It’s Time to Engage Seriously with Socialists

Hugo Newman
Dec 5, 2017 · 37 min read
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Strawmanning of socialism is as unfair to socialism’s opponents as it is to socialists. There are very good arguments against socialism out there, and they’re the ones we should be referring to at every opportunity.

It has become hackneyed of late to preface political thinkpieces with the observation that we are living in unusually polarised times. Frankly, I’m not entirely sure that it’s true. It may be that the ubiquity of social media rather gives the impression that there prevails more trenchant division now than ever before, when in fact it merely gives people a more immediate means to publicly air political disagreements that were always there to begin with. Nevertheless, even the impression that there is increasing polarisation could itself be damaging, as it is likely to discourage people from ever engaging with perceived ideological opponents.

So for now I’m going to work with the assumption that there is at least a widespread belief that political polarisation is endemic, because I think that’s enough to warrant concern and to motivate making a concerted effort to foster more good faith dialogue amongst traditionally opposed political camps. One of the most diametrically opposed pairs is of course the socialist and the capitalist, broadly speaking. Mutual distrust, or even resentment, tends to predominate in that relationship, and I’ve witnessed my fair share of bad faith argumentation over the years between those two camps — most recently and regrettably taking the form of snarky meme-based pissing contests.

However, one of the more frustrating aspects from my own point of view is the tendency of both sides to persistently strawman the other. I come from a socialist background, but have over the years and after much research and reflection transitioned to libertarianism or classical liberalism. Yet I find amongst nominally like-minded people that, all too often, their treatment of socialism is frustratingly superficial, even disingenuous. It strikes me that there is something to the stereotype of those in the classical liberal/conservative milieu that they lack some empathy. But it’s not the more commonplace caricature that such people are cold-hearted or mean-spirited (in my experience, at least with the many libertarians and classical liberals I’ve encountered, they’re about as moved by the plight of the most vulnerable in society as any other person). Rather, there’s a conspicuous lack of intellectual empathy. Typically, people within my political “camp”, broadly speaking, are just incapable of even imagining how a socialist could come to the conclusions that they come to.

The reason this is so problematic is that it causes libertarians and classical liberals to begin their criticisms of socialism with a version of (or rationale for) socialism that virtually no socialist actually subscribes to. As such, they end up addressing themselves to no one except those who already agree with their conclusions. Meanwhile, socialists come away with an impression that their critics are all stupid, or intellectually dishonest, or both. And not without some justification. Libertarians in turn hear socialists respond with “well that’s not what we have in mind at all!”, and think that this is simply gerrymandering of their definition to avoid unwanted consequences, or just downright denial. When in fact they are in all likelihood genuinely calling for a more serious engagement with their vision.

I don’t want to suggest that only classical liberals or libertarians are guilty of fueling this dynamic. Some socialists too are guilty of the corresponding sin when engaging and critiquing “capitalism”. But that’s a subject for another occasion. My concern here is to go some way to redressing the discursive transgressions of my own side, while at the same time presenting what I take to be the best and most compelling good faith criticisms of what socialists really have in mind when they endorse “real socialism”. My hope is that the few socialists who might end up reading this will at least agree that the right thing is being considered and criticised, and that the criticisms themselves are not superficial, but thoughtful and intellectually respectable. My secondary hopes are that this kind of good faith critical invitation might encourage socialists to extend the same courtesy to libertarians/classical liberals; and that my own political fellow-travellers will reconsider the manner in which they usually engage with socialists.

Before I begin, let me give a brief overview of what I’ll be covering. The first section below presents what I take to be the most compelling and morally plausible characterisation of socialism — the vision that originally drew me in and kept me a committed “comrade” for several years. I want to be clear at the outset: I’m not addressing myself here to democratic socialism in the Bernie Sanders vein of heavy redistribution and government regulation combined with a truncated market. Nor am I addressing the (in)famous and nebulous “Scandinavian Model”. I’m concerned here with what might be called “pure” socialism, or “radical” socialism, or “Marxist” socialism. I’ll explain this vision in due course. But I want to be clear that I’m not dealing with all possible conceptions of socialism at once (though undoubtedly some of my criticisms, or at least aspects of them, could be usefully applied to the former conceptions). In the second section, I present the most compelling arguments against this socialism proper, in as concise a manner as possible. My intention here is not to thoroughly develop and flesh out these arguments — that would be beyond the scope of a single article. Rather, I wish to accurately familiarise socialists who may not have even been aware of these arguments, or indeed who are only aware of them through caricatures, or have heard them mentioned only to be dismissed out of hand as “neoliberal propaganda”. The final section will reflect more generally on some moral and historical considerations that should, I believe, give socialists pause for serious thought and self-reflection.

What is “real” socialism anyway?

The typical libertarian or classical liberal refrain when asked about socialism is a kind of incredulous series of questions: “What? You want the government to control all industry? You want our politicians to be in charge of the economy!? How can you even for a second entertain the notion that these bungling bureaucrats could competently manage our economic affairs!?” Of course, the socialist is likely to respond to this with a scoff and an eyeroll. The reason being that what they have in mind is a conception of government so far removed from what we’re familiar with in liberal democracies, that to think of socialism as simply handing the reins of power for the entire economy over to the kind of government we have now is the equivalent of conceiving of capitalism as the market as we know it now just minus all government services. In other words, an absurd vision that no one in their right mind would desire.

