Market socialism is an economic system where the means of production are not owned or planned but only mediated through the market. In this system it is either the state or the workers who own the means of production, i.e. it involves public, cooperative, or the society as a whole. The model or structure of the market decides how the profit needs to be utilized; whether to give it to the employees as remuneration, use it for the society, or distribute it among the population in the social dividends.
Some of the features of market socialism are as follows. In market ownership, there is public ownership of the nonlabor factors of production. Decentralized decision making takes place in terms of the firms, households, and information structure and all the processes are coordinated by the markets. It negates the expropriation underlying the surplus-value prevalent in other systems of production.
Market socialism is self-regulating and a complete system that can be easily distinguished from the mixed economy. It is also termed a liberal economy because production and consumption are guided by the market rather than the government. Secondly, the enterprises are publicly owned and operated. Many British political scientists are of the view that while this system retains the mechanism of the market, it somehow work towards the socialization of capital ownership. The proponents consider it a good system believing that it combines the advantages from the concept of the market with those of socialist economics. They view the market not as something exclusively associated with the ideology of capitalism but also as something that is fully compatible with collective worker ownership over the means of production as well.
One of the first attempts to establish market socialism was in the Soviet Union during the 1920s but it remained unsuccessful. However, soon elements of the system emerged in Hungary, Czechoslovakia, and Yugoslavia in the 1970s and 1980s. The Soviet Union tried to instill market socialism again under the leadership of Mikhail Gorbachev and many discussions took place concerning the topic that USSR should move to be a market based socialist system.
Market socialism emerged from three important sources. The first source comprises of the efforts to accommodate the theory of Marxism with the events occurring after the death of Marx. Marx was against capitalism as he believed that capitalism exploited the workers or the proletariat by the bourgeoisie who owned all the means of production. Marx saw capitalism and the market producing alienation, inequality and class conflicts. The second source traces back to the early 1920s, just after the Russian revolution when Vladimir Lenin instituted the new economic policy in response to the instability arising from the centrally planned and controlled economy. The third source came from Yugoslavia when in the 1960s a form of market socialism was adopted in distinction to centrally planned socialism of the Soviet Union.