>Dictatorship is a much better word.
No, it isn't; it's a much worse word, because it hides the economic reality of living in a country. And that's what socialism vs capitalism is all about: the way the economic activity is conducted in a country, and the way it affects everyone's life. The regimes were different in Castro's Cuba and Pinochet's Chile, and saying they were both a dictatorship is a way of sweeping that difference under a carpet.
I'm sorry, but it's ludicrous to claim that the Eastern bloc countries were not socialist. The most charitable way I can characterize it is as an extreme instance of the no-true-Scotsman fallacy.
Certainly during those regimes' existence no one seriously doubted they were socialist (except people who wanted to redefine the word "socialism" for their ideological benefit). In fact, even Chomsky realizes he has to explain that somehow and makes up justifications for why the West called USSR socialist and for why the USSR called itself socialist. Those justifications are idiotic, by the way (he's claiming the Soviets called themselves socialist to get sympathy from Western socialists, as if the internal propaganda and ideology weren't in any case by far, by x1000 the more important reason).
It's also not true that "the entire country was owned by a small clique", etc. It was not owned, it was controlled, and the 'small clique' (actually the Party bureaucracy) ostensibly represented the will of the workers, through formally functioning though farcical mechanisms such as elections, the extensive Communist Party hierarchy down to individual members, etc. It was not quite a dictatorship - dictators tend to pass their countries to their offspring or in absence of those to hand-picked successors. In the USSR, the power went to another top Party official after an internal power struggle. Never to a descendant (compare with North Korea, which is closer to a socialist dictatorship).
Now having centralized control over the economy by, say, the top echelons of the Communist Party, representing the will of the people, is an idea that's perfectly compatible with socialism and Marxism. That is why, in fact, countless socialists in the West supported the Soviet Union and saw it as the torch-bearer of the socialist dream; they were not confused about the fact that the economy in the USSR was under central control! Now many of them were naive in thinking that the Party leadership really represented "the will of the people", which it generally didn't. But that's not a reason to say it wasn't socialism; it's a reason to say, maybe, that it was bad socialism, socialism gone haywire, a socialist dictatorship, what have you. But it was, very clearly and unmistakably, socialism. Just as if in a capitalist country an oligarch clique takes over all the real power, that's not a reason to stop considering it a capitalist country. If you don't do that, the no-true-Scotsman fallacy destroys any chance you have of objectively observing whatever it is that actually happens in socialist or capitalist societies, and learning whatever lessons there are to learn from that.