[lbo-talk] Rural society and Communism (Was: CBO on HR 1)

SA s11131978 at gmail.com
Fri Feb 13 21:15:29 PST 2009


Marvin Gandall wrote:


> In retrospect, the Soviet and Chinese
> regimes were successful in fulfilling "the historic tasks of the
> bourgeois-democratic revolution" - ie. land reform, industrialization,
> mass
> education, public health, national independence, etc. - but could not
> build
> an enduring socialist (publicly owned and controlled) economy in
> predominantly rural societies encircled by more advanced capitalist
> economies enjoying higher levels of labour productivity.
[...]
> I don't think socialism had little appeal to the Western workers because
> they were and are somehow inherently lacking in "ideals of social
> solidarity". They found the capitalist welfare state more attractive
> because, plain and simple, it delivered a higher standard of living to
> them
> than was evident in anticapitalist China and the USSR undergoing
> rigourous
> industrialization. There was therefore a real materialist underpinning to
> the social democratic ideology of the Western working class. Even so,
> except
> in the wealthiest English-speaking capitalist countries, the Communist
> parties were still able to sink deep roots in Western urban centres
> from the
> time of the Russian Revolution until it's demise seven decades later.
> Because of this relationship between the material and the ideological, it
> would not surprise me to see radical left-wing ideas revive if the
> economic
> underpinnings of Western working class consciousness - underpinnings
> which
> has been weakened over the past several decades - were to thoroughly
> collapse.

Sorry for the length of this post. There's a lot I agree with here. But an important point is that in the heyday of the socialist idea in the West (let's say 1900-1950), the notion that central planning socialism could work at least as well as a market economy seemed to be validated by the best and most orthodox economics of the day. It was not just a romantic idea for overcoming injustice; it was also an idea that appeared to any moderately educated progressive, the kind who read the Sunday supplements and kept up with politics and ideas, to stand a good chance of being a more efficient and rational system.

Economics back then pictured an economy ruled by prices; and a price was just the solution to a set of engineering equations. There was no reason why a trained planner couldn't solve these equations better than the market. Even economists who opposed socialism recognized that the case for central planning was very strong and they had a hard time formulating arguments consistent with neoclassical orthodoxy.

Nowadays nobody believes that anymore. For example, the old economics would say that if a central planner saw steel orders outpacing supply, he could just raise the price of steel until orders fell into line with production. Prices were merely signals about relative scarcity and raising the price would send the "right signal." Economists generally failed to see a different role that prices play: In the 1920's, the current prices of steel, rubber, glass and labor were all signals telling Henry Ford that automobiles could be produced at a low cost using such and such a technique. But that way of using prices as signals constituted an *act of imagination* on Henry Ford's part, not just the solution to a set of equations designed to solve a pre-set problem. And what distinguishes a market economy from a centrally planned economy is that in principle anybody can apply their own individual imagination to prevailing prices and come up with ideas for new products and processes. And then they can approach any one of a large number of potential capital suppliers (banks, venture capitalists, rich uncles) to try to finance the idea. This acts as an engine for generating and bringing to light new ideas for economically feasible technical improvements.

Of course, many people would point out that in the real world of capitalism, the vast majority of production and investment is carried out by big bureaucratic corporations, not plucky little tinkerers toiling in their basement. That's true, but every single act of production involves a product and/or process that first had to be thought of by some entrepreneurial agent. It may have actually been a plucky entrepreneur like the Google boys. But even if it was a corporation, it was a corporation that had access to an innumerable choice of potential capital sources, and that was always under (potential) competitive pressure from millions of other firms and individual entrepreneurs who might come up with a better product or process.

All of this is now well understood; it's been thoroughly absorbed into conventional wisdom in the same way the engineering view of economics was part of conventional wisdom 70 years ago. Most of all, everyone still remembers the practical outcome of central planning - goods of poor quality and variety and technological backwardness. And that was *not* only true of traditionally backward economies like the Russia - it was also true of East Germany. (And Czechoslovakia.) Incidentally, the economist Peter Murrell wrote a book in the 1990's presenting overwhelming empirical evidence that the Soviet-type economies were exactly as technically efficient as western economies, in terms of the static allocation of resources. They weren't "inefficient." They were just not dynamic.

Anyway, I think all this limits the potential for central planning socialism to revive as a social ideal.

SA



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