The Evolution of Socialism and Its Influence in the US

Calling someone a socialist, communist, or Marxist is still occasionally considered an insult in the United States. But what does it mean to be a “socialist”? Does America have elements of socialism, despite the frequent insistence that it is a capitalist and free-market society?

In many presidential election cycles, candidates debate economic policies and reforms that their opponents often label socialist or Marxist. Since the end of the Cold War and the collapse of the Soviet Union, confusion has increased over what these terms actually mean. Are any of the US’s Western allies considered socialists? Can socialism and free market economics coexist? Let us explore the complex history of socialism and its influence on the United States.

The modern concept of socialism was birthed in the 1840s by German philosophers Karl Marx and Friedrich Engels, who published The Communist Manifesto. Marx and Engels, creating Marxist theory, argued that it was natural for owners of capital (factories), called capitalists, to exploit workers for surplus value. To protect the workers, Marx wanted the government, which represented the people, to control the labor market by controlling all capital. At the time, this was a popular idea among many workers, who were often treated poorly and faced routine twelve-hour workdays.

Marx’s economic theory clashed with those of existing classical economists like Adam Smith and David Ricardo, though his idea of the labor theory of value—products being valued based on the amount of labor it took to produce them—did find wider support. Although Marx’s work is often criticized as flawed today, the labor situation in the 1850s made his ideas more attractive. Marx and Engels also pointed to slavery, which still existed in the United States, as capitalism run amok. They hoped that the defeat of the Confederacy would eventually lead to a socialist revolution in America by Northern factory workers.

1862: Civil War Increases Government Control

Government seizure of capital began in the United States during the American Civil War (1861-65) due to the rigors of full mobilization. On January 31, 1862, Congress gave US President Abraham Lincoln the authority to nationalize all railroads in Union territory. In April, control of the railroads was given to the US Army, which used them to transport soldiers and equipment to the front lines. This was a major advantage for the Union, which had far more railroads than the Confederacy.

A few weeks after Lincoln took control of the railroads, he also took control of the nation’s new telegraph lines. The new technology allowed military commanders and the president to learn information about enemy troop movements in record time. Again, this advantaged the Union, which had a far more extensive telegraph network than the Confederacy. By placing both railroads and telegraph lines under government control, a step the Confederacy delayed until later in the war, the Union could wage war more efficiently. By May 1865, the Union had defeated all significant Confederate forces and successfully preserved the nation.

The wartime nationalization of industries in 1862 may technically have been socialism, but few would link it to Marxism due to the emergency nature of war. The first emergence of peacetime socialism occurred during the Progressive Era (1890s-1920). In 1901, the Socialist Party of the United States was founded and grew rapidly. For the first time, many Americans cared about the plight of the urban poor, including children. The federal government and state governments began passing reforms to deliver some degree of social welfare and limit child labor and workplace hazards.

During the Progressive Era, the government did not nationalize industries, but did drastically increase regulations on businesses. This included trust-busting, or breaking up monopolies that were deemed a threat to free and fair trade. In effect, the Progressive Era limited capitalism without significantly socializing America. However, it laid the foundation for future pro-socialist reforms by creating widespread acceptance of social reforms and limits on corporate practices. Many voters agreed that it was acceptable for the government to place limits on businesses for the public good, especially when it came to health.

New Deal: Social Security Act and Welfare

While the Progressive Era saw the rise of federal regulations for many industries, social welfare remained the purview of local and state governments up through the 1920s. Although World War I saw another spike in temporary government nationalization of key industries, the Roaring Twenties restored the power of capitalism. The 1929 stock market crash that heralded the arrival of the Great Depression, however, forced permanent changes to America’s government and economy. By 1932, up to a quarter of the labor force was unemployed, and millions of citizens were begging for government relief.

The New Deal, crafted by incoming US President Franklin D. Roosevelt, featured a rapid flurry of economic and social reforms. Although no industries were nationalized, thus not reaching the threshold of true socialism, the federal government did create its first systems of wealth redistribution. The Social Security Act of 1935 created a federal pension system for US citizens, with a payroll tax instituted on most workers to fund it. Upon age 65, after having paid into the system for decades, retirees would be assured of monthly government payments for life. Whether or not Social Security is a socialist program remains debatable, with conservatives arguing that it is not. It remains extremely popular and thus retains strong support across the political spectrum.

After the New Deal, the public was more accepting of government redistribution of wealth (taxing and welfare). When World War II erupted and the United States returned to full mobilization of resources, the country instituted widespread rationing for the first time. The Office of Price Administration (OPA) managed a complex system of rationing beginning in May 1942 with sugar. The government aimed to equitably distribute the remaining consumer goods that were not diverted into the war effort. It was a difficult task, and a black market developed in many areas where people paid extra to get more units of desired goods.

