In this article we will discuss about State Socialism:- 1. Meaning of State Socialism 2. Phases of State Socialism 3. Assessment.

Meaning of State Socialism:

The year 1848 is very significant in the history of Socialist thought. It was the period when one phase of socialism had ended and the latter was to be started. By this time, all Utopian socialists, viz., Robert Owen, Fourier, Blanc, St. Simonians and Proudhon proved to be utter failures.

In the trial of their schemes. When the Revolution of 1848 was over, a class of Socialism appeared, known as State Socialists who recognised STATE as an instrument for the execution of their socialists schemes. In this way, socialism developed mainly in France and England till 1848, was to a great extent utopian and idealistic and moreover, it was dominated by the middle-class spirit.

State Socialism developed in Germany during the second half of the 19th century which was based on scientific realism. State Socialism was not merely an economic doctrine; but it was also a moral and social movement. It was based upon “a certain ideal of justice and particular conception of function of society and of the State.”


Since reforms, both social and economic were to be executed through a nation state, State socialism had a nationalistic character. The socialists, namely Rodbertus and Lassalle presented this idealistic doctrine; they wanted to bring a radical change in the social order with the help of the government.

State socialism has also been known as socialism of the chain in Germany because a large number of intellectuals—Professors and writers of contemporary Germany were associated with it; and as Internationalism in France.

The main tenet of State Socialism was that the State should improve and consolidate its position by bringing about legislation for the uplift of the downtrodden. Strictly speaking, it is wrong to call this socialist movement, for it did not advocate abolition of private property and unearned income. It was content with some reforms which were not very socialistic in nature.

The movement developed in two stages. In the first stage, the Laissez-faire was criticised. In the second stage Socialism proper emerged and a manifesto containing objectives of State Socialism was issued. Wagner was the leader of this new movement.

Phases of State Socialism:


First Phase of State Socialism:

In the formative stage, the state socialism began in Germany in the early 19th Century as an economic movement. It was not an organised one, and in fact it was a loose mingling of economic thoughts which generally criticised the free competition. There were several classical economists who criticised the ideal of free competition or Laissez-faire. They were also against individualism.

Besides, Sismondi and Cournot in France, Herman and List in Germany, and John Stuart Mill in England felt that the ideal of liberty (which classicists upheld) was likely to create a conflict between individual and social interests.

The struggle could only be resolved by seeking state intervention in these matters. Thus, these thinkers and writers were not the forerunners of State Socialism; but their criticism of Laissez-faire and their advocacy of state intervention were unconscious contributions to the tendencies which led to the growth of State Socialism.


Second Phase of State Socialism:

A clear-cut formulation of the doctrine of State Socialism took place in 1872 when a historical conference of economists, jurists, administrators, politicians and professors was held at Eisenach. The leaders of this conference were Schmoller Schaffle, Buvhart and Wagner.

The Eisenach conference formulated the doctrine of State Socialism, as follows:

“The State was a great moral institution for the education of humanity, which could enable an increasing number of people to participate in highest benefits of civilisation.” The citizens of the nation were not merely in economic association with each other but were bound together by the ties of common languages, culture and political constitution. The State was the organ of the moral solidarity of the nation and hence was responsible towards the poorer sections of the society.

The following arguments were put forward by the state socialists in support of their case for state and against individualism and laissez-faire:

(i) Based on the theory of conjectures propounded by Lassalle, they argued that the weakness of individual judgement often led to economic crisis.

(ii) As Sismondi, St. Simon and Louis Blanc had stressed, the State Socialists argued that the troubles and uncertainties caused by competition among individual producers should be checked and curbed in the social interest.

(iii) The functions of the State were historically evolving. In the early stages of development, individual actions and private charity were adequate. In modern life greater ‘Social character’ in economic matters is expected out of necessity.

It can be seen that State Socialism was a sharp reaction against the extreme Laissez-faire of classical economists. Schmoller gave the name “MANCHESTERISM” for the extremely optimistic and liberal aspects of classicism which was fully elaborated by Cobden and Bright in England, and Bastiat in France. Thus, State Socialism was opposed to ‘Manchesterism’, but it qualified its stand. Individual initiative as such, was to be fostered.


State interference was to be prevaile6d upon in such spheres, where individual interest came to clash with the general social interest. In pursuance of this stand, the Socialists did not condemn private property and its fruits, viz., rent and interest. What they wanted was a more equitable social system to give tine worker due profit of his labour. In the sphere of distribution, they advocated a step of progressive taxation system which would bring about a leveling of social classes.

In the sphere of production, they stood for state control of such industries which are in the nature of public utilities and are likely to become monopolies, if left in the hands of individuals. Thus, they advocated the State administration of transport system, nationalisation of railways, canals, roads, municipalisation of water, gas and electricity and State operation of the banking system.

It would be wrong to presume that this programme of socialists was scarcely socialist in character, because, it upheld private property, rent and interest. It was, in reality a well-meaning programme of reform for national prosperity through state agency. The programme had a moral and ethical, rather than an economic basis. It was a far cry from the militant Marxists Socialist Programme. In fact, it was the nature of compromise.

Assessment of State Socialism:

Though State Socialism remained an intellectual rather than a working class movement, its programme was tried and experimented extensively in almost all democratic countries of the world. The German Chancellor, BIS-mark applied this programme when he provided sickness and old-age insurance measures for the working class.


All the state socialist programmes were adopted and implemented in England and France with the beginning of the 20th century. It was not implemented as an application of the theory, but to meet the demand put forth by the progressive democratic opinion.

Public control and operation of utility services and progressive taxation and control of employer-employee relations were steps in recognition of more “social” character of modern life in which state interference was essential to preserve the individual’s interest. The modern Welfare State when it resorts to a “Controlled” economy, only implements the programme of State Socialism.