In a sense, all economies are socialist to the extent that private depredations will result in legislation or revolt. Wealth is always held at the sufferance of the mob. You possess what you can defend; you own what the law says you own. Ownership is way more efficient, but it must be negotiated, which is why it is right to describe war as politics continued by other means, politics as bargaining continued by other means.
No bright lines separate private negotiation, collective bargaining, and politics. In a functional Congress, interest groups negotiate areas in which private companies will not be allowed to compete. In 1964, for example, Congress prohibited businesses from competing for white customers by excluding black customers. Before that, companies were forbidden from competing on price by hiring children or paying slave wages or locking seamstresses in firetraps.
The real dichotomy for which the capitalism/socialism dichotomy stands is between the “you eat what you kill” paradigm and the “we’re all in this together” paradigm. In this metaphor, everything we eat is something someone has “killed.” The question then remains as to who is to do the killing, and who is to do the eating. Capitalism represents the idea that the killing be done by those best able to do it, as proved by competition, with first dibs on the kill as the incentive. Socialism represents the idea that the killing be done by people selected to do it by people elected to select them, with the former having a salary as incentive and the latter having re-election as incentive.
Conceptually, re-election should be incentive enough to produce a sound choice of capital allocators and managers. But history shows that incumbency too often begets corruption and electoral skulduggery. The result, as illustrated (I’d say proved) by the Soviet Bloc, is that politicians do not in fact select good managers; they select cronies and rig elections. Therein lies the danger of “socialism,” and the best argument against the concentration of economic decision-making in the political class, which is really what people mean these days when they use that word.
The fear of socialism is frequently expressed as fear that the profit motive is essential to production of good products. But why are managers selected by politicians less effective than those selected by risk-taking capitalists? The answer often given is that politicians do not know enough — never met a payroll — but why is that so? I see no conceptual reason why political managers could not know enough, why they could not be drawn from the ranks of effective managers, could not have MBAs, could not be vetted for that ability through the electoral process. But they are not so vetted by the electoral process. The problem is that socialism only works at the “conceptual” level. In the wild, with homo sapiens as the implementing species, it does not get the job done.
The idea of “unfettered” capitalism is a red herring. Defenders of “capitalism” are not defending such a thing. They are defending a system in which the allocation of capital and choice of managers is based on competition and risk, versus one in which those decisions are made by politicians. The latter system is conceptually sound if we assume that political competition will produce officials with the right skills and incentives to run the economy. (One might, for example, imagine a government that capitalizes competing state-owned enterprises.) I suspect that most supporters of public decision-making believe that the electoral process will produce good decision-makers. Those people are mostly wrong, in my view. I would argue that calling such people “socialists” and calling those who favor a risk-based model “capitalists” is close enough, as they say, for government work.