Socialism nowadays is a very hot topic and also the one in which many friends and siblings funnily end up tiring themselves. During the COVID-19 crisis, the word “socialism” became even more debated. However, no matter how much one thinks socialism is practical or not, we seemingly debate lesser about it’s overall history and more only about Marx. I personally hold no grudges about the views of anyone. So, let’s read here a little crash course on it’s literary and practical origins.
We need to understand and make clear that the word socialism did not always mean what it means now or is commonly understood.
In the early 19th century it had a very different meaning, and you have to understand that if you read the writings of socialist advocates and activists. Right up until about the 1860s. What it actually meant at that time was a laissez-faire market economy with a very limited economic role for government. Quite different from the meaning it has now. But it meant although a market economy, not a capitalist economy. It meant an economy that was organized in a non-capitalist way. You can get some idea of this from looking at some of the later writings of John Stuart Mill (J. S. Mill). Towards the end of his life, he became a supporter of this kind of political economy and he explains in some of his later essays, and his autobiography, of what he meant by this.
So what were the main features of this laissez-fair market economy but non-capitalist economies? Socialism as a word originally referred to:
• No rent; in other words there was no landlord class. So, there was no way in which you were allowed to charge for access to land or buildings.
• No intellectual property; there was no intellectual property. There were no patents, no copyrights.
• Ability to monetize personal credit; so that private individuals or groups of individuals could issue their own money, essentially in the form of promissory notes. This is where getting around was supposed to be the monopoly of the banking system.
• Above all — no wage labor. Cooperative production & profit sharing; the most important thing was that this was an economy that was supposed to have no-wage-labor. The key to the original idea of socialism was an economic system where you didn’t have employment relations between people who had capital and people who did not. Instead, what you had was cooperative production. Productions carried on by producer cooperatives, labor cooperatives. And, instead of people being paid wages they would get a guaranteed share of any profit brought about by that productive activity.
J. S. Mill captured this idea when he said he looked forward to a world in which labor would hire capital rather than capital hiring labor. The two key concepts are the concepts of ‘monopoly’ and ‘free exchange’ because the early socialists believed that the capitalist system they were confronting was the one dominated by monopoly. They did not think it was truly competitive in actual nature. Instead, they proposed an economy of free exchange. A complete free exchange without the matter of private ownership of land and the wage system they saw it as distorting.
Then, there was a very sudden change. In the 1870s the commonly understood meaning of the term socialism underwent a dramatic shift. It came to mean what it means now, an economy that has a significant role for government and for the political process more generally. This is the meaning it has ever since. ‘Economic democracy’ becomes a key concept. Which is the idea essentially that the economic process should to a greater or lesser degree be controlled and directed by a political process. The political decisions, democratic in some cases will override spontaneous process of market exchange. This is supposed to be subordinating the economic process to the political one to the demands of democratic politics. You also get in the 1870s the first time ever where the word ‘State socialism’ also known ‘Staatsozialismus’ is used. This is a sign of the idea that socialism is increasingly being associated with an active role for the state in the economy. ‘Staatsozialismus’ is a German term first used to describe the economic policy of Otto Von Bismarck, the Chancellor of Prussia and subsequently imperial Germany. This was actually coined by his critics, describing his economic policies from the mid of the 1870s onward and particularly after 1878.
About 20 years later in the 1890s and the early 1900s the socialist tradition in it’s newly understood meaning undergoes a bifurcation. It develops into two quite different forms. The first of these is social democracy. The man who originally formulates this is Eduard Bernstein who comes up with it as a critique of orthodox Marxism. This is the first tradition, social democracy. The other is revolutionary socialism. In particular Leninism which replaced the other forms of revolutionary socialisms after 1917.
Leninism is a kind of amendment of orthodox Marxism. After 1917 for obvious reasons, Leninism is the overwhelmingly dominant form of that revolutionary socialism takes. In 1917 a revolutionary socialist party, the Bolsheviks actually capture control of a large state Russia. The Bolsheviks then put their ideas into practice but they actually got in to a problem. It was not clear to them at that time what socialism meant. They understood that it meant ‘The State’, the agent of the proletariat in their way of thought, taking over the control of the economy. They went for imposing of ‘War Communism’. This is a state-owned and controlled economy which has no money, no markets, no prices, and also no wages. It’s based on the ideas partly of an Austrian economist called Otto Neurath. He argued that in a planned state controlled economy you didn’t need prices or money. You could just use quantitative measures, so, many tons for example to work out what you need to produce and how you went about it. This was tried between 1917 and 1923. It was a total tumbling of a state. The Russian(Soviet) economy quite simply collapsed. It was not that it worked badly, it simply stopped working completely. Over the 5 years or so, the entire economic system stopped functioning to any meaningful degree. This is often blamed on the civil war, but in fact the civil war ended in 1921 and if anything, the situation in the economy got worse after that rather than better. This can supported by the fact that the collapse of the economy was marked equally in areas that were badly affected by the civil war and in the areas that were relatively unscathed by it. So, it was clearly the economic system bringing this collapse. The civil war was only an exacerbating factor and not a primary factor.
