Free Life 24, December 1995, Ralph Miliband on Socialism, Reviewed by Sean Gabb

From Free Life, Issue 24, December 1995
ISSN: 0260 5112

 Socialism for a Sceptical Age
Ralph Miliband
Polity Press, London, 1994, 224pp, £11.95 (pbk)
(ISBN 0 7456 1427 2)

Socialism after Communism:
The New Market Socialism

Christopher Pierson
Polity Press, London, 1995, 264pp, £13.95 (pbk)
(ISBN 0 7456 1458 2)

As their titles indicate, both these books are about the future prospects of socialism. The first is a defence of orthodox Marxism, the second an alternative to it.

I will start with Dr Miliband's book, which he finished shortly before his death in May 1994. It is not the policy of Free Life to attack the dead. Honour aside, the living make far more enjoyable targets. But this book almost cries out for an exception from the rule. If its author is dead, and his colleagues at the Socialist Register have lost much of their influence since 1989, many of their old disciples remain active in the labour movement; and some can expect to hold office in a future Labour Government. I will not claim that those politicians who now wear suits and have acquired Filofaxes are still running Eisenstein epics in their heads. Even so, Marxian socialism is a doctrine so comprehensive, and so flattering to certain emotions, that it must tend to leave a mark on the character of anyone who once believed it. This being so, it is worth recalling just what credulity and fanaticism belief in it requires. And I can think of no better place to see this than in Dr Miliband's book.

Let us take the standard disclaimer:

In the light of the meaning that is properly attached to socialism, it is obvious that the practice of Communist regimes was for the most part a denial rather than an affirmation of that meaning. [p.56]

Now, this will not do. It is not good enough to enthuse about "a far- distant state of society marked by abundance, equality and harmony" [p.4], and then to define every failed effort to get there out of existence. During this century, there have been dozens of revolutions led by undeniable socialists. Every one of the regimes set up by these people has been quickly overthrown, or has just as quickly changed into something disliked by other socialists. This cannot all be bad luck. It must say something about the feasibility of socialism. I can think of no other doctrine – not even fundamentalist Islam – that has so wholly disappointed its projectors.

The burden of proof, therefore, is on the socialists. They must prove beyond reasonable doubt that their doctrine is not inherently about slavery and mass-murder. They must honestly account for its failure in the past. They must also refute the abstract arguments against it, that explain – and often predicted – these failures. Yet Dr Miliband does nothing to prove his case, not even on the balance of probabilities. His inability, or unwillingness, to face the empirical evidence has already been noted. Nor does he try to win the economic calculation debate. This he simply ignores. He nowhere mentions the names von Mises and Hayek. He confines himself instead to a series of random and often comical assertions – such as:

The evidence strongly supports the quite modest claim of Bob Rowthorn and Ha-Joon Chang that 'as far as large-scale enterprises are concerned, there is no activity which the public sector cannot in theory perform as efficiently as the private sector'. [p.107]

This again will not do.

As might be expected, he is happier with negative arguments. A system of market relationships, he says, allows a small minority to grow rich at the expense of the poor. It is irrational and chaotic. It produces drug addiction and crime, and "divisions based on gender, race, ethnicity, nationality and religion" [p.19]. It is maintained partly by bribery, and partly by a set of "hegemonic discourses" that keep the oppressed from realising just how wretched they are. Throughout, the argument is supported by phrases like "pathological deformations", "hysterical villification of the Left", "reactionary forces", "dire poverty and degradation", "Thermidorians", and so forth. It all sounds like the harangues I used to tune into Radio Tirana to laugh at. But it is not evidence by any reasonable definition.

Indeed, Dr Miliband eventually grows so drunk on his rhetoric that he forgets what he is trying to attack. He defines "capitalism" as

a system in which at least the predominant part of the means of economic activity… are under private ownership and control; and in which the primary dynamic of that activity…, is the extraction of private profit from formally independent wage-earners. [p.10]

Much later, he claims that

[t]he majority of people in the world live in countries where a wild capitalism prevails. [pp.193- 94]

There seems to be a contradiction here. The majority of people live in countries where market relationships for the most part are not allowed to exist. They are not "capitalist". I do not think I am engaging in the same childish semantics as I have just condemned. These are countries where peasant farmers are forced to sell their produce to state marketing boards at far below world prices, and where in the towns the means of enrichment are confined – often by law – to an oligarchy gathered round the local despot. Dr Miliband cannot attach his definition both to England and to Nigeria without also attaching such radically different meanings to words that it really breaks in two.

