Edited and written by David Gordon, senior fellow of the Mises Institute and author of four books and thousands of essays.

The Socialist Asylum

Summer 1999

Bertell Ollman, Ed.
Routledge, 1998, vii + 200 pgs.

One question about socialists has for many years puzzled me: how can they exist? The Soviet Experiment, the Chinese Great Leap Forward, etc. are now "one with Nineveh and Tyre"; but how can they have deceived a rational person for more than a moment?

The question can be made more pointed. Whatever the blindness of Western intellectuals before 1989, surely, one might think, no one can now be a socialist. Given socialism's manifest failures, the position seems about as plausible as the presidential candidacy of Harold Stassen.

Nevertheless, socialism is alive and well in the American academy, and this book helps us understand why. It consists of debates on market socialism conducted by four socialists in good standing. Two of them, David Schweickart and James Lawler, support market socialism; Hillel Ticktin and the editor, Bertell Ollman, oppose it.

I shall not hold readers in suspense any longer. The answer to the question posed above is a simple one: the socialists are stark, raving lunatics. They embrace socialism because they cling to the empty shibboleths of Marxism.

Only Mr. Schweickart earns partial clemency from this verdict: he is at least acquainted with the rudiments of economic thought. In his principal essay, he ably summarizes the standard Misesian and Hayekian case against socialism. A centrally planned economy "faces four distinct sets of problems: information problems, incentive problems, authoritarian tendencies, and entrepreneurial problems" (p. 12).

Mr. Schweickart's statement of the first of these problems, as set forth in the Mises-Hayek calculation argument, is excellent: "Production involves inputs as well as outputs, and since the inputs into one enterprise are the outputs of many others, quantities and qualities of these inputs must also be planned. But since inputs cannot be determined until technologies are given, technologies too must be specified. To have a maximally coherent plan, all of these determinations must be made by the center, but such calculations, interdependent as they are, are far too complicated for even our most sophisticated computational technologies. Star Wars, by comparison, is child's play" (p. 12).

Of course, no socialist in good standing can say an unqualified good word about the great Austrians. And so Mr. Schweickart feels impelled to add: "It is absurd to say...that Ludwig von Mises and Friedrich Hayek have been proven right by events, that a centrally-planned socialism is 'impossible.' To cite only the Soviet Union: an economic order that endured for three-quarters of a century...should not be called 'impossible'" (p. 12).

I cannot help but suspect that Mr. Schweickart really knows better. Mises and Hayek did not doubt the existence of Soviet Russia. Rather, they contended that a world socialist economy could not engage in rational economic calculation, for reasons well stated by Mr. Schweickart himself. The Soviet Union (as the contributors to this volume never tire of reminding us) was not fully centrally planned; further, it had available capitalist prices as set on the world market. The existence of Soviet Russia posed no threat to Mises's and Hayek's case.

Although a confirmed socialist like Mr. Schweickart cannot help but on occasion wax nostalgic over the Workers' Paradise, nevertheless, in his sober moments he acknowledges the force of the argument.

What then is he to do? Will he overcome his inclination in favor of central planning and embrace capitalism? Perish the thought! Our ingenious author redefines socialism so that it no longer entails central planning. Instead, he favors a system he grandiloquently terms Economic Democracy. In it, production takes place in firms owned by workers. The state coordinates these firms through its control of investment, but there is no central planning of the sort that Mises and Hayek have refuted.

The problems of this scheme are well brought out by Hillel Ticktin. But before turning to his comments, I shall add a difficulty of my own. This problem, one may be sure, would not appeal to Messrs. Ticktin and Ollman, despite their opposition to cooperatives, since it strikes at the heart of socialism. Suppose that Mr. Schweickart were right that cooperatives greatly exceed in efficiency standard-model capitalist firms. Nothing prevents cooperatives from developing on the free market and (if Mr. Schweickart's view about their superior efficiency is right) supplanting firms owned by capitalists. The fact that this has not happened suggests that cooperatives are not the paragons of efficiency that Mr. Schweickart imagines.

Mr. Schweickart's response (besides calling me a mean-spirited reactionary) is obvious. He will counter that the capitalist-controlled state and banking system would strangle an incipient cooperative commonwealth in its cradle. In point of fact, precisely the opposite is the case. In spite of large tax advantages cooperatives have never succeeded in making much headway in capitalist economies. It is not necessary to confront fantasies of capitalist resistance: cooperatives characteristically fail to rise to the level at which such resistance would have a point.

Suppose, though, that one ignores this argument, as I am sure Mr. Schweickart will be happy to do. The question remains: why does he think that cooperatives are desirable? Mr. Schweickart has a reason, but it is one that most readers will I suspect find unappealