Category: Private enterprise

July 17th, 2019 by geoffhodgson1946

Geoffrey M. Hodgson

The meaning of socialism

The word socialism first appeared in 1827. Robert Owen defined socialism as “the abolition of private property”. Karl Marx took a similar line, and extended the idea of common ownership to the national economy. At least at that time, socialism and communism were virtually synonymous, especially in terms of their shared vision of the final goal. They both meant the common ownership of the means of production, and the end of markets and competition.

Robert Owen

This view persisted throughout the twentieth century, including within the UK Labour Party. George Bernard Shaw wrote with approval: “Socialists are trying to have the land and machinery ‘socialised,’ or made the property of the whole people”. In 1908 the Labour Party Conference passed a resolution, adopting the aim of “the socialization of the means of production, distribution and exchange to be controlled by a democratic state”. In 1924 Sidney Webb summarized his view of socialism as involving “(1) Collective Ownership; (2) Collective Regulation; (3) Collective Taxation; and (4) Collective Provision”.

Similar views were found among Labour Prime Ministers. J. Ramsay MacDonald saw socialism as “a movement to supplant Capitalism altogether, by organising communally the services which Capitalism performs or ought to perform.” In 1937 Clement Attlee wrote of the “evils” of capitalism: their “cause is the private ownership of the means of life; the remedy is public ownership.” Attlee then approvingly quoted the words of Bertrand Russell: “Socialism means the common ownership of land and capital together with a democratic form of government.”

In my book Is Socialism Feasible? I show the persistence of this view of socialism. I also discuss several attempts to change its meaning, including by Douglas Jay, Anthony Crosland, Deng Xiaoping and Tony Blair. Blair tried to shift the meaning to social-ism, by replacing the goal of common ownership by vaguely-specified “ethical values” and a recognition that individuals are socially interdependent. This attempt to revise the meaning has not made much of a mark.

Deng Xiaoping faced the problem of persuading the Chinese Communist Party to support his enormously successful market reforms. Deng declared:

“The essence of socialism is liberation and development of the productive forces, elimination of exploitation and polarization, and the ultimate achievement of prosperity for all … common prosperity is the essence of socialism.”

Note the subtle shift from property to prosperity. If that is socialism, then few people are not socialists.

But the original meaning endures. The Merriam-Webster Dictionary defines socialism as “a system of society or group living in which there is no private property” or “a system or condition of society in which the means of production are owned and controlled by the state.” This is remarkably similar to the original definitions of Owen and Marx.

How moderates help Corbyn, and socialists help Trump

Among prominent living politicians today, including Jeremy Corbyn, Bernie Sanders and Jean-Luc Mélenchon, Socialism has retained its original meaning, of widespread common ownership, or at least they have not renounced that original definition.

Bernie Sanders

At the same time, leading Labour Party moderates who support a mixed economy continue to support “democratic socialism”. By doing so they give succour to the full-blooded socialist left, who are much closer to the enduring traditional view of socialism than the moderates themselves. We can pretend that the word socialism has shifted in meaning, but there is little evidence of a major and widely accepted change.

Moderate or otherwise, those using the “democratic socialism” label help to sustain the mistaken idea that socialism (in its enduring and prevalent sense) is compatible with democracy. History and theory both show that a totalitarian concentration of political power flows inevitably from the unmitigated concentration of economic power in the hands of the state that is associated with large-scale socialism.

Alexandria Ocasio-Cortez

A similar problem exists in the US, particularly after the recent election of a young group of socialists to congress, including the impassioned and eloquent Alexandria Ocasio-Cortez. Along with Sanders, they are members of the Democratic Socialist Alliance (DSA) within the US Democratic Party.

The DSA argues for “a vision of a humane international social order based both on democratic planning and market mechanisms”. They also argued that “widespread worker and public ownership will greatly lessen the corrosive effect of capitalists [sic] markets on people’s lives”. While, unlike many other socialists, the DSA notably accepts an enduring role for markets, its agoraphobic bias is revealed by the failure to mention the corrosive effects of bureaucracy on people’s lives.

In some statements, leading DSA politicians seem to favour Nordic-style, welfare state capitalism. But they have not made it clear that they support the large private sectors and financial markets that are prominent in all the Nordic countries. Instead, they go along with the abolition of capitalism. They distance themselves from the Communist regimes of the past. But while the experiment with socialism in Venezuela has led to a catastrophic human disaster, they fail to come out in full condemnation of that regime.

This helps Trump. Not only does he mobilise racist prejudices, he also uses their self-declared socialism to describe them as communist. Given that socialism and communism were (at least originally) virtual synonyms, this ammunition is handed to Trump by his most fervent opponents.

The changed meaning of social democracy

When Social Democratic parties were first formed in Europe in the nineteenth century, most were strongly influenced by Marxism. They were fully socialist in its original sense.

Some separation of meaning between socialism and social democracy occurred beforehand, but it was brought to a head by the onset of the Cold War in 1948. Europe as a whole, and Germany in particular, were divided between the Eastern and Western Blocs.

All socialist and communist parties had to choose –  the East, the West, or a plague on both? With Moscow ties in many cases, almost all Communist parties chose the East. Many moderate Socialist, Social-Democratic or Labour  parties chose the West.

SPD Congress in Bad Godesberg 1959

At its Bad Godesberg Congress in 1959, the German Social Democratic Party (SPD) made fundamental changes to its aims. It dropped its opposition to capitalism, and it abandoned the Marxist analysis of class struggle. The SPD declared:

“The Social Democratic Party therefore favours a free market wherever free competition really exists. Where a market is dominated by individuals or groups, however, all manner of steps must be taken to protect freedom in the economic sphere. As much competition as possible – as much planning as necessary.”

The crucial point here is that the SPD moved from (temporary or permanent) toleration of markets and competition, to accepting markets and competition as desirable, alongside strong public enterprise and state regulation where necessary.

This explicit and fundamental change in aims in the world’s largest and most influential Social Democratic Party led to a separation of meanings of the terms social democracy and socialism. But it must be acknowledged that strong residues of old-style thinking persisted, in the SPD and in social-democratic parties in other countries.

The acid test

There is a simple test to distinguish a socialist from a social democrat, according to currently prevalent meanings of those words.

To be a social democrat it is not enough to accept markets and a mixed economy, as Jeremy Corbyn, John McDonnell and the Democratic Socialists of America have done. After all, a mixed economy could be accepted as a temporary staging post in the transition to full-blooded socialism, as Vladimir Lenin did with his New Economic Policy in 1921.

A modern social democrat must go further. He or she must make a clear and positive case why markets, competition and a private sector are more than a temporary expedient. It must be argued that these things are indispensable, both for economic efficiency and the preservation of freedom. This is the acid test. The SPD in 1959 understood this point and it passed the test.

As far as I am aware, neither Corbyn, McDonnell, Sanders nor Ocasio-Cortez have made such a positive case for a permanent private sector. If I am right, then they are socialists, not social democrats. Despite their protestations, they are closer to traditional communism than to modern social democracy, as practiced in the Nordic countries and elsewhere. I would be delighted if they can prove me wrong.

Large-scale socialism is outdated, extreme and demonstrably incompatible with democracy. At least if these declared socialists want to win parliamentary majorities and form governments, then they have to change their terminology, and dispose with outdated and unfeasible ideas.

But while Nordic social democracy remains remarkably successful (as I show in my book Is Socialism Feasible?) the social-democratic brand throughout Europe has declined in electoral support. Although re-naming is necessary, much more than renaming is required. The abandonment of the socialist label is but a first step. But that is another story.

17 July 2019

References

Attlee, Clement R. (1937) The Labour Party in Perspective (London: Gollancz).

Blair, Tony (1994) Socialism, Fabian Pamphlet 565 (London: Fabian Society).

Crosland, C. Anthony R. (1956) The Future of Socialism (London: Jonathan Cape).

Democratic Socialists of America (1995) ‘Where We Stand: Building the Next Left’, DSA: Democratic Socialists of America. https://www.dsausa.org/where_we_stand.

Griffiths, Dan (ed.) (1924) What is Socialism? A Symposium (London, Richards).

Jay, Douglas (1937) The Socialist Case, 1st edn. (London: Faber and Faber).

Hodgson, Geoffrey M. (2019) Is Socialism Feasible? Towards an Alternative Future (Cheltenham UK and Northampton MA: Edward Elgar).

Owen, Robert (1991) A New View of Society and Other Writings, edited with an introduction by Gregory Claeys (Harmondsworth: Penguin).

Shaw, George Bernard (1890) What Socialism Is, Fabian Tract No. 13 (London: Fabian Society).

Posted in Bernie Sanders, Common ownership, Democracy, Donald Trump, George Bernard Shaw, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Lenin, Liberalism, Markets, Private enterprise, Property, Robert Owen, Socialism, Soviet Union, Tony Blair, Venezuela

August 25th, 2018 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

When it was used by Robert Owen and his followers from the 1830s, the word socialism meant “the abolition of private property” and the adoption of widespread common ownership. That same meaning was accepted by Karl Marx and Frederick Engels. It was used in the twentieth century to describe Marxist regimes in Russia, China, Cuba and elsewhere. The goal of widespread common ownership was inscribed in the aims and values of the UK Labour Party from 1918 to 1995.

 

The socialist algorithm has eight steps, arranged in a loop:

Step 1: Critique. Point to all the dreadful things that have happened under capitalism, including war, famine, oppression, exploitation, economic inequality and environmental degradation.

Step 2: Dream. Propose a non-existent, imaginary socialism that is highly democratic, peaceful, egalitarian and non-discriminatory. Say that it includes widespread state ownership but avoid going into details on how a large-scale complex system would work, or about the institutional and administrative mechanisms involved, or how ultra-democracy would operate in practice.

Step 3: Ignore. Discount claims by leading economists, political scientists and historians that such a system could not work fairly and humanely, at least unless major roles were retained within the system for markets and private property. Press on regardless to the next step.

Step 4: Solidarise. Choose some regimes in the past that started on the socialist road, such as Russia, China or Cuba. If a new explicitly socialist regime – Venezuela for example – pops up and carries out some policies you like, such as reducing poverty and illiteracy, then give it your support for a while.

Step 5: Blame. When things go wrong with the nominated socialist regimes in Step 4 – including war, famine, oppression, exploitation, economic inequality or environmental degradation – blame foreign intervention, sanctions by capitalist countries or internal counter-revolutionaries. Don’t blame the issues ignored in Step 3.

Step 6: Deny. When it proves difficult to blame everything that goes wrong on foreign intervention, sanctions by capitalist countries or internal counter-revolutionaries, then deny the scale or even the existence of the problems.

Step 7: Rename. At the point where the socialist regimes nominated in Step 4 become so dreadful – with war, famine, oppression, exploitation, economic inequality or environmental degradation – to the point where blame or denial (Steps 5 and 6) are no longer plausible, then declare that these regimes were not, or are no longer, socialist.

Step 8: Return. Collect £200 and go back to Step 1.

 

This algorithm has variant criteria, particularly over those used to decide what regimes are described as socialist under Step 4. This leads to endless controversies among socialists over the criteria and outcomes of such choices.

The personal determination to deny facts in Step 6 may also waver among some less-hardened comrades.

Further controversy exists among socialists on the criteria deployed in step 7, which trigger the abandonment of the socialist label in particular cases.

The Russian Revolution

The Russian Revolution instigated the socialist algorithm and led to countless runs of the program. It has also illustrated numerous variants.

Some say that it never was “proper socialism” in the first place, for some reason, such as the failure to establish worker control of the factories, or the dissolution of democratic government. These purists move rapidly to Step 7, collect their £200, and move back to Step 1.

Bertrand Russell quickly collected his £200. He visited Russia in 1920 in a Labour Party delegation, where among others he met Lenin. Russell wrote in 1924: “Socialism … means the common ownership of land and capital, together with a democratic form of government.”

Hence, for him, Bolshevik Russia was never socialist. But Russell did not consider the possibility that any concentration of ownership and economic power in the hands of the state would always undermine political democracy. (Step 3.)

Or you may say that the Bolshevik regime was socialist up to the restoration of some private ownership and markets with the New Economic Policy in 1921. Or you could say that socialism ended in Russia with Stalin’s consolidation of power in 1928. Die-hard forgivers of Stalinism would say that it ended in 1991.

To survive, the die-hards need a good dose of denial (Step 6). For example, in 1990 Corbyn’s future aide Seumas Milne suggested that estimates of deaths under Stalin by Robert Conquest and others were too high. This was quickly contradicted when more evidence became available in 1991 showing that earlier estimates, particularly by Conquest, were in the right ball park.

Socialist Scrabble

Imagine the consternation and debate caused in Marxist circles over these problems. The neatest solution is to avoid any proclamation of socialism and describe all Soviet-style regimes as “state capitalist”. This is the ingenious solution of Tony Cliff and others. Cliff was the founder of what eventually became the Socialist Workers Party.

The trouble with this solution is that the definition of capitalism becomes so flattened and widened that it bears less resemblance to Marx’s analysis in Capital. This disparity becomes more severe when the importance for capitalism of financial markets is taken into account, as highlighted by Joseph Schumpeter and others. Competitive financial markets played no more than a marginal role in Russia from 1917 to 1991.