So what kind of governance do socialists envision? And how is it different from the simplistic view all too often presented by socialism’s critics? The best thing to do is go to the source. I quote directly from two socialist writers who I think effectively capture the essentials of the socialist vision. The first comes from a British Socialist Party publication titled “Socialism in the 21st Century”, authored by Hannah Sell. Sell summarises the vision as follows:

‘A genuine socialist government would not be dictatorial. It would extend and deepen democracy enormously… [E]veryone would get to take part in deciding how society and the economy would be run. Nationally, regionally, locally — at every level — elected representatives would be accountable and subject to instant recall. Therefore, if the people who had elected them did not like what their representative did, they could make them stand for immediate re-election and, if they wished, replace them with someone else. Elected representatives would also only receive the average wage… A socialist government would ensure that no elected representatives received financial privileges as a result of their position but, instead, lived the same lifestyle as those they represented…

… [A] socialist government would bring major industry into democratic public ownership. It would be necessary to draw up a plan, involving the whole of society, on what industry needed to produce. At every level, in communities and workplaces, committees would be set up and would elect representatives to regional and national government — again on the basis of recall at any time if they disagreed with their decisions. Everybody would be able to participate in real decision-making about how best to run society…. (Sell 2006, 42–43)

A similar statement of much the same vision comes from socialist theorist and writer William Paul, who penned the following overview of the essential structure of socialism in his 1917 book The State: its origin and function:

‘The revolutionary socialist denies that state ownership can end in anything other than a bureaucratic despotism. We have seen why the state cannot democratically control industry. Industry can only be democratically owned and controlled by the workers electing directly from their own ranks industrial administrative committees. Socialism will be fundamentally an industrial system; its constituencies will be of an industrial character. Thus, those carrying on the social activities and industries of society will be directly represented in the local and central industrial councils of social administration. In this way the powers of such delegates will flow upwards from those carrying on the work and conversant with the needs of the community. When the central administrative industrial committee meets it will represent every phase of social activity… [T]he republic of socialism will be the government of industry administered on behalf of the whole community’ (Paul 1917/2005, 25–26)

You can see here essentially what socialists have in mind. Their vision is not primarily one of centralized top-down governmental power, comprised of technocrats with complete authority to command everyone to produce in accordance with some arbitrary central plan (even if that’s how it might end up). Rather, they conceive of a bottom-up process, whereby power is ultimately devolved to and vested in the workers themselves. They have the final say. They have veto power over any and all economic decisions, whether at a national or local level. The decision-making process flows upwards, but always subject to the check-and-balance of recall should representatives be deemed to be doing a sub-optimal job of communicating and upholding specific workers’ or groups’ interests. Now one can take issue with the ultimate feasibility of this vision (as indeed I will below). But I don’t think any intellectually honest person can deny that, at least on the surface, there is something intuitively appealing about this vision for society — or at least not manifestly implausible. One can see why it at least appears aligned with commitments to fairness, to giving power and real economic control to ordinary people, to ensuring that everyone has an equal input into how society is run. The idea seems to be that, if we want to ensure that everyone has a more or less equal claim on the resources and wealth of society, then the best way to do that is to ensure that everyone has an equal political share in the productive operations of society. And what’s so extreme about that?…

The Case Against Socialism

The case I want to make is based on what I call “immanent” criticisms of socialism. I want to grant all of the above to the socialist. I want to accept that real socialism is exactly what Sell and Paul insist on. And I want to say that, even if you could realise precisely the kind of structure outlined above in the real world, untouched by external distortions or interferences, the forces and dynamics inherent to the structure would necessarily lead to economic ruin and political authoritarianism. I title the arguments as follows, for the sake of convenience: (i) the argument from rational voter ignorance; (ii) the calculation/information argument; (iii) the economic incentives argument; (iv) the collective action argument; and (v) the anarchist dilemma.

(i) The argument from rational voter ignorance

The theory of rational voter ignorance is an attempt to account for a puzzling yet persistent feature of virtually all known democratic nations. Whenever surveys of the general public’s political knowledge have been conducted for the past 60 or so years, every single time, it’s discovered that people are systematically ignorant of even the most basic political (or politically relevant) information. As political economist Mark Pennington notes, ‘[e]mpirical studies across Europe and the United States confirm that voters, irrespective of educational achievements and social class, tend to be ignorant of even the most basic political information. In the United States, for example, analysis suggests that as many as 70 per cent of voters cannot name either of their state’s senators and the vast majority cannot estimate the rate of inflation and unemployment within 5 per cent of their actual levels…’ (2011, 66). Similar results for comparable questions obtain across Europe and beyond. This would seem anomalous, given that democracy, of all forms of governance, is supposed to not only give people a considerable opportunity to engage in politics, but the optimal incentives to do so, and do so in an informed manner.

Typically, socialists have responded to this by pointing to the fact that private special interests have largely co-opted the democratic system. The problem with this explanation is that it’s at best a proximate one, at worst a non-explanation. It leaves open the question of why such forces should have been allowed to co-opt the process in the first place? If in theory voters are, as socialists must surely maintain, naturally disposed to being politically engaged and interested, then why on earth would the majority of voters have been so feckless as to allow special interests to move in and buy out policymakers at the outset? Surely even self-interested voters ought to have promptly voted out the traitors had they been paying attention to begin with? And there would have naturally arisen a demand for more honest alternative political candidates. That is to say, if democratic institutions were to work the way they were supposed to work, private interest co-opting ought to have been pre-empted by overwhelming majority votes against it. Clearly this didn’t happen. So why is it that special interests can consistently get away with such activities? Why the consistent, cross-cultural ignorance and attention deficits, obtaining under both relatively left-wing and relatively right-wing democratic governments?

