Economic Theory

Socialism: will next time be different? (Part 2)

…continued from Part 1


On 21-24 June, the Alliance for Workers’ Liberty organised the conference ‘Socialism Makes Sense: Ideas for Freedom 2018’ in London. One of the speakers was the IEA’s Dr Kristian Niemietz. The article below is based on his remarks.


So much for the economics. Now let’s move on to the democracy business.

This is where I often find discussions with socialists a bit frustrating. Socialists are usually very keen to distance themselves from previous examples of socialism. They’re keen to emphasise that their version of socialism has nothing to do with the Soviet Union, or Maoist China, or all these other examples.

That’s fair enough. But when I ask them: “What exactly would you do differently? If you had been in a position to influence events in the Soviet Union or some other socialist state, what exactly would you have changed” – when I ask questions of that sort, I never get a clear answer from socialists. Socialists respond to that by escaping into abstraction. They talk about outcomes they would like to see, they talk about lofty ambitions and aspirations, such as, “an economy run in the interest of working people” or “a democratised economy”.

Sorry, but those are just soundbites. What does this mean? Are we all going to gather in Hyde Park and debate how many tooth brushes and how many razor blades we are going to produce? Are we going to have parliamentary committees that decide how much beer we should brew? Unless you can identify a specific mechanism, unless you can describe a specific set of institutions, and explain how they will work, all this talk of a democratically run economy is just blah blah blah.

There are 65 million people in this country. We all have very different needs, different preferences, different values and different goals. It is hard enough to get a group of more than, say, five people to agree on a restaurant. There’s always one guy who’s a vegan or a vegetarian, one guy who has a food allergy, one guys who insists on going to some fancy Italian place that the others think is far to expensive, and so on. With this in mind – good luck trying to get 65 million people to agree on an economic plan.

I’m not saying economic democracy never works. You can organize very small communities with very simple economies in that way. That’s why the Israeli Kibbutz system works. Or at least some of them. But it’s a model which is not scalable. There is a reason why the Kibbutzim have never grown beyond a certain size, and why they’ve never developed more complex, more diversified economies. It’s not because of any legal obstacles. If that model could work on a larger scale, it would have happened by now. The Kibbutzim would have simply grown in size and complexity, and eventually, they would have accounted for most of the Israeli economy.

But that hasn’t happened. Because it only works on a small scale and where economic activity is simple. Once an economy reaches a certain level of complexity, the time and effort that is required to organise it through democratic mechanisms grows exponentially. At some point, it just no longer feasible at all to organize an economy in that way.

That is why even in the Kibbutz movement, you can see that the larger they become – and a Kibbuts with 1,000 people would already be one of the largest – the more they move away from the traditional, grassroots-democratic model. They adopt more conventional management structures, and become more like conventional private enterprises.

Kibbutzim have been around for 100 years, and they’ve never managed to grow that model beyond a certain size and a certain level of complexity. If those people, with all their experience and all their expertise, never managed to make that work, I have some serious doubts that you guys are going to make it work. Especially given your refusal to provide any details on how you’re going to do it.

I have found one tangible claim on this in Sean Matgamna’s book “Socialism makes sense”. He says, the economy could be run more or less like the NHS. So let’s look at that option.

I don’t think the NHS is a good system, I think most Continental European health systems are much better. But it is an OK-ish system. It sort of works.

However, the NHS is just a conventional nationalised industry. There’s nothing special about how it’s organised. It’s not fundamentally different from British Airways while it was nationalised, or British Telecom while it was nationalised. The only difference is that people revere the NHS, and project a lot of things into it, in a way they never did with British Airways or British Telecom. But it is not, in any objective sense, different from a conventionalised nationalised industry.

The NHS is definitely not democratically run. Not an any level. It is, in some ways, very much a top-down organisation.

For example, a lot of what’s going on in NHS hospitals and other NHS organisations is determined by central targets that are specified by the Department of Health, and then imposed on individual NHS providers.

Where there is local autonomy, it’s a group of clinical experts, the so-called Clinical Commissioning Groups, making the decisions. There are a number of ways in which, in theory, the wider public can participate in those decisions. There are attempts to raise public engagement. But in practice, almost nobody does it. Of course they don’t. Because it’s technical, dry and boring.

I wrote a book about healthcare, so I am, almost by definition, more interested in that subject than 95% of the population. But even I wouldn’t dream of attending a committee meeting, discussing clinical priorities. I am interested in the issue at an abstract, general level. But I’m not interested in it at that level of detail. I’m not interested in the nuts and bolts.

And that is, of course, true of all nationalised industries, including the ones that used to be nationalised in Britain before Thatcher. Those industries were run by a group of technocrats, and the wider public did not participate. And that could not be otherwise. It’s true of most economic policy areas that they are interesting in the abstract, but as soon as you dig just a little bit deeper, they quickly become very dry and technical. You’re never going to get high levels of public participation in economic decisionmaking. Because nobody, not even professional economists like myself, is interested in the nuts and bolts.

You could have an economy in which most sectors are organised like the NHS. But then, you would have just recreated the Soviet Union.

That’s it from me. Enjoy your conference. Things are going your way at the moment. Socialism has become extremely fashionable again. So maybe we’ll soon see your ideas being implemented in practice. My only worry is that once that happens, you will hate it.


Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

2 thoughts on “Socialism: will next time be different? (Part 2)”

  1. Posted 26/06/2018 at 07:39 | Permalink

    If you believe in “democratic” socialism, do you allow the people to vote it out? Because if you don’t, it isn’t democratic. And if you do, you won’t have socialism (we already are in that position, after all).

    Yugoslavia allowed free movement of people and actual worker participation in decisions. It was the mildest Socialism ever achieved in terms of freedom of expression, religion etc. But even it couldn’t allow democracy, and collapsed as soon as it allowed a vote.

  2. Posted 17/07/2018 at 02:31 | Permalink

    Just a personal experience. I was in Berlin when the wall came down, and tens of thousands of East Berliners and other DDR citizens streamed through the holes wrecking balls were making in that hated wall.
    The East Berliners were now exposed in the flesh to everything they had only ever seen on West German TV (which they could watch illegally).
    What stays in my mind is the sheer wonder on the faces of East Berlin children holding an orange in their hands for the first time. They treated it with a combination of reverence and curiosity, rolling it in their hands, holding it up to the light, sniffing it and excitedly pointing out the features of their particular orange to the other children. That went on a long time before they peeled and ate them.
    The East German economy had never been able to provide oranges for its citizens, something which in the capitalist West was treated as everyday a product as toilet paper. With the exception, of course, of the Bonzen, the party bosses living in the villas once inhabited by the Nazi party elite.
    No system with such structural and moral deficiencies has anything to recommend it.

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