We are all socialists now”, said sir William George Granville Venables Vernon Harcourt, later a senior British government minister, in 1887. Newsweek carried the front page headline “We’re all socialists now” in 2009. Both the politician and the publication were vehement defenders of capitalism.

For Harcourt, socialism meant that local governments could compulsorily buy land so workers could rent and grow vegetables on it (a way to cut their wages and promote their health simultaneously). For Newsweek, government spending to restore economic growth during the worst recession since the great depression of the 1930s was socialism.

The term “socialism” has no agreed definition. Nor does “capitalism”, to which it is generally counterposed. For us at Red Flag, capitalism is a system in which production is organised around the competitive pursuit of profits, the employing class controls the bulk of productive resources (machinery, equipment, factories, offices, raw materials and investable money), and pays workers less than the value they create on the job.

Under capitalism, the overwhelming majority of workplaces are dictatorships. Workers have to follow the orders of those at the top of companies, corporations and public service departments, and the layers of managers beneath them. We sell our ability to work for a wage, and that gives employers the right to direct our labour.

When the cycles built into the system turn down, huge numbers of workers, and also the self-employed and even senior corporate managers and shareholders, lose or face the threat of losing their former sources of income. But workers, who have the least to fall back on, suffer the most.

Beyond questions of economics, capitalist production and the class structure inherent in it shape every aspect of society and underpin oppression and war.

Socialism is incompatible with capitalism.

For 19th century revolutionary Karl Marx, socialism was not a distinct mode of production but a period of transition, only possible after a workers’ revolution, from capitalism to an entirely new, communist mode of production. That transition was in its earliest stages by the time the Russian revolution of 1917 was snuffed out at the end of the 1920s. So, in Marx’s sense, there has never been a “communist” society or country.

The transition can only proceed because it is driven by a new and more democratic state, created in a successful revolution that has destroyed the old state. Such a state can systematically eliminate the vestiges of capitalism, notably money and markets, so that all production and distribution is democratically planned. This process also undermines the very basis, in classes, of any state.

In the Communist Manifesto, Marx and his collaborator Frederick Engels wrote that “the first step in the revolution by the working class is to raise the workers to the position of ruling class to win the battle of democracy”.

We can assess different conceptions of socialism based on the extent to which they challenge the fundamental features of capitalism, and by their democratic content.

Under socialism, as understood by revolutionary Marxists, workers collectively control society’s productive resources with state institutions – crucially, workers’ councils. Their democratic structures operate not only at the level of whole countries but also reach down through districts and localities to every workplace, and up to large geographical regions, continents and the whole planet.

This kind of socialism can only be achieved through the radically democratic mechanism of the mass action of the working class seizing control of production and the whole of society. That is, through revolution.

So socialism is not nicer capitalism. And we can’t win socialism by making capitalism progressively nicer.

It is crucial to fight for reforms to improve workers’ wages and conditions and undermine oppression. Such struggles prepare the working class for revolution: the destruction and replacement of the existing state. And their success makes life better for the majority. But it is the experience and self-confidence gained through struggle, rather than piling one reform on top of another, that takes us closer to socialism.

‘State socialism’

The itty-bitty socialism of Harcourt, when he uttered his pithy phrase, didn’t involve a lot of democracy: in 1887, 40 percent of adult men and all women could not vote in British parliamentary elections. Nor did it challenge any aspect of capitalism. In fact, it strengthened the system while also benefitting small numbers of workers.

The responses of many governments to the global financial crisis, far from negating capitalism, bailed out the system, along with large corporations – especially banks.

The structures of all capitalist states – not just the liberal democratic ones of Australia, the USA, France, Japan etc. – are bound up with capitalism and its maintenance.

Their democratic content is meagre. People only get a say when they vote every two to five years. There are constitutional and other legal restrictions on what governments can do to benefit workers, enforced by conservative courts.

Arbitrary geographical electorates do not represent fundamental class interests. Senior elected and unelected officials are integrated into the ruling class through high incomes, associating with other powerful people and the nature of their jobs as managers of organisations employing many workers. Many at the top of the state also come from ruling class backgrounds.

Private ownership of industry gives capitalists power, not only directly over “their” workers, but also the capacity to influence governments. Under capitalism, states depend ultimately on the prosperity of productive capitalist enterprises for their funding, and the popularity to which economic growth and low unemployment contribute.

That dependence makes capitalist states susceptible to blackmail, in the form of lower investment in the face of “unfavourable government policy”. Illegal forms of blackmail are also far from unknown.

Legal bribery, in the form of jobs after careers in politics or the public service, plays a role too. The grossest contemporary example in Australia is former Queensland premier Anna Bligh, now the chief executive officer of the Banking Association.

So states aren’t counterposed to capitalism. In the extreme case of state capitalism, the capitalist class is the upper layers of the state machine, exercising its control over production and society through managerial authoritarianism like that in large, diversified corporations.

