The problem with answering this question is that there is a wide spectrum of political thought conventionally categorized as being somewhere on the socialist spectrum when not all of it is as most people commonly think of socialism.
Without a degree in Political Science, what’s commonly thought of as “socialism” is Marxism, in which a free society is to be transformed by violent revolution or coercive means into one of a centralized totalitarian government that owns the means of production manned by a monoculture of politically correct oppressed workers as a step towards a communist “workers’ paradise”. Wherever that has been attempted, massive carnage and/or societal collapse ensued. The concept is repugnant to Americans since we have spent much blood and treasure over several decades to prevent such societal madness from infecting other nations, and in keeping it so.
Social programs alone do not a socialist polity make. Just because a country or an organization has social programs does not make that country or organization “socialist”. For example, the United States has welfare programs, Social Security, Medicare, Medicaid, public education, publicly funded libraries, government guaranteed loans, public health insurance, food assistance, housing subsidies, public utilities, public postal system, energy subsidies, childcare assistance, a communal military, etc. But, despite the desires of the Progressive wing of the Democrat Party, one would not consider the United States a “Social Democracy” in which the means of producing and distributing goods is owned by either a centralized government, or in partnership with the private sector, that plans and controls the economy. We are still a free market Democratic Republic.
Accordingly, not all systems of societal governance, care and prosperity can be rightfully considered socialist. So, what are the differences?
Paramount is the primacy of concepts that align with virtuous (non-perverse) incentives and human nature.
Equity of Outcome vs Equality of Opportunity
Equity of Outcome’s objective is to create a state in which all people have approximately the same material wealth and income, or in which the general economic conditions of everyone's lives are alike. Attempts to achieve equality of outcome have historically killed initiative and innovation for lack of incentive and created an apathetic monoculture of mediocrity as seen in Maoist China, Stalinist Russia, Kim regime North Korea, etc. Where attempted on a community level, once the inherent unfairness of outcome between producers and slackers is realized, the producers leave and the community fails.
Conversely, equality of opportunity’s objective is to provide a level playing field whereby opportunities are won by those who are most qualified and are retained by those who perform most ably, and don't go to persons for reasons deemed arbitrary or irrelevant, such as circumstances of birth, upbringing, having well-connected relatives or friends, religion, sex, ethnicity, race, caste, or involuntary personal attributes such as disability, age, gender identity, or sexual orientation. It is equality of opportunity and the rewarding of merit alone that made America the top destination of immigrants, the most diverse cultural melting pot, and the economic powerhouse of the world.
Collective Ownership vs Employee Ownership
Collective ownership of the means of production refers to ownership either by the state (communism) or indivisible community “ownership”. In either case, no one’s livelihood is directly dependent upon the performance of the means of production. Bureaucrats are paid by the state almost irrespective of job performance. Members of a “community” have their own individual means of earning a living mostly independent of the major industry, except where directly employed or by community dividends through no effort of their own. As such, no one is truly personally responsible and accountable for the performance of the means of production and a tragedy of the commons usually ensues.
Conversely, employee ownership, as in a producer cooperative, ensures that each employee takes personal responsibility not only for their individual job performance but also, by voting on major decisions, for the performance of the enterprise as a whole, both upon which their livelihood directly depends.
Collective vs Managerial Decision Making
Collective decision making’s objective to achieve a consensus (i.e., EVERYONE in agreement) on ALL decisions, which is almost never possible without much consensus building having already been done, results in costly delays and/or inaction. When consensus cannot be achieved, the fallback is majority rule – pure democracy (aptly described as two wolves and a lamb deciding what’s for dinner). As such, decisions get based on groupthink or mob rule, resulting in a tyranny of the majority.
Conversely, managerial decision making ensures that those who are most qualified and personally accountable make the major decisions. When coupled with managerial term limits and a personal stake in the outcome, the most responsible and productive decisions get made or rapidly revamped.
Free Market Cooperativism
An example of the ideological and workability gulf between socialism and producer cooperatives is what occurred around the towns of Bologna and Emilia Romagna, one of the poorest regions of Italy. In the 1970s there was a standoff between the ruling communist party and producer cooperative leaders who made it clear that if forced to adopt socialist governance policies they would move operations elsewhere. The communist party backed off and played only a support role instead. The result was a collaboration that turned one of the poorest regions of Italy into one of the wealthiest areas anywhere in Europe.
That the producer cooperatives got the ruling party to back off and support their non-Marxist governance model demonstrates what can be accomplished when the basic utopian failure points of socialism are replaced with concepts more consistent with free markets and human nature.
Another excellent example is the Mondragon Cooperative, which started in what was at the time among the most oppressed and poverty-stricken areas in the Basque country of Spain after WW II. Since then, it has scaled from a small local startup to a global enterprise.
Mondragon employees must buy stock in the company and are paid salaries based on their individual job duties. Stock value depends on organizational performance as a whole and their salaries are based on individual job performance. They don’t accept outside investors. Each gets one vote in the annual General Assembly. If the organization does well, a portion of profits is distributed. If it does poorly, a portion of the bonus pool is deducted to make up for any shortfall. Any employee-owner can be elected to represent their department on the Business Council for limited 4-year terms (which are staggered every 2 years to prevent formation of management cliques), after meetings of which they return to their regular job duties. This prevents the establishment of oligarchies and of slackers or free riders.
Social Welfare vs Employee Perks
It is common practice in a free market democratic republic for employees to earn not only a salary but stock options in their companies, healthcare and retirement benefits, life insurance, disability benefits, workers' compensation, living stipends, student loan repayments, college grants and scholarships, paid training and development, continuing education, travel expenses, company equipment, company transportation, remote work flexibility, investment opportunities, and an office to work from. Does providing those employee perks make them into socialist enterprises?
If not, then a producer cooperative that provides not only a salary but employee stock ownership, housing (instead of just an office), on-site holistic healthcare, on-site family education and continuing training & education, along with all the other perks commonly provided by business enterprises cannot be considered “socialist”.
The primary difference between socialism and a cooperative social enterprise is that the former is based on arbitrary entitlements whereas the latter is based upon merit alone.
The Middle Way
Political gamesmanship between the "Left" and the "Right" has resulted in an ideological dichotomy that promotes reductionist binary thinking and thus polarization and divisiveness, blocking societal coherence, unity, and productivity. Candid perception of what's most workable for the prosperity of individuals, organizations, and society generally - irrespective of ideological origin - is thereby obstructed when it's somewhere in the middle:
Rainbird Village Producer Cooperative
Rainbird Village is an employee-owned, regionally self-reliant Utah Benefit Municipal Corporation and Cooperative Enterprise modeled after the highly successful Mondragon Cooperative and producing multiple regenerative products and services for the open market. Thereby, it provides to its employees a no-cap earnings potential, stock ownership, on-site housing, on-site holistic healthcare, on-site family education and continuing training & education along with all the other perks commonly provided by business enterprises.
This gives our people income from, and equity in, multiple income streams that they control, as well as liberates them from mortgage plantation servitude, public education indoctrination, sick-care exploitation, long supply chain addiction, industrial food risks, long commutes & traffic congestion, and urban sprawl isolation, freeing up approximately 40% of their disposable income.
As such, we have found a Zen mix of care for People, Planet and Profits.
Harrison Quigley
Co-founder, Rainbird Village