But socialism really took off in midcentury, spurred by the writings of German philosopher Karl Marx and the rise of labor unions. A process of de-nationalisation began, with leasing of publicly owned plants to national and foreign entrepreneurs, often including former owners dispossessed during War Communism; new private enterprises were allowed to employ up to 20 wage-employees besides family members.
Max Weber saw in socialism an acceleration of the process of rationalization commenced under capitalism. Finally, it is highly questionable whether current high rates of unemployment, worsened by the austerity policies enforced by the IMF and the EU with the tight constraints of the Maastrict Treaty, the so-called Growth and Stability Pact, and the Fiscal Compact and concentrated on the younger generations, are really necessary to promote capitalist dynamism and innovation.
Financial markets contribute to economic growth at the cost of a greater vulnerability and potential instability.
At the global level income distribution recorded a small reduction in inequality due to the higher income growth in countries on average poorer like India, China and Brazil, but principally because of the under-representation of the richest in household surveys samples and the concealment of their wealth in fiscal paradises.
Other socialists, however, have been willing to accept or even welcome private ownership of farms, shops, and other small or medium-sized businesses.
The last quarter of the twentieth century marked a period of major crisis for Communists in the Eastern bloc, where the growing shortages of housing and consumer goods, combined with the lack of individual rights to assembly and speech, began to disillusion more and more Communist party members.
The first objections to Marx came from the mutualists who opposed communism and statism. The ascent to power of Reagan-Thatcher led to neo-conservative and hyperliberal policies, hostile to workers and to re-distributive policies, the welfare state was reduced, unemployment rose to levels unprecedented in the previous 50 years, trade unions weakened and the number of their members fell.
This hyperliberalmodel was developed by the Chicago School of Law and Economics and by the economists of the Mont Pelerin Society, founded in by Friederich Hayek, Milton Friedman, and five other economists all subsequently honoured by a Nobel Prize for economics, as well as 32 other conservative economists such as Eucken, Mises, Roepke.
Inequality does not. These adjustment processes are rooted in the maximisation of profit on the part of enterprises operating in a system of markets, whose owners appropriate profit to their own advantage.
That system achieved its own survival but could not deliver post-war reconstruction, let alone industrialisation and growth; it was destroyed by its own contradictions.