Leon Trotsky

Leon Trotsky was more subtle. He introduced the concept of “degenerated workers state”. This term signalled that the working class had gained power, but the system had become corrupted by an over-bearing bureaucracy. For Trotsky, Soviet Russia was neither capitalist nor socialist.

But true to his Marxist credentials, Trotsky had to argue that a system where a rising class was neither in nor out of power had to be unstable – it could only last a few years.

Trotsky was murdered in 1940, so he left that problem to his followers. This unstable “transitional” regime lasted for well over half a century, defying Trotsky’s analysis.

And so it goes on. There are numerous variants, and many moves on the socialist scrabble board – playing with labels or names.

Socialist Venezuela

The drama in Venezuela is playing out before us. Many – but not all – socialists hailed the election the radical socialist Hugo Chávez in 1998.

In 2004 a number of intellectuals and politicians signed a “manifesto” declaring that they would vote for Chávez if they were Venezuelans. The signatories included Tariq Ali, Perry Anderson, Tony Benn, George Galloway, Eric Hobsbawm, Ken Livingstone, Naomi Klein, Ken Loach, John Pilger and Harold Pinter.

Jeremy Corbyn and Hugo Chávez

Jeremy Corbyn’s loyalty to Venezuelan socialism endured and survived the death of Chávez in 2013. He attended a vigil following the death of Chávez, hailing him as an “inspiration to all of us fighting back against austerity and neo-liberal economics in Europe”.

As late as 2015, when Venezuela was in ever-deepening crisis and human rights violations were abundant, Corbyn’s enthusiasm for the regime was undiminished. He remarked:

we celebrate, and it is a cause for celebration, the achievements of Venezuela, in jobs, in housing, in health, in education, but above all its role in the whole world … we recognise what they have achieved.

Similarly in 2014, John McDonnell (who is now Shadow Chancellor of the Exchequer under the Labour opposition led by Corbyn) praised the Venezuelan regime: “Here you had the contrast between capitalism in crisis and socialism in action.

Blame then rename

As the problems with the regime of Chávez grew in intensity, Step 5 (Blame) came into force. There may have been involvement by the CIA, particularly in the brief coup that overthrew Chávez for a few days in 2002. But hostilities from outside were relatively mild, particularly compared with Civil War that followed the Bolshevik Revolution in 1917. Venezuela continues to sell oil to the US and several other countries. Venezuela buys arms and military equipment from the UK, as well as from Russia and China.

Neither external nor internal opposition can adequately explain the unfolding catastrophe in Venezuela. In fact, the problems started the beginning. Chávez manipulated electoral mandates to undermine democratic checks and balances, to increase executive power, to neuter the Supreme Court, to make criticism of his government illegal and to increase censorship.

The outcome after 2013 was the disastrous regime of Nicolás Maduro. Venezuela saw famine, oppression, exploitation, economic inequality and environmental degradation.

By 2018 there was hyper-inflation of around a million per cent per annum, and about three million Venezuelans – about 10 per cent of the population – had emigrated.

Despite his 2014 declaration of support quoted above, John McDonnell has now moved to Step 7, helped by a little more denial on the way. On 20 May 2018 he declared “I don’t think it [Venezuela] was a socialist country”. McDonnell has collected his £200 and returned to Step 1.

Conclusion: back to the beginning

Obviously, it all starts with Step 1. Let us pause here for a while. There is a lot wrong with capitalism. But let us distinguish between capitalist democracies and autocracies.

Democracy is a key variable. The Biblical Four Horsemen of the Apocalypse are conflict, war, famine and death. As I have outlined in my book Wrong Turnings, from historical experience the antidote is clear: the chances of war, famine and premature death can be greatly diminished through a society with democratic institutions that defends +universal human rights.

Many of the horrors of capitalism occurred under undemocratic regimes. Wars between democracies are relatively rare. Famines are much less common under capitalist democracies. Consequently, the reduction of death and misery from famine and war is best pursued by opposition to all forms of despotism, whether capitalist or Communist.

This does not mean that capitalist democracies are always peaceful and unoppressive. Far from it. What it means is that there is plentiful evidence that democracy reduces the chances of famine, environmental degradation, premature death and war. And, for explicable reasons, no socialist country has lasted as a democracy.

Dreaming (Step 2) is fine. But we have to practical and realistic. Rather than ignoring in Step 3, we need to understand. One of the major problems with socialism – at least in its statist and non-market versions – is that a concentration of economic power in the hands of the state leads unavoidably to a dangerous and undemocratic concentration of political power.

“There’s no food”

In the Venezuelan case, the concentration of political power, which was designed to achieve statist control of the economy, had adverse effects well before wholesale public ownership was achieved.

Either way, attempts to move toward socialism weaken the economic sources of countervailing power and undermine the socio-economic foundations of democracy. Despite pronouncements to the contrary, the centralizing mission of statist socialism always leads to the destruction of necessary checks and balances.

In history there has been no exception to this outcome. We may dream of socialist democracy, but in the end we must learn from history and from analysts who show the dangers or impracticalities of socialist solutions to the problems in the world. In short, statist socialism cannot co-exist with democracy and with the protection of human rights.

 

25 August 2018

Minor edits – 26 August 2018.

 

Published by University of Chicago Press

 

Bibliography

Cliff, Tony (1955) Stalinist Russia: A Marxist Analysis (London: Michael Kidron).

Conquest, Robert (1968) The Great Terror (London: Macmillan).

Conquest, Robert (1986) The Harvest of Sorrow: Soviet Collectivization and the Terror-Famine (Oxford: Oxford University Press).

Griffiths, Dan (ed.) (1924) What is Socialism? A Symposium (London, Richards).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Schumpeter, Joseph A. (1942) Capitalism, Socialism and Democracy (London: George Allen and Unwin).

Trotsky, Leon D. (1937) The Revolution Betrayed: What is the Soviet Union and Where is it Going? (London: Faber and Faber).

Posted in Bertrand Russell, Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Lenin, Liberalism, Markets, Nationalization, Private enterprise, Property, Robert Owen, Socialism, Soviet Union

August 19th, 2018 by geoffhodgson1946

More on the Seven Dimensions of Liberalism

 

Geoffrey M. Hodgson

 

The common core of all varieties of liberalism is the stress on individual liberty and universal rights, including the rights to private property and to freedom of expression. These universal rights and liberties require equality under the law, under a competent legal system that protects rights and pursues justice.

In a previous blog I laid out Seven Dimensions of Liberalism. The present blog extends that analysis by considering different varieties of liberalism within this seven-dimensional space. I contrast what (in forensic mood) might be described as neoliberalism with what I call liberal solidarity.

Classical liberalism

There are several possible names come to mind as possible labels for the highly varied constituent territories of liberalism. Terms such as classical liberalism, new liberalism, social liberalism, neoliberalism and libertarianism should be considered. But all these labels have their problems.

Adam Smith

Consider classical liberalism. This is typically applied to foundational liberal thought from John Locke, through Adam Smith and Jeremy Bentham to John Stuart Mill. But there are profound divisions within classical liberalism.

Thomas Paine’s pursuit of measures to reduce inequality is unmatched by his liberal contemporaries.

Adam Smith’s emphasis on the importance of “moral sentiments” and justice contrasts greatly with the reductionist-utilitarian approaches developed by Hume and Bentham and adopted (albeit with reservations) by Mill.

Apart from the emphasis on individual rights including private property, the classical liberals agreed on the need for a small state. But they lived in a period when the state and its tax levels were much smaller than they became in the twentieth century.

We cannot automatically assumed that they would have taken the same small-state view in the present context, especially if they were responsive to practical experiment and historical experience.

Consequently, classical liberalism does not denote one distinctive type or phase of liberalism. The original Liberalism from the seventeenth to the mid-nineteenth century contained widely diverging variants.

New liberalism and other labels

A major turn in liberal thought was foreshadowed by Mill and developed in the later decades of the nineteenth century and the early twentieth century by Thomas H. Green, Leonard T. Hobhouse and John A. Hobson in the UK, and in the US by Lester Frank Ward, John Dewey and others.

These “new liberals” saw individual liberty as something achievable only under favourable social and economic conditions. Poverty and ignorance were barren soils for individual freedom and fulfilment. They argued that individual flourishing required the development of an education system, a welfare state and other state action to reduce unemployment and poverty.

John A Hobson

Thinkers such as Green, Hobhouse, Hobson, Ward and Dewey have been described as new liberals. But their ideas are no longer new and the label is in little use today. It also risks confusion with the now-ubiquitous and over-stretched swear-word of neoliberalism.

Social liberalism is another term that has been to describe the strain of liberal thinking – from Green to Dewey – that pursued greater state intervention and a welfare state.

But a problem with this label lies in the multiple meanings of the word social. Many used social liberalism to signal an emphasis on the need for cooperation between individuals through social arrangements to further human fulfilment. The word social here is used in a broad and inclusive sense.

An alternative understanding of social is exclusive: social is regarded as an antithesis to economic. This commonplace but problematic dichotomy contrasts the economic sphere of business and profit-seeking with the social sphere of the family, non-market relations, reciprocity and so on.

This enabled an alternative interpretation of social liberalism as liberalism applied to the narrowly-conceived social sphere. It would involve, for example, the promotion of homosexual rights and the decriminalization of the use of recreational drugs. Worthy as those aims may be, this is a much narrower agenda than that promoted by social liberalism in the broader sense.

Another option is the word solidarism. Inspired by Émile Durkheim and Léon Bourgeois, ideas emerged in France that were similar to and at about the same time as the new liberalism of Hobhouse and Hobson in Britain.

The solidarists criticized extreme laissez-faire and argued that individuals had a debt to society as a whole, which should be repaid through taxation and social welfare schemes. But solidarism in France took a distinctive form, putting more limited emphasis on state intervention than the proposals of some of their British counterparts.

Ambiguities of social democracy

A final term to be considered here is social democracy. This has shifted more successfully in meaning than socialism, but originally they amounted to more or less the same thing. Many of the early social democratic parties were led by Marxists, including the important Social Democratic Workers’ Party of Germany, founded in 1869. Although some social democrats favoured peaceful reform rather than violent revolution, at that time they mostly agreed on the goal of large-scale common ownership.

Harold Wilson

During the twentieth century the usage of the term social democracy shifted radically. After the Second World War it came to mean the promotion of greater economic equality and social justice within a capitalist economy. It also connoted a political strategy orientated toward the interests of the trade unions and the working class.

The term social democracy still carries this historical and strategic baggage. It has been eschewed by some because of its links with socialism. Others argue that its strategic, class-orientated vision has become obsolete. Another problem is that the word social does not make a clear addition to democracy, which few would oppose.

Post-war social-democratic policies are challenged by the fragmentation of their traditional base in the organized working class and by the heightened forces of globalization.

Consequently, while a reformed and reinvigorated social democracy may have some mileage, I suggest we consider the alternative term liberal solidarity to describe an important zone within liberalism. We should examine its principles and its agenda for reform. But first it is necessary to deal with the tricky label and substance of neoliberalism.

Original diversity within the Mont Pèlerin Society

The Mont Pèlerin Society changed in substance and direction. It began under a different name in the 1930s and was first convened under its current name in 1947. It was then an attempt to convene different kinds of liberals in defence of a liberal market economy, just after the defeat of fascist tyranny, during an expansion of Communist totalitarianism, and while witnessing the rise of statist socialist ideas in Western Europe and elsewhere. Liberalism broadly was on the rocks: it needed its defenders.

Michael Polanyi

Michael Polanyi (the brother of Karl Polanyi) advocated Keynesian macroeconomics in a market economy, alongside a radical redistribution of income and wealth. He rejected a universal reliance on market solutions, seeing it as a mirror image of the socialist panacea of planning and public ownership. He did not mince his words against this “crude Liberalism”:

“For a Liberalism which believes in preserving every evil consequence of free trading, and objects in principle to every sort of State enterprise, is contrary to the very principles of civilization. … The protection given to barbarous anarchy in the illusion of vindicating freedom, as demanded by the doctrine of laissez faire, has been most effective in bringing contempt on the name of freedom … .”

Although he attended the first meeting of the Mont Pèlerin Society, Polanyi had drifted away by 1955, stressing its inadequate solutions to the problem of unemployment and its promotion of a narrow view of liberty as the absence of coercion, neglecting the need to prioritize human self-realization and development.

In its early years, the Mont Pèlerin Society hosted debates on the possible role of the state in promoting welfare, on financial stability, on economic justice, and on the moral limits to markets. Like Polanyi and other early members of the society, Wilhelm Röpke argued that the state was necessary to sustain the institutional infrastructure of a market economy. The state should serve as a rule-maker, enforcer of competition, and provider of basic social security. Röpke’s ideas were highly influential for those laying the foundations of the post war West German economy.

While they received a more sympathy from Hayek, Ludwig Mises regarded Röpke’s views as “outright interventionist”. Mises became so frustrated with these arguments in favour of a major role for the state that he stormed out of a Mont Pèlerin Society meeting shouting: “You’re all a bunch of socialists.”

The rise of modern neoliberalism

Angus Burgin’s history of the society shows how its early period of relative inclusivity was followed by schisms, departures, and a narrowing of opinion. People like Polanyi and Röpke became inactive. Eventually the primary locus of the Mont Pèlerin Society shifted to the US, with greatly increased corporate funding under the rising intellectual leadership of Milton Friedman.

