Socialism Was Born Bad: The Case of Oskar Lange
By Bryan Caplan
Oskar Lange is arguably the most famous of the market socialists. His fans often see him as a great spokesman for “socialism with a human face.” In the early 1990s, I attended a talk where Ken Arrow lauded Lange as a great friend of freedom.
While I always scoffed at this praise, I was still taken aback when I happened to read Lange’s famous “On the Economic Theory of Socialism” (Review of Economic Studies, 1937). His fans notwithstanding, Lange’s views strikingly confirm my view that the socialist movement was “born bad.” Though Lange was an exceptionally economically literate socialist, his clarity of thought led him directly to a totalitarian vision that he gladly embraced.
You need not take my word for it. Just read Lange’s case against socialist gradualism – and remember that this is the era of Stalin. [All italics original].
The opinion is almost generally accepted that the process of socialisation must be as gradual as possible in order to avoid grave economic disturbance. Not only right-wing socialists but also left-wing socialists and communists’ hold this theory of economic gradualism. While the latter two regard a speedy socialisation as necessary on grounds of political strategy, they nevertheless usually admit that, as far as economic considerations alone go, a gradual socialisation is decidedly preferable. Unfortunately, the economist cannot share this theory of economic gradualism. An economic system based on private enterprise and private property of the means of production can work only as long as the security of private property and of income derived from property and from enterprise is maintained. The very existence of a government bent on introducing socialism is a constant threat to this security. Therefore, the capitalist economy cannot function under a socialist government unless the government is socialist in name only. If the socialist government socialises the coal mines to-day and declares that the textile industry is going to be socialised after five years, we can be quite certain that the textile industry will be ruined before it will be socialised. For the owners threatened with expropriation have no inducement to make the necessary investments and improvements and to manage them efficiently. And no government supervision or administrative measures can cope effectively with the passive resistance and sabotage of the owners and managers.
Why not compensate owners to forestall these problems?
[T]o be fully effective the compensation would have to be so high as to cover the full value of the objects expropriated. The capital value of these objects having been maintained on an artificially high level by monopolistic and restrictionist practices, the compensation would have to be far in excess of the value of these objects in a socialist economy (and also under free competition in capitalism). This would impose on the socialist government a financial burden which would make any further advance in the socialisation programme almost impossible. Therefore, a comprehensive socialisation programme can scarcely be achieved by gradual steps. A socialist government really intent upon socialism has to decide to carry out its socialisation programme at one stroke, or to give it up altogether. The very coming into power of such a government must cause a financial panic and economic collapse. Therefore, the socialist government must either guarantee the immunity of private property and private enterprise in order to enable the capitalist economy to function normally, in doing which it gives up its socialist aims, or it must go through resolutely with its socialisation programme at maximum speed. Any hesitation, any vacillation and indecision provokes the inevitable economic catastrophe. Socialism is not an economic policy for the timid.
Macabre words to write four years after Stalin’s decidedly “untimid” collectivization program. Is it possible that Lange was a concern troll trying to destroy revolutionary socialism from within? Highly unlikely. His conclusion, though mannerly, is vintage romantic socialism in the spirit of Lenin – or even Sorel.
Marshall placed caution among the chief qualities an economist should have. Speaking of the rights of property he observed: ” It is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life.” But he did not fail to indicate that the great founders of modern economics were strong not only in caution but also in courage. Caution is the great virtue of the economist who is concerned with minor improvements in the existing economic system. The delicate mechanism of supply and demand may be damaged and the initiative and efficiency of business men may be undermined by an improvident step. But the economist who is called to advise a socialist government faces a different task, and the qualities needed for this task are different, too. For there exists only one economic policy which he can commend to a socialist government as likely to lead to success. This is a policy of revolutionary courage.
At least Lenin was honest enough to call his policy revolutionary “terror.” But it’s just two perspectives on the same policies. For Lange – like the other founding fathers of socialism – courage is the courage to practice terror.