Geoffrey M. Hodgson

‘This is a thundering good read’ – Peter Smith

‘The best article I’ve read for a while’ – Karen Bradley

‘Brilliant on why socialism isn’t “obvious”’ – Robbie Hudson

‘Very informative & sobering. Highly recommended’ – Jan Davies

One thing in British politics is very obvious: Jeremy Corbyn and his followers are very keen on something they call socialism. But this word has migrated in meaning since it first appeared in English in 1827. So it is reasonable to ask what they mean by it.

I’ve tried. I got lots of vague answers.

So let’s go to Corbyn himself. In 2015 he was reported in the Mirror newspaper as saying that socialism ‘is an obvious way of living. You care for each other, you care for everybody, and everybody cares for everyone else. It’s obvious, isn’t it?’

I fully appreciate that the Mirror is an unsuitable forum for a detailed account of the workings of the future socialist utopia, but unfortunately I have little else to go on. Apart from some gestures in favour of nationalization, and some sentimentality for the pre-Blair version of Labour’s Clause Four, I can find no fuller account of what Corbyn’s ‘socialism’ means.

Yet we are told twice (in one short quote) that it is ‘obvious’.

Here is my own confession: fifty years ago I believed that socialism was ‘obvious’. Eventually I was persuaded otherwise. Initially, it was not my growing awareness of the horrendous consequences of the socialist experiments in Russia, China and elsewhere that jolted me.

My comrades and I saw these deformations as unfortunate results of Stalinist bureaucracy plus Western hostility. We believed that a different, ‘democratic socialism’, was possible.

What persuaded me that socialism is not ‘obvious’ was a consideration of how such a system could work, in detail and in practice. How would production and distribution be organised? How would dispersed information concerning production and distribution be gathered and processed? How would resources be allocated? Who would decide? How would trillions of dispersed decisions be somehow processed by democratic committees? How would less-devoted workers be incentivized or persuaded to work harder or with greater attention to detail? What incentives would exist to encourage innovation and change, especially when everything had to be referred to some democratic council? And so on.

Once you begin to ask these difficult questions, socialism becomes much less ‘obvious’.

Numbers and incentives

Some version of socialism might work on a small scale. Cooperation can work in small groups, based on close, inter-personal interactions. Humans have co-operated in this way, in families and tribal units, for many thousands of years.

Nobel Laureate Elinor Ostrom studied the management of common-pool resources – such as medieval common land, fisheries or agricultural irrigation schemes – and showed how they can be effectively managed by relatively small local communities.

Their small size allows participants to monitor each other, to ensure that necessary tasks are carried out and that the interests of the community are served.

Enforcement mechanisms range from praise to punishment. Within these relatively small and cohesive groups, trust and targeted sanctions are mechanisms for encouraging cooperation, reciprocity and compliance with social rules.

But these mechanisms depend on a degree of familiarity with one another. Big problems emerge when we move from tribal to large-scale societies. These began to develop about twelve thousand years ago. Our natural and cultural dispositions to cooperate and to help one another had to be supplemented by other mechanisms.

In larger societies, face-to-face, trust-based mechanisms to sustain cooperation are relatively less effective. When we move from communities of a hundred or so, where it is possible for everyone to know everyone else, to communities of thousands or more, then interpersonal trust and reputation are much less successful with large-scale interactions, and they have to be supplement by other incentives and constraints.

The increase of scale can create incentive problems that can be overcome in smaller communities. Many socialist experiments involved collectivisation. But when thousands of people are brought together, and rewards are shared, then there is less incentive to make the extra effort, because the rewards from that additional work would be hugely diluted.

This problem was illustrated dramatically in China. After the Communist Revolution of 1949, agriculture was organized into large collective farms. Farmers had little incentive to improve productivity, other than by threats and bureaucratic bullying. Risky innovation was unwise. Productivity remained low and often there were shortages of food.

Mao Zedong died in 1976, opening up the possibility of reform. In 1978 some peasant farmers decided to withdraw from collective farms and take responsibility for production at the household level, where the household (instead of the collective) received the revenue from its sold output. Individual households had much greater incentives to work harder and to innovate.

After decades of slow growth under Mao, China’s explosive economic growth began with those changes in rural areas. As a result, unprecedented millions were lifted out of poverty. China’s spectacular economic growth began when agriculture began to pass into the private control of the peasants after 1978.

This book by G. M. Hodgson elaborates on some of the political issues raised in this blog: Wrong Turnings: How the Left Got Lost Published by University of Chicago Press in January 2018

While interpersonal interactions can engender cooperation on a small scale, and they continue to do so in families and small communities, in large-scale societies other mechanisms and incentives are necessary. Economic history teaches us that modern dynamic economies depend on markets, competition and a large private sector, as well as an effective state.

Corbyn is right: it is very important that we care for one another. But in terms of practical input, we cannot care equally for everyone. We can care more readily for those close to us, who we know well: our family, our friends and our workmates. But extending our caring to society as a whole becomes more of a political and less of a personal project. We need caring governments, but the practical extension of caring from the personal to the political is neither obvious nor easy.

The need for countervailing power

A simplistic response would be to suggest that we elect a government that is staffed by well-meaning individuals. But to different degrees, almost everyone is corruptible. Even the uncorrupt have their own biased agendas and priorities.

There is a need for rules, monitoring and countervailing power. If all economic power is concentrated in the bureaucracy of planners, then will be no effective alternative power that can countervail.

Even if politicians are competent and well meaning – lots of them are – they still face the problems of dispersed knowledge and uncertainty in modern, large-scale, and highly complex economies.

