17 times the size it was a century ago.

Capitalism has developed the world significantly; however there are limits to how far it can go. For example, capitalism has not provided clean water for 1.2 billion people, or food for the 841 million who are starving. Even in developed countries ordinary people face poverty, rising rates of depression and environmental health problems. As time goes on these problems are getting worse, rather than better.

In fact capitalism has no plan to provide people with what they need for a dignified existence. It is a system driven only by the need to maximize profits. But this is not only because of the greed of individual billionaires or the failure of politicians (although these certainly do exist). Inequality and poverty are part of the nature of capitalist society. They will always exist under capitalism.

The alternative to capitalism is socialism, a system that uses the potential of human talent to build a truly fair and democratic society. This society would have an economy that is democratically planned to provide for the needs of everyone.
It is hard to imagine how such a system is possible and realistic, especially since attempts to set up socialism (like in Russia) have failed in the past.

However socialism’s scientific analysis of politics and the economy provides the only real explanation of the problems. Understanding capitalism shows us what can be done to make a difference to change the society we live in. It outlines how capitalism can be replaced with a fairer and more logical system.

This pamphlet gives a very broad overview of how capitalism works, what socialism is, and how it would be set up. It also briefly answers some of the most common questions raised about socialism. However, note please that this pamphlet is meant as an introduction only, and it does not cover all the factors in depth.


The economist Karl Marx explained 150 years ago that capitalism is the first society in history based on the mass production of commodities.

It is also a type of class society. Marx used this term to describe societies in which there is a fundamental economic (and hence social and political) division between the ruling and labouring groups. Under capitalism, the ruling class is the capitalist class, and the labouring class is known as the working class. The capitalist class owns everything that is needed to produce commodities, including factories, raw materials and so on. However, capitalists don’t make commodities themselves; they pay the working class to do it.

The commodities produced enter a process of exchange, in which capitalists attempt to sell them to make a profit. Under this system, market relations dominate every aspect of our lives. Capitalism works by making everything – even art, literature, sex and sport – a commodity to be bought and sold.

Marx explained that the underlying value of commodities is determined by the amount of human labour used to produce them. He understood that this is not the only factor – the reality of the market is far more complicated than that. Supply and demand, shortages and overabundance, for example, all mean that the prices of commodities fluctuate around an underlying value. Nonetheless, it is the labour of the working class that ultimately determines the value of all commodities.

Capitalism works in the sense that capitalists make their profit – by never paying workers the full value of their labour.

For example, if an employee creates $500 a day in commodities for their boss – either directly through services or indirectly through selling the commodity produced on the market – that would equal $2500 over a five day week. However most workers wages are less than that – let us say they get $500 for the whole week. The excess – the surplus value created by the worker (in this example $2000) – is kept by the boss as profit to be reinvested back into production, or kept as pure profit for the shareholders.

Capitalists will usually pay workers only what is necessary for their survival, i.e. the minimum wage (which can fluctuate through labour and skill shortages). How much surplus from the worker’s labour goes to the worker, and how much to the capitalists, is not fixed. The nature of a class society is that the classes are in constant struggle with each other. Capitalists and workers want opposite things because they are trying to make money cooperatively, yet in polar opposite ways. One is working to earn a living, the other trying to avoid work to get super rich.

Capitalists always want to increase their profit, which means reducing wages. Workers want the security of being able to provide for themselves and their families, which means getting decent wages. Speed-ups, increasing working hours, cutting tea breaks, stopping bonuses, and the introduction of performance-related pay, all result in the boss getting a larger proportion of the surplus.

On the other side, cuts in the working week and improvements in pay or working conditions increase the workers’ share of the surplus. Because of the inequality in power between bosses and workers, the only way that workers can gain more than the bare minimum is by getting together in organisations like unions and fighting for it. This ongoing conflict over the share of surplus value created by workers is what Marxists call the class struggle.

Who is in the working class?

Roughly speaking, the working class is made up of anyone who receives his or her income by working for a wage. Some people – the unemployed, pensioners and many single parents – have to survive on the small amount provided by state benefits. They are still members of the working class because the only way they can hope to improve their living standards above the breadline is through work. Some people don’t strictly fit these categories, but are part of the working class because of their social outlook and their economic situation – their wage level, standard of living and so on.