One compelling explanation of this is the theory of rational voter ignorance. Professor of law Ilya Somin nicely captures the logic of this simple yet powerful insight: ‘An individual voter has virtually no chance of influencing the outcome of an election — somewhere between 1 in 10 million and 1 in 100 million in the case of a modern U.S. presidential election, depending on the state where one lives. The chance of casting a decisive vote [is]…extremely small. As a result, the incentive to accumulate political knowledge is vanishingly small, so long as the only reason for doing so is to cast a “better” vote. Even highly intelligent and perfectly rational [or perfectly moral] citizens could choose to devote little or no effort to the acquisition of political knowledge. The theory of rational ignorance implies that most citizens will acquire little or no political knowledge and also that they will often make poor use of the knowledge that they do acquire. Both political knowledge acquisition and the rational evaluation of that information are classic collective action problems, in which individual citizens have incentives to “free ride” on the efforts of others’ (2010, 204–205). In other words, the costs of informing oneself adequately about the vastly complex domain of politics — with its remit covering economics, infrastructure, healthcare, education, security, foreign affairs, law and jurisprudence, environmental regulation, monetary policy, agriculture, etc etc — are very very high in terms of opportunity costs, mental exertion, time, effort, memory. And the prospective benefits to you of acquiring all that knowledge (and processing it rationally) are virtually zero due to the near-zero chance of your vote being decisive in any given election.

One very important thing to note here from a socialist’s point of view is that the above problem obtains even if we assume the voter within the democratic context is selfless, altruistic, and committed to achieving equality of one form or another. The point is that, given that I can’t control anyone else’s voting activity, and certainly not millions of remote people, I can only assume that there’s a strong chance that others will have different views from me on how best to politically achieve such goals. So that even if I’m unusually altruistic, it will make little sense for me to spend a lot of time and effort informing myself on the vast array of politically relevant information, when the chances that my informed, altruistic vote will have any effect at all on election outcomes are near-zero. Even if everyone else shares my moral convictions and my views on politics, and I somehow know they will vote the way that I will, in that case the rational thing for me to do would be to leave it to them to spend a great deal of time informing themselves while I spend the saved time engaging in direct action to improve the lives of those around me. For, after all, my extra vote is not going to make a difference to the outcome in any case. Whereas my direct altruistic activities are almost certainly going to make a difference to those around me. So the morally responsible thing for me to do in that context would be to “trade off” political knowledge for direct humanitarian efforts far more likely to yield benefits. The problem is, all other altruistic citizens would face precisely the same incentives. With the result that even altruistic, committed egalitarians and humanitarians will tend to be politically ignorant under democratic institutions. Put simply, the incentives of the individual and the interests of the collective are fundamentally misaligned due to the structure and scale of democratic voting. The notion that granting everyone an equal vote is a way of equitably affording each individual a means of determining their political fate is at best a half-truth, and more accurately, a rhetorical misdirection.

People can and sometimes do of course politically rally around very generic and easy-to-understand causes. More often than not, these are negative causes whereby people are against certain obvious and conspicuous social ills or political transgressions — anti-war protests, anti-poverty demonstrations, anti-discrimination campaigns, anti-corruption marches; and in the few cases where large groups of people politically mobilise around positive causes (e.g. pro “universal healthcare”), more often than not the question of how those causes are to actually be implemented are either left unaddressed, or conceived of in such radically diverse and incompatible ways that the members of those groups are unlikely to ever come to an agreement on substantive policy. Moreover, the question is not simply how to get people to vote. Voting itself is relatively cost-free, and people do vote (though still often a minority of eligible voters). Voting one way or another is relatively easy, and in many cases people have plenty of incentive to vote in order to feel civically responsible, to publicly demonstrate their political virtue, or to simply express their values. The problem is rather how to ensure that people who do vote, vote in a robustly informed way. This, regrettably, almost never occurs.

Socialism is essentially democracy squared. Under the socialism described above, the remit of democracy is extended and deepened even further. More economic and social concerns are to be decided by collective majority vote. So the cost side is amplified in terms of the amount of knowledge required to make an informed vote on, say, the “national economic plan”. And the chances of your vote being decisive at the decisive level — namely the national level — remain close to zero. Now some might say, “ah, but in socialism, you have workplace democracy, where your vote has a much better chance of counting in this sense”. Yes, but remember, socialism is bottom up. Up to the centralised level of national (or even international?) economic planning. Without that, it’s no longer socialism but decentralised syndicalism (more on which below). Workplace policies cannot be voted on and determined unilaterally. They have to dovetail with all other workplace demands and ultimately be subordinated to the national economic plan, and so must be subject to the final centralised decisions on economic policy. Moreover, suppose you vote your workplace representative to the industrial council, where dozens or even scores of other workplace representatives preside. What are the chances that your individual or even workplace desires and demands will be not only faithfully and adequately conveyed by your representative at that level, but that they will survive the back and forth of council negotiation and compromises and conflicts? Short of assuming utopian unanimity into the picture at each level, the chances of even your workplace vote being sustained all the way up the chain to a centralised council charged with the unenviable task of integrating millions of dispersed and probably incompatible demands into a single economic plan is even more remote than that of your individual vote changing the outcome of a national election.

There’s the socialist’s first problem. How do you propose to overcome the immanent defect of rational voter ignorance, without simply assuming improbable levels of motivation into your model at the outset? And remember, workers under socialism still have to work! They will actually still have to be productive in their respective fields. Does the socialist propose that they will simply magically want to spend a huge amount of time and effort informing themselves about all manner of remote industrial, economic, agricultural, educational, legal, social, security, environmental issues — all for a virtually zero chance of effecting ultimate decisions on those issues?