Milton Friedman

Hence the Mont Pèlerin Society evolved from a broad liberal forum to one focused on promoting a narrow version of liberalism that is more redolent of Herbert Spencer than of Adam Smith, Thomas Paine or John Stuart Mill. This ultra-individualist liberalism entailed a narrow definition of liberty as the absence of coercion, it relegated the goal of democracy, it neglected economic inequality, it overlooked the limits to markets, it saw very limited grounds for state welfare provision and intervention in financial markets, and it stressed self-interest rather than moral motivation.

But in the seventh dimension it tolerated a multiplicity of positions, as exemplified by Friedman’s opposition to the Iraq War. In all of the seven dimensions of liberalism, the post-1970 position of the Friedman-led Mont Pèlerin Society was redolent of Spencer, but without some of the latter’s Victorian idiosyncrasies. In the first six dimensions, this post-1970 neoliberalism is very different from liberal solidarity.

It is only after the 1960s that the Mont Pèlerin Society acquired a narrower identity, which at a pinch might be described as neoliberalism. Here Mirowski is onto something: “Neoliberals seek to transcend the intolerable contradiction by treating politics as if it were a market and promoting an economic theory of democracy.” In other words this neoliberalism reduces, all of politics, law and civil society as markets, and are analysed using market categories.

Neoliberalism’s affinity with Marxism

This neoliberalism has an odd similarity with Marxism, despite other major differences in theory and policy. Marx and Engels also reduced civil society to economic matters of money and trade. Marx wrote in 1843: “Practical need, egoism, is the principle of civil society … The god of practical need and self-interest is money.”

Karl Marx

Civil society, for Marx, was the individualistic realm of money and greed. Hence Marx concluded that “the anatomy of civil society is to be sought in political economy.” The analysis of the political, legal and social spheres was to be achieved with an economics based on the assumption of individual self-interest.

Furthermore, the state, law and politics under capitalism were made analytically subservient to this dismembered, economistic vision of civil society.

Accordingly, Frederick Engels wrote in 1886 that under capitalism “the State – the political order – is the subordinate, and civil society – the realm of economic relations – the decisive element.” Everything was deemed a matter of greed and commerce, to be understood through economic analysis.

Hence, in its theory of capitalism, classical Marxism was a harbinger of modern neoliberalism, reducing everything to market relations. There was no defence of civil society in its own right.

When attempts were made to build socialism on Marxist principles, not only markets were minimized but also civil society was virtually destroyed. Before 1989, the restoration of civil society was one of the foremost demands of the dissident movements in Eastern Europe.

Certainly there are more sophisticated and less reductionist treatments by Marxists of civil society and the state, not least by Antonio Gramsci. But Marx and Engels, alongside some neoliberals, embraced economic reductionism. Everything turns into the economics of trade, eclipsing the autonomy of politics and law, and neglecting the vital importance of non-commercial interaction and association within civil society.

Neoliberalism versus liberal solidarity

On these vital issues, liberal solidarity stresses its differences from both neoliberalism and classical Marxism. It does not treat the individual purely as a self-interested, market-oriented maximizer. It is committed to democracy as a distinctive source of legitimation for government, and a means of individual and social development (dimension 2), not as a marketplace for power.

Liberal solidarity stresses the feasible and moral limits to markets (dimension 4). It upholds a view of the individual that combines measures of self-interest with a moral concern for justice and fairness (dimension 6). On all these points it is distinct from these other doctrines.

Today, liberal solidarity must emphasise its radical differences from both post-1970 neoliberalism and from Marxism. This is made extremely difficult in a leftist intellectual context when any defence of markets or private enterprise, to any extent or degree, is pushed aside as neoliberal. Current cavalier uses of the term do much more harm than good.

Many so-called anti-neoliberals are also anti-liberals. They prioritize neither liberty nor freedom of expression. They offer no defence of private enterprise or markets, to any extent or in any form. They promote a state-dominated economy, which we know from history will always threaten freedom and human rights. They believe they are principled. They may have good intentions. To quote from their mentor Lenin: “The road to hell is paved with good intentions.” But as Marxists fail to understand, the only principled and effective defence of human rights is some form of liberalism.

Liberalism has to be fortified, but not in all of its forms. Liberal solidarity is the radical alternative to the illiberal or undemocratic populisms of the left or right. It can address the problems created by large corporate interests, by the power of undemocratic capitalist technocrats or by incipient dictatorships. It emphasises the importance of markets and private property, but without regarding them as universal panaceas. It retains uppermost the importance of human rights and human cooperation, with the goal of human flourishing and social development.

 

19 August 2018

Published by University of Chicago Press in January 2018

 

References

Burgin, Angus (2012) The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge MA: Harvard University Press). See pp. 16, 80-86, 121.

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Jacobs, Struan and Mullins, Phil (2016) ‘Friedrich Hayek and Michael Polanyi in Correspondence’, History of European Ideas, 42(1), pp. 107-30.

Marx, Karl and Engels, Frederick (1962) Selected Works in Two Volumes (London: Lawrence and Wishart). See vol. 1, pp. 362, 394-5.

Marx, Karl and Engels, Frederick (1975) Karl Marx and Frederick Engels, Collected Works, Vol. 3, Marx and Engels: 1843-1844 (London: Lawrence and Wishart). See p. 172.

Mirowski, Philip (1998) ‘Economics, Science and Knowledge: Polanyi vs. Hayek’, Tradition and Discovery: The Polanyi Society Periodical, 25(1), pp. 29-42.

Mirowski, Philip (2009) ‘Postface: Defining Neoliberalism’, Mirowski, Philip and Plehwe, Dieter (eds) (2009) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Cambridge MA: Harvard University Press), pp. 417-55. See p. 456.

Mirowski, Philip (2013) Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (London and New York: Verso). See p. 71.

Polanyi, Michael (1940) The Contempt of Freedom: The Russian Experiment and After (London: Watts). See pp. 35 ff., 57-58.

Polanyi, Michael (1945) Full Employment and Free Trade (Cambridge: Cambridge University Press). See pp. 142-6.

Polanyi, Michael (1951) The Logic of Liberty: Reflections and Rejoinders (London: Routledge and Kegan Paul).

Posted in Democracy, Karl Marx, Left politics, Lenin, Liberalism, Ludwig von Mises, Markets, Michael Polanyi, Neoliberalism, Philip Mirowski, Private enterprise, Property, Right politics, Socialism

August 1st, 2018 by geoffhodgson1946

 

Beyond its shared stress on liberty and rights, liberalism comes in many different forms. One of these varieties is liberal solidarity.

 

Geoffrey M. Hodgson

 

All versions of liberalism stress individual liberty and universal rights, including the rights to private property and to freedom of expression. These universal rights and liberties require equality under the law, under a competent legal system that protects those rights and pursues justice.

Original conservativism differs from liberalism because it stresses established or religious authority and tradition over rights. Socialism generally differs from liberalism because it downgrades the right to private property. But there is no historical case where personal and civil liberties have existed without extensive rights of private property.

Statist socialism further differs from liberalism also because it concentrates politico-economic power in the hands of the state, thus undermining countervailing power, which is necessary to sustain democracy and individual rights. Marxism differs from liberalism to an even greater degree, because it regards all liberal rights as bourgeois: it rejects the idea of universal individual rights in favour of the class rule of the proletariat.

Liberalism was broadly defined in its struggles against despotism. But once autocracy is removed, and freedom and legal equality are established, then liberalism as a whole lacks a further common purpose, other than the preservation or consolidation of those liberal gains. At this point, the wide liberal coalition divides into multiple zones, exploring different districts of their spacious common territory, and falling on different sides of key dilemmas.

Hence the Enlightenment triumph of liberalism gave way to rival liberalisms, each stressing different priorities or visions of the future. These differences range across multiple dimensions in conceptual hyperspace.

While exploring seven dimensions of this hyperspace, I accent a particular variety of liberalism that I call liberal solidarity.

The seven dimensions

Consider the following seven vital dilemmas:

1. Broad versus narrow conceptions of liberty.

The narrow definition of liberty, promoted by Freidrich Hayek and Milton Friedman among others, is the absence of coercion. Other liberals – including John Stuart Mill, Michael Polanyi, Isaiah Berlin and Amartya Sen – argued that this is insufficient. They asked us to consider the conditions enabling the individual to appraise his or circumstances and then to act freely, typically in cooperation with others. These conditions constitute positive or public liberty, in contrast to the negative or private liberty provided by the absence of coercion. As well as the capacities for choice and action, some writers argue that liberty is also about the opportunities for self-development and for human flourishing.

2. Degrees of commitment to representative political democracy.

Most liberals support representative political democracy, as long as it does not overturn basic human rights, including the rights of minorities. But some liberals, such as Ludwig Mises and Hayek, have regarded democracy as dispensable under specific conditions, believing that the preservation of private property and markets are more important. The counter argument is that democracy is strongly correlated with economic development, the protection of human rights, and the absence of war and famine. Hence democracy is vital for a healthy, tolerant and open society.

3. Degrees of emphasis on economic equality.

Thomas Paine was a liberal who stressed the interdependence of individuals in a free society. Hence, given our debt to others, we are obliged to pay taxes for the common good. Also John Stuart Mill argued there should be some redistribution of inherited wealth. Against libertarian individualists, many liberals defend responsible trade unions as a way of empowering working people and reducing inequality. These are cases of liberal solidarity rather than atomistic individualism.

4. Possible limits to choice and markets.

While liberals generally stress the importance of individual choice, in both trade and politics, some also stress the practical and moral boundaries to contracts and to markets. Today we condemn the holding and trading of slaves. For democracy to be uncorrupt, there should not be markets for the votes of ordinary people or politicians. Other market arrangements are challengeable, on moral or practical grounds, suggesting that contracts and markets are not the solution to every problem.

5. Grounds for state intervention and a welfare state.

Some liberals, including John A. Hobson and John Dewey, saw the provision of adequate healthcare and education as vital for individual self-determination and flourishing. Individuals should also be as free as possible from the anonymous coercions of ignorance, destitution and illness. Hence the liberals David Lloyd George and William Beveridge built the foundations of the welfare state in the UK. John Maynard Keynes pointed to the need for the state to intervene to prevent financial crashes and minimize unemployment. Many modern liberals also accept the legitimacy of judicious state action to mitigate climate change.

By the above five criteria, liberal solidarity recognizes liberty as more than the absence of coercion, defends political democracy, attempts to reduce extremes of economic inequality, and conceives of a larger role for the state than small-state versions of liberalism. It promotes a mixed economy including some public ownership and a variety of forms of private enterprise. The mixture would include worker cooperatives (which are the most viable positive legacy of small socialism).

Liberal solidarity counters the original liberal emphasis on minimal government. Some state intervention is necessitated by the limitations of markets and by growing complexity. Nevertheless, all liberals acknowledge the dangers of excessive bureaucracy and concentrations of state power, and they call for mechanisms of scrutiny and accountability, as well as for countervailing powers.

6. Self-interest versus cooperation and morality.

Several liberals have argued that social order emerges out of the interactions of self-interested, pleasure-maximizing individuals. But this is not a universal view among liberals. While recognizing the selfish aspects of human nature and the incentives they offer for trade and innovation, many liberals stress the importance of morality, justice or duty. They argue that adequate social cohesion cannot be achieved on the basis of selfishness alone. Adam Smith expressed this view: he was not an unalloyed advocate of individual selfishness. Charles Darwin – who politically was a liberal – explained how, alongside a measure of self-interest, morality and cooperation were products of human evolution, and thus part of our nature. Hobson took up this Darwinian view, also underlining the importance of moral motivation. Relatedly, Keynes saw the Benthamite utilitarian calculus of pleasure-seeking, as “the worm which has been gnawing the insides of modern civilisation and is responsible for the present moral decay.” The motivational bases of liberal solidarity are morality, sympathy and justice, and not simply personal satisfaction or self-interest.

7. Nationalism versus internationalism and openness.

Like socialism and conservativism, liberalism has been divided on questions of foreign policy. Socialists, conservatives and liberals have argued for and against specific wars, for or against imperialism or colonialism, for or against the idea of exporting favoured institutions by invading other countries with armed force. They have also been internally divided on immigration policy, advocating different degrees of restriction or free movement.

Addressing dimension six, liberal solidarity emphasises our potential for cooperation and moral judgment, rather than focusing on self-interest alone. In regard to dimension seven, liberal solidarity opposes imperialism and colonialism. It stresses the importance of social inclusion and the benefits of free movement.

Liberals, Conservatives and Republicans

From the beginning of the twentieth century, in the UK and the US, liberalism became more interventionist. Versions of liberalism prominent in the UK and US are closer to liberal solidarity than some variants in Continental Europe.

When unfettered-market, minimal-state versions of liberalism re-emerged in the UK and US, and became more prominent in the 1970s, they had to find different homes. They took over the Conservative Party in the UK and the Republican Party in the US. Hence Margaret Thatcher was elected as a Conservative Prime Minister in 1979 and Ronald Reagan as a Republican President in 1980. In some their ideas they sounded like nineteenth-century liberals: Whigs became Tories.

But their adoption of unfettered-market ideology was partial, and often compromised when traditional conservative values were threatened. Supported by Thatcher, Reagan ramped up military spending. Their nationalism was heightened when it came to foreign policy and international trade. They retained restrictions on recreational drugs or prostitution. They stressed ‘family values’ as much as rampant individualism.

