Utopian Experimental Socialism

“All the other collective settlements, except for some that were first and foremost religious communities, had similar histories of failure.”

Now, I’m no socialist, but I am highly tempted to say this experimental result appears to run counter to the socialist calculation arguments. There are roughly two arguments against socialism working:
1) The incentives. People don’t like to work for nothing.
2) The knowledge problem. Those making the decisions are lacking the appropriate knowledge to make the decisions. (That’s one thing Hayek wrote about quite convincingly for those late to the party)

My understanding of the socialist calculation debate is that when you told socialists that their ideas wouldn’t work because people would free-ride, they often responded by saying that socialist society would foster a new socialist man who would work selflessly for the good of the community. At some point, somebody got tired of that answer and said: “Fine! I grant you your new socialist man. Nevertheless, your central planning committee can’t know whether you need more eggs or more steel. That is something prices do which you can’t solve.” The free-marketeers won and God saw that it was good.

But look at the data above. Both the religious and secular communities have the same calculation problem. The difference between them is that (most likely) religious fervor turns the members of the religious communities into the new socialist man. So this does seem to be a point scored in favor of the feasibility of socialist calculation…

(Why this is not dispositive is left as an exercise to the reader.)

@PrometheeFeu

Good point. I think the trick is quis custodiet that religious fervor. Is the fervor voluntary (“marketplace of religion”) or forced? If voluntary we might imagine some natural law constraints. If forced the sky’s the limit (Pol Pot, Hitler, etc).

Owen is a really interesting case. Has anyone written a biography informed by solid economic analysis? He clearly was quite effective as a businessman and municipal administrator. Perhaps the discipline of needing to meet a payroll and dispense dividend checks kept his oddities within workable bounds. After his business career, virtually everything he touched was a failure. Of those failures, his London experiment in the labor theory of value is more interesting to me than his Wabash experiment: Owen knew nothing of farming on a frontier.

Moreover, the history of the Harmonists after the sale of their Wabash community is interesting as well. They survived as a voluntary community of religious communists for decades and were quite prosperous. (They were not socialists at all; empowering the state was not part of their scheme.) They literally died out, not because of poverty but because they engaged in celibate marriage. (Obviously, they were a highly and oddly motivated bunch.) You can still see parts of what was their little town about twenty miles northwest of Pittsburgh.

As Patrick Sullivan notes, we did test Marx’s ideas in the 20th century (and the 21st); however, the record is not a spectacular and bloody failure. On the contrary, as Steven Pinker notes in his book, “The Better Angels of our Nature: How Violence has Declined”, socialism has arguably been peaceful, prosperous, and successful so far. It remains to be seen whether Europe and the USA can print money indefinitely without causing violence.

One of the best histories of the Soviet Union is Utopia in Power by the dissidents Geller and Nekrich.

They were wrong, but at least they had the common sense and common decency to beta test their radical proposals on a small scale with consenting subjects.

Similarly, it would be nice, Prof. Caplan, if you would choose some more moderate or gradual way of implementing your proposal of vastly increased immigration.

PrometheeFeu writes:

But look at the data above. Both the religious and secular communities have the same calculation problem. The difference between them is that (most likely) religious fervor turns the members of the religious communities into the new socialist man. So this does seem to be a point scored in favor of the feasibility of socialist calculation…

I see your point, but I’d argue that if it’s a point on socialism’s side for the calculation debate it’s a minor one at best that only works temporarily on small and relatively primitive societies.

The Hayekian version of the knowledge problem is that knowledge is dispersed among too many people for any central planner to come up with effective answers. But, logically speaking, the smaller the community the less this problem would apply. Thus a community of 500 has a lot fewer knowledge problems than a community of 1,000,000 people.

The version of the problem from Ludwig von Mises is somewhat different. This argument states that without prices determined on a competitive marketplace it becomes impossible to rationally allocate the factors of production. Thus the more capital-intensive your society the faster it will break down to effectively autarky. Both the religious and secular socialist experiments had relatively little capital, most of which was acquired from markets and with market models to ape in terms of capital usage that they did have (which was how the Soviet bloc muddled along).

The upshot of all this, Hayek and Mises were both right still, but their effects are largest in bigger societies with more advanced chains of production. Before the secular groups could really feel any of the sting of the knowledge problem, the motivation problem hit. The religious groups overcame the motivation problem, and then stagnated and gradually faded away as they felt the knowledge problems even at their smaller size. If these socialist groups had truly overcome the knowledge problems you would expect the religious groups to be prevalent and real competition to modern distorted capitalism.

I would like to speak in defense of Marx and Engels a little bit.

I generally agree that the thing they called “scientific socialism” had more in common with a religious vision than a scientific one. But this is not necessarily a bad thing a-priori — religious organization was how the European world was organized from 333 to 1600, and this religious order was replaced by Protestantism and capitalism gradually over many decades. The idea of Marxism, as I interpret it, is to reestablish the religious order of the Catholic world, except replacing the metaphysical terms of the earlier Christianity with the scientific materialistic terms which are equivalent in their practical application:

* God becomes “the inevitable law of history”
* The struggle for Christ’s victory on Earth becomes the class struggle
* The inevitable victory in the struggle is the parallel to the inevitable fall of pagan Rome to Christianity.
* The ruling pagans become the bourgeoisie
* The oppressed Christians become the proletariat
* The communist party is the analog of the church heirarchy.
* Dialectical materialism is the liturgy

I see Marxism as parallel to the Christian movement which toppled ancient Rome. This parallel was embraced by some socialists, I think including Marx, who considered the Christian movement as an earlier instance of class struggle. It was also embraced in a different sense by the Fascist movement, who considered themselves as toppling Christianity/Marxism and reestablishing the Roman order of power and submission.

Marxism, in this point of view, is a stringent test to see if capitalism was really a forward evolution, or whether it is a parallel to the barbaric Roman order, with powerful people in higher social classes enslaving lower classes. The idea of Marxism is that the class separation of capitalism is just another version of the old Roman class separation, which threw Christians to lions. Capitalism takes their livelihoods and throws the folks on the street instead.

So Marxism wants to restore a modernized Christian order. It removes all the metaphysical nonsense, no Gods, no angels, no heaven, keeping only the social theory more or less unchanged. The social theory is that progress in society is dictated by a teleological inevitability, and that the end result is that the oppressed classes, the Christians in Rome, the proletariat in a modern industrial capitalist society, are eventually and inevitably victorious in taking control of the economy. You could almost say, because God is on their side, except in Marxism you don’t.

Marxism also removes the social strictures regarding sexual chastity. In Rome, sex was mixed with violence, and used as a tool of oppression, it was sadism, public torture, and power of humiliation. In this context, Paul’s celibacy, and the celibacy of the early Church, was a protest that freed them from the vices that held them back from waging a class war for social justice, and it made sense in that context. But in the 19th and 20th century, the sexual prohibitions had become an anachronism. Still, some figures on the socialist left, like Ralph Nader, also lived largely celibate lives.

Marxism’s unabashedly liberalized sexual mores was one of the recruitment tools, since it drew crowds of young men and women into the ranks, using their sex drive, not social justice.

So the Marxist vision is parallel to the Christian vision, and the Marxist revolutions bring a form of Christian ethics which is free of Christian metaphysics.

In terms of economic policies, the early Marx of 1848 made a lot of sense as viewed from today. He called for the end of the gold standard and institutionalized inflation, liberalized social policy, progressive income taxes, redistribution of income, nationalization of large industries (where competition was generally nonexistent anyway), and generally most of the policies which were standard in mid 20th century market economies. The communist ideal was not explicitly spelled out as a top-down planned economy by Marx, I think mostly because there were many contemporary anarchist communists, who wanted direct worker control of the factories, rather than a top-down command economy. Marx wanted the anarchists on his side, and so ends the manifesto with the strange idea that under communism the state would wither away. His vision, clearly, was that the state would not need to direct the economy once the political worker committees would be set up, these would direct their own affairs to maximize profitability, but they would then distribute these profits to collective gain.

The idea that this vision somehow failed because of lack of incentive is problematic. The record of the Soviet Union on incentive is rather good— many people worked really hard. Their economic output is not a complete disaster when viewed over the span of 70 years, it is only suboptimal when compared to the US or Western Europe in consumer good production and farm productivity.

The education system in the Soviet Union was vastly superior to that of the west, and this was attested to by the extraordinary science and technology development compared to the west, especially when you consider their research budgets were pittances. The Soviet research programs were generally top-notch. The atomic program was comparable to the US only lagging in the 1980s, the space program exceeded the US in many respects throughout its history (again, despite the shoestring budget), speaking as a theoretical physicist, the theoretical and experimental soviet work was top-notch, second to none, despite extreme discrimination in recognition, so that many of the great advances of physical science (the laser, inflation theory) were first made in the Soviet Union, but credit accrued to those in the west who were second but had better publicists and better access to the Swedish Nobel committee.

In terms of the arts, the Soviets excelled also, except here, the heavy handed government censorship was burdensome. The greatest filmmakers of the 20th century were Soviet (I like Eisenstein, but I think Tarkovsky was the greatest, since he was able to mix in classical Orthodox Christian elements along with the Marxist vision, and made a unique cinematic language that is now the standard worldwide), the history of science fiction cannot be understood without noting the heavy contribution in the East, which invented the space-opera in the Sputnik era, and where Stanislaw Lem was writing.

The heavy industry, armaments, steel production, large business, industrial 1960s-1970s minicomputers, in the East these were all competitive with the west. The computers only started taking off in the west in a way that wasn’t matched with the microcomputer revolution, which produced a new industry from scratch using competitive free-market development exclusively. It was in this respect that the Soviet system was deficient. It must be noted that major computer developers in the West, the IBM’s and so on, pooh-poohed the early microcomputers. It must also be noted that Bulgaria or Chechoslovakia (I forget which) supplied microcomputers to the Eastern block in the late 1980s that were surprisingly adequate compared to their western counterparts.

For me, the extraordinary degree of Soviet competitiveness is a testament to just how far away from a free market the west was throughout the 20th century, and in many ways still is. If US heavy industry and large corporate culture was truly optimally efficient, as a textbook free market would be, it should have cleaned the Soviet’s clocks in terms of results. If the US factory farming were really Pareto optimal, it wouldn’t be comparable in efficiency to the Soviet Union’s abysmal factory farming yields.

One of the most inspiring things for me as a teenager was opening up a bundle of “Soviet Life” magazines (they were exchanged in my high school for Life magazines as a sort of high school detante and understanding program). The “Soviet Life” was so skinny compared to an American magazine. When I opened it, I realized why. It had no advertizements! One article I remember detailed the life of some worker who had done something mildly extraordinary, I think it was a tractor driver who was able to meet and exceed quota on a factory farm several years in a row. I was really touched by this, American media has such a hard time doing this stuff. Here was a whole culture that celebrated the achievement of working folks.

I cannot sympathize with the idea that the failure of Soviet communism came from lack of hard work. The failure came from the lack of innovation in the production of consumer goods, and from the annihilation of ancient farming knowledge and methods during collectivization pushes. Soviet goods were homogenous and lackluster (they weren’t terrible, they just didn’t shine like Western goods, and they had no unique touch that made them stand out), the state manufacturers displayed an inconceivable sluggishness in response to new technology or new methods, it was effectively impossible to start a new business venture given the stifling bureaucracy unless you knew someone up on top. This in addition to the murderous lack of political freedom, the horrific environmental record (which was suppressed), and the total lack of accountability of politicians, made the Soviet experience a disaster.

But the East had some plusses that weren’t lost on residents: the products of industry were always free from planned obsolescence, so they lasted forever. East german refrigerators and ovens famously took ten years to arrive, but never needed to be replaced, because they were designed to last (the factory had a backlog and the last thing they wanted to do is to replace something). Further, if you didn’t see advertizements, and just compared the East/West products in their utilitarian efficiency, you wouldn’t often see a major difference.

Everyone could afford the stuff that was available, it just wasn’t always available. The inequality in the system was negligible compared to the west, the income disparity in the 1960s Soviet Union was a factor of 4-6, not a factor of 4,000-60,000. This meant that there genuinely was no class system, and everyone would relate to everyone else as a social equal. This sense of community and shared success is something else that former East German residents said they miss. The Eastern block maintained a liberalized social policy, one of the first edicts of Lenin’s government (reversed two decades later under Stalin) legalized homosexuality.

Generally, people had the freedom to criticize how specific things worked in the system, this was actually encouraged. They were just not free to criticize the system itself. On a blog of East Germans recalling the old life, I read a quote:

* In the East, I could not criticize the government, but I could walk into my boss’s office and give him a piece of my mind whenever I felt like it. Now I am free to criticize my government, but not my boss. I am not sure which freedom is more valuable.

