Basing themselves on a historical-materialist analysis of the tendencies inherent in the development of socialised productive forces, Marx and Engels distinguished two phases in the development of the future socialist or communist society.
The first phase of socialism, while based on a far higher level of development of the productive forces than exists under even the most advanced capitalist economy today, will not yet be fully mature economically and entirely free from the traditions and vestiges of capitalism. While the means of production will have become common property and all citizens will have become working partners in a single, worldwide, democratically centralised planned economy, in the first phase of socialism it will still not be possible to eliminate inequality in the distribution of consumer goods. Apart from the free satisfaction of the most basic needs, the distribution of consumer goods and services by and large will continue to be measured in terms of the quantity of labour given by the individual to society. Since no two individuals are really equal in their capacity for labour, or in their needs, the principle of equal remuneration for equal amounts of labour gives unequal individuals equal amounts of products for effectively unequal amounts of labour. This inequality in the division of consumer goods and services will mean that in the first phase of socialism a state will continue to be necessary to regulate the distribution of products and the allocation of labour. However, since classes will have withered away this state, which consists of the armed workers themselves, will have lost its character as a coercive instrument for the systematic repression of one class by another.
In the higher phase of socialism, humanity will pass beyond formal equality in the distribution of consumer goods and services to actual equality, that is, to the operation of the rule from each according to their abilities, to each according to their needs. As a result of the planned development of the productive forces and the full automation of production, socialism in its higher phase will be able to assure society such an abundance of goods that labour will cease to be a requirement for the satisfaction of people's material wants. Each individual's material wants will be freely satisfied according to need. Labour itself will disappear and be replaced by free creative practice. The state, as a special apparatus of coercion, will wither away and be replaced by a purely technical administration of the general business of society based on the people's voluntary fulfilment of social duties. Socialist society in its mature phase will be based on the most complete human solidarity. The leisure and educational opportunities which will be afforded to everyone through the provision of material abundance will offer every individual possibilities for the fullest development of their creative abilities. For the first time a truly human society will exist in which the free development of each individual will be the condition for the free development of humanity as a whole.