Like others, these two parties are coalitions, involving unfettered-marketeers, nationalists and traditional conservatives. The election of Donald Trump as US President in 2016 shows the strength of the conservative and nationalist strain among Republicans. Trump is no liberal: he advocates torture, attacks minorities, threatens the press, imposes tariffs and pursues a version of economic nationalism.

Thatcher and Reagan overlooked the absence of democracy in Augusto Pinochet’s Chile and in Apartheid South Africa, and supported stronger military and executive powers. As Andrew Gamble put it, Thatcher and Reagan promoted a ‘free economy and a strong state’.

Thatcher and Reagan were inspired by leading intellectuals such as Hayek and Friedman, who had been working for decades to restore the influence of unfettered-market liberalism. But neither Hayek nor Friedman fits exactly into the Thatcher-Reagan mould. Friedman, for example, advocated the decriminalization of drugs and opposed compulsory military service. He also opposed the Gulf War of 1990-1991 and the Iraq Invasion of 2003.

Hayek voiced partial support for a welfare state. Although he did not support redistributive taxation to reduce inequality, he advocated legislation to limit working hours, state assistance for social and health insurance, state-financed education and research, a guaranteed basic income, and other welfare measures. At least once, Hayek also accepted Keynesian-style, counter-cyclic government strategy to deal with fluctuations in economic activity. Consequently there was some significant difference between Hayek and other libertarians.

Challenges for liberal solidarity

Having set out the large, seven-dimensional hyperspace and explored a few of the important positions within it, it is clear that the depiction of liberalism as broad church is an understatement. The potential variation within liberalism is huge. That is both an asset and a problem. Each variety of liberalism faces the difficulty of distinguishing itself from others. We need to subdivide liberalism’s massive territory if we are to navigate and explore different positions. Each important position within the large space needs to be differentiated from others.

A later blog will further explore the seven-dimensional hyperspace of liberalism and develop the case in favour of liberal solidarity. I shall also show a dramatic contrast with what is often described as neoliberalism.

 

1 August 2018

Published by University of Chicago Press in January 2018

 

Bibliography

Gamble, Andrew (1988) The Free Economy and the Strong State: The Politics of Thatcherism (London and New York: Palgrave Macmillan).

Hodgson, Geoffrey M. (2013) From Pleasure Machines to Moral Communities: An Evolutionary Economics without Homo Economicus (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Posted in Democracy, Left politics, Liberalism, Markets, Michael Polanyi, Neoliberalism, Private enterprise, Property

June 1st, 2018 by geoffhodgson1946

 

 

Stretching the word “neoliberal” to cover people as different as Deng Xiaoping and Donald Trump has turned it into an absurdity.

 

Geoffrey M. Hodgson

 

Once upon a time, the word neoliberalism might have been confined to an extreme form of individualism that eschews state regulation, promotes economic austerity and a minimal state, opposes trade unions and vaunts unrestrained markets as the solution to all major politico-economic problems.

But today the usage of the word neoliberalism is no longer so restricted. I have been told more than once that anyone who is not a socialist is automatically a neoliberal. Any defence of the existence of markets now risks quick rejection with an angry neoliberal stamp upon it.

More frequently these days, a wide range of politicians, from Margaret Thatcher and Ronald Reagan at one extreme, to Bill Clinton, Hillary Clinton, Emmanuel Macron and Tony Blair at the other limit, are all described as neoliberals, despite, for example, hugely varied policies on taxation, government expenditure and the role of the state.

In their book on Neoliberalism, Damien Cahill and Martijn Konings describe the US President Donald Trump as a neoliberal. Yet he is a supporter of protectionism and he has imposed import tariffs: he does not believe in free trade. The word neoliberal is now stretched beyond credence and coherence.

Sneaky Deng Xiaoping was a neoliberal

Guardians of socialist purity have described some errant Marxist or socialists as neoliberals. In his Brief History of Neoliberalism, Marxist academic David Harvey described revisionist-Marxist Deng Xiaoping as a neoliberal.

From 1978, Deng supported the reintroduction of markets into the Chinese economy. But he still proposed a strong guiding hand by the state, including centralized management of the macro-economy and the financial system.

Harvey admitted that Deng’s policies led to strong economic growth and “rising standards of living for a significant proportion of the population” but he passed quickly over this ellipsis.

In fact, Deng’s Marxist-revisionist “neoliberal” reforms lifted more than half a billion people out of extreme poverty, albeit unevenly and at the cost of greater inequality. That was about one-twelfth of the entire world population in 2000. With this development, China halved the global level of extreme poverty. The bulk of the poverty reduction in China came from rural areas.

This achievement is unprecedented in human experience. If China’s extension of markets is neoliberalism, then neoliberalism is the most beneficial economic policy in history.

Vladimir Lenin and Josip Tito as neoliberals

But earlier contenders for the title of “the first neoliberals” can be found. In her book on Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, the sociologist Johanna Bockman found roots of neoliberalism in the experiments in so-called “market socialism” in Josip Tito’s Yugoslavia from the 1950s and in Hungary from the 1960s.

There is no stopping this neoliberal treachery – infiltrating socialism as well as capitalism!

Josip Tito

Adopting the methodology of Harvey and Bockman, I would like to nominate Vladimir Ilyich Lenin as the first neoliberal, for his betrayal of socialist central planning and his introduction of the New Economic Policy (NEP) in Soviet Russia in 1921. In this admitted “retreat” from socialism, Lenin re-introduced markets and profit-seeking private firms.

Crucially, in support of this nomination, there is evidence that Deng’s post-1978 reforms drew a strong inspiration from Lenin.

“A brainless synonym for modern capitalism”

Of course, I am being ironic. My point is that, thanks to Harvey and others, neoliberalism as a term has become virtually useless. As Philip Mirowski and Dieter Plehwe put it, neoliberalism for some has become “a brainless synonym for modern capitalism.”

Mirowski also complained that opponents “often bandy about attributions of ‘neoliberalism’ as a portmanteau term of abuse”. But Mirowski did not drop the term.

Geoffrey Hodgson & Philip Mirowski

In his superb history of the Mont Pèlerin Society, Angus Burgin commented critically on the term neoliberalism:

“It is extremely difficult to treat in a sophisticated manner a concept that cannot be firmly identified or defined.”

The word is no longer sound currency. Bad usage has driven out the good. It has become a swear-word rather than a scientific term.

Neoliberalism as a ruling class strategy

Part of the impetus behind the excessive and ultimately destructive use of the word neoliberal is the Marxist belief, expressed by David Harvey among others, that neoliberalism is a strategy serving the interests of the capitalist class.

Following the post-war settlement of 1945-1970, which conceded greater power and shares of income to organized labour, rising neoliberalism allegedly rescued the capitalist class.

Their evidence is that in several major countries from the 1970s, trade unionism declined in strength and the shares of national incomes going to the top five per cent increased.

There is some truth in this. But first it overlooks the fact that levels of public welfare expenditure generally did not decrease after the 1970s.

Second, in several countries, including most dramatically in China, standards of living have increased, even for the lower income deciles. While for many people in the US, real wages have stagnated, this has not been the case in several other countries, particularly prior to the 2008 crash.

Third, the argument may exaggerate the degree to which the capitalist class is united, in terms of their real interests or of their perceptions of them.

Fourth, it is questionable that capitalist interests are best served by declines in real wages, given the powerful Keynesian argument that capitalist prosperity depends on effective demand in the economy as a whole. Higher real wages can increase prosperity across the board, and serve the interests of capitalists and capitalism.

Fifth, there are other, possibility more effective, strategies for countering the power of organized labour and reducing the incomes of many people in favour of the top five per cent. These alternatives include economic nationalism, which can take the extreme form of fascism. Generally these are not free-market, small-state approaches. If they are all labelled neoliberal, and regarded as the grand global strategy of the bourgeoisie, then the analysis becomes dangerously insensitive to the increasingly probable threats of economic nationalism and fascism.

Neoliberalism and the Mont Pèlerin Society

Perhaps the most well-informed and intelligent attempt to give neoliberalism a distinctive meaning is by Philip Mirowski, who associates it, more or less, with the Mont Pèlerin Society.

But the Mont Pèlerin Society changed to a degree, in substance and direction. It began under a different name in the 1930s and was first convened under its current name in 1947. It was then an attempt to convene different kinds of liberals in defence of a liberal market economy, just after the defeat of fascist tyranny, during an expansion of Communist totalitarianism, and while witnessing the rise of statist socialist ideas in Western Europe and elsewhere. Liberalism broadly was on the rocks: it needed its defenders.

As a measure of the relative inclusivity and internal diversity of the Mont Pèlerin Society, consider the testimony of the philosopher Karl Popper, who was a friend of Hayek and a prominent Mont Pèlerin member in the early years. Popper wrote to Hayek in 1947 that his aim was “always to try of a reconciliation of liberals and socialists”.

Michael Polanyi and Wilhelm Röpke

Michael Polanyi – the brother of Karl Polanyi – was a founder member of the Mont Pèlerin Society. He advocated Keynesian macroeconomics in a market economy, alongside a radical redistribution of income and wealth. He rejected a universal reliance on market solutions, seeing it as a mirror image of the socialist panacea of planning and public ownership. He did not mince his words against this “crude Liberalism”:

“For a Liberalism which believes in preserving every evil consequence of free trading, and objects in principle to every sort of State enterprise, is contrary to the very principles of civilization. … The protection given to barbarous anarchy in the illusion of vindicating freedom, as demanded by the doctrine of laissez faire, has been most effective in bringing contempt on the name of freedom …”

Polanyi had drifted away from the Mont Pèlerin Society by 1955, stressing its inadequate solutions to the problem of unemployment and its promotion of a narrow view of liberty as the absence of coercion, neglecting the need to prioritize human self-realization and development.

Michael Polanyi

In its early years, the Mont Pèlerin Society hosted debates on the possible role of the state in promoting welfare, on financial stability, on economic justice, and on the moral limits to markets. Like Polanyi and other early members of the society, Wilhelm Röpke argued that the state was necessary to sustain the institutional infrastructure of a market economy. The state should serve as a rule-maker, enforcer of competition, and provider of basic social security. Röpke’s ideas were highly influential for those laying the foundations of the post war West German economy.

While they received a more sympathy from Hayek, Ludwig Mises regarded Röpke’s views as “outright interventionist”. Mises once became so frustrated with these ongoing arguments in favour of a major role for the state that he stormed out of a Mont Pèlerin Society meeting shouting: “You’re all a bunch of socialists.”

The rise of Milton Friedman

Angus Burgin’s history of the society shows how its early period of relative inclusivity was followed by schisms, departures, and a narrowing of opinion. People like Polanyi and Röpke became inactive. Eventually the primary locus of the Mont Pèlerin Society shifted to the US, with greatly increased corporate funding under the rising intellectual leadership of Milton Friedman.

Milton Friedman

Hence the Mont Pèlerin Society evolved from a broad liberal forum to one focused on promoting a narrow version of liberalism that is more redolent of Herbert Spencer than of Adam Smith, Thomas Paine or John Stuart Mill.

This ultra-individualist liberalism entailed a narrow definition of liberty as the absence of coercion, it relegated the goal of democracy, it neglected economic inequality, it overlooked the limits to markets, it saw very limited grounds for state welfare provision and intervention in financial markets, and it stressed self-interest rather than moral motivation.

Perhaps Friedman was a neoliberal. Perhaps Hayek too. But if we add Lenin, Tito, Deng or Trump to the list, then we are in the realms of absurdity – the term becomes useless.

 

1 June 2018

This book elaborates on the issues raised in this blog:
Published by University of Chicago Press in January 2018

 

Bibliography                                                     

Bockman, Johanna (2011) Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism (Stanford: Stanford University Press).
Burgin, Angus (2012) The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge MA: Harvard University Press). See esp. pp. 57, 80-86, 116, 121.
Cahill, Damien and Konings, Martijn (2017) Neoliberalism (Cambridge UK and Medford MA: Polity Press). See esp. pp. 144-5.
Harvey, David (2005) A Brief History of Neoliberalism (Oxford and New York: Oxford University Press). See esp. pp. 1-3, 120-22.
Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).
Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).
Jacobs, Struan and Mullins, Phil (2016) ‘Friedrich Hayek and Michael Polanyi in Correspondence’, History of European Ideas, 42(1), pp. 107-30.
Mirowski, Philip (2013) Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (London and New York: Verso). See esp. pp. 29, 71.
Mirowski, Philip and Plehwe, Dieter (eds) (2009) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Cambridge MA: Harvard University Press). See esp. p. xvii.
Pantsov, Alexander and Levine, Steven I. (2015) Deng Xiaoping: A Revolutionary Life (Oxford and New York: Oxford University Press). See esp. p. 373.
Polanyi, Michael (1940) The Contempt of Freedom: The Russian Experiment and After (London: Watts). See esp. pp. 35 ff., 57-58.
Ravallion, Martin, and Shaohua Chen (2005) ‘China’s (Uneven) Progress against Poverty’, Journal of Development Economics, 82(1), pp. 1-42.

 

Posted in Donald Trump, Left politics, Lenin, Liberalism, Markets, Michael Polanyi, Neoliberalism, Philip Mirowski, Private enterprise, Right politics, Soviet Union, Tony Blair, Uncategorized

May 5th, 2018 by geoffhodgson1946

Geoffrey M. Hodgson

 

Karl Marx was born on 5 May 1818. He was one of the greatest social scientists in human history. The intellectual structure of his thought has affected our understanding of history, of economic development and of political power. All modern scholars of significance have to define their position in relation to Marx’s monumental achievement.

