[lbo-talk] Oskar Lange "On the policy of transition" (was sachs and poland)

farmelantj at juno.com farmelantj at juno.com
Mon Dec 5 11:52:19 PST 2011

Wojtek wrote:

WS:] Yup. I do not have an electronic version of the book so I cannot post the whole argument on line, but here is a quotation that summarizes it: "For, as we have seen, if socialization cannot be achieved by a great and bold stroke, the government has to give up its socialist aims altogether" (ibid, p.126).

It was pretty amusing to hear various neoliberal talking heads on the Polish TV parroting the same argument - sans theoretical justifications, just a bunch of anecdotes and parables about driving on left or right side of the road or jumping over a ravine - in favor of privatization. ---------------------------------------

This is some excerpts of what Lange wrote. I think have included enough to provide the flavor of his argument.

Jim Farmelant http://independent.academia.edu/JimFarmelant

--------------------------------------- The preceding treatment of the allocation of resources and of pricing in a socialist economy refers to a socialist system already established. The question does not present any special theoretical difliculty if a sector of small-scale private enterprise and private ownership of means of production is embodies in a socialist economy. However, on grounds which result from our previous discussion of the problem, this sector should satisfy the following three conditions: (1) free competition must reign in it ; (2) the amount of means of production owned by a private producer (or of the capital owned by a private shareholder in socialised industries) must not be so large as to cause a considerable inequality in the distribution _of incomes; and (3) the small-scale production must not be, in the long run, more expensive than than large-scale production. But the problem of transition from capitalism to socialism presents some special problems. Most of those problems refer to the economic measures made necessary by the political strategy of carrying.through the transformation of the economic and social order. But there are also some problems which are of a purely economic character and which, therefore, deserve the attention of the economist.

The first question is whether the transfer into public property and management of the means of production and "enterprises to be socialised should be the first or the last stage of the policy of transition. In our opinion it should be the first stage. The socialist government must start its policy of transition right away with the socialisation of the mdustnes and banks in question This follows from what has been said before on the possibility of successful government control if private enterprise and private investment. If the socialist government would attempt to control or supervise them while leaving them in private hands, there would emerge all the diificulties of forcing a private entrepreneur or capitalist to act differently than the pursuit of profit commands. In the best case the .constant friction between the supervising government agencies and capitalists would paralyse business. After such ab unsuccessful attempt the socialist government would have either to give up its socialist aims or to proceed to socialisation; ----------------------------------------

Lange goes on to argue against any policy of gradualism in transitioning from capitalism to socialism on the grounds that any enterprises of businesses that are left in private hands but which are slated to be socialized later on will be basically run into the ground by their capitalist owners before they get to be socialized. That's why Lange insisted that socialization could only work if it is done in a bold single step. Likewise, since Lange believed that for the sake of economic efficiency those sectors of the economy where real competition still exists should be left in private hands, Lange insisted that the socialist government ought, in effect, to give its sacred word, that it has no intention to nationalize them. Otherwise, any uncertainty about their ultimate fate would encourage their owners to run those enterprises into the ground too..

Lange finishes up his argument with the following:

"Marshall placed caution among the chief qualities an economist should have. Speaking of the rights of property he observed: "It is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life." But he did not fail to indicate that the great founders of modern economics were strong not only in caution but also in courage. Caution is the great virtue of the economist who is concerned with minor improvements in the existing economic system. The delicate mechanism of supply and demand may be damaged and the initiative and efficiency of business men may be undermined by an improvident step. But the economist who is called to advise a socialist government faces a different task, and the qualities needed for this task are different, too. For there exists only one economic policy which he can commend to a socialist government as likely to lead to success. This is a policy of revolutionary courage." -------------------------------------------

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