But the ramifications of rational voter ignorance go deeper than that even. Because the attention deficit occasioned by rational voter ignorance is what creates the space within which it makes sense for representatives to engage in sub-optimal representative behaviour — to take short cuts; to be deceptive in order to avoid admonishment by those they allegedly represent (think how hard it will be to sustain and integrate hundreds or even thousands of groups of divergent worker demands in a timely manner!); and even, in the case of the unscrupulous few who arise in any large population, to engage in corruption or blackmail.

(ii) The calculation/information argument

The second argument against socialism originates in Mises’ 1922 article, “Economic Calculation in the Socialist Commonwealth”, and was supplemented and expanded by Hayek in his 1945 article “The Use of Knowledge in Society”. Mises’ argument in a nutshell goes something like this: when you abolish private property in the means of production (that is, capital, supplies, tools, machines, the raw materials used to manufacture the machines, etc), you pre-empt free exchange in the means of production; when you eliminate free exchange, you eliminate market prices; when you eliminate prices, you eliminate an intersubjective metric of relative valuation of scarce resources; when you eliminate an intersubjective metric of relative valuation of resources, you are left with no non-arbitrary means of determining how much of any given undifferentiated resource (steel, wood, gold, oil, plastics, rubber, etc etc) or human labour should be used in what quantity in any given enterprise. This leaves one with an industrial apparatus that proceeds blindly, haphazardly deploying resources without any means of testing whether it has been wasteful or excessively lean or time-consuming in doing so. No reliable, objective or even intersubjective feedback criteria are available.

To fully elaborate this theory would require a long digression into both monetary theory and microeconomics. Due to space constraints, I will instead defer to 2 powerful videos below that succinctly convey the essentials of this argument. The first traces through the vast complexity and intractability of the problem facing a producer in a world where market prices are absent. The sheer scale and incommensurability of remote valuations that bear on the question of which resources to use in what quantity renders a rational, non-arbitrary decision virtually impossible. Where market prices prevail, on the other hand, one can be lead, as Hayek observed, without even knowing the reasons why, to making economising decisions that are in the collective interest. If, for example, one highly important resource becomes scarce in some remote part of the economy, the price is likely to rise. This in turn causes the prices of those goods that use that resource in their production to rise in turn. When unknowing consumers are then confronted with these newly raised prices for end products, they are less likely to purchase those products and more likely to seek out less costly alternatives, or to refrain from spending. This in turn sends signals back to the retailer to stock up on the alternatives, or reduce production of the costlier products. What ends up happening then is that, all through the production chain, the price signals incentivise economising on the original, newly scarce resource, so that less and less is used. The high price also incentivises new entrants to seek out alternative sources of the scarce resource, or to invest in discovering substitutes. All of this proceeds without any central agency or authority dictating the allocation of resources.

An excellent summary of the Misesian/Hayekian insight

Now of course this process does not work perfectly, as it is only as infallible as humans are — which is to say, not infallible at all! The wonder is not however that it works all the time, but that it works a lot of the time, and billions of times a day in almost every sector of the economy. Notwithstanding distortions due to external interferences and occasional surges of human stupidity (which arise in states as well as markets), the whole economic apparatus proceeds remarkably well when one steps back and considers the millions upon millions of coordinated, remote moving parts in any line of production. One more ancillary note regarding the video above. A socialist is likely to laugh derisively at the contention that the capitalist railroad manufacturer choosing the “cheapest” alternative is in the social interest. They might ask how it is in the social interest for the capitalist to choose the cheapest, lowest quality materials or inputs for the railroad? This, however, is to miss the fundamental point. Or rather, to not think through the logic of the case sufficiently. The greedy capitalist is not just motivated to choose the cheapest mode of production simpliciter. Rather, she is motivated to choose the cheapest mode of production consistent with a quality of product for which consumers are willing to pay a high enough price to at least cover those costs. If the railroad manufacturer constructs a cheap but faulty railroad, he is likely to bear the costs in several ways. He will fail to be commissioned to construct future railroads, losing out to competitors. He will likely be sued by the train operators who contracted him to lay the railroads for breach of contract, as it will have been within their own self-interest to ensure in advance that they do not end up running their trains on faulty lines. Therefore, such contracts will tend to include non-delivery clauses (as they do in real life), such that in the event the service is not delivered as promised, the provider will be financially liable.

Perhaps the best way to illustrate the full power of Mises’s and Hayek’s predictions is to juxtapose them with the actual fate of the Soviet Union. Now before the socialist reader screams “but that wasn’t real socialism!”, note this: even if you maintain that the Soviet Union was not real socialism, it remains true that there was indeed no private property in the means of production in that system. And this is the point. Even in “ideal socialism”, private property in the means of production is absent. Free exchange or markets in capital, tools, supplies is not permitted. This was true of the Soviet Union, and it would be true of even the ideal socialism of Sell and Paul outlined above. Mises’s and Hayek’s predictions apply to any society in which private property and markets in the means of production are abolished, and that includes every form of ideal socialism. The fact that the outcomes in the Soviet Union align perfectly with what they predicted should give the socialist serious pause for thought. How likely is it that that very specific pattern of failure predicted was due to some other extrinsic or coincidental factor? I strongly encourage the reader to watch the clip below to get a full sense of the power of Mises’ and Hayek’s arguments. The footage is taken from Adam Curtis’ wonderful documentary on the Soviet Union, “The Engineer’s Plot”:

Hayek’s and Mises’ criticisms apply to any society in which private property in productive resources is abolished. Even if the Soviet Union wasn’t “real” socialism, it was nevertheless a society in which private property in the means of production was prohibited.

(iii) the economic incentives argument

This is perhaps one of the more well-known arguments against socialism, though it is often and unfortunately misunderstood, or at least inadequately explained. One of the best explanations out there comes from an essay by David Osterfeld, and so I’ll be leaning heavily on his treatment here. The thing that’s so often missed by socialist skeptics when confronting this argument is that, as in the case of rational voter ignorance, the problems identified obtain not only if we assume self-serving egoists into the picture. Rather, the dynamics and the economic stagnation will prevail even where the people involved are by and large well-motivated. Therefore, even if the socialist (implausibly) assumes perfectly motivated socialist worker-citizens into their model at the outset, the nature of the economic setup will be such as to incentivise economically sub-optimal behaviour regardless.

To illustrate, let’s follow Osterfeld’s thought experiment and imagine a community of 1000 workers producing wheat, yielding 100,000 bushels of wheat a year. That’s an average of 100 bushels per worker per year. For the sake of simplicity, let’s attribute a unit value of 5€ per bushel, meaning that the community produces 500,000€ of output per year. This community aspires to socialist principles of production and distribution. Each person has an equal vote in how the production is to proceed (recall the voting dynamics above…). No person is to be given material advantages over others for their work on the commune. Those lucky enough to be born with talents conducive to wheat production won’t be given extra benefits not available to others. Therefore, they pursue as closely as possible an egalitarian distribution of social output: 1,000 people, 500,000€ => 500€ per person per year.

Now consider what happens if a person is unusually committed to communal flourishing in this context. They want to do all they can to improve the lot of the entire community. One seemingly obvious way of going about this is to become more industrious, and to try to contribute more to the common pool. This person finds ways, through much toil and effort, to increase her output by 50%, from 100 to 150 bushels per year. At 5€ per bushel, annual output then increases to a value of 500,250€. Annual individual income then increases from 500€ to 500.25€ per person. The altruistic, hard-working socialist has thereby improved the lot of each person in the commune by a fairly meagre .05%, by becoming 50% more productive. In other words, the “rewards” for the altruistic person are low, because there is this discrepancy between productive effort and per person returns. No matter how hard our altruistic socialist works, she can only make a tiny marginal improvement to overall social well-being. Indeed, she is likely to see that she will be able to make a much more substantial and direct improvement to the lives of those near and dear to her by channeling that extra 50% effort into more localised activities. Conversely, if she decreases her productivity by 50% in the bushel production effort, she will likewise only reduce the social output by a mere .05% — a barely perceptible decline! She could then channel that 50% productivity saving into local direct action with more substantial and immediate per person improvements in well-being. The problem, once again, is that all people within the collective will face the same social cost-benefit calculus. The result will be that social output will tend over time to fall incrementally, almost imperceptibly. But like the proverbial boiling frog, before long such a dynamic will lead to economic ruin.

That is a best-case scenario. The best outcome one could hope for in such a community is economic stagnation where output is flat year on year, without any real economic growth to speak of. However, even the socialist will want to lay claim to realistic assumptions about human motivation form the outset. Much more likely then is a scenario in which there is the usual spectrum of human motivations and personality types. In a socialist context populated by a mixture of egoistic, lazy, industrious and altruistic types, much more likely is that a significant percentage will perceive both that diligence and industriousness yields neither personal nor collective rewards, and that slacking-off and shirking affords considerable personal rewards (leisure-time) while yielding only marginal negative effects on total social output. When several face those same incentives and feedbacks, what’s likely to happen is a substantial drop in economic output. That leaves the (likely) minority of industrious and/or altruistic types to pick up the slack. But again, these latter will apprehend that even if they individually increase their output substantially, they will only make marginal improvements to total communal output. And undoubtedly, the following thought will occur to many of the industrious: “why should I go on breaking my back while those others slack off and in the end reap the same benefits as honest, hard-working people like myself!?” If one is to make uncontroversial assumptions about human psychology in this scenario, it’s highly likely that even the well-intentioned will fast become disillusioned and disenchanted with the system. The result? Not just economic stagnation, but steadily or perhaps even rapidly declining economic output and productivity.

I give the final word to Osterfeld, who summarises the tragic dynamic perfectly:

‘The basic problem of socialism is the imbalance or asymmetry it creates between costs and benefits. At times the costs are diffused throughout the entire community while the benefits are concentrated on one or a few members [slackers enjoying greater leisure time]. At other times it is the costs that are concentrated [industrious/altruistic increases in production] while the benefits are diffused. The result is that socialism, by its very nature, rewards sloth and indolence and penalizes diligence and hard work. It therefore establishes incentives that are incompatible with its self-proclaimed goal of material prosperity. The inherent dilemma of socialism is that individuals who respond “rationally” to the incentives confronting them will produce results that are “irrational” for the community as a whole’ (Osterfeld, 1986)

As in the case of rational voter ignorance, the structure of the socialist economic system is such as to make individual rationality and collective rationality pull apart. And again, this is a feature that is internal to the system under any motivational profile. It cannot simply be explained away or stipulated out of contention by assuming “good” motivations into the model from the outset. It is immanent and inevitable, assuming even minimal rationality on the part of the members of the society.

