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The election of Zohran Mamdani as mayor of New York City has recently put a spotlight on socialism. According to an NBC poll, increasing numbers of Americans view this system positively.
But when we talk about socialism, we’re usually not talking about the same thing. I’ve written about this previously, but doing a deeper dive on the topic recently showed me I didn’t fully understand what I was talking about, either. Beyond its dictionary definition, the word “socialism” actually describes four very different systems.
1. State Socialism. This is what most fits the basic definition. The government owns all units of production; factories, farms, stores, property, restaurants, etc. A select number of ruling bureaucrats make every major decision. Individuals can’t start their own businesses. There’s no competition. The government decides what is made, how much is produced, and how much it costs. Everything runs by a central plan. Individuals have almost no economic freedom.
This is what the old Soviet Union practiced. It still exists in North Korea and, to some degree, in Cuba.
2. State Capitalism. In this model, private companies exist and people can still make fortunes. Yet the government, often led by an authoritarian leader, ultimately calls the shots.
This is the system practiced by China, Russia, and Saudi Arabia. It looks like capitalism from a distance, with markets, private property, and billionaires. But the political leaders choose which industries or companies succeed. The government often owns partial stakes in businesses, and executives must stay in line with political goals. Those who challenge government authority risk losing everything—their wealth, freedom, or even their lives.
3. Democratic Socialism. This model emphasizes democratic control of businesses. Workers own the company collectively, elect the board of directors, and share profits. These cooperatives compete with one another in markets, just like private businesses do. The difference is that power is spread out among the workers themselves rather than concentrated in the hands of distant shareholders or government.
This tradition has deep roots going back over a century and got renewed attention in the 1950s as an alternative to Soviet-style dictatorship. British socialist Richard Crossman, cited in a 1954 article by Lewis Coser and Irving Howe, described the main task of democratic socialism as “to prevent the concentration of power in the hands of either industrial management or the state bureaucracy.”
While no country has fully adopted this system nationwide, smaller successful examples exist everywhere. These include member-owned credit unions and electric cooperatives, companies that are fully employee-owned, and corporations with significant employee stock ownership plans. This is the tradition apparently embraced by Mamdani, who calls himself a Democratic Socialist.
4. Social Democracy. Despite the similar name, this is not the same as Democratic Socialism. It is what we see in places like Sweden, Denmark, Holland, and Germany. These countries embrace democracy and capitalism as well as having robust social safety nets funded by high taxes. Private businesses still exist; the government does not run the economy. People can still get rich, but the inequality gaps are smaller. Citizens typically receive universal healthcare, affordable college education, strong labor unions, generous unemployment benefits, and paid vacation. These are funded through progressive taxation and business regulations that fall most heavily on corporations and the wealthy. Ironically, Americans (including me in the past) often mistakenly call this “socialism.” The residents of these countries simply call it capitalism with a strong social contract.
I’ve long held that we often talk about “socialism” without knowing what it is. It is even more complex that I knew. Understanding some of that complexity can help us have meaningful discussions rather than talking past each other.
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