The Basic Problem With Modern Socialism

The basic problem with modern socialism is that it’s not actually socialism – it’s anti-marketism. Socialism itself, the idea that the people doing the producing should own the productive assets used to do the producing, well, why not? As long as it’s all voluntary who gets hurt by the existence of John Lewis? Anti-marketism is an entirely different thing and one that condemns us all to penury.

So, why conflate the two? As, in the problem, all too many do.

An example today from Larry Elliot:

Why? Because the forces of conservatism are strong. Change comes about only when the pressure for it becomes too great to resist. The financial crisis provided one such opportunity to reform an economic system that for many people clearly wasn’t working; Brexit was a second. The left’s case for Brexit has always been based on the following notions: the current economic model is failing; socialism is needed to fix it; and the free-market ideology hardwired into the EU via the European Central Bank, judgments of the European court of justice and treaty changes will make that process all but impossible without a break with the status quo.

Note the placing of opposites there – socialism and free markets. Yet they’re measurements of an economy along entirely different axes. John Lewis is socialism, so is Mondragon, the Co Op. Social or societal ownership of productive assets. Clearly it has its place and that place isn’t everywhere. If it truly were more efficient as an ownership and organisational structure then it would, in that free market, have outcompeted the capitalist forms. It doesn’t everywhere, so it ain’t, everywhere.

Most obviously, it’s not going to work where capital requirements are high. 500 workers are unlikely to have a few billion to throw at building an oil refinery that they’ll work in. They’ll need outside sources of capital – we’re in a capitalist organisation therefore. But where it does work then why not allow it to work? No skin off anyone’s nose.

Anti-marketism though:

It’s the same problem we see every time. It’s simply not possible to know enough about a complex economy in order to be able to plan it. Actually, as Cosma Shalizi has shown with reference to the Soviet Union, it’s not even possible to know what to plan for.

There’s a fairly simple choice here — use central planning and have a simple economy, or use another method and have a complex one. This itself has a corollary – simple economies will be poor ones. A complex economy supports fine grained division and specialisation of labour, with the resultant trade in production, that’s what the complexity is. And the division and specialisation is, as Smith and Ricardo – backed up by Marx even – told us, what produces the wealth and high incomes we all so enjoy. Planning can’t support the fine grained part of the economy because of a lack of information, so a planned economy will always be a non-complex and thus poor one.

Friedrich Hayek was not the High Priest here, more the recorder of a generally agreed conclusion. Given that we cannot use planning we must use that only other calculating engine we’ve got: the economy itself and the price system. That’s the only system which will support complexity and thus wealth generation to any degree.

And that’s the problem with our modern socialists. They’re failing to grasp the most basic essentials of political economy. Socialism works at points and places, as does capitalism. Non-market economies don’t work at any level of complexity or wealth. And yet those socialists are parading around insisting not on a bit of bias toward one of the systems that works, socialism, but against the only one that does, markets.

They’re deliberately insisting that we all become poorer. A bit of a problem, no?

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GR8M8SRhoda Klapp Recent comment authors
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Rhoda Klapp
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Rhoda Klapp

Socialism on a small group basis, fine. Socialism on a national basis (what should we call that?) not so good. Socialism on an international basis? Can work only in totalitarian stasis.

GR8M8S
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GR8M8S

I do wonder what will happen come the day John Lewis needs more capitol? Will their current owners throw money into the hat? And will those who earn more cough up more while keeping the ownership at the same levels?