Many of Marx’s predictions were wrong. He was mistaken, for example, about the general deskilling of the working class. On the contrary, although many remain unskilled, average skill levels have increased. Furthermore, although many remain desperately poor, the average standard of living of the working class has vastly increased since his time.

On the other hand, some of Marx’s predictions have been vindicated. He characterized the nature of the capitalist system more acutely than any of his predecessors and he predicted its spread over the entire world. He saw capitalism a dynamic system that broke down archaic institutions and barriers to trade.

Marx also focused on the generation of inequality under capitalism, which has increased and is recognized as a serious problem.

Marx got some forecasts wrong and some right. Prediction is far from everything in social science. What towers above all is his contribution to our understanding of the inner dynamics of capitalism. With all its shortcomings and theoretical flaws, it remains a huge achievement.

Was Marx the author of the Marxist tragedy?

Let us turn from Marx the social scientist to Marx the politician. Remarkably, from 1917 to the present day, a number of regimes have been set up by revolutionary activists who have claimed to be Marxists. All of these turned sour: these totalitarian regimes led to millions of deaths. Estimates vary. 90 million is on the conservative side, with about 65 million in Mao’s China alone.

Marxism has various ideological immune systems to deal with these brutal facts. One gambit is to blame it on the hostile interventions of foreign powers. But it is implausible that these alone are responsible for the outcomes. No foreign intervention prompted Mao’s Great Leap Forward of his Cultural Revolution, for example, which together led to about 40 million deaths.

Leon Trotsky

Another argument – due to Leon Trotsky – is to blame it on the creation by tyrannical leaders such as Stalin of a bureaucratic caste that denied the working class any democratic power. But this implausibly assumes that a huge nationwide bureaucracy can somehow be run on the basis of meaningful votes on every important decision. No-one with any practical experience of a large organization would entertain such a fantasy.

A more colourful recent excuse is due to Yanis Varoufakis, the influential Greek academic and politician. He argued that the Marxist texts were too powerful. As a result they attracted devious opportunists who rode the Marxist rhetoric for “their own advantage.”

With it, they might abuse other comrades, build their own power base, gain positions of influence, bed impressionable students, take control of the politburo and imprison anyone who resists them.

The problem, it seems, was that Karl Marx and Frederick Engels were too powerful with their prose. If only they had written more turgid texts – then millions would have been saved from the famines and the Gulags.

Seriously, though, the greater problem is not the power of the language, but what it says and what it empowers and enables. Marxism creates a sense of historical destiny, where the creation of socialism is a seemingly obvious solution to the ills of the world, which will defied only by the rich, whose resistance must be crushed.

Marx bears some responsibility for the murdered millions

At least two major aspects of Marx’s thought removed protections of human rights and paved the way for brutal totalitarianism.

The first was his doctrine of class struggle. Analytically, this may have some value and it is subject to academic debate. But it was also a normative doctrine, about the working class seizing power and ending the rule of the capitalists.

Marx and Engels argued that the current aims and desires of the proletariat were less important than its historical destiny to abolish capitalism and become the ruling class. They wrote:

It is not a question of what this or that proletarian, or even the whole proletariat, at the moment regards as its aim. It is a question of what the proletariat is, and what, in accordance with this being, it will historically be compelled to do.

This is the first totalitarian impulse. Marxist revolutionaries are deemed to know better what is in the interests of the working class than the working class itself. Democracy becomes an impediment to the realization of those true interests, about which the masses are not fully aware.

The normative doctrine of class struggle has another outcome. It means that the rights of one social class are privileged over another. Universal individual rights are no more. As Engels put it, legal and individual rights are “nothing more than the idealized kingdom of the bourgeoisie.”

Their normative arguments in favour of socialism are not based on any alleged rights. Instead, socialism is seen as historic destiny. Marx tried to show that crises within capitalism are recurrent and inevitable, and that capitalism digs its own grave by enlarging and empowering the working class.

The consequence of this class deprivation of human rights was enshrined in law under Marxist-socialist regimes. The 1918 Constitution of the young Soviet regime distinguished between the rights of the workers and the rights of others. The Soviet state also announced that it

deprives all individuals and groups of rights which could be utilized by them to the detriment of the socialist revolution.”

A major problem here was that the criteria used to decide what was detrimental were unspecified, opening the door to arbitrary repression by the authorities. This is exactly what happened.

A regime that denies rights to some, especially with malleable criteria concerning who is denied those rights, ends up denying rights to everyone. These are the consequences of Marx’s “dictatorship of the proletariat”.

A full concentration of economic power leads to totalitarianism

A second aspect of Marx’s thought that promoted totalitarianism concerns the economy.

Marx and Engels advocated the abolition of private property and markets, and the concentration of all economic power in the hands of the state. They welcomed efforts “to centralize all instruments of production in the hands of the state” and looked forward to a time when “all production has been concentrated in the hands of a vast association of the whole nation”.

But as subsequent experiences from Russia to Venezuela illustrate, such a massive concentration of economic power requires for its enforcement, and sustains as an outcome, a massive concentration of political power that is intolerant of democracy. The good intentions or democratic inclinations of leaders are not enough. Those most hungry for power, and least affected by moral qualms in exercising it, will eventually rise to the top.

There is a widespread opinion among non-Marxist social scientists (including Barrington Moore, Douglass North and Francis Fukuyama) that democracy requires countervailing political and economic power to have a chance of survival. In Marxist terms, if the economic “base” determines the “superstructure”, then a pluralist polity requires a pluralist (or mixed) economy, not one that is overshadowed by a massive state.

A complete concentration of political and economic power in the hands of the state, which Marx and Engels advocated with enthusiasm as well as eloquence, always requires and enables a despotic political regime. There are no exceptions.

Leszek Kolakowski

Over forty years ago, Leszek Kolakowski was an Eastern European dissident and a perceptive critic of Marxism. He wrote:

“My suspicion is that this was both Marx’s anticipation of perfect unity of mankind and his mythology of the historically privileged proletarian consciousness which were responsible for his theory being eventually turned into an ideology of the totalitarian movement: not because he conceived of it in such terms, but because its basic values could hardly be materialized otherwise.”

Kolakowski was right. Many have still to learn the tragic lessons of Marxist failure in practice, as well as of its partial but flawed analytical success.

Critics will say that giving Marx some blame for the atrocities of the twentieth century is like trying to blame Jesus for the atrocities of the Spanish Inquisition. They are wrong, Jesus never advocated class war or a concentration of economic power in the hands of the state, both of which create the conditions for tyranny.

5 May 2018

Minor edits – 6 May 2018

 

This book elaborates on the issues raised in this blog:

Published by University of Chicago Press in January 2018

Bibliography

Courtois, Stéphane, Werth, Nicolas, Panné, Jean-Louis, Packowski, Andrzej, Bartošek, and Margolin, Jean-Louis (1999) The Black Book of Communism: Crimes, Terror, Repression (Cambridge MA: Harvard University Press).

Fukuyama, Francis (2011) The Origins of Political Order: From Prehuman Times to the French Revolution (London and New York: Profile Books and Farrar, Straus and Giroux).

Hodgson, Geoffrey M. (2006) Economics in the Shadows of Darwin and Marx: Essays on Institutional and Evolutionary Themes (Cheltenham: Edward Elgar).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Kolakowski, Leszek (1977) ‘Marxist Roots of Stalinism’, in Robert C. Tucker (ed.) (1977) Stalinism: Essays in Historical Interpretation (New York: Norton), pp. 283-98.

Moore, Barrington, Jr (1966) Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (London: Allen Lane).

North, Douglass C., Wallis, John Joseph and Weingast, Barry R. (2009) Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge and New York: Cambridge University Press).

Posted in Common ownership, Democracy, Karl Marx, Labour Party, Left politics, Lenin, Leszek Kolakowski, Liberalism, Mao Zedong, Markets, Nationalization, Politics, Private enterprise, Property, Robert Owen, Socialism, Uncategorized

February 24th, 2018 by geoffhodgson1946

 

 

Geoffrey M. Hodgson

 

Bernie Sanders campaigned for the Democratic presidential nomination in the US in 2015-2016. In the primary elections he received over thirteen million votes. He won 23 primaries and caucuses and approximately 43 per cent of pledged delegates, compared to 55 per cent for Hillary Clinton.

Polls taken in 2017 have found Sanders to be the most popular politician in the US.

Sanders is a long-avowed “socialist”. What does he mean by this term? This is not an attack on the personality of Sanders, nor an attempt to smear him. Instead it is a search for the truth. What does he mean by “socialism” and what are his intellectual roots?

Does democracy imply socialism?

This is not a story about Russian spies. It is about Russian dolls. Sanders is the outer form of a Russian doll, with the slogan of Democracy across his chest. This slogan is used to promote socialism, typically with some vagueness about its meaning.

For Sanders, democracy implied socialism and substantial public ownership. In a 1987 interview he explained:

“Democracy means public ownership of the major means of production, it means decentralization, it means involving people in their work. Rather than having bosses and workers it means having democratic control over the factories and shops to as great a degree as you can.”

Nineteen years later, Sanders was still repeating this argument that extended democracy implied a greater role for government. But he then side-lined the question of public ownership. When asked in 2006 what democratic socialism meant, he responded:

“[The] government has got to play a very important role in making sure that as a right of citizenship, all of our people have health care; that as a right, all of our kids, regardless of income, have quality child care, are able to go to college without going deeply into debt; that it means we do not allow large corporations and moneyed interests to destroy our environment; that we create a government in which it is not dominated by big money interest. I mean, to me, it means democracy, frankly.”

Given his rising prominence in the US, among a population that has not normally been sympathetic to socialist ideas, it is understandable that Sanders played up democracy and played down public ownership. But there is no evidence that he has abandoned his support for widespread common ownership.

Sanders is not alone in sometimes hiding his socialism behind the word democracy. Michael Moore did it in his ironically-titled 2009 film Capitalism: A Love Story, where he argued that

“capitalism is an evil, and you cannot regulate evil. You have to eliminate it and replace it with something that is good for all people, and that something is democracy.”

But democracy is a system of government, and it is not in itself a type of economy.

Like Moore, Sanders in recent years has been economical with the truth. As we have entered the new millennium he has left the details of his socialism vague. He grants his audience the freedom to choose its meaning.

Socialism: A love story

They may impute its original radical meaning of widespread common ownership. Or they can infer that Sanders is promoting a version of social democracy, as found in Denmark, Norway or Sweden. Sanders said in 2015 that

“we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.”

Lars Løkke Rasmussen

We certainly should learn from these Nordic countries, but we should not dupe people into believing that they are socialist. A few days after Sanders’ comment, the Danish Prime Minister Lars Løkke Rasmussen attacked the misconception that the Nordic model is a form of socialism:

“I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.”

The Nordic countries mentioned by Sanders have relatively high levels of taxation and relatively low levels of economic inequality. They have strong welfare states. But they have not achieved anything close to socialism in its original sense. The private sector is still dominant. But by giving little guidance about what he means by socialism, Sanders can please a wider audience.

In a country where even minimal government involvement in the economy is habitually described by its opponents as socialist, Sanders has been opportunist. As he has come closer to power he has accepted the socialist label without much further explanation, knowing that for millions of Americans this is taken to mean even the mildest level of government economic intervention.

Sanders has allowed this inaccuracy to prevail, thus establishing a wide following among liberals, social democrats and radical socialists. He may have told the truth, but not the whole truth.

A mixed economy?

Jeremy Corbyn

As he has got closer to the pinnacles of power, Sanders has accepted a place for small-scale private enterprise. Similarly, the UK Labour Party Leader Jeremy Corbyn has acknowledged the reality of a mixed economy.

But crucially, neither Corbyn nor Sanders have elaborated a positive defence of the private sector.

Genuine advocacy of a mixture requires making the case for more than one type of ingredient. As well as their support for the public sector, they could have argued, for instance, that a substantial private sector is necessary for a viable civil society, to reap the benefits of competition, and to help sustain innovation and technological advance. Sanders and Corbyn have failed to make such arguments.

These arguments are rare among traditional socialists. The widespread absence of a defence of the private sector speaks as loudly as their calls for government intervention or common ownership. It suggests that a private sector is being reluctantly tolerated, and it would all be swept up into public territory if the opportunity arose. A mixed economy is to be accepted for now, as the system makes its transition toward full-blooded socialism and the abolition of all private enterprise.

Democratic socialism would take too many meetings

There is a further problem with the notion of democratic socialism that is adopted by Sanders and Corbyn. They promote a vague vision of extensive democratic control in the economy. Neither of them explain in detail how this extensive democratic decision-making is going to work. Would employees and consumers have a say on everything? How would they decide? How would the hierarchy of decision-making be structured?

The adjective democratic is kept as vague as the noun socialism. The details and feasibility of any such arrangement are simply ignored. If votes were held on every important question then the population would be overburdened with a myriad of decisions. Our lives would be taken up with meetings and voting.

It is impossible for anyone to gain expert knowledge on anything but a small number of technical and scientific issues. It would be counter-productive to put these technical issues to the vote. While many socialists have paid homage to some vague notion of “democratic control”, no-one has shown in theory or in practice how it would function in detail.