This is an important clue to the failures of the free market system as it exists today. The inability to criticize across class boundaries without horrific retribution in the form of starvation and homelessness is a huge inhibitor of true free market growth. In a true free market, you have the freedom to criticize your boss, because you are not replaceable without cost, and markets, not politics, determine your position. We are not living in such a free market. In such an ideal market, even if you are fired, you can find a new job instantly.

The drive to innovate in the Soviet Union, especially in the early years, was generally extremely strong, unlike the picture people paint. The general idea was instilled by propaganda that the Soviet system was competing with the west, and it was essential that it should win, to lift up the workers of all the world to a better standard of living. This is an incredibly strong incentive for individuals, especially for young people. It motivates one much better than the idea that maybe you can have an extra television or a yacht. The claim that the extraordinary compensation of high class Western corporate folks is somehow competitive incentive is generally a load of hogwash— it’s just siphoning off corporate profits into pockets without any competitive counterbalance. When salaries differ by factors of a thousand, people will work hard just to keep their class position, even if the salary gap is slashed to a factor of 100 or 10. The social incentive to get ahead is measured in differential pay, the difference between you and your class-neighbor, not in absolute amount of money.

There is a separate incentive for accumulating capital, but capital is not generally something you buy TV’s with, it’s something you use to expand your business. When corporate capital can be turned into private income (at least for a publically traded corporation), this is a market no-no, it suggests that the people who do this are not sufficiently regulated by market competition.

I am writing this long comment to give a fair review of Marxism as it was implemented. It is not reasonable to dismiss this social experiment out of hand with a few slogans, since it’s one success was in something that the West has never been able to do: in the Soviet union, if you were broke and needed a job, you would just go to a construction site or shipping dock, any one, and they would put you to work somewhere doing something useful. If you needed a place to stay, they would put you in a subsidized apartment, and you would not go homeless. If you needed medical care, you would receive it to the best of the state’s ability, and your children would be given a good education, arguably the best in the world (except for political science). Your path to success was studying technical professions, like engineering, not social schmoozing skills. These achievements, which are shared by all communist regimes, are nothing to sneeze at, it is something that we would all like to see, although we wouldn’t want to give up our political and economic liberty to see them.

Having said all this, the reason I am not a Marxist is because I am convinced (with no actual empirical evidence) that the capitalist system is capable of matching these achievements, and at the same time allowing for innovation and growth at capitalist rates. The only reason to believe this is the idealized mathematical models in economics textbooks, which tell you that in an ideal market, anyone should be able to walk into a construction site or private small business and get work at a good wage at any time, anyone should be able to find affordable housing at the wage derived from this work, and the medical care and education should be superior and equally affordable within a private competitive system. While these theoretical predictions are routinely belied by the dismal social results of capitalism, they can be approximated in a half-assed way using confiscatory taxation and redistribution, while keeping the capitalist social order untouched. You can get most of the gains of the Soviet system using the mix of socialist education and medicine, with private consumer goods and private corporate capitalism you see in Western Europe. But you can’t criticize your boss in Western Europe either.

A true free market in theory should beat the pants off of such a mixed model in terms of growth and equality, but it doesn’t in practice. I spend some time occasionally attempting to reason out why. Unfortunately, I think that on this forum, one is supposed to close one’s eyes to the fact that the market model as it is implemented today fails without state intervention, that it degenerates into slums and obscene wealth side by side, and that the best markets we have today cannot provide those few basic things that the Soviet Union provided to its citizens reliably.

Because of these failures, I think Marx is still relevant. It must be noted that Marx’s magnum opus, Capital, is just a collection of statistics that show that the market under industrialization conditions was operating at nowhere near optimal equilibrium conditions described in books, and that it left the English proletariat destitute and worse off than the cottage industry that it replaced. This observation cannot be argued with, it is a fact of history, noted not only by Marx, but by Dickens and by early labor unions, and the contributions of these folks, who held Marx up as a secular saint, must not be shrugged off.

I hope that those who advocate free markets truly aim to make the market so free that it is essentially egalitarian up to a tolerable factor of 4-6 in compensation inequality, and up to occasional successful startups that outcompete everyone else and reward their founders handsomely. This is the outcome of free-market competition as described in textbooks. This textbook model is the ideal, not this shameful oppressive status quo we are trapped in.