Economic Theory

The Mirage of Democratic Socialism: a rejoinder (Part 2)

…continued from Part 1

My IEA paper “The Mirage of Democratic Socialism: An Alternative History” describes a hypothetical socialist state, which tries, and fails, to reinvent itself. It starts with bold reform measures, but in the end, it ends up once again pretty much where it started.

Some of my socialist detractors on social media have taken issue with the paper, or rather, with its format. According to them, the paper does not, and could not, present a valid argument against socialism, because none of this actually happened. It’s just the author’s morbid fantasy, they claim.

This is not quite right. Of course, what I describe in the paper did not happen in exactly that way. But it is not plucked out of thin air either. It is a collage of things that happened under various socialist regimes, which draws out, and accentuates, the inevitability of it all. The point is to show that what did happen had to happen – irrespective of the motives of the people in charge.

Take migration. The paper’s alternative timeline splits off from ours a few months after the fall of the Berlin Wall, so in the beginning, there is complete freedom of movement between East and West Germany, including between East and West Berlin. But when migration starts to get in the way of economic planning, the government gradually brings back border and migration controls.

This, and the way my fictitious socialist politicians justify it, is an allusion to what really happened in a lot of socialist countries. Migration controls under socialism, both for within-country and for cross-border migration, were not random acts of bureaucratic chicanery. They were driven by economic requirements.

The Soviet Union, for example, initially allowed free movement within the country. Not coincidentally, this came to an end when the socialist transformation of the economy began in earnest. As the political scientist Alan Dowty explains:

“Strict internal controls were imposed in the early 1930s as Stalin’s first Five-Year-Plan and forced collectivisation gathered force. To allocate scarce housing and to weed out “non-productive” elements, the government in 1932 introduced the internal passport […] [t]ogether with the residence permit”

On its own terms, it makes sense. You cannot plan an economy if you don’t have the power to allocate the factors of production. Including labour.

Contemporary socialists have the unhelpful habit of putting everything that happened under Stalin into a box labelled “Stalinism, therefore Not Real Socialism, therefore nothing to do with me”. That’s too easy. Yes, those measures were brought in under Stalin. But they were not specifically Stalinist (which is why they survived the ‘De-Stalinisation’ period unscathed). What would a non-Stalinist government have done differently?

In the GDR, the Berlin Wall and the border fence with West Germany were also quintessentially economic measures. It is not true that nobody was allowed to move from East to West Germany: for pensioners, it was relatively easy to do so. The emigration ban applied specifically to people of working-age.

The leaders of the GDR did not come to power with the intention of walling people in. They tried less extreme measures first, such as appealing to people’s sense of duty, portraying West Germany as a hellhole, and finally, a system of border controls with readily available travel permits. But when all else failed, they eventually had to make a choice. At that point, the GDR had already lost about 3m people (mostly highly skilled workers), and was still losing around 200,000 per year. They could not go on like this.

You cannot pretend that the Berlin Wall was only built because bad people, who misunderstood socialism, were in charge. What would nice people, who understood socialism properly, have done differently in that situation? What would you, Democratic Socialist Who Is Not AT All Like Those Nasty Stalinists, have done differently? Watch socialism fall apart?

Robinson Crusoe economics

Some of my critics got really hung up about the format, going to epic lengths to explain why thought experiments about fictional societies are completely meaningless.

Let’s put it this way. Introductory economics textbooks often refer to a “Robinson Crusoe economy” to explain basic economic concepts, such as opportunity costs, capital goods, comparative advantage (once you introduce Friday) etc. For example, if Robinson Crusoe must choose between catching fish and plucking coconuts, and if it takes him three times as long to catch a fish than to pluck a coconut, then each fish has an opportunity cost of three coconuts. And so on.

What would you make of an economics student, who raised their hand, and said:

“Sorry, professor – but this is all nonsense. Robinson Crusoe didn’t actually exist, you see? He’s not real. He is a fictional character from a novel.

Therefore, what you’re doing here is illegitimate. It doesn’t tell us anything about economics. You’re just making this up. Opportunity costs are not real. These are just your personal prejudices.”  

My guess is that you would not be impressed by that reasoning. The Robinson Crusoe economy is, of course, not about Robinson Crusoe. It is just a tool for communicating economic ideas, which might otherwise seem a bit abstract, in a simple and accessible way. It is popular with economics tutors and lecturers, because it allows them to strip away anything that would unnecessarily distract their students, and draw out the point they want to explain.

The exact same thing is true of the format I’ve chosen for this paper. Free-market liberals know that socialism is inherently unworkable, and inherently authoritarian. This seems obvious when we talk about it among like-minded people. But when we’re talking to someone who doesn’t share our central assumptions about politics and economics, it suddenly becomes surprisingly hard to explain.

Is there a more suitable format than the one I have chosen? Quite possibly. But then – it doesn’t really matter. The format is not important. It is simply a tool to communicate a series of economic arguments.

Those arguments could, of course, be wrong. They could be riddled with errors. They could be total nonsense from start to finish. But so far, none of my critics have pointed out any errors. All they have done is harp on about the format in which I’m presenting them. It would make as much sense if they attacked the font type, or the cover.

Suggestions for debate

So here’s what I would suggest. If you want to show that I’m wrong about socialism, you should do one of two things:

  1. Go along with the setup of the paper, and show me where my mistake is. Show me why the problems I’m describing would either not arise at all in a socialist society, or how a socialist society would be able to solve them.

  2. Or propose a different model of socialism altogether. Show me that my idea of how a socialist society would work is wrong, and how “your” alternative socialist system would be able to solve the problems that “mine” cannot solve.

That would be the way to have a fruitful discussion about socialism and capitalism.

I’ve made my position clear. The ball is in your court now.

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).

Leave a Reply

Your email address will not be published. Required fields are marked *