More Russian dolls inside

Let us go further into Sanders’ past. In the 1980s, when he was mayor of Burlington in Vermont, Sanders promoted a twinning programme with Yarolslavl in the USSR. He and his wife spent their honeymoon in the USSR in 1988.

This may be excused as an attempt to develop international understanding between varied communities, but this visit by an enduring, self-declared “socialist” to a “socialist” country under Communist Party rule would have been used to damage his presidential campaign in 2016, if he had won the nomination.

Going further back, as a young man in Chicago in the 1960s, Sanders was a member of the Young People’s Socialist League, which was the youth wing of the Socialist Party of America.

Founded in 1901, this party went through several splits and ruptures, but it was generally clear what it meant by socialism.

The following words appeared in its constitution:

“[The] Socialist Party is to bring about the social ownership and democratic control of all the necessary means of production – to eliminate profit, rent, and interest, and make it impossible for any to share the product without sharing the burden of labor – to change our class society into a society of equals, in which the interest of one will be the interest of all.”

This formulation – involving widespread common ownership of the means of production – is in line with the original vision of socialism, as promoted by Robert Owen, Karl Marx, Vladimir Lenin, Leon Trotsky and numerous other socialists.

Finding Lenin and Trotsky

Eugene V. Debs (1855-1926) was the most famous leader of the Socialist Party of America and four times its presidential candidate, peaking at 913,693 votes in his 1920 campaign. Adopting the Marxist language of militant class struggle, Debs supported the 1917 Bolshevik Revolution in Russia. He also praised the attempted 1919 armed insurrection led by Karl Liebknecht and Rosa Luxemburg against the new-born German Republic.

In 1977 Sanders made a 30-minute documentary about Debs and his ideas. Sanders never recanted the version of socialism promoted by Debs and the Socialist Party of America.

In 1980 Sanders served as an elector for the Socialist Workers’ Party (USA), in an attempt to put this Trotskyist group on the presidential ballot, although Sanders was never a member of that organization.

Although Sanders was hugely popular during the 2015-16 primaries, if he had become the Democratic presidential candidate, then his Republican opponents would have milked this information about his Trotskyist links and his Russian honeymoon.

Leninism and democracy

Sanders is too vague about his socialism and his links with past radical socialists to draw too many definite conclusions. But the links are there, all the way back to Trotskyism and Leninism. It is ironic to compare how Sanders tries to champion democracy today, with the treatment of democracy by his Leninist antecedents.

In August 1917 Lenin explained in his State and Revolution that the forthcoming seizure of power would be highly democratic for the working class.

In November 1917 the Bolsheviks overthrew the liberal-socialist government of Alexander Kerensky. By the end of 1918, in the midst of a vicious civil war, all parties except the Bolsheviks were banned, and Russia had become a one-party state.

The “immense expansion of democracy” that Lenin had promised in his State and Revolution was not delivered. It would not have been feasible, even under the most conducive of circumstances.

As it turned out in Russia, there was no possibility of organizing a political force to counter, criticize or modify Bolshevik policy. Without organized alternatives to the ruling elite, democracy becomes a sham.

When the exiled Kerensky spoke at a London meeting in 1921, someone there claimed that the Bolsheviks were democrats. Kerensky responded:

“If it is democracy to banish your opponents, to suppress all meetings and newspapers, and to lock up people who disagree with you without trial, by what signs do you ask me to recognise tyranny?”

Let’s be honest about socialism

Sanders has tapped into legitimate discontent about inequality and poverty in the US, but has failed to explain how his version of socialism will work. He has kept the meaning of the s-word vague, thus providing himself with radical appeal with limited long-term practical substance, other than the adoption of some measures of reform within a capitalist economy.

From its inception in 1827 and for much of the twentieth century, socialism had the radical meaning of widespread common ownership that both Sanders and Corbyn originally promoted. Subsequently, some thinkers tried to shift its meaning, but no consensus emerged on its new substance.

Socialists should stop hiding their socialism behind the word democracy. Many socialists believe in democracy, but democracy and socialism are not the same thing.

Real-world socialism has failed to sustain democracy. This is a problem for socialism and it should not be ignored.

The connection between claimed “democratic socialism” and socialism in its totalitarian incarnations is avoided by Sanders and Corbyn by comparing the ills of real-world capitalism with an imaginary, idealized socialism that is unfeasible as it is invisible.

Sanders and Corbyn do not compare the ills of real-world capitalism with the ills of real-world socialism. If they did this honestly, then they might reach different conclusions. Instead of chasing socialist unicorns they might seek for the best within capitalism and then try to improve it further.

 

24 February 2018

Published January 2018

Buy on Amazon.com or Amazon.co.uk

Bibliography                                                     

Clarke, Peter (1978) Liberals and Social Democrats (Cambridge: Cambridge University Press). The quote by Kerensky is found on p. 220.

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press)

Posted in Bernie Sanders, Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Lenin, Liberalism, Markets, Nationalization, Politics, Private enterprise, Property, Robert Owen, Socialism, Soviet Union

February 18th, 2018 by geoffhodgson1946

But it does not deserve to be there

 

Geoffrey M. Hodgson

 

Despite the disastrous record of self-described “socialist” regimes, socialism (whatever it means) is remarkably popular.

According to a 2017 survey of American adults, 37 per cent preferred (what they described as) socialism to capitalism. Among millennials (meaning those reaching adulthood in the early twenty-first century), 44 per cent preferred socialism over capitalism. This survey broadly confirmed previous American polls from about 2015, which showed a surge of support for socialism, especially among younger people.

Polling in the UK found that 39 per cent of adults have an unfavourable view of capitalism, while 33 per cent were favourable. Also in the UK, 36 per cent viewed socialism favourably, compared to 32 per cent negatively. Germans were reported as even more positive about socialism, with 45 per cent being favourable and 26 per cent unfavourable.

These polling figures are remarkable, especially when we take into account that regimes describing themselves as socialist led to over 90 million deaths in the twentieth century. Socialism has captured the ethical high ground, despite the poor record of socialist regimes in terms of human rights.

Somehow today’s socialists evade this legacy. They argue that these regimes were not really socialist. Or they were corrupted by bad leaders. Or they suffered largely because of antagonism from the capitalist West. All these arguments assume that a humane socialism is feasible and that there are not congenital flaws in socialism that lead it to dictatorship.

The word socialism has been in existence for almost 200 years and generally it has meant the promotion of common ownership and the abolition or limitation of markets and private property. There have been attempts to change this meaning but they have largely failed.

Love, care and cooperation

Socialism raises the moral flag because it claims to be the creed of love, care and cooperation. By contrast, it is argued, capitalism and markets encourage selfishness and greed.

Socialists point to defenders of capitalism such as Ayn Rand, who like the fictional Gordon Gekko in the 1987 movie Wall Street, promoted the view that that greed is good and altruism is evil.

Mainstream Economists are tainted too: they often favour markets and assume individual self-interest as an axiom. Socialism will subdue markets, private profits and other spurs to greed, and through common ownership create a system that encourages people to cooperate together and act unselfishly.

So the argument goes. But the evidence tells a different story. The socialists, the “greed is good” defenders of capitalism, and believers in our total selfishness are all wrong.

Theory and evidence, from Darwin onwards, show that evolution has provided humans with a mixture of selfish, cooperative and moral capacities, which can be stunted or developed according to different cultural and institutional settings.

There is also strong evidence that market or trading relationships can enhance sentiments of fairness and reciprocity. The notion that markets always make people greedy, selfish and amoral has been refuted. The moral high ground claimed by socialism is challenged not simply by the misdeeds of socialist dictators, but also by extensive evidence about human nature and how it is affected by markets or other institutional circumstances.

Small-scale societies have relied on sentiments of cooperation and moral solidarity that have evolved within groups over millions of years. Solidarity within tribes or bands helped them survive in competition over resources with their rivals. But unfortunately evolution has not disposed us to be nice to outsiders.

The modern world has built up citizen loyalty to nation states, but the downsides have been hostility to foreigners and belligerent nationalism. In the modern world, institutions are needed to encourage mutual understanding and reciprocity on a global scale.

Thomas Paine

One of these institutions is the market. There is impressive evidence that, on balance, international free trade can reduce the risks of war between nations. In larger-scale systems, despite market competition, trade can build bonds and reduce conflict.

While the complete commercialisation of family and community life could undermine trust and altruism, wider trade on a larger scale increases mutual interdependence. As Thomas Paine, Richard Cobden, John Hobson and several others argued, markets can help to build solidarity within and between nations.

Socialism as “obvious”

Yet, despite evidence to the contrary, socialism still clings to the high moral ground. For Jeremy Corbyn and many others, socialism is an “obvious” response, where caring for one another supersedes the greed and profit-seeking that is always fostered by capitalism. Little further detailed evidence is deemed necessary.

If socialism is “obvious”, then how do we explain the failure of other intelligent people to get on board? If they are not stupid, then they must be acting out of personal malice or greed. They must have sold out their principles in some way. Or they are just plain nasty.

When socialism is seen as “obvious”, its opponents are regarded as stupid or evil. Because the solution is “obvious” there can be no doubt. There is no need to look at evidence, to experiment, to seek wise counsel, or to listen to critics. Those that deny the obvious are deluded, corrupt, or in the pay of those that gain from the existing system.

Hence the claim that “socialism is obvious” encourages a remarkable intolerance of those that take a different view.

Modern economies are highly complex, and to pose any system or solution as “obvious” is a dangerous populist naivety. Precisely because something called socialism has now become popular, we are entitled to ask more precisely what it means.

Socialists compare an imaginary “obvious” world with the real world, with all its poverty, inequality and other problems. They simply assume that their imaginary world of love and cooperation will work. They assume that much can be decided democratically, ignoring the fact that it is impossible to make more than a small fraction of day-to-day decisions democratic. They ignore the problems of incentivizing work and innovation, and of ensuring functional autonomy without private property. All these problems became apparent in real-world socialist experiments in the past.

Socialism and dictatorship

A major problem with large-scale socialism is that a large concentration of political and economic power in the hands of the state undermines the economic foundations of countervailing power and empowers totalitarian forces and outcomes. These problems are illustrated by developments in Russia, China and Venezuela.

Such a centralization of economic power requires and promotes a strong executive, unburdened by checks and balances. When this concentration of economic power is achieved, it reinforces political centralization in the absence of countervailing interests and powers.

The argument that “good” leaders will avoid these pitfalls is spurious. Without checks and balances there are strong temptations to cut constitutional corners. Eventually a “good” leader will be succeeded by someone worse, who will have less scruples about abusing executive power.

The conclusion is that democracy and human rights require countervailing power and a market economy with a much smaller public sector. Countervailing interest groups, with their own access to resources and an ability to check or influence the state, are necessary to prevent democratic abuses and over-centralization.

Ignoring this powerful argument, in the face of extensive historical evidence in its support, is morally reprehensible. It betokens a moral irresponsibility in the light of ample evidence to the contrary. The socialist tenure of the moral high ground is illegitimate.

Conclusion

Instead, the moral high ground should be conceded to those who understand that:

– modern economic systems are highly complex and cannot be largely planned from the centre

– genuine autonomy requires rights to private ownership

– the existence of democracy and the protection of human rights require countervailing politico-economic power

– mixed economies have the best economic performance

– a welfare state is necessary to protect the poor and needy

– instead of chasing unicorns, we should follow the example of those capitalist countries that have the lowest levels of inequality.

 

18 February 2018

 

Published January 2018

 

Bibliography                                                     

Boehm, Christopher (2012) Moral Origins: The Evolution of Virtue, Altruism and Shame (New York: Basic Books).

Bowles, Samuel and Gintis, Herbert (2011) A Cooperative Species: Human Reciprocity and its Evolution (Princeton, NJ: Princeton University Press).

Courtois, Stéphane, Werth, Nicolas, Panné, Jean-Louis, Packowski, Andrzej, Bartošek, and Margolin, Jean-Louis (1999) The Black Book of Communism: Crimes, Terror, Repression (Cambridge MA: Harvard University Press).

Darwin, Charles R. (1871) The Descent of Man, and Selection in Relation to Sex, 2 vols (London: Murray and New York: Hill).

De Waal, Frans B. M. (2006) Primates and Philosophers: How Morality Evolved (Princeton: Princeton University Press).

Haidt, Jonathan (2012) The Righteous Mind: Why Good People are Divided by Politics and Religion (London: Penguin).

Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, Gintis, Herbert and McElreath, Richard (2001) ‘In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies’, American Economic Review (Papers and Proceedings), 91(2), May, pp. 73-84.

Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, and Gintis, Herbert (2004) Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies (Oxford and New York: Oxford University Press).

Henrich, Joseph, Jean Ensminger, Richard McElreath, Abigail Barr, Clark Barrett, Alexander Bolyanatz, Juan Camilo Cardenas, Michael Gurven, Edwins Gwako, Natalie Henrich, Carolyn Lesorogol, Frank Marlowe, David Tracer, and John Ziker, (2010) ‘Markets, Religion, Community Size, and the Evolution of Fairness and Punishment’, Science, 327 (5972), pp. 1480-84.

Hirschman, Albert O. (1982) ‘Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?’ Journal of Economic Literature, 20(4), December, pp. 1463-84.