Perhaps had he written his book in better health, he would have improved it. Or perhaps not. We might have been denied the honesty of Chapter 6, "The Politics of Survival". This is a discussion of how a "truly" socialist government might win and keep itself in power. Democratisation, apparently, is not the same as democracy. That Salvador Allende won in 1970 with 36.3 of the Chilean vote was no argument against trying to nationalise everything worth laying hands on. The only pity was that it denied him a majority in both houses of the legislature. And the lesson is not to rely too much on the formalities:

How much popular support a government bent on radical change requires at the start… is not a matter of precise numbers; but it is fair to say that it does require a large and solid degree of such support…. [pp.161- 62]

Nor should the formalities hinder the exercise of power. Clearly, a socialist government would have to isolate the country from the rest of the world, by imposing

various measures, including exchange and carefully selected import controls, to protect its economy…. [p.179]

It would also have to censor the press:

The majority of newspapers could… be relied on to be highly critical of the government, with a daily exposure of its alleged failings and derelictions, and with dire warnings of the catastrophic pass to which its doctrinaire measures were bringing the country. [p.174]

[It would need to] engage in its own massive and sustained campaign of persuasion, distinguished, however, from the similar exercises of its opponents by its commitment to truthfulness. One of its concerns in this field would be to support the flowering of a left press which, though independent and critical, would have a distinct bias in its favour. [p.185]

It would also have to sack all the judges, since these would

consider it their duty to resist the challenge [of socialism], guided as they would be by the conviction that they were defending fundamental rights. [p.170]

And this cannot be allowed:

[I]n a first period, necessarily of long duration, the executive power in the state would need to be very strong….

In conditions of acute crisis, a radical government would need to be armed with the kind of powers which have always been at the disposal of bourgeois governments in time of crisis…. In wartime, they are truly extraordinary, and include virtually unlimited powers over persons and property… A radical government would use them to do whatever was required to deal with the emergency, and also to cope with unlawful actions, often of a violent nature, which some parts of the opposition would undertake. [pp.185-87]

To be sure,

these powers would need to be carefully limited in time, subject to careful legislative scrutiny, and renewable only where a strong case had been made for their renewal. [p.187]

But, let us never forget,

it is well to be clear that the realization of a programme of designed to transform the social order in democratic and egalitarian directions requires, as an essential condition, that the government be equipped with adequate power. It is only where that condition is met that a socialist government would be able to proceed with the reforms to which it was committed. [ibid]

So never mind these powers, "necessarily of long duration" but also "carefully limited in time". Never mind the Ministry of Propaganda. Never mind these vague but menacing threats against "unlawful actions" that need not actually be violent. There are no omelettes without broken eggs. Or have I misunderstood? There might actually be no omelettes:

For my part, I think of socialism as a new social order, whose realization is a process stretching over many generations, and which may never be fully 'achieved'. Socialism, that is to say, involves a permanent striving to advance the goals that define it. [p.3]

I may have quoted enough of this and its attendant language for it to be self-refuting. But I cannot help stressing that what is here being called for is an abolition of the rule of law. We are to be put under the rule of an absolute and arbitrary state – and all for yet another try at something that, whatever its supposed merits, never has been, and probably never can be, achieved. To repeat, I do not like to attack the dead. Still less do I like attacking the personal motives of those with whom I disagree. But, as Ayn Rand somewhere remarks, there are some mistakes that are simply too big to be made by accident.

However, I move to the next book; and I say at once that in reviewing these books together, I am not attempting a smear by association. I believe that Dr Pierson is a decent, civilised person. For him, socialism is not a utopian fantasy that covers the real business of shooting people. It really is about trying to make everyone better off.

I am impressed by his honesty with the evidence. Yes, he says, the Soviet Bloc was socialist. To claim otherwise is "analytically unhelpful" [p.65]. And yes, the 1989 revolutions were anti-socialist: the mass-demonstrations were not only for democracy, but also for a return to private ownership [ibid]. Moreover, socialism failed because it was based on a rejection of market forces. Dr Pierson has read von Mises and Hayek – and John Gray in his better days – and quotes and discusses them at length, and is convinced by them. Central planning, he agrees, cannot work. It cannot gather and use the information needed for a rational allocation of resources. All it can do is centralise power and encourage its ruthless exercise.

Any socialism that is to work, therefore, must take account of markets. It must be "market socialism". Dr Pierson defines this as

an economic and political system which combines the principles of social ownership of the economy with the continuing allocation of commodities (including labour) through the mechanism of markets. [p.84]

Beyond this form of words, there is no certainty, since Dr Pierson is almost as keen to describe the ideas of other market socialists as to defend his own; and the boundary between description and defence is often hard to see. But, as I understand, the main employers in his socialist economy are to be various sorts of workers' cooperative, and public corporations modelled on the BBC. For the most part, these will be left to compete with each other, making such use of their assets as they see fit. A large state will remain – to manage the socially- owned investment funds, and to make the usual redistributions – but will not be a very domineering thing.