Consequently, relatively little can be planned from the top. Solutions to real-world, nitty-gritty problems are rarely ‘obvious’. There is a need for both humility and experimentation. We need to try and see what works and learn from mistakes, rather that rushing headlong towards what seems obvious.

The survival of democracy depends on a dispersion of real economic and political power. A healthy, pluralist polity depends on a pluralist economy, with multiple centres of autonomous decision-making. This means a system of private enterprise, as well as a political system with checks, balances and power that can be held to account. The state can and must also play a vital role in the economy, but not to the extent that it smothers private enterprise and initiative.

There is a large and fascinating analytical literature on the problems involved in classical socialism, and I cite a few works on this below. There is not the space to go into it further here. These works are not all written by neoliberals. But intelligent neoliberals – despite their limitations – are often worth reading. Although there are disagreements on approach and detail, the general conclusion is that large-scale socialism cannot work effectively and democratically. This analytical conclusion is corroborated by the historical experience of stagnation in innovation in Soviet-style regimes.1

The ‘obvious’ roots of fanaticism and intolerance

The ‘obviousness’ of socialism empowers its supporters with enduring energy and even fanaticism. If socialism is ‘obvious’, how do we explain the failure of other intelligent people to get on board? If they are not stupid, then they must be acting out of personal malice or greed. They must have sold out their principles in some way. Or they are just plain nasty. When socialism is seen as ‘obvious’, its opponents are regarded as stupid or evil.

The perceived ‘obviousness’ of socialism fuels both fanaticism and intolerance. Because the solution to the problem is ‘obvious’, there can be no doubt. There is no need to experiment, to seek wise counsel, or to listen to critics. Those that deny the obvious are deluded, corrupted, or in the pay of those that gain from the existing system.

The great American politician Robert F. Kennedy once said:

‘What is objectionable, what is dangerous about extremists is not that they are extreme, but that they are intolerant. The evil is not what they say about their cause, but what they say about their opponents.’

We have seen this elsewhere, in the brutal fanaticism of religious zealots, as well as in the murderous tragedies of twentieth-century socialism under Stalin and Mao. They all shared in common the absence of doubt, the certainty of redemption or victory, and the confidence in their own righteousness.

It is deeply saddening that the once-great British Labour Party has been taken over by people who think that their aims and long-term solutions are ‘obvious’. Once the zealots take over, there is no way back. The party is then trapped in a vicious circle.

A diminished vote in an election is a success because it is seen as a big vote for a purer socialism. When Labour lost the 1983 election on a socialist manifesto, with the lowest share of the vote since 1918, Tony Benn greeted the result as a triumph for socialist ideas.

Even small successes – such as winning elections to parish councils – feed frenzies of celebration. All acknowledged failures are blamed on others, such as the ‘mainstream media’ or the ‘traitors’ within.

With an ideology where no possible event can falsify the ‘obvious’, the doubters are purged. The wise give up. The fanatics win.2

Fanatics are immune to reason or evidence, until they begin to appreciate the necessity of doubt, and to favour a real world where the doubters are not shunned, but valued and protected. As John Stuart Mill and others pointed out long ago, recognition of the possible fallibility of all judgement, and of the need to protect those that criticise or dissent, are the cornerstones of modern liberal democracy.

Touting socialism as an ‘obvious’ solution empowers a fanaticism that can crush all traces of liberal tolerance, which is essential for democracy within any political party, as well as within the political system as a whole. Corbyn’s victory in the 2016 leadership election marks the point of no return for Labour. It is beyond the beginning of the end. Labour is now dying. Thoughtful radicals must go elsewhere.

10 August 2016

Minor edits – 11-13 August 2016

A version of this post was published in the i newspaper on 11 August.

More comments on this post:

‘A gloomy but sadly very acute and perceptive analysis’ – Helen Salmon

‘Definitely one of his best, and the best thing I’ve read all week’ – Tom Atkinson

‘Excellent article on the anti-democratic nature of seeing one’s views as “obvious”’ – Francis Hoar

‘Brilliant piece on why “obvious” socialism leads to intolerance (and doesn’t work either)’ – Colin Talbot

‘Thank you so much for your still small voice of reason: it is worth its weight in gold amid this chaos’ – Elizabeth Jones

End Notes

A recent contribution of mine on the socialist calculation debate can be found here. After publication, Colin Williams kindly pointed out that the Russell quote that heads this post – although widely attributed to him and close to other similar quotes by Russell – cannot be found in this exact form in Russell’s works .

Bibliography

Hayek, Friedrich A. (1944) The Road to Serfdom (London: George Routledge).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2016) ‘Some Limitations of the Socialist Calculation Debate’, Schmollers Jarhbuch, 136, 2016, pp. 33-58.

Lavoie, Donald (1985) Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (Cambridge: Cambridge University Press).

Mill, John Stuart (1859) On Liberty (London: John Parker & Son).

Nelson, Nigel (2015) ‘Jeremy Corbyn: If I Don’t Win Labour Leadership I Can Always go Back to my Allotment’, The Mirror, 25 July. http://www.mirror.co.uk/news/uk-news/jeremy-corbyn-dont-win-labour-6138128 .

Nove, Alexander (1991) The Economics of Feasible Socialism Revisited (London: George Allen and Unwin).

Ostrom, Elinor (1990) Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press).

Steele, David Ramsay (1992) From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation (La Salle, Illinois: Open Court).

Zhou, Kate Xiao (1996) How the Farmers Changed China (Boulder, CO: Westview Press).

August 10th, 2016 by geoffhodgson1946