Hodgson, Geoffrey M. (2013) From Pleasure Machines to Moral Communities: An Evolutionary Economics without Homo Economicus (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

McDonald, Patrick J. (2004) ‘Peace through Trade or Free Trade?’ Journal of Conflict Resolution, 48(4), August, pp. 211-22.

Sober, Elliott and Wilson, David Sloan (1998) Unto Others: The Evolution and Psychology of Unselfish Behavior (Cambridge, MA: Harvard University Press).

Posted in Common ownership, Democracy, Jeremy Corbyn, Labour Party, Left politics, Markets, Nationalization, Neoliberalism, Private enterprise, Property, Socialism, Soviet Union, Venezuela

January 11th, 2018 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

Although education is not a public good, there are good reasons why the state should support education services.

 

As leader of the UK Labour Party, Jeremy Corbyn has opined that “education is a public good” and drawn the conclusion that it should all be provided by government and funded by taxation.

All three leaders of the UK Green Party since 2012 – Nathalie Bennett, Caroline Lucas and Jonathan Bartley – have repeated the phrase “education is a public good”. They too implied that all education should be free of charge to the user and paid for out of taxation.

Jeremy Corbyn and Caroline Lucas

Similarly, Shakira Martin, who was elected President of the UK National Union of Students in 2017, remarked: “Education is a public good and should be paid for through taxation.” These influential organizations are led by people who have not learned the lessons of Econ 101.

In addition, this inaccurate rendition of the meaning of public good is common among journalists, who also have a moral responsibility to use terms accurately.

What is a public good?

The economist and Nobel Laureate Paul Samuelson established the concept of a public good in an academic paper in 1954, although some of the basic ideas involved had been formulated previously by others.

John Stuart Mill, for example, had argued in his Principles of Political Economy that lighthouses should be built and financed by governments, because their widespread benefits could not readily be financed by passing ships, and no individual had the pecuniary incentive to construct them.

The established technical definition of a public good is a good or service that is non-rivalrous and non-excludable. Non-rivalrous means that its use or consumption by any actor does not significantly reduce the amount available for others.

Non-Rivalrous Consumption

Non-excludable means that potential users cannot practically be excluded from the use of the good or service. This definition can be confirmed by reading any reputable economics textbook.

Consider the example of street lighting. If a town council uses local tax revenues to set up and maintain lighting on its streets, then there are widespread benefits for everyone. But it is not possible to charge people individually, according to whether they benefit from the illumination.

So when elections to the town council occur, self-interested citizens will vote for candidates proposing lower taxes, assuming that they will benefit anyway from any public good provision. Why pay more taxes when the lighting is free at the point of use? Self-interested consumers will try to hitch a free-ride. The outcome is that the street lighting will be underfunded, while everyone would prefer streets that are well-lit.

Free Riders

Samuelson’s argument was popularized by John Kenneth Galbraith in his 1958 book The Affluent Society. Therein Galbraith argued that vital public goods would be under-provided in a market system: there could be the coexistence of “private opulence and public squalor”. The combined efforts of a revered mainstream economic theoretician and of an astute and inventive populariser of economic wisdom helped to pave the way for a wave of interventionist policies in the US and other developed economies.

Do public goods necessitate public provision?

After this action came the reaction. In a 1974 article Ronald Coase (another Nobel Laureate) argued that many early lighthouses in England were privately constructed and financed by tolls at the ports. In fact, an emblematic example of a public good had often been financed privately. Hence “economists should not use the lighthouse as an example of a service which could only be provided by government”.

Ronald Coase

This and other interventions led to a widespread reaction against the Samuelson-Galbraith view that public goods necessarily require public provision or public financing.

It has been pointed out that radio and TV broadcasts and open-source computer software are also public goods. Yet both are often provided by private companies. Private radio and TV broadcasters finance their broadcasts by advertising.

Computer companies sometimes make software readily available to encourage use of their computers, for which the software was designed. The software is given away to help sell the hardware, or there is a charge for support services for software users.

Whether they are desirable or not, in principle there are many possibilities for private provision of public goods. In reality there are numerous cases where the state franchises out the provision of goods or services to private contractors. Such provision could include public goods. In these cases, public financing remains, but provision is private.

The claimed advantages of private franchising would include the introduction of an element of competition between potential franchisees, and the possibilities of efficiency gains through well-focused, relatively autonomous private providers. But here again the proof of the pudding is in the eating. Many public franchising operations have failed to deliver the promised gains. Others have been more successful.

Accordingly, we end up with a pragmatic rather than a doctrinaire conclusion. Economic systems are complex, with varied, interconnected components. Theory simplifies, and does not catch all the interactive effects. Theory has continuously to be appraised in the light of empirical experience. So far it is clear than the existence of a public good does not necessarily imply that it has to be provided by government, just as there is no compelling case that its private provision will also be superior.

Misunderstanding the meaning of a public good

Careful, rational discussion of the issues surrounding vital debates over public and private provision is not simply impeded by the prevalence of opposing ideological extremes. There is also a growing and prominent disrespect for the careful use of the terms that have been established by scholars in this area.

Combinations of sloppiness and ignorance threaten the utility of key terms. They engender ambiguity, degradation and ultimate uselessness. This has already happened with swear-words such as neoliberalism. It is hoped that it does not happen with cheer-words such as public good.

A prominent misunderstanding of “public good”, is that it means “a good that can only, or should only, be provided by government”. But this conflation of public good with public provision is mistaken.

Another, even cruder, misunderstanding is that “public good” means “good for the public”. While anyone who has taken Econ 101 should spot this error, it is nevertheless widespread. Speakers sometimes give their error away when they give relative stress the “good” in the phrase, as if “good” had the meaning of virtuous or worthwhile.

Yet in the correct definition of “public good” the second word takes another commonplace meaning, denoting a possession, or an item of commerce. This second meaning is found in the pledge “with all my worldly goods I thee endow” in the Book of Common Prayer or in “the goods train went through the station”. Bad things, like tobacco, heroin, cocaine, nuclear bombs and personnel mines, are also goods in this sense.

Is education a public good?

First assume that the claims of Corbyn, Lucas and others were true: education is “good for the public” and it should be funded out of taxation, and maybe even provided by a publicly-owned enterprise.

Many additional things are “good for the public”, including clothing, food and housing. By the same logic, these “goods” should all be funded out of general taxation as well, and distributed without further charge to their users. Influential politicians thus suggest that everything that serves basic needs should be financed, and possibly distributed, by the state. The market would simply be left for luxuries. Their logic implies a state-run economy of which Stalin and Mao would be envious.

Second, even if education were a public good (by the Econ 101 definition) then this would not imply that it should be paid for out of taxation. As noted above, free radio and TV broadcasting is generally a public good, but little of it is paid out of taxation, and it would be difficult to make the case that it should be (unless we fancy a totalitarian state that does all the broadcasting and curtails all private radio and TV stations).

Third, while observing the Econ 101 definition of a public good, note that education is generally a rivalrous rather than a non-rivalrous service. Education services require resources, including buildings, infrastructure, equipment and trained teachers. Additional students generally require additional resources. (Although in some cases the marginal cost is low, such as with mass-distributed online courses.) Consequently, education provision is generally rivalrous.

Fourth, again with an eye on the Econ 101 definition, note that education services are mostly (but not entirely) excludable. Schools and universities can readily prevent other people from attending, while it is much more difficult to prevent any passing mariner from observing the light from a lighthouse.

Technically, by the standard definition, most education services are private goods, because their provision is both excludable and rivalrous. But there is no necessary reason why all private goods should be privately provided. The Econ 101 distinction between public and private goods does not readily or directly correspond with public and private provision respectively.

The parts of an education system that are actually or virtually non-rivalrous, such as massive online courses, are technically club goods. Like radio and TV broadcasting they can be provided publicly or privately.

Positive externalities in education

When students receive their qualifications, they often have advantages over others on the jobs market. Hence they reap benefits. Nevertheless, with education there are strong positive spill-over effects.

Educated people help to raise the levels of public culture and discourse, and can pass on some of their skills to others. Educated people are also vital for a healthy democracy. But none of this undermines the general excludability of education services.

The spill-over effects are important, and relate to the question of public versus private provision. Another word for a spill-over is an externality: this is a cost or benefit that affects someone who did not choose to incur that cost or benefit.

Externalities can be positive or negative. Examples of negative externalities are pollution or congestion caused by motor cars. Because a driver will suffer only a fraction of the overall pollution and congestion costs of making a car journey, negative externalities impose costs on others without penalty for the car user. By standard assumptions, unless compensatory measures are taken, car use will be excessive and suboptimal.

Arthur Pigou

The theory of externalities was developed by Arthur Pigou, who argued that in the presence of negative externalities some public authority should intervene to impose taxes or subsidize superior alternatives. By such measures, motor car traffic could be reduced and pollution reduced. Inversely, services such as education with positive externalities should receive subsidies or be provided free, to encourage more extensive participation in these activities.

In a famous 1960 paper, Coase dramatically changed the terms of debate with his argument that if transaction costs were zero, then all the extra costs or benefits could be subject to contractual arrangements and the externalities would disappear. For example, if the owner of every dwelling near a road had property rights in the surrounding segment of the atmosphere, then the driver of a passing and polluting car could be sued for degradation of that property. The pollution externality would be internalized.

Coase’s intention was to underline the implications of transaction costs: the existence of externalities is dependent on positive transaction costs. Coase accepted that in many cases it would be impossible to avoid the transaction burden. For example, enforcing rights in the surrounding atmosphere to curb pollution may be too expensive.

Many pro-market zealots ignored or underestimated the transaction-cost aspect of Coase’s argument. Instead, their foremost claim was that Coase had undermined the case of public intervention based on externalities.

Consider the positive externalities of education. It would be impossible or socially destructive for every educated person to charge a fee to participants in an intellectual dinner conversation, or to invoice the government for making a well-informed choice when casting his or her vote in the ballot box. The internalization of these positive externalities by such means is impossible or undesirable.

The issue of missing markets is relevant here, as I discuss in my book Conceptualizing Capitalism. There are missing markets for future employment because to introduce such complete markets would be tantamount to slavery. The prohibition of slavery means that we cannot have complete futures markets for labour. This means not simply the existence of transaction costs but the enforced absence of transactions, which would be equivalent to making the transaction costs infinite.

Consequently, because of these missing markets, education and training will be undersupplied through markets under capitalism. There is a rationale for some kind of public intervention. Of course, government intervention has its problems too. We must experiment, and compare real-world cases, not idealized models.

Mixtures of public and private provision

There are mixtures of public and private provision of education in most countries. The majority of schools in most countries are run by local government. At the other extreme, most on-the-job training is done by private companies.

The US has a mixture of private and state universities, although both types receive substantial public funds. In the UK most universities receive public money for teaching and research, and in return they are obliged to conform to a myriad of government regulations. They also receive student fees and research grants from the private sector.

Technically all UK universities are private (corporate) entities: they have a legal status equivalent to charities (which are also not-for-profit private corporations). By contrast, in several major countries in Continental Europe and elsewhere, most universities are integrated into the state machinery and all their employees are civil servants. This is not the case in the US or the UK. This international diversity of models provides the opportunity to compare different systems and determine what works best, taking account of the different contexts in which they operate.

J’accuse: abetting Trumpism

A growing danger in world politics – including in the UK and US – is the wilful rejection of the ideas of experts, of the academic community and of science in general. Hence President Donald Trump denies the science of climate change and cries that it is a hoax. UK Cabinet Minister Michael Gove says we listen too much to experts.

This growing disrespect for science and expertise is moving democracies toward an extremely dangerous place, where the general public have increasing difficulty segregating lies from truth. This danger could be called Trumpism.

I do not put Jeremy Corbyn or Caroline Lucas in the same box as Trump. Far from it. For example, they share none of his obnoxious racism and sexism. But Corbyn and Lucas are disrespecting experts and ignoring bits of science nevertheless.

We need a well-informed public conversation concerning the best arrangements for the (public or private) provision of basic needs and services, including education, health, housing and transport. Such a debate is much more difficult if leading public figures, including the leaders of major political parties, promote incorrect and misleading versions of highly relevant analytical terms.

Donc, je les accuse – of abetting the Trumpist degeneration of public discourse with their false claim that “education is a public good”. They should acknowledge the error and make a correction.

 

11 January 2018

 Minor edits: 12-13 January 2018

 

Published January 2018

Appendix

Note 1: As with many such definitions, there are few, if any, pure cases. So a public good refers to a good or service where consumption by one person does not significantly reduce the amount available for others, and where potential users cannot practically or generally be excluded from the use of the good or service.

Note 2: There is a widespread assumption that actors act wholly out of self-interest. But from evidence with humans in laboratory experiments and elsewhere, we know now that this is untrue. People will often agree to pay for public goods, even if they know that they have the alternative of free-riding on the contributions of others. One can conjecture, however, that numbers of people are important. We know from the work of Nobel Laureate Elinor Ostrom (1990) and others that cooperation is possible over the use of non-excludable resources, even when usage is rivalrous and it can degrade the resource. (Non-excludable resources that have rivalrous usage are defined as common-pool resources: they are not public goods.) But Ostrom’s examples highlight the role of face-to-face interaction and the building of trust. But it is doubtful that these mechanisms can be expanded to large-scale societies, at least without additional systems of control and enforcement.

