Does Socialism Ever Work?

Here is another guest article from J Enigma. Massive thanks to him and all my guest posters.

A while back, I wrote a guest piece for this blog entitled “Socialism Always Fails?” It did pretty well and engendered some discussion, but I think in that piece I danced around a core question and I want to at least try to address it here.

In the original piece, I took a critical look at the right-wing claim that “Socialism always fails” or that “Socialism never works,” and I came to two conclusions: one, socialism is never defined in these conversations, and so it becomes a matter of yelling over labels. But the second point, that I feel I didn’t spend a great deal of time addressing, is that “works” isn’t defined, either. What does it mean for something to “work,” “succeed,” or “fail?”

And it begs the question – can socialism of any type ever “work?”

Systematic Analysis

Before we can talk about what an economic system might look like if it worked, we have to talk about what economic systems are. Now, for some of you this is probably obvious. However, not everyone has a grasp of this material and even if you do, it’s useful to understand where a person is coming from when they make an argument. I may have a slightly different idea about how a definition works than you do, because my economics knowledge is colored by my education in history. So consider this as much an introduction into how I personally view economics as much as an attempt to explain economic systems in layman terms.

When I learned economics in history, these are the four systems that got emphasized. These aren’t the only ones, but they’re the “big four” so to speak.

Market Economies: Market economics are economies where investment, production, distribution, and allocation of capital are all the products of supply and demand; that is, the price signals created by the individuals within the market act to direct the market. If this sounds like capitalism, well – it is. Historically market-based economies have been strongly associated with capitalism because capitalism was the OG market economy. However, it should be noted that market economies range from the truly laissez-faire systems of Augusto Pincohet and libertarianism to the regulated and interventionist systems of Sweden, Norway, and France (although Dirigisme is a weird beast that may deserve a separate entry), to the State Capitalism/Socialism of the People’s Republic of China. In short, almost everyone uses a market-based economy, with one major exception: North Korea, and if reports are to be believed, the latest Kim is planning on changing that and moving them towards a situation similar to what China has, where the private sector is downplayed but still very present.

Mixed Economies: Of course, when I talk about Sweden, Norway, France, China, and the likely outcome in North Korea if it doesn’t crumble under its own weight before it can make the leap, I’m not talking about a pure market economy; I’m talking about a mixed economy. With a mixed economy, you have elements of state interventionism with free markets; private enterprise with public enterprise; and a market economy in some sectors and a planned economy in other sectors. In truth, every modern country uses some degree of mixed economy, with the state managing some aspect while the market manages other aspects. When people are arguing over “socialism vs. capitalism” they aren’t really arguing about a market-based economy vs. planned economy (see below). They’re arguing about the degree to which public enterprise and private enterprise should share the same economic space. This is why what gets called “socialism” in the United States often isn’t – it’s better called welfare capitalism, social democracy, or in the cases like me, liberal socialism: some level of economic mixing directed for the betterment of the state and the people who make it up.

Planned Economies: Planned economies, also called centralized economies, are economies where investment, production, distribution, and allocation of capital are the results of economy-wide plans. While most Americans intuitively associate this with “socialism,” and therefore “state,” I’m careful to exclude the use of the “state” here because planned economies can exist without those. In its purest form, anarcho-communism takes on shades of a planned economy, as does libertarian socialism, libertarian Marxism, and similar ideologies that explicitly call for the abolishment of the state. Likewise, it’s very easy for a non-state entity to seize control over the investment, production, distribution, and allocation of capital; just ask anyone who’s ever tried to deal with Comcast, or look in the past at the monopolies of the 20th century. They ran planned economies so centralized that China looks like a paragon of laissez-faire capitalism by comparison.

Traditional Economies: This is a catch-all term for a number of different economic systems that are traditionally considered “pre-industrial”, usually focused on subsistence economies, barter economies, and gift economies. These three are very different economic systems, one of whom probably never existed on any widespread level (specifically, the barter economy) while the other two are probably as old as humanity. With a subsistence economy, the economy makes just enough to ensure that all of the members within the economy have what they need and there’s very little in the way of surplus storage, with little to no monetary system. A gift economy, by contrast, is where valuables are given as gifts rather than traded for any sort of long or short-term gain. The last economic system that deserves note is the barter system, which while it exists was probably nowhere near as widespread as people seem to think it was and, contrary to Adam Smith, didn’t predate money. Human tribes likely used some sort of subsistence or gift economy rather than rely on an ad hoc barter system in the absence of money.

So Which Ones Work?

Now, if you’re a typical American, you’re probably “all capitalism, all the time” and probably support a free market, thinking that capitalism and the free market are synonymous, and that they’re the only system that “works.” All those other systems have been tried and “failed.”

Well, as I’ve shown, there are actually many, many different types of capitalism. Capitalism as a concept spans 2 of those 4 categories; an economic system that is mixed can be capitalist just as easily as an economic system that’s purely market-based. Furthermore, it’s extremely difficult to distinguish between a market-based and mixed economy. So which one “works” – mixed or market?