There will even be room for private enterprise. In the first place, it is recognised as a kind of civil right:

Given that it is primarily corporate capital which market socialists wish to unseat, it may be better to countenance small-scale capitalist acts between consenting adults than to endorse the levels of state surveillance and discretion that would be required to prevent them. [p.98]

In the second, it must remain as an engine of progress. Dr Pierson accepts that while social ownership might be able to imitate the "static allocative function of the market" [ibid], it might not be compatible with innovation.

With more or less regret, the genuine entrepreneur (s/he who introduces a new product or service or initiates a new method of production), must be encouraged…. In Yunker's model of 'pragmatic market socialism', there would be 'material incentives to entrepreneurial endeavour almost as strong as those which currently exist under capitalism'. [p.99]

Of course, this book is to be welcomed. It is an important weapon in the battle to reclaim the British labour movement for civilisation. It can be read as a set of notes and amplifications to the speeches of Tony Blair. If trade unions are now offering private health policies to their members, if Labour Councillors are beginning to talk of a "partnership" with business, if the next Labour Manifesto may contain more sense than the last one did, it is thanks to the work of Dr Pierson and of people like him. So far as they succeed, they are doing everyone a favour.

But though useful, their brand of market socialism is not to be taken seriously. It is not a coherent position. It is at best a kind of intellectual methadone. It may be good for weaning the Labour Party off hard socialism. But like methadone, it is not itself a cure. I know this book is directed at other socialists, and so is concerned more with refuting their objections to markets than with refuting my objections to socialism. But even making this allowance, I am not sure that Dr Pierson has made any case at all for socialism.

I ask – if markets have been shown to work and socialism has not, why bother trying to mix them? There are a few slighting references to what may be called "actually existing capitalism" – for example:

By the end of the 1980s, and after a decade in government, the economic performance of the most enthusiastic neo-conservative regimes (in the US and the UK) was, at best, unimpressive. [p.66]

But, even if true, this is no case in itself against markets. Though worth mentioning at this point, let us avoid the ethical arguments. Dr Pierson knows that markets are chiefly valuable to people like me because they allow free individuals to live and work together as they prefer; and any economic growth that results is a secondary benefit. And I know that for him, community and participation are at least as important as the liberal freedoms. But, as said, let us keep away from this – especially in what is turning into a longer than average review article. Let us keep instead to the material issues.

And on these, Dr Pierson is not playing fair. He has read the liberal economists well enough to know that any failures in the actual record of Thatcherism can be explained by failures to carry market reform far enough. Again, this is not a variant on the special pleading of Dr Miliband discussed above. I am not explaining millions shot, while millions more turn out to eat tree bark. It is plain that markets do work, even when frustrated with all the ingenuity of modern governments. I am not by British standards very well off. But as I write this review, I am using what by the standards of a decade ago is a miracle of technology. Tristan und Isolde is playing on the wireless. In the kitchen, Mrs Gabb is fussing over what looks a delicious joint. She has the heating full on, and I suspect I can pay the next gas bill. Not everyone may like our life as described; but not everyone is compelled to share it. The freedoms of our present society allow an almost endless variety of lifestyles. If others are less well off than I am, there is good reason for saying that their participation in the employment market has been artificially limited. We have a tax and welfare system that deters them from working as hard as they might. We have regulations that deter businessmen from offering as many opportunities at as high rewards as they otherwise might. I cannot help adding that the Labour Party's minimum wage proposals – with which I will assume Dr Pierson agrees – will ensure that the market never clears at the bottom end. Certainly, before he can claim that markets do not work well, he should first show why their further extension will not remedy this.

And turning from why free markets are not desired, let us now look at whether market socialism can be made to work. For all his ingenuity, Dr Pierson does not come close to showing that it can. As seen, he recognises its inherent failure to allow innovation; and he tries to overcome this by incorporating a class of private entrepreneurs. But he does not explain why socially owned enterprises will be conservative. He cannot claim that they will be run by incompetents – that would destroy part of his argument. I will not claim this either. The reason is that innovation involves risk; and where success is not personally rewarded, there is no incentive to endanger promotion and pension.

