Economic Theory

The Mirage of Democratic Socialism: a rejoinder (Part 1)


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Two out of five people under the age of 35 have a positive opinion of socialism. Two out of five (presumably largely the same people) also agree with the statement that “communism could have worked if it had been better executed”.

My IEA paper ‘The Mirage of Democratic Socialism: An Alternative History’, published about two months ago, tackles this popular misconception head-on. It shows that it was not due to a coincidence, bad luck, or unfortunate circumstances that socialism turned out the way it did. It turned out that way for specific reasons, and it could not have turned out very differently.

The paper presents that case in the form of an alternative history. It describes a parallel timeline, in which the fall of the Berlin Wall does not lead to the end of socialism, but to a period of democratic renewal. The old elites are kicked out, and replaced by a group of well-meaning, high-minded idealists, whose anti-totalitarian credentials are beyond any doubt. Those idealists try their best to democratise the system from within. They dismantle the old top-down bureaucratic structures, and try to replace them with a bottom-up, grassroots-democracy system.

It works for a short time. But soon, the contradictions inherent in socialism reassert themselves, and the system begins to slide back into its bad old ways. Eight years later, our idealist reformers end up with a system that looks, once again, suspiciously like the system they inherited, and tried so hard to get away from.

Unsurprisingly, the paper provoked quite a few angry responses from socialists on social media. Interestingly, so far, my critics have only managed to attack the format of the publication, rather than its content. The most common criticism (apart, obviously, from “Who funds you?”) was that a thought experiment of that kind cannot teach us anything about socialism – it only reveals the prejudices of the author. Why make up stories about fictional countries and alternate universes? Why not look at real-world evidence instead?

Real socialism vs “real” socialism

This is a strange criticism for a number of reasons. First of all, I am, of course, more than happy to debate real-world examples of socialist societies. If my socialist critics want to talk about the Soviet Union, or Maoist China, or North Vietnam, or North Korea, or Hoxhaist Albania, or Venezuela, or, of course, the GDR that actually existed, rather than the fictitious GDR of my paper – my door is always open.

But I get the distinct impression that that is the last thing they want to do. In fact, part of the reason why I created this ‘intellectual safe space’ of a socialist country that (at least in this form) never existed is that every time I mention a real-world example, socialists accuse me of straw-manning them. They insist that neither the Soviet Union, nor Maoist China, nor North Vietnam, nor North Korea, nor Hoxhaist Albania, nor Venezuela, nor the GDR were ever ‘really’ socialist, and that it is mean-spirited to even mention them. Those systems, they argue, were distorted, perverted versions of socialism, which tell us nothing about the “real” thing. We should not judge socialism by how it has panned out in practice so far, but by its original intentions. We should not judge the socialism that was, or the socialism that is, but the socialism that, one day, could be.

In other words: socialists want us to imagine a hypothetical socialist society, rather than talk about a real one. They want us to imagine a socialist society led by people who are true to the original ideals, rather than people who are interested in their own power. Does this sound familiar?

It does to me. Because that’s exactly what my paper does. So why are my socialist detractors still not happy?

“Based on real events…”

The socialist society that I describe in the paper never existed in this specific form. But neither is it all just made up. The paper draws heavily on the experience of socialist countries that really did exist, or still exist today, such as the USSR, Venezuela, and, of course, the GDR itself.

For example: in the beginning of my paper, the government converts state-owned enterprises into autonomous worker-run cooperatives, managed by democratically elected workers’ councils. It then turns out that those workers’ councils often pursue priorities which are at odds with the economy-wide Five-Year-Plan. So their autonomy has to be curtailed again.

Something like that really happened around the time the GDR was founded. As the economic historian André Steiner explains in his book “The Plans That Failed. An Economic History of the GDR”:

“The work councils […] oriented themselves by the interests of their enterprises and their workforce rather than by the requirements of the economy as a whole. This was one of the reasons why they were abolished in 1948. […] Thus there was no institution that would have enabled the workers to share in decision making”

This is just one example which shows that there is, at the very least, a strong tension between central planning and local autonomy. It is too easy for contemporary socialists to claim that the leaders of the GDR, or its sister states, were all just a bunch of control freaks, who had no interest in giving ordinary people a say in the running of the economy. It is too easy to say that they never tried. They did try. But the tension between central planning and local autonomy is real, even if today’s voguish socialists refuse to acknowledge it.

More recently, although in a completely different way, that tension has also manifested itself in Venezuela.

Hugo Chávez initially defined his “Socialism of the 21st Century” explicitly against Soviet socialism, which he called a “perversion” of the original idea. He was keen to emphasise that his version of socialism would be completely different. This was not just empty rhetoric. Rather than just nationalising existing industries, the Chávez government initially tried to build up a “social economy”, consisting mainly of worker-run cooperatives. These were meant to be free from corporate influence, but, crucially, they were also meant to be independent from the state. The Chavistas thought of them as a springboard towards a more advanced stage of socialism.

But that leap never happened, and the Chavistas eventually realised that it never would. As Chávez himself put it:

“The model of cooperatives [cooperativismo] does not guarantee socialism because a cooperative is collective private property; that is, if we are 20 in a cooperative, we are going to work for the benefit of us 20, and that is merely capitalism. Cooperatives need to be impelled towards socialism. […]

According to Chavez, an enterprise was only socialist if it “belongs to the entire community and […] operates under a direction, a plan; it produces in accordance with the interests not only of the cooperative members but of the entire community”

In other words: after many long detours, Hugo Chávez ultimately ended up reinventing the Soviet Union.

Read Part 2 here…

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).


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