(iv) the collective action argument

This argument stems from the work of Mancur Olson, specifically in his 1965 classic The Logic of Collective Action. The basic idea is that, other things being equal, in a democratic context smaller special interests will tend to be overrepresented and diffuse majority interests neglected, due to a free-rider problem that is amplified when a group becomes larger. Even if a sizable proportion of the population shares common interests, it is unlikely that this will lead to a concerted, organised movement around those interests. One of the reasons is that the larger a group is, the smaller the prospective per capita gains are likely to be from any benefits won through political action. Moreover, any group action that promises equal per person returns is likely to incentivise free-riding, i.e. leaving it to others within the group to do the political legwork for the same returns. Of course, free-riding can be eliminated by monitoring the input of the group’s members and punishing shirking. However, this becomes much more difficult to implement the larger a group becomes. Correspondingly, the larger a group becomes, the easier it is to get away with free-riding. The result is that, once a group hits a critical mass, it will tend to fall apart due to the forces of free-riding, attendant resentment, and smaller per person returns.

On the other hand, smaller political groupings tend to avoid these problems. If I am a member of a private or specialised interest group, the prospective per person gains from concerted political action will tend to be higher. Moreover, I will be more likely to contribute to the effort due to the fact that shirking my duties will more probably be noticed by the other members, and I risk being excluded from sharing in the returns. The result is that, over time, private and special interest groups will tend to coalesce, while broader majoritarian interests will tend to dissipate. This is precisely what we see happening in democratic states. Generally, the political pressure groups that do form are at most groups of workers from specific industries or sectors looking to secure higher wages through political means. Consistent, concerted activism rarely extends beyond this. But the much more effective and sustained political pressure comes from even smaller interest groups, where free-riding is even less likely to occur, and prospective per capita returns even greater. It is for this reason that we end up with things like the 2008 US Farm Bill. Philosopher Michael Huemer sums the phenomenon up well:

‘As of mid-2012, the most recent farm bill in the United States was the Food, Conservation and Energy Act of 2008. Among other things, this law continues the federal government’s established policy of farm subisidies, which total over $12 billion per year, most of which goes to large commercial farms. This benefits a small number of mostly wealthy people at the expense of the rest of the country. The $12 billion, spread over 311 million Americans, comes to just under $40 per person… It is not in your interests to research the provisions of the latest farm bill and how your representatives voted on it to secure a one-in-a-million chance of saving yourself something on the order of $40… On the other hand, the businesses that receive the government’s largesse have reason to pay close attention’ (2013, 212–213).

Again, as socialism is the extension of democratic dynamics, we are likely to see these patterns re-emerge under socialism, only in more systemic ways. Now a socialist might resist by pointing to the fact that, under socialism, private interests would strictly speaking be absent. And so there would be no special interests to speak of. Therefore, at least this collective action failure would not arise. However, this is a fairly implausible hypothesis on closer inspection. Though there will not be private “owners” under socialism, there will be distinct industries, sectors, worker groups, regional groups, representatives, state functionaries, and so on. Some of these will be smaller than others; some will be closer in working relationships with those administering resource allocation than others; and some will be less scrupulous than others. And although in the socialist’s vision money may be prohibited, this does not change the fact that there will be wealth up for grabs from the common pool in the form of resources, personal and consumption goods, exemptions from work or duties, and all manner of other advantages. To think that special interests will not arise in this context requires, again, a naive assumption of near-perfect motivation into the model from the outset. Granting more realistic assumptions about human motivation and psychology from the outset, there is no reason to think that the collective action problems identified by Olson will not re-emerge in the context of socialism.

The confounding factor however is the conjunction of Olson’s collective action problem with the problem of rational voter ignorance. Given the fact that the latter phenomenon will, if anything, be more pronounced under socialism — and will adversely affect thereby more social and economic concerns — we should expect that the attention vacuum created by rational voter ignorance will allow for even more space within which special interests can operate and co-opt the allocational process to their ends. The most likely outcome will be a largely disengaged, demotivated workforce subordinated to the allocational will of an entrenched bureaucracy captured by special interests.

(v) the anarchist dilemma

I recall well from my days as a socialist that there was a fairly pervasive tension within the movement, broadly speaking. I myself manifested that tension in my own thoughts. I came to socialism, as many young people do, through Noam Chomsky. I was therefore introduced to socialism through the nebulous spectrum of anarcho-syndicalism/libertarian socialism/anarcho-communism. Within this broad and long tradition endorsed by Chomsky, the idea roughly is that workers will democratically own and control the means of production, with all such collectivised firms, companies, and factories voluntarily federated in some unspecified way. There will be no central authority of industrial representatives as there would be under traditional socialism, and so all workplaces would ultimately have a considerable degree of autonomy and would not be required to subordinate themselves to a final economic plan issued from a centralised council.

The driving force of this tradition seemed to be an understandable sense of unease with the centralising impetus of traditional socialism. Libertarian socialists were acutely aware of the despotic potential of a central “representative” council (read government) with the ultimate authority to issue economic commands — even if those commands come at the end of a process of democratic negotiation and conveyance of worker preferences up the chain of representation. The libertarian socialists appear to want to secure an additional space of autonomy for both worker groups and individuals within the society. Hence the “libertarian”, or “anarcho” qualifier.

I considered myself more intuitively aligned with the libertarian socialist tradition, though I could sense even in my early days that this position raised a confounding array of puzzles and potential impasses (I recommend in particular Chapter 6 of David Gordon’s wonderful book Resurrecting Marx for an excellent overview of such puzzles and problems). Here, however, I will focus on just one dilemma in particular.