In addition to rationing, the US economy was subject to price controls to limit inflation. To maintain wartime production and prevent labor disputes, the government instituted wage controls on private employers, as well as a slew of regulations to force (relatively) equal pay for women and minorities. These labor controls protected workers and the American public but were disliked by large companies. After the war, the socialist reforms that had largely nationalized America’s labor force for the conflict were quickly abandoned. Labor unions began striking for higher pay in 1946, prompting a wave of conservative legislation to reduce their power.

1960s: War on Poverty and Great Society Reforms

Although US President Harry S. Truman wanted to maintain the New Deal and World War II labor reforms, conservatives successfully argued that such regulations were akin to those used in the Soviet Union. As the Cold War emerged and a new Red Scare swept across the country, moderates wanted to avoid anything that could be accused of socialism. By 1964, however, the Red Scare had abated, and it was no longer political kryptonite to propose anti-poverty reforms. In a series of reforms reminiscent of the New Deal, US President Lyndon B. Johnson declared a War on Poverty as part of his larger Great Society program.

Politically skilled and publicly popular, Johnson was able to push major anti-poverty and Civil Rights legislation through Congress. On July 30, 1965, Johnson signed the most sweeping pro-socialist legislation since the Social Security Act of 1935. The Medicare and Medicaid Act created two sweeping health insurance programs that would be funded by the federal government. Medicare provided basic health insurance for all Americans, regardless of income, beginning at age 65. Medicaid provided basic health insurance for Americans in poverty. Both were funded through payroll taxes on virtually all US workers, similar to Social Security.

A second major reform in 1965 involved providing increased federal funding for public K-12 schools nationwide. The Elementary and Secondary Education Act (ESEA) dedicated federal funds to close learning gaps among low-income students and help provide all children and teens with equitable public education. Prior to this, there was little redistribution of education funds, meaning low-income school districts had few resources. The ESEA helped level the playing field in terms of education funding, providing opportunities for bright and hardworking but economically disadvantaged youth.

Coming on the heels of the National Defense Education Act (NDEA), which forced states to increase math and science education, the ESEA dramatically increased federal oversight of K-12 public education. Critics felt that this violated states’ rights and was socialist due to the redistribution of wealth from higher-income school districts to lower-income districts. They also opposed the federal government’s ability to withhold ESEA funding (Title funding) from schools that did not meet federal standards. While states retained official control of public education, schools largely complied with federal mandates to continue receiving additional funding.

1990s-Now: Health Care Reforms

Since the creation of Medicare and Medicaid in 1965, healthcare costs have risen faster than the rate of inflation. This has prompted periodic calls for health care reform, with Americans displeased with health insurance options available through the free market. In the early 1990s, the administration of incoming US President Bill Clinton explored federal subsidies for small business health insurance plans. In November 1993, a bill was proposed that would require universal coverage, meaning all US citizens would have to sign up for health insurance through either a private or government-controlled plan.

Although Clinton’s proposal failed in Congress, the concept of universal coverage returned in 2009 with the Affordable Care Act (ACA). The ACA, colloquially known as “Obamacare” after US President Barack Obama, initially required all citizens to purchase health insurance coverage or pay an annual tax penalty. This individual mandate, coupled with an employer mandate that businesses with a certain number of employers offer health insurance plans, was often criticized as socialist by conservatives. However, similar to the reforms of the Progressive Era, nothing was nationalized, thereby avoiding true socialism.

Government control of the labor market increased dramatically in 2020 due to a rapid viral pandemic. The Covid pandemic erupted in the United States in March 2020, forcing state governments to react quickly to limit infection. Most states used lockdown and shutdown executive orders to close non-essential businesses and keep people at home. This effectively controlled the labor market, albeit temporarily, and could be considered socialist. However, as the pandemic was considered an emergency situation akin to war, and the lockdowns were brief, few argued that the situation was socialism.

To prevent unrest due to the lockdowns and shutdowns, the administrations of both US presidents used stimulus spending. Millions of Americans received, for the first time, cashable checks (or direct deposits) from the federal government. Simultaneously, the government made most Covid medical treatments free to consumers, including vaccines, once they were introduced. At the time, few Americans complained about the stimulus checks, but many later blamed the generous federal spending on Covid relief for causing high inflation in 2022.

Summary of Socialism in the United States of America

“Socialism” is often a vague term, with political pundits using it for any perceived government overreach. A more technical definition of socialism requires government control of the factors of production, mostly labor and capital. Although government influence on labor and capital has significantly increased since the beginning of the Progressive Era in the 1890s, direct control of labor and capital has been limited to wartime or national emergencies. Thus, America cannot accurately be labeled a socialist country, even with increased government regulations.

In terms of degree, it is undeniable that America is more socialist than it used to be. Redistribution of wealth through programs like equitable education funding, social welfare, and government subsidies to businesses are now common. However, aside from antitrust legislation to break up monopolies, few hard limits on capitalist power exist. If employers pay to meet regulations, they can grow and innovate as much as they want. On a political spectrum, the United States is still quite far from being in the true zone of socialism.