Now, this being so, it should be plain that private enterprise by itself will not be enough. It will require finance. But if the investment funds are socially owned, they too will be conservative. They will have the same bias against risk as the socially owned enterprises. Traditionally, new technologies have at first seemed not only risky but also mad. Bearing in mind the weight of conventional opinion, would a public investment board have given a penny to the Wright brothers? Or to any of Edison's projects? Or to the development of a clockwork radio I saw recently on television? I think not.

To be sure, most savings are already invested by large private institutions; and the people who work in them are notoriously averse to risk. But there is still the minority of savings, personally invested. These are what allow innovation. Monopolising finance into large public institutions might allow a class of small traders to survive. But that is all. It will not allow the scale or nature of private enterprise that Dr Pierson believes necessary.

I allow that we are not being shown a complete system, but various possibilities. It may be that control of investment can somehow be socialised, but also kept decentralised and flexible. My criticism might apply not to market socialism in itself, but to one as yet undeveloped feature of it. However, there remain the wider dynamics of the system. These are inherently defective. No permutation described in this book can avoid them.

Dr Pierson says repeatedly that markets are to be allowed on sufferance – for example:

Markets will only do the things that market socialists require of them…. [p.215]

If they do fail to do as required, they will be regulated or even abolished. Though the state under market socialism will be more modest in its claims than under other kinds of socialism, it will remain powerful:

[I]t is not clear that there would be a lot less state under market socialism than under current social democratic regimes. [p.185]

But if the authorities are willing and able to correct "market failure", there will be an incentive to find it. Suppose a workers' collective making televisions is losing market share to Chinese suppliers. Will it try to become more productive, or diversify into something else, or simply go out of business? Or will it cry "market failure" and demand protection? All experience with private companies shows that it will do the latter. It will hire experts to produce the usual statistics and arguments about "unfair" trade. It will lobby its political representatives. It will get support from its suppliers and other local businesses. As usual, these efforts will be countered by true but less specific arguments about comparative advantage and the gains from trade. Even governments formally committed to free enterprise find this sort of pressure hard to resist. A government already sceptical about markets will be a far easier target. To suppose otherwise is to show an incredible naivety about markets. Their economic value is that they not only allow but also require enterprise. Doing things that other people will pay money for is always difficult. If privilege is available at reasonable cost, businessmen will be directed, as if by an invisible hand, to seek that instead.

It is no reply to assume that a market socialist government will play umpire in this search for privilege. That again is naive. Even without overwhelming pressure from without, politicians and bureaucrats have their own internal motivations; and these include an expansion of their numbers and status. They can be expected to use – and believe – any argument for enlarging the state that is likely to be accepted. Moreover, they will cooperate with any public or private group outside that has a compatible agenda. Look at the de facto marriage between the Ministry of Defence and the arms companies, between the Department of Transport and the road building companies, between the Police and the moral purity campaigners. Look at the rigging of the gas market, at the professional closed shops, at the Common Agricultural Policy. These are marriages obviously against the public interest; but few members of the public have an interest great enough to try annulling them. Under market socialism, the marriages will involve different partners, but a similar outcome. Whatever the initial commitment to markets, the interests of almost every coherent group will produce a growing burden of regulation. It will not end in Dr Miliband's closet Stalinism. It will simply take us to the stagnant corporatism we are already bound for.

I have spoken about this "brand" of market socialism, for there is another. Stuart Pemberton, arguing in these pages – see Free Life No.22, April 1995 – has called for a more radical project. Socialism, he says, cannot be achieved by the state. It requires an entirely free market, in which socialist communes and cooperatives can emerge by themselves. So far as the state must do anything at all, this is confined to diminishing taxes and regulation, and the ending of limited liability, which diverts enterprise into forms that could never otherwise exist. I am not sure if these communities would be popular. But I think they would satisfy every socialist aspiration compatible with leaving the rest of us alone.

To conclude, though the British labour movement is less unattractive than it used to be, I am still not inclined to vote for the Labour Party. It is dominated by people who used to give Dr Miliband more than the time of day, and by people who can be trusted to do nothing very different between periods of Conservative rule. Dr Pierson is a vast improvement on Dr Miliband; and I repeat my gratitude. But all he has done is provide a more honest justification for Thatcherite social democracy than the Thatcherites ever did with their talk of markets. There is a lot further yet to go. Perhaps Dr Pierson is in practice what he is in theory – a transitional point between Dr Miliband and Mr Pemberton. But it has taken the labour movement nearly a generation to get even partly to him. I cannot imagine how long it will take to go the whole way. In the meantime, I suppose I must hold my nose and continue voting Tory. Despite is many faults, here is a party containing people who want to go the whole way.

Sean Gabb

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