The libertarian socialist at least pays lip service to individual autonomy within their vision. When asked whether an individual may freely choose to leave their collective/syndicate and pursue another line of work, most libertarian socialists tend to agree that this would be perfectly fine in a libertarian socialist world (whether, conversely, an individual would be required to leave if, for example, a majority of workers within the syndicate voted him or her out, is another crucial question. And one rarely if ever addressed by libertarian socialists. Understandable, given that such occurrences would veer uncomfortably close to the alleged “tyranny” wielded by capitalist bosses over individual workers within their companies. And would leave libertarian socialist workers without any “guarantee” of employment, exposing libertarian socialists to precisely the kinds of job-insecurity criticisms so often wielded against capitalism. Just one of the many puzzles I gestured at above). Suppose then that a small group of individuals within a syndicate or collective workplace decides voluntarily to leave. They strike out on their own, and agree amongst themselves to form their own alternative firm. Within this firm they agree provisionally to a division of labour that, to all intents and purposes, appears hierarchical. One assumes a managerial role; another an assembly role; a third a maintenance role. They make use of previously unused, unclaimed resources and get to work. They eventually approach other syndicate workers and invite them to work in their newly established firm. The internal structure begins to resemble a traditional capitalist firm, with a managerial hierarchy and division of labour. The three founders, through entirely voluntary interactions, come to assume managerial roles over time.

The question is: is such a firm, in principle, permissible under (or consistent with) libertarian socialism? The reason this question constitutes a dilemma is as follows. If the answer is yes, then libertarian socialism ultimately collapses into libertarian anarchism, or anarcho-capitalism. The reason being that it will be permissible for individuals to freely associate, establish hierarchical firms if they wish, and produce unilaterally without requiring prior permission from a centralised agency. They will have both the individual and resource autonomy that is characteristic of the self-ownership and private property rights at the heart of anarcho-capitalism. Others cannot, presumably come in and close this operation down by force. But if even one person is allowed to unilaterally leave a syndicate, and work away on her own little productive project with peacefully acquired resources, then why not 3? Why not 10? And so on.

If, on the other hand, the answer to the above question is no, then additional questions arise. If it is not permissible, then on what grounds? Is it simply that hierarchies — even voluntary ones — are to be forcefully shut down? That certainly seems a strange way of construing “libertarian”! If some workers happen to prefer that, to have managerial responsibilities delegated away to others so that they can simply focus on their specialised task, then why not allow it? It seems a rather arbitrary cut-off point. But more importantly, who is to shut it down should it arise? Who is charged with that responsibility? If all of this proceeded peacefully and voluntarily, why would there be any reason for those from any particular syndicate to go out of their way to forcefully intervene? It would seem that, if there is to be an enforceable and practicable prohibition against capitalistic firms emerging within such an economy, one cannot avoid the institution of some centralised authority charged with the task of forcefully pre-empting any such tendencies. An authority that monitors the activities of all firms within the society and ensures, under ultimate threats of force, that no individuals unilaterally defect from the productive apparatus in order to set up rival firms along capitalistic lines. But then the anarcho-syndicalist is forced to give up on their nominal anarchism, and must admit after all that their society will require at least some degree of centralised force in order to ensure no deviations from the syndicalist standard.

Now a libertarian socialist might bite this bullet and simply say, “well, so be it! Yes, in theory, capitalistic firms and exchanges could emerge if people chose unilaterally to leave their cooperatives and set up hierarchical alternatives. But this is highly unlikely to occur when workers see how much better life is under a regime of democratic control of the workplace! Syndicates and cooperatives will be so much more efficient and more pleasant that only a mad person would voluntarily subjugate themselves to a capitalistic firm!” The problem here is that this is still, ultimately, an acceptance of anarcho-capitalism in principle. Which is to say, all that this kind of response amounts to is an expectation that an anarcho-capitalist framework will tend to foster anarcho-syndicalism. The rules of the game will ultimately be anarcho-capitalist at base, since unilateral individual exit, free association, and peaceful resource use by groups of peacefully associating individuals are to be permitted. All that the anarcho-syndicalist is offering, essentially, is either a strong recommendation that workers opt for democratic, collectivised workplaces, or a strong expectation that that is what will tend to occur.

The dilemma, then, is that libertarian socialism is fundamentally unstable, and vacillates between the poles of centralised socialism and anarcho-capitalism. In the case of consistently following the “libertarian” impulse, it ultimately collapses into anarcho-capitalism (the best libertarian socialists seem able to offer in response to this horn of the dilemma are ad hoc suggestions, that people or communities would just voluntarily set up anti-capitalist task forces or some such). If socialism is to take priority, then it must admit a state in through the back door and abandon any anarchist pretensions in order to guarantee its socialistic structure.

Some Closing Thoughts

I recall an experience from my youth, around the time I was turning to socialism. A fairly unremarkable experience, and one undoubtedly shared by many. I was walking down the street of my home city and encountered a homeless person begging for change. This person was sitting outside a huge, glistening new office building. In and out of this building were walking self-important looking business types, conspicuously well-off and self-absorbed. The facile conclusion I drew was: why on earth should this poor homeless man be consigned to such a miserable fate, when his plight could be so easily alleviated by simply taking some of these business-people’s excesses and giving it to this poor man? He could get his life together! He could have some dignity! Some prospect of security and even self-realisation! Why all that money poured into this huge glistening eyesore of a building, when it could have been spent instead on improving the lives of several homeless and struggling people?

The impulse to socialism is perfectly understandable when one is confronted with such stark juxtapositions of luxury and suffering. And yes, in most cases those rich people certainly should give generously to those suffering through no fault of their own. The world would probably be a much better place if middle and upper-class people in developed nations donated even 10% of their earnings to demonstrably effective NGOs and charities. But why not make an institutional rule of it, instead of relying on the manifestly unreliable goodwill of people? But even mandated redistribution seems like just so much papering over the cracks. Surely we need to strike at the root of poverty and suffering! And what better way to do that than by simply turning over equal control of the whole productive and distributional apparatus to the entire population of the working and unemployed classes? That way, won’t we guarantee their equal access to the wealth made possible by social and economic cooperation?