 

Bibliography                   

                              

Bennett, Nathalie (2017)) “#Nathalie4Sheffield – Issues: Young People”. https://www.natalie4sheffield.org/issues/young-people .

Coase, Ronald H. (1960) ‘The Problem of Social Cost’, Journal of Law and Economics, 3(1), October, pp. 1-44.

Coase, Ronald H. (1974) “The Lighthouse in Economics”, Journal of Law and Economics, 17(2), October, pp. 357-76.

Galbraith, John Kenneth (1958) The Affluent Society (London: Hamilton).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Martin, Shakira (2017) “National Union of Students Responds to PM Review of Student Funding”, NUS Connect, 1 October. https://www.nusconnect.org.uk/articles/national-union-of-students-responds-to-pm-review-of-student-funding .

Mill, John Stuart (1871) Principles of Political Economy with Some of their Applications to Social Philosophy, 7th edn. (London: Longman, Green, Reader and Dyer).

Ostrom, Elinor (1990) Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press).

Pigou, Arthur C. (1920) The Economics of Welfare (London: Macmillan).

Rampen, Julia (2016) “Caroline Lucas and Jonathan Bartley: ‘The Greens can win over Ukip Voters too’“, New Statesman, 21 October. https://www.newstatesman.com/politics/staggers/2016/10/caroline-lucas-and-jonathan-bartley-greens-can-win-over-ukip-voters-too .

Samuelson, Paul A. (1954) “The Pure Theory of Public Expenditure”, Review of Economics and Statistics. 36(4), pp. 387-9.

Stretton, Hugh and Orchard, Lionel (1994) Public Goods, Public Enterprise, Public Choice: Theoretical Foundations of the Contemporary Attack on Government (London and New York: Macmillan and St Martin’s Press).

Walker, Peter (2017) “Jeremy Corbyn: UK Firms Must Pay More Tax to Fund Better Education”, The Guardian, 6 July. https://www.theguardian.com/politics/2017/jul/06/jeremy-corbyn-uk-firms-must-pay-more-tax-to-fund-better-education .

 

Posted in Caroline Lucas, Common ownership, Donald Trump, Green Party, Jeremy Corbyn, Labour Party, Left politics, Liberalism, Markets, Nationalization, Neoliberalism, Politics, Private enterprise, Property, Right politics

October 1st, 2017 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

Ken Loach was a prominent celebrity at the 2017 Labour Party conference, being photographed in the main conference hall and elsewhere in close proximity to Jeremy Corbyn. But it seems that Loach was not then a member of the Labour Party. Instead he was a recent founder of a rival political party – Left Unity – which was set up to oppose Labour.

This is not a personal attack on Loach. Generally, he is a dignified and caring person. He is entitled to his views, but they are dogmatic and impractical. The question is why Labour now welcomes with open arms a member of a rival political party, with views far more extreme than those that Labour has traditionally professed.

What does Loach’s invitation tell us about the state of the Labour Party today? We need to look at his political views. We need to understand the politics of a celebrity that Labour now chooses to put on public display.

Ken Loach’s contributions to film and to public debate

Loach is a brilliant film director and his work has rightly received global recognition. Two of his films received the Palme d’Or at the Cannes Film Festival. He has also received BAFTA awards.

His best work shows us in moving, dramatic detail how working class people can be trapped by the system, suffering poverty and the tragic loss of their human potential. Such were the personal and emotional stories in Cathy Come Home (1966), Poor Cow (1967), Kes (1969), Raining Stones (1993) I, Daniel Blake (2016) and other great films. Loach, with his gritty, realist style has awakened and re-awakened us over decades to the shamefully enduring problems of poverty, inequality, discrimination and exploitation.

Other projects by Loach are different in style. He was to direct Jim Allen’s controversial stage play, Perdition. Allen was a Trotskyist and a close friend of Loach, until his death in 1999. Presented as a courtroom drama, the play dealt with an allegation of collaboration between Hungarian Zionists and the Nazis during the Holocaust. This allegation has been strongly contested by historians.

The play was due to open at the Royal Court Theatre in January 1987, but it was cancelled 36 hours before the opening night. This same claim of Zionist-Nazi collaboration, citing the same contested sources, was repeated more recently by Ken Livingstone and it led to his suspension from the Labour Party.

From gritty realism to unrealistic politics

In contrast to the gritty realism of his working class dramas, Loach takes a less realistic line when it comes to history.

For example, Land and Freedom (1995) is set in the Spanish Civil War. The script was written by Allen. Scenes in Land and Freedom depict an ideological battle within the Republican camp. The Communist Party opposes others on the left, including anarchists and revolutionary socialists.

Against the Communist Party, Allen and Loach took the side of the revolutionary socialists calling for a socialist revolution and for the seizure of the land by the peasants. This unrealistic ultra-leftism mars the film. It brushes aside the argument that General Franco’s insurrectionary fascism would have been best fought by the broadest possible popular front, from liberals to communists.

A similar unrealism appears in The Wind That Shakes the Barley (2006). The script was written by Paul Laverty. The film is set in Ireland in the period 1919-1923. It depicts the struggle for independence and the subsequent civil war.

Again there is a sequence where key characters discuss their strategic options. Again full-blooded socialism is mooted as the only way of liberating the country, from poverty and from British tyranny.

But a socialist revolution in Ireland in 1919-23 was even less likely than one in the 1930s in Spain. Ireland was a country of small tenant farmers. It had little urban concentration or industrial development. The small urban working class was not as well organised as in Britain. Socialism had a tiny following.

A socialist revolution in these circumstances was a fantasy of the film’s director and its script writer. Again the insertion of unrealistic revolutionary socialist preaching spoils the film.

Left Unity

Left Unity founded in 2013 when film director Loach appealed for a new party to replace the Labour Party. In March 2014 Loach condemned Labour for following other parties by upholding “the importance of the market economy”. Like other governments, Labour “cuts back on public enterprise and prioritises the interests of big corporations and private companies”. Loach continued:

The demands of the competitive market are remorseless: reduce the cost of labour; privatise everything; remove protection from working people, and maintain a pool of unemployed to discipline those lucky enough to have a job. Trade unions are to be obstructed while the wealthy are courted in the hope that they will find a pliant, flexible workforce that is easy to exploit. … Labour’s … fundamental stance is limited by the same imperative: profit comes before all else. … The Labour party is part of the problem, not the solution.

Loach called on true socialists to abandon Labour and join Left Unity. More than 10,000 people supported Loach’s appeal. In 2014, the party had 2,000 members and 70 branches across Britain.

Left Unity put up ten candidates in the 2015 general election, to stand against prominent Labour figures including Andy Burnham and Harriet Harman. Left Unity also contested some local elections. There is an unintentional irony in the u-word in its name.

Rejecting social democracy

At the launch of his party’s manifesto, Loach said that Left Unity is “against the logic of the market” which he believed had “failed in every respect”.

Loach decisively rejected social democracy. Referring to Labour and other similar parties, he said that “they’re mainly social democrat parties that think you can manipulate the markets to the advantage of ordinary people”.

For Loach, such manipulation is impossible: “The market demands cheap labour, it demands labour that can be turned on and off like a tap, zero-hours contracts, short-term contracts, agency work.” For him, the market offers us no other option. Hence social-democratic reformism and Keynesian intervention are both fatally flawed.

Nationalising the supermarkets

The 2014 Constitution of Left Unity supported a mixed economy, as a transitional arrangement within an over-arching national plan. But in its 2015 General Election Manifesto, Left Unity took a much more extreme line, reflecting Loach’s absolutist anti-market views:

We need an economy run democratically … This means the principle of common ownership of all natural resources and means of producing wealth, and an end to the dominance of private financial interests such as the City of London over the economy. We stand for ‘from each according to their ability, to each according to their needs’. … We are for public ownership of the banking system, as well as all essential public utilities including transport, telecoms, energy and water companies, and the supermarkets.

Note here the common ownership of all “means of producing wealth”. There are no exceptions. Everything, from banks to supermarkets, would be publicly owned. Marx would have liked that.

Lenin would have also liked the suggestion that this fully planned economy should be run democratically. Lenin argued this in his State and Revolution in 1917. But as soon as his Bolsheviks came to power they had to abandon the idea. Such ultra-democracy is totally impractical.

A quick leap to the higher phase of communism

But Marx might have criticised the Labour Unity Manifesto’s conflation of long and short-term aims. In his Critique of the Gotha Programme, Marx wrote that “from each according to his ability, to each according to his needs” could apply only in

a higher phase of communist society, after the enslaving subordination of the individual to the division of labour … and … after labour has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly

By contrast, Loach and Left and Unity put “to each according to their needs” alongside immediate aims in an election manifesto. It seems that they wanted to leap to “a higher phase of communism” right away.

Loach and Left Unity now want to abolish all markets and all private ownership of the means of production. This went much further than Corbyn and his team, who have argued for a “mixed economy”. But Corbyn’s embrace of Loach and his views might suggest that they share the long-term view that all markets and private enterprise should be abolished.

Even in Marxist terms, the position of Loach and Left Unity on markets is rather crude. Markets have existed for thousands of years. Marx never saw them as the key defining feature of capitalism – instead, for him, it was the system of wage labour. Following Joseph Schumpeter, I would also stress the role of finance.

Resemblances with pro-market economics

But remarkably, the views of Loach and Left Unity replicate some arguments by extreme pro-market economists. Against a majority view, economists such as Ludwig von Mises and Friedrich Hayek argued that a mixed economy cannot work. As von Mises put it in 1949:

The market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such thing as a mixed economy, a system that would be in part capitalist and in part socialist.

Left Unity seems to follow the same logic as these uncompromising, pro-market economists. By contrast, many economists accept that there is a case for some judicious state regulation and intervention in a market economy, to deal with problems such as externalities and market instability.

In my book Conceptualizing Capitalism I go further, to argue that the state is necessary to part-constitute the legal framework of a capitalist economy. Hence some state intervention in a market economy is unavoidable. Given this, the practical question for progressives is where and how it should intervene. The literature on varieties of capitalism shows that many different outcomes are possible within capitalism, and defects such as inequality can be significantly diminished.

In particular, Loach and Left Unity overlook the successes of social democracy, particularly in Northern Europe. During the twentieth century they have built up strong welfare states, redistributed some wealth and regulated markets.

Of course, there have been strong and sustained attempts to reverse these achievements. But it is much more realistic to defend social-democratic gains against the free-marketeers than to urge a quick leap to the higher phase of communism.

Against NATO – for a boycott of Israel

The foreign policy of Left Unity is “anti-imperialist”. Like Corbyn, it calls for Britain to quit NATO. But unlike Corbyn, Left Unity does not support Brexit.

Left Unity calls for “a campaign of boycott, divestment and sanctions against Israel until it complies with its obligations under international law”. It does not call for boycotts or sanctions against other countries that break international law, such as Russia and North Korea, among others.

Loach supports the boycott of Israel, calling it an “apartheid regime”. Before his election as leader, Corbyn also pushed for boycotts of Israel. This selective targeting of Israel now seems a widespread opinion among Labour members, but it is not official party policy.

Rather than accepting that anti-Semitism as a problem within Labour, Loach argues that the claims are false: those that raise the issue are trying to undermine Corbyn’s leadership.

Loach is also noted for his support of the controversial founder of Wikileaks, Julian Assange. It has been alleged that Wikileaks has received support from Russian agents, and that it acted to destabilise the candidacy of Hillary Clinton in the 2016 US presidential election.

Supporting ISIS

Another remarkable incident tells us not so much about Loach, but about some of the people who join Left Unity.

In a 2014 conference of Left Unity, a minority proposed support for the so-called Islamic State in Iraq and Syria (ISIS). True to their Leninist credentials, they argued that the left “has to acknowledge and accept the widespread call for a Caliphate among Muslims as valid and an authentic expression of their emancipatory, anti-imperialist aspirations.” They supported ISIS as a “stabilising force” with “progressive potential”.

The motion was heavily defeated. Supporting ISIS is not Left Unity policy. But the fact that anyone could make such a proposal, particularly while describing themselves as left and socialist, is deeply shocking. As Benjamin Jones argued: “this is just the latest flirtation in a long courtship between elements of the British far left and the Islamist far right.”

A warm welcome

In the 2015 General Election, Left Unity’s parliamentary candidates received a pitiful average of 288 votes – all losing their deposits. Later that year, after Corbyn’s election as Labour leader, Left Unity voted against affiliation to the Labour Party but resolved not to put up any more candidates against Labour.

Because of Corbyn’s leadership victory, several hundred members resigned from Left Unity and joined Labour. Left Unity is now a depleted party, without a viable independent strategy.

It seems that Labour is now welcoming their members, ignoring their extremist and unrealistic views and their fervent opposition to social-democratic reform. This is a suspicious unity of a dubious left.

 

1 October 2017

Minor edits – 3, 5 Oct 2017

 

This book elaborates on some of the political issues raised in this blog:
Published by University of Chicago Press in January 2018

 

Bibliography                                

Cohen, Nick (2007) What’s Left? How the Left Lost its Way (London and New York: Harper).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Mises, Ludwig von (1949) Human Action: A Treatise on Economics (London and New Haven: William Hodge and Yale University Press).

Rich, Dave (2016) The Left’s Jewish Problem: Jeremy Corbyn, Israel and Anti-Semitism (London: Biteback).

 

Posted in Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Markets, Nationalization, Private enterprise, Socialism, Tony Benn