Socialist mode of production

The socialist mode of production, also referred to as the communist mode of production, the lower-stage of communism[1] or simply socialism as Karl Marx and Friedrich Engels used the terms communism and socialism interchangeably,[2][3] is a specific historical phase of economic development and its corresponding set of social relations that emerge from capitalism in the schema of historical materialism within Marxist theory. The Marxist definition of socialism is that of an economic transition. In this transition, the sole criterion for production is use-value (i.e. direct satisfaction of human needs, or economic demands), therefore the law of value no longer directs economic activity. Marxist production for use is coordinated through conscious economic planning. Distribution of products is based on the principle of "to each according to his contribution". The social relations of socialism are characterized by the proletariat effectively controlling the means of production, either through cooperative enterprises or by public ownership or private artisanal tools and self-management. Surplus value goes to the working class and hence society as a whole.[4]

The Marxian conception of socialism stands in contrast to other early conceptions of socialism, most notably early forms of market socialism based on classical economics such as mutualism and Ricardian socialism. Unlike the Marxian conception, these conceptions of socialism retained commodity exchange (markets) for labour and the means of production seeking to perfect the market process.[5] The Marxist idea of socialism was also heavily opposed to utopian socialism. Although Marx and Engels wrote very little on socialism and neglected to provide any details on how it might be organized,[6] numerous social scientists and neoclassical economists have used Marx's theory as a basis for developing their own models of socialist economic systems. The Marxist view of socialism served as a point of reference during the socialist calculation debate. According to The Oxford Handbook of Karl Marx, "Marx used many terms to refer to a post-capitalist society—positive humanism, socialism, Communism, realm of free individuality, free association of producers, etc. He used these terms completely interchangeably. The notion that 'socialism' and 'Communism' are distinct historical stages is alien to his work and only entered the lexicon of Marxism after his death".[7]

Marx himself did not use the term socialism to refer to this development. Instead, Marx called it a communist society that has not yet reached its higher-stage.[1] The term socialism was popularized during the Russian Revolution by Vladimir Lenin. This view is consistent with and helped to inform early concepts of socialism in which the law of value no longer directs economic activity. Monetary relations in the form of exchange-value, profit, interest and wage labour would not operate and apply to Marxist socialism.[8]