Today capitalism is no longer taking society forward. Millions upon millions are trapped in poverty in the ex-colonial world. In the West, the gap between rich and poor is widening – even during economic upturns. The drive for profit is killing our environment, while vast amounts of resources are wasted on arms expenditure, duplication of consumer goods, speculation and advertising.

Capitalism has led to the super-concentration of wealth and power. Meanwhile at the bottom, more and more people are forced downwards to be part of the working class. We are seeing the development of the working poor – workers who, despite working full time, are living hand to mouth.

The alternative to capitalism is socialism. This would replace the competitive market economy of capitalism with a democratically run planned economy; set up to meet the needs of all, rather than make profit.

Real democracy would mean that the people themselves would decide how the wealth they produce would be used. This would include ending poverty, providing better wages, health care, education and new technology that would reduce the working day.

Only through public ownership can there be democratic control, because businesses operating in a capitalist market are constrained by the laws of that system. At capitalism’s most basic level, this means that in order to attract investment (capital) a business must maximise its profit. If investors believe they can make a better return elsewhere they will withhold funds, and the business goes bust or gets taken over.

Planning would eliminate an enormous amount of waste in the form of useless production. Well over half the price paid for many branded goods (clothes, toiletries etc) goes to pay for the product’s advertising budget. A planned economy would not allow individual businesses to restrict production to maximise prices, or to deliberately build obsolescence into products in the way monopolies do now.

Economic planning would utilise spare capacity and increase investment in new production to cause economic growth to soar.

But in order to democratically plan production workers must first control their places of work. Large-scale workplaces would be run by democratically elected committees of the workers, in conjunction with a socialist government.

These committees would make decisions about the day-to-day running of the workplace. A socialist system of local, regional and national government would represent all communities including delegates from workplaces. This is where broad priorities for the economy would be decided, including allocation of resources between different sectors, and deciding how to distribute resources for investment and wages.

This is not a utopian idea – the prerequisites for this exist now. The only barrier is the capitalist class monopolising political and economic power.

Over time a socialist society here and internationally would gradually eat into the scarcity that breeds class division. When all the basic needs of life are met, the class divisions in society wither away – as do the social ills they create. As the repressive state apparatus – such as the military – becomes obsolete, government will exist for purely administrative – not power – purposes.

We believe that this would eventually create a classless society, where divisions between people would be over art and culture, development priorities, and so forth. Not over the basics of life, such as who eats and who doesn’t. This type of future society we call communism.


Not surprisingly, capitalists try to use the media and education system to encourage workers to go along with their way of thinking. They even try to convince us that our competitive capitalist society reflects human nature.

They argue that people are too greedy for a fair society to work. In fact, as Marx explained, it is our conditions (our social environment) that determine our consciousness, not the other way around. Human nature is affected by the kind of world we live in – in our case a competitive, capitalist world.

However humans did not rise to the top of the food chain by competing against each other in the struggle to get ahead. They did this through cooperation. Only by cooperating were humans able to combine their resources to hunt, build shelters, and eventually domesticate plants and animals, develop pottery, and so on.

This co-operation is even greater today. Each of us is dependent on literally thousands – and even millions – of other humans around the world to provide services and produce everything else we need and want to live. One of the main contradictions of a capitalist society is that we have social production (meaning we produce the things we use by working together), but private ownership of the means of production. This encourages social atomisation, or the ‘I only care about myself’ attitude.

Capitalism tells us we are greedy because this view benefits them. What we want above all is peace, stability, a decent job, no worries about health care or education, time off for family and loved ones, etc. It is only the capitalists that thrive off the individual competition between one company and another.


Just regulating business without changing the capitalist system would ultimately fail.

Private businesses use their resources to find legal loopholes in tax and regulatory regimes. In the event that this proves too difficult, investors withdraw from an industry or market and look elsewhere. This is the process known as ‘capital flight’.

Once investors perceive an industry, or even an entire country’s economy to be unprofitable, they withdraw their funds. This often leads to a collapse in the local currency and recession. This has been the experience of many less developed countries in recent years, which have been told by the IMF to cut taxes and privatise public services in order to attract capital investment. The fact is that in a market economy a handful of hyper-rich people will always decide what is produced, where, and in what quantities, irrespective of the needs of society.

