In his essay “Critical Realism and Socialist Realism,” literary theorist and philosopher Georg Lukács aims to articulate the relationship between critical realism and socialist realism. He notes that the crucial distinction between the two is that socialist realism is based on a “concrete" perspective and uses that perspective to describe forces that work towards socialism "from the inside.” It is not a “foil” to capitalism in the way he thinks critical realism is; it is instead a valuable, independent entity.

Lukács goes onto to describe what he means when he says that socialist realism works from the inside and not the outside. He feels that writers who work from the inside seek to articulate objective truths amidst dynamic social contradictions. For instance, he points to Charles Dickens and says that Dickens explores his poor characters from the inside and his middle-class characters from the outside. Lukács argues that writers who use the concrete perspective found in socialist realism are more aware of the development of society than critical realists are. He is a proponent of critical realism, but he uses this comparison with socialist realism to show how some critical realists throughout history have overlooked many true social realities. Ultimately, he celebrates the literary possibilities that socialist realism allows for. He explains:

The perspective of socialism enables the writer to see society and history for what they are. This opens a fundamentally new, and highly fruitful, chapter in literary creation.