State capitalist regimes existed in Russia from the end of 1920s, when the 1917 revolution had been definitively defeated; Eastern Europe under Russian domination after World War Two; China and Cuba after the 1949 and 1959 victories of nationalist revolutions. There is still a pure example in North Korea.

While North Korea is the only remaining country without a substantial private sector, the state still controls large sections of the Chinese and Cuban economies directly. Not only that, but the World Bank has documented that the government share in GDP has been rising unevenly in most developed, predominantly private capitalist countries for many decades. That’s been the case whether conservative, liberal or social democratic parties have been in office.

Karl Kautsky, the most prominent Marxist theorist internationally from the 1890s until World War One, ended up arguing for parliamentary democracy and state ownership.

He thought that a planned, socialist economy could be achieved gradually and peacefully through the patient work of parliamentary heroes, supported by extra-parliamentary mobilisations. By winning elections in existing states, socialist politicians could legislate a kinder, gentler capitalism, which they would gradually transform into socialism.

This position ignored the symbiotic relationship between liberal democratic states and capitalist relations of production. It also contradicted Marx’s conclusion that the radically democratic, but very short-lived Paris Commune of 1871 indicated the form a workers’ state could take and the necessity of smashing the bourgeois state.

‘Market socialism’

In watered down form, Bhaskar Sunkara, the owner and editor of US socialist magazine Jacobin, still advocates Kautsky’s approach, which is increasingly evident in the publication’s pages and on its website. Sunkara and his co-thinker Seth Ackerman are keener on the market then Kautsky was. In their vision of socialism, there will be market competition among worker-owned co-operatives or “socially owned” firms.

British Labour leader Jeremy Corbyn and self-proclaimed democratic socialist Bernie Sanders in the US not only accept the need for markets but don’t even want to get rid of private ownership of productive resources. Their model is the Scandinavian countries with substantial welfare budgets. But wage labour is still exploited in these countries, and they have hardly proved immune to the scourges of capitalism, including economic crises, sexism and racism.

Markets and the competition among producers mean that no-one is in control of the economy and genuine planning is impossible. To avoid giving advantages to rivals, producers of commodities have an interest in keeping much information – about how they produce, how much they produce and sell, their costs and returns – to themselves. Production for markets makes crises therefore unavoidable.

Competition among producers also means that, whether they are companies, corporations or co-operatives, they are pressured to hold wages down. The result is class struggle, as workers resist attacks on their living standards. With competition on markets, whether among individually owned, corporate or co-operative enterprises, the pursuit of profit still governs economic life.

The existence of wage labour and labour markets mean that workers are compelled to sell their ability to work to get money to pay for the commodities they consume: food, clothing, housing and so on.

“Market socialism” is a vision of society still dominated by fundamental features of capitalism. Its advocates deny the possibility that democratic control over our lives through comprehensive planning can be extended so that we can avoid the waste of resources generated by out-of-control, crisis-prone economic forces, and also enjoy a wider range of choices about what and how we consume.

A socialist alternative

Under socialism – a transition to communism – progressively more of the things that we consume, use and need will be decommodified, removed from markets, produced according to plans, according to what people want and need, and will be provided without charge.

After the revolution, this approach could be rapidly applied to health care, education, transport and housing. Over time, different food stuffs, items of clothing and domestic goods could be decommodified. The endpoint would be the decommodification of all goods.

In this process, the compulsion to work in order to avoid starvation would decline. But labour would become more attractive, as creative activity under the collective control of those who participate in it. That control would provide scope for initiatives by individuals and groups of different sizes. And it would mean the abolition of the boundaries between art, life and work.

We can see indications of these possibilities today. They are apparent in workers’ contributions to improved productivity and safety, and a social atmosphere on the job, frequently against the wishes of managers.

Then there is voluntary labour to promote the welfare of others in hospitals, community groups, used cynically by governments, businesses and charities to avoid spending money on projects and wages.

The leisure-time activities of amateur carpenters, singers, knitters, software writers, cooks, reptile keepers, restorers of old machinery, and the organisations they sustain to help them pursue their interests, are also evidence of our need and capacity for creative labour.

Insisting on the need for markets means accepting that the pursuit of profit, rather than the satisfaction of human needs, will always govern human affairs and that we, as a society, can’t consciously decide how to organise our priorities in production and hence consumption. It involves a lack of insight into the exploitation and alienation which constitute capitalism and are necessary features of any large-scale, market economy, as well as a profound lack of imagination.

Judged on the extent to which they involve extensive democracy and erode fundamental features of capitalism, there’s no real socialism in Harcourt’s limited regulation of property rights, the Scandinavian welfare states, the state capitalist dictatorships or in proposals that accept the market as an indispensable economic mechanism.

The socialism we need must build a society that allows its members to flourish by eliminating the fundamental features of capitalism that these versions of socialism share.