States that are nominally socialist, implying that democratic principles are adhered to in political decision-making, are not really so when the state governmental or party apparatus makes all fundamental decisions. Without referenda from the people on issues, full elections of officials, and self-management by organizations of labour and other productive classes, there exists a statist political ideology that wishes to draw all power to the centre.
Pseudo-socialism can lead to fascism, as was the case in Nazi Germany. The Dutch tried to maintain their colonial presence in Indonesia through attempts at state socialism.
State socialism, a bourgeois-reformist, opportunist concept, according to which socialism is reduced to state intervention in the economy and in social relations. It is without any true socialist content. It arises from bourgeois lies, which call any attempts to restrict free competition, socialist. It is a petit bourgeois illusions of utopian socialists, who see socialism being introduced by the government and ruling classes.
To remedy these wrongs (the unjust distribution of wealth and the poverty of the workers), the Socialists encourage the poor man's envy of the rich and strive to do away with private property, contending that individual possessions should become the common property of all...; but their contentions are so clearly powerless to end the controversy that, were they carried into effect, the working man himself would be among the first to suffer. They are moreover emphatically unjust, for they would rob the lawful possessor, distort the functions of the State, and create utter confusion in the community". (Papal Encyclical, Rerum Novarum, 1891).
Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. Socialism likewise maintains that the good of the individual can be realized without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil. Man is thus reduced to a series of social relationships, and the concept of the person as the autonomous subject of moral decision disappears, the very subject whose decisions build the social order. From this mistaken conception of the person there arise both a distortion of law, which defines the sphere of the exercise of freedom, and an opposition to private property. A person who is deprived of something he can call "his own", and of the possibility of earning a living through his own initiative, comes to depend on the social machine and on those who control it. This makes it much more difficult for him to recognize his dignity as a person, and hinders progress towards the building up of an authentic human community. (Papal Encyclical, Centesimus Annus, 1 May 1991).