Unfortunately, this line of reasoning crosses that fine line from simple to simplistic. It’s symptomatic of a number of fallacies and mistakes — among them the notions that an economy is a zero-sum game; that redistribution and/or property rules has no significant adverse effects on productive output and the absolute amount of wealth produced; that prescribing egalitarian control over production will necessarily yield egalitarian distributional outcomes. I can’t address each one fully, but allow me to dwell for a few moments on the most important. Consider Deirdre McCloskey’s excellent distillation of the implications and relative impotence of redistribution as an effective means to poverty alleviation:

‘Redistribution, although assuaging bourgeois guilt, has not been the chief sustenance of the poor. The social arithmetic shows why. If all profits in the American economy were forthwith handed over to the workers, the workers… would be 20 percent or so better off, right now. But one time only. The expropriation is not a 20 percent gain every year forever, but merely this one time, since you can’t expropriate the same people year after year and expect them to come forward with the same sums ready to be expropriated again and again. A one-time expropriation raises the income of the workers by 20 percent, and then their income reverts to the previous level — or at best (if the profits can simply be taken over by the state without damage to their level, miraculously, and then are distributed to the rest of us by saintly bureaucrats without sticky fingers or favored friends) continues with whatever rate of growth the economy was experiencing…’

‘… The point is that 20 and 22 and 25 percent are not of the same order of magnitude as the Great Enrichment [rise in living standards since the industrial revolution], which in turn had nothing in historical fact to do with such redistributions or charitable contributions. The point is that the one-time redistributions are two orders of magnitude smaller in helping the poor than the 2,900 percent Enrichment from greater productivity since 1800. Historically speaking 25 percent is to be compared with a rise in real wages from 1800 to the present day by a factor of 10 or 30, which is to say 900 or 2,900 percent. The very poor, in other words, are made a little better off by expropriating the expropriators, or persuading them to give all their money to the poor and follow me, but much better off by coming to live in a radically more productive economy.’ (2014, pp. 44–45, 46)

The point here isn’t to suggest that the status quo is the best we can hope for and we should just settle (far from it). But it certainly counsels a degree of tentativeness that should accompany any suggestion of a radical tearing down and replacement of market-based economies. The rise in real per-capita wealth for the average person in developed nations since 1800 is almost inconceivably large, and by no means inevitable. The entirety of human history was characterised by almost exceptionless grinding subsistence and misery for the masses, and there were plenty of retrograde steps following from relatively modest advances. Marx himself of course was famously known to have granted that capitalism was not to be disparaged in an unqualified manner, that it had yielded some progress that ought to be acknowledged. But Marx made such a concession at a time before the great majority of the wealth gains accruing to the masses of people had been achieved by ever-expanding liberal markets.

I slowly came to realise that the moral imperative was not elimination of inequality, but maximal improvement of the absolute condition of the worst off. Those two are too often conflated and confused in the minds of socialists, undoubtedly due to the fallacy that an economy is a zero-sum game. Ultimately, I couldn’t deny the breathtaking (though not flawless) achievements of liberal institutions in this respect. This realisation, in conjunction with the recognition of the immanent defects of socialist institutions, brought me to a position combining the unrivalled prosperity-generating dynamics of liberal markets with alternative and sustainable means of alleviation of avoidable suffering for the worst off.

I don’t doubt all of the above will fail to convert socialist readers. If I can at least make them see why one could reasonably come to view socialism unfavourably, then I’ll be satisfied. But let me finish with one more challenge.

Consider again the above problems, (i) to (v). What could one expect to result when all of the following come together: Acute voter ignorance and attention deficits, arbitrary economic plans, perverse production incentives, special interest co-opting, and a central administration with ultimate authority to sustain the collective structure by force? I would hazard that we could expect to see a society characterised by ever-declining economic output, worker-voter disillusionment, corruption, and an economy grinding along only through threats of force. Now reflect on all the allegedly “not real”, “in-name-only” socialist and communist countries that arose throughout the 20th century. And consider the pattern of failures that occurred in almost every case: economic stagnation, if not devastation; worker-voter disillusionment; extensive apparatuses of internal terror and political repression; corruption and bureaucratic favoritism; totalitarianism. And notice that these results occurred across a large range of sociocultural backdrops, the same experiment repeated in nations of differing demographic constitutions and histories and languages and values. Is it really plausible to posit that the similar failures in every single one of these cases were the results of different incidental factors that derailed these socialist experiments time and time again? That each of these socialist movements and leaders, who seemed so earnestly and genuinely committed to socialism at the outset, got derailed because those movements’ leaders just couldn’t get it quite right each time for different reasons? Is it not a far more parsimonious and plausible explanation that the repeated pattern of failure is due to the inherent defects that arise when one attempts, even if sincerely, to implement this kind of economic arrangement?

I’ll leave the reader to dwell on those questions, and invite feedback in the comments below. I intend this to be an invitation to a genuine and good faith dialogue with socialists. There’s a great deal at stake when it comes to these issues. It’s incumbent upon us to try as far as possible to treat with intellectual respect those with whom we fundamentally disagree. Otherwise, minds will never be changed, and collective progress towards the truth, wherever it lies, never achieved.

Hugo Newman

Written by

I hold a PhD in Political Theory from University College Dublin. I'm co-founder and director of an eLearning company and currently live in Madrid, Spain.

Hugo Newman

Written by

I hold a PhD in Political Theory from University College Dublin. I'm co-founder and director of an eLearning company and currently live in Madrid, Spain.

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