In 1923 the Bolsheviks pulled back and introduced the economic policy. This is often associated with the slogan that Lenin had actually come up with in 1904 “One step backward, two steps forward”. The idea is that you have to take a step backwards, in order to then advance further take two steps forward. Now that’s important because what it means is that the new economic policy was presented and understood by the Bolshevik leadership as being a kind of tactical withdrawal before they resumed the onward march to their idea of a socialist economy. What it meant was that there was a return to money, prices, and there was also some private enterprise allowed. And in particular they encouraged the peasants to produce and sell their crops at a profit to the urban population. To deal with the most acute and severe consequences of war communism which was widespread famine. This led to the emergence of a subclass of fairly successful property owning peasants. The ‘Kulaks’ as they came to be called later on.
Then, a three-cornered debate in Bolshevik party took place. From between roughly 1924–1929, particularly after Lenin’s death. Having being committed to the idea of state control and state-controlled economy, what to do next. The three factions of thought were;
• The left being led by Trotsky with the idea of spreading the revolution outside of Russia in terms of war communism.
• The right-wing led by Nikolai Bukharin. The idea centered on building socialism at a snail’s pace.
• The centrists, which included Stalin and other Bolshevik leaders, Zinoviev and Kamenev, settled on state corporatism. The thought was that the most advanced form of economic organization in the world was a large corporation and the idea to turn the whole economy of Soviet Union in to basically one entity. As the history shows, Stalin won the argument, exiled Trotsky then defeated and crushed Bukharin and other of their allies. The result however concluded to forced collectivization of agriculture. This is known in Ukraine as the Holodomor where 10 million people starve and die. Much of the famine caused deliberately by the communist party in order to break the resistance of the Kulaks. A five year plan was introduced for forced industrialisation paid for by exporting raw materials. Importing foreign made equipment and machine tools and paying for it by exporting raw materials, for example, grains, minerals, etc. When the party became increasingly opposed to this, Stalin responded by launching the Great Terror. 98% of the members of Bolshevik party were killed between 1932 and 1939 and only a handful of them survived.
During the same period, millions of ordinary citizens were killed in the program of forced industrialisation in attempts to break their resistance. This shows us that the Soviet Union did industrialize but at a terrible human cost. Then in the early 1950s and early 60s the GDP grew very rapidly and in a very few cases grew rapidly than all other countries. However we must not confuse GDP growth with any prevalence of stability as scholars may call it. In fact the GDP figures even at those times were misleading as it shows; there were continuing problems in agriculture which had never seen any progress since the efforts of forced collectivization. Plagued by food and growth shortages, little to no supplying the needs of an urban populace. The Soviet economy was good for a while in producing large industrial steel, tanks, artillery, but not good at producing goods that ordinary people wanted.
An even greater problem with Soviet planners was that it was never clear to them where exactly and what they should invest in. Over time, it persisted. From 1963 onward, the economy started stagnating, as the Communism became more and more focused in competing against United States in terms of military, and focused on control against the world, the eventual collapse of an economy against the right to private ownership kept collapsing. The standard story is the fact of every revolutionary socialism; in China, the great leap forward 1958–1962 caused 45–60 million deaths, the Greatest famine in history. Ethiopia led by Mengistu fails in any output, in Tanzania, a policy of state socialism bore the similar results. In Venezuela today, despite bombardment of various propaganda and controls, the same symptoms are showing up in every case.
Today, a lot many try their failing best to forward the idea of Social Democracy. So, it’s important to always first reject it as one should do in anything else and then break it down in examination. Since every theory is different, there are some historically popular ones;
• Classical social democracy (1890s to 1950s): a complete alternative to a capitalism.
• The state will own ‘commanding heights’ and key sectors of the economy as it pleases but not everything. If the state will control it’s wished sectors, it will give control in it’s own choice to the rest of the economy. An economy working in an equilibrium framework, which is not possible.
• State directed economy: decisions made by politicians in key economic realities and in theory, decision made in the light of democracy and liberal rights.
• Social collectivism and nationalism: a mode of thought under which an entire society thinks of itself as a large household.
In most cases of democratic socialism theories, consumption is downplayed and various kinds austerity ideas are promoted. And, collective consumption and rationing is called upon for as opposed to an individual’s consumption in the name of equality.
Socialists, even democratic ones are hostile to any idea of insurance, welfare state, any welfare programs and many are puzzled about it. Instead, they advertise opposition in terms of a service state where in a politico-economic system a state is providing a number of key goods free of charge. This is a common practice in most capitalist countries. After WW2 in a number of countries, especially European and Britain major shifts were made toward socialistic narratives and moves. Between 1947 and 1952, all of these modes and adaptation were defeated. In so many cases, democratic socialist governments pulled back from such measures and didn’t follow them through again. There were strong tensions about the incompatibility of such implementations with liberty and democracy itself. Consumerism also presented it’s natural challenge to the people, social democracy is incompatible with personal choice and consumer economy. There were poor investments and performances.
The Westphalian world however adopted a different approach. The idea of any state directed economy was completely scrapped out, and a strategy of a market economy was adapted, with extensive welfare programs, welfare states, redistribution and higher sustainable taxes on higher incomes. This greatly improved public spending and public in a number of different ways in different geographies. Tripartite negotiations were encouraged with Keynesian demand management in some places. Many of these measures were very successful than various socialisms, but however, the tripartite and Keynesian demand management system both were dropped completely in the 70s. The reason was that instead of any balance there was inflation, stagnation, corruption as well as misallocation of resources. There was also a cultural factor which contributed to these being dropped out.
In conclusion, whether democratic or revolutionary, socialism never works for a general humanity itself, and undermines innovation and individual rights altogether.
