In the theoretical work of Karl Marx and Friedrich Engels, socialization is the process of transforming a solitary economic activity into a social relationship and collective endeavor. Socialization takes place during the development of capitalism where the act of production becomes centralized and undertaken by firms in a highly mechanized and collective manner, in contrast to the pre-capitalist modes of production which were largely solitary in comparison. Socialization occurs due to centralization of capital in industries where there are increasing returns to scale.
In Marxist theory, a contradiction develops between the socialized production and the private ownership and appropriation of the surplus value and profits. Classical Marxist theory posits that this contradiction will intensify to a point where socialization of the surplus value appropriation in the form of social ownership of the means of production will be necessitated, resulting in a transition from capitalism to socialism.
In Marxist theory
Socialization is a process that begins to take place in capitalism as large-scale manufacturing based on a vertical division of labor displaces "cottage industry" - the small-scale production shops, guilds and family-run businesses that existed in feudal economies. This process transforms the act of production into an increasingly social and collective process involving planning and greater coordination among producers, but appropriation of the social product in the form of private profit continues to be a private affair by investors and owners of the enterprise. Furthermore, exchange of the commodities produced is the private act of a small group of capitalists or an individual owner. As the process of socialization expands, a contradiction between the socialized nature of production and the individual nature of appropriation of the surplus product arises, coinciding with the obsolescence of the functions performed by the capitalists (the private owners).
The socialization and centralization of industry and capital under capitalism lays the foundations for a socialist economy. Socialism entails ownership of the socialized means of production by the workers engaged in the production either in the form of worker ownership or social ownership by all of society. The establishment of social ownership over the means of production resolves the contradiction between social production and private exchange/appropriation under capitalism.
Karl Marx envisioned socialization under socialism as involving an expansion of self-management and workplace democracy in the workplace, in contrast to the rigid hierarchy and bureaucracy that characterizes traditional capitalist enterprises. As workers gain more autonomy, they gain more collective decision-making power and control over their work processes. Socialization of industry is different from nationalization, which can, but usually does not imply the socialization of the workplace; socialization of industry can take place in private or cooperative-owned enterprises. In a capitalist economy, socialization is limited because the socialized enterprise continues to operate in a commodity economy under the capitalist laws of motion. Socialization therefore takes a different form in the capitalist mode of production than in the socialist mode of production.