The term “socialist” conveys a variety of meanings that are shaped by national contexts (German, French, and English speaking countries).
To limit the range of coverage in view of given space constraints, the main focus will be non-Marxist economic contributions to the concept of a socialist economic order. From the viewpoint of economics, a socialist economic order has two essential elements: social ownership of the means of production, and coordination of economic activities through a central plan instead of private ownership and coordination via independent markets.
Authors who deal with measures of social policy to improve the living conditions of the working class, but not under the perspective of a socialist order, will be mentioned but given less attention.In contrast to Britain, in Germany and in Austria socialism as a political movement was dominated by Marxist theory from the 1870s onward to 1914. This implied adherence to the labour theory of value which was vigorously defended by Karl Kautsky and Rudolf Hilferding. As a consequence, marginalist thinking was rejected as “Vulgarokonomie” - “vulgar economics” (Chaloupek 1987). Rodbertus’s version of socialism, developed independently of Marx, is of theoretical interest only, while the so-called “Kathedersozialisten” (socialists of the chair) were opposed to socialism and did not support the Social-Democratic Party. Lassalle was recognized as co-founder of the party. If his theory of the state could not be harmonized with Marx’s approach, it became evident before World War I that it was in many cases better suited as a basis of concrete policy demands, when the Social-Democratic Party gained strength as a political force in the parliamentary system.
When the debate about socialization erupted at the end of World War I, Marxists - theoreticians as well as politicians - were helpless. They turned to concepts offered by non-Marxist socialists or even bourgeois theoreticians and practitioners. The theoretical background of non-Marxist socialist economists in Germany and Austria was marginal- ist economics, mostly of the Austrian School type.
Unlike most Marxists, they did not consider the capitalist market economy an “anarchic” system without social purpose. In their understanding of the functioning of the market system, there were important elements which had to be preserved for a functioning socialist system.The challenges posed by the Great Depression of the 1930s were even more difficult to meet than those of the post-World War I situation. National economic planning, which emerged as a central concept of economic policy debates, would have required socialization which was practically unfeasible and/or politically impossible. Keynesianism which provided the foundations for a new approach to economic policy came too late for Social Democrats in Germany and Austria.
Even after World War II, the Social Democrats in Germany and Austria were hesitant to embrace Keynesianism, which they adopted only in the 1950s as a theoretical basis, combining elements of a market economy and state control.