Therefore we call for the nationalisation of the main corporations and privatised services in Australia. Through democratic input from the working class via workplace and community committees, organised locally, regionally and nationally, a socialist government can undertake a socialist plan of production. In this way resources can be put into job creation and services such as public health, education and transport, and away from speculation, advertising and private greed.

We are not against reforms, we fight every single attack we can against working people. But we also understand that the problems are not separate; they are all problems of the capitalist system. We are pro-reforms, but anti ‘reformism’. Reforms show the truth of capitalism’s contradictions, but individual reforms cannot implement the fundamental changes needed to solve the world’s ills.


We refute absolutely any claim that the regimes in Eastern Europe and the USSR were any type of ‘communist’ utopia. In fact, they were not even socialist.

The Russian revolution began as a real attempt at setting up socialism. However because of the situation in Russia at the time, this attempt failed and was deformed into Stalinism. Stalinism is absolutely opposed to real democratic socialism. In Russia it was the enemies of Joseph Stalin who suffered the worst, and hundreds of thousands of workers who supported socialism were murdered. Rivers of blood separate socialism from the Stalinist dictatorships.

A key factor of socialism is that it cannot be confined to one country. We live in a globalised world with international production, distribution and exchange. However, at the time of the Russian revolution, Russia was isolated and underdeveloped. When economic difficulty struck after the civil war, this made it easy for the relatively few educated people with administration and technical skills to develop into an elite and hijack the workers’ economy. This problem could have been overcome if the revolution had spread to other more advanced countries, but unfortunately revolutions in Western countries were defeated.

The same problem would be unlikely to occur in a country like Australia today. Here in an advanced capitalist country the economy is industrialised and well developed, working people are educated, and they don’t rely on capitalists for administrative and technical skills. In fact, capitalists aren’t needed at all. Today the world economy today is much more global and intertwined. A revolution in even one advanced country would open up the door to a socialist federation of the world.


Unfortunately there are many examples of revolutionary periods where workers have had the opportunity to change society, but lacked the organisation required to finish off capitalism and create socialism.

The need for a workers’ party flows from the position of working people in capitalist society. The working class is the most unified class in society. Capitalists force workers together in workplaces through productivity rationality, and because of this, workers share experiences and suffer the same problems. To defend their interests, they create collective organisations like trade unions and workers’ parties. Capitalists are not united in the same way. While they sometimes work together, they are inherently divided because they must always be in competition with each other.

Of course the working class is made up of people with differences. It’s made up of men and women of different races, ages, skill levels, and so on. Capitalists use these differences to divide workers and, ultimately, prevent revolution. The role of the workers’ party is to overcome these divisions and unite workers around a common objective. This could be anything from shorter working hours to overcoming capitalism.

A workers’ party depends on, and springs from, the working class. The relationship between the party, its leadership, and the class is an important and complicated issue. Russian revolutionary Leon Trotsky explained that: “without a guiding organisation, the energy of the masses would dissipate like steam not enclosed in a piston box. But nevertheless, what moves things is not the piston or box, but the steam.”

The working class creates a revolutionary situation in response to the conditions they face in their daily lives. However, without a workers’ party with the correct programme, every opportunity to overthrow capitalism will be lost.


As a revolutionary party, the Socialist Party fights to defend and extend the rights of workers.

Locally, nationally, and internationally, we fight for the smallest local reforms that improve the lives of working people and protect our environment. This could be anything from fighting for the right to a tea break at work, to supporting public transport; or broader steps forward for the working class as a whole, like building a new workers’ party.

But we don’t want to be fighting these battles forever. We want to live in a society where there is no need to be constantly fighting for basic rights. That’s why in all the campaigns we participate in we put forward the case for socialism. Socialism, by its very nature, incorporates ideas of feminism, environmental protection, militant trade unionism, and opposition to all forms of oppression.

It is only by overthrowing capitalism that we will be able to begin to build a society free from poverty and inequality. That would be a democratic socialist society, driven not by the need to create profits for a few, but the desire to satisfy the needs of all humanity.

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