Let’s look at this from a different perspective: the traditional economies. We sneer at them because they’re primitives who don’t have cool things like pagers, phonographs, and fax machines, the things that make modern civilization, but what we consider “civilization” is barely 10,000 years old. Human history is much, much older; anatomically modern humanity emerged almost 200,000 years ago, in the horn of Africa, and spread from there. For much of that history, we’ve been using subsistence and gift economies. The Native Americans were still making use of gift economies well into the 18th and 19th centuries and there are still people who use it today; surely if something’s been used for the better part of 200,000 years – more 100x longer than market-based economies, basing them from the publication of The Wealth of Nations in 1776 – it’s because it “works”, right?

Once more, from a different perspective: centralized economies get a lot of flak, and that’s because most people intrinsically associate a centralized economy with the Soviet Union. And while the Soviet Union did have its own unique style of centralized planning, let’s set aside labels like communism and capitalism for a second and take a look at who else in history has used centralized planning for their economy: if you believe the idea that mercantilism is a form of centralized planning, which is a convincing one, this means that the British Empire used it. Going back beyond industrial economies and looking at agricultural ones, the Roman Empire was arguably a centralized agrarian economy, and there’s no argument that the Egyptian Empire was a highly centralized economy. In fact, Egypt was, in some ways, more centralized than the Soviet Union was. And Egypt lasted 30 centuries – that’s 3,000 years. They weren’t just a backwater country during that time, either – for those 3,000 years Egypt was the preeminent civilization in the Middle East. And while it’s easy for us to look back on them now and sneer at them because they’re primitives who don’t have cool things like the betamax, buggy whips, and floppy disks, stuff that makes our civilization great – that sort of hindsight bias blinds you to the fact that these highly centralized economies provided a way of life that was unparalleled at any point in human history up to that moment. Egypt, the Hittites, the Myceanans, and others were the superpowers of their age, with qualities of life higher than any other point in human history before them.

So we have two economic systems, one that has existed since the dawn of human civilization and one that has existed since the dawn of humanity, and both of them must have worked, otherwise we would never have gotten as far as we have.

So I ask again, which one “works?”

What Does “Works” Mean Again?

In the original piece, I noted that it really boils down to what someone means when they say “works.” And what “works” means varies from person to person. When leftists talk about economic systems “working” they’re typically talking about economic systems that benefit the common individual; that aren’t systematically biased against them. Capitalism doesn’t have to be these things, but it’s loudest defenders were also jackasses who idea of “works” means “makes white people money, screws over everyone else,” and so we end in a situation where capitalism has the reputation it has, and people are calling for “socialism,” – i.e. welfare capitalism or capitalism with a safety net – because they’ve grown up knowing capitalism as nothing but a system that is designed to exploit people.

And to be fair, they aren’t wrong. Even under the most generous interpretations, our current economic system is absolutely unsustainable; you can bury your head in the sand all you want, but that doesn’t mean climate change isn’t real and the exploitation of labor and the environment aren’t creating real, lasting, long-term damage to our planet, species, and civilization(s). But the current system only works because governments are involved – remember, mixed economies. So that means there’s still a chance to change the way this works, because in a democracy the people are the government.

So what it comes down to is this: what does works even mean? Egypt worked, and that was a centralized economy. The Soviet Union was round for almost 70 years; that’s not the best run in the grand scheme of things but it’s not terrible, especially when you consider the leadership it was saddled with in the beginning and the fact that Russia was never an industrialized nation anyway prior to the Bolsheviks seizing power; had something like the Bolsheviks seized power in a more industrialized nation, might history have played out different? Might we be arguing today that capitalism failed and anarcho-syndicalism “works?”

Really, “works” can mean whatever you want it to. And at the end of the day, almost any economic system can work so long as enough people decide to play along. But when people have had enough and they’ve decided not to play along anymore, then the economic system stops working. And generally, people have a reason for not playing along. What’s yours?

So the next time a right-winger tells you “socialism doesn’t work” or “socialism always fails,” ask them what the conditions for “working” or “failing” are. If they bother responding – which they probably won’t but you never know – then you can take the conversation from there. It’s time to stop arguing about labels; that’s not productive, and it lets idiots think they have a viable, meaningful opinion because they can regurgitate some stupid meme they read on Facebook rather than going out and actually educating themselves on the subject like responsible citizens living in a modern democracy. This stuff isn’t easy to learn; these systems are complicated. But everyone should at least know the basics and shouldn’t rely on thought-terminating cliches; enough so they are familiar with the topic, but also enough so that they know they don’t know everything and enough so they can evaluate an expert’s opinion based on the opinion of other experts.

Our democracy depends on it. Any democracy depends on it.

J. Enigma, amateur philosopher, political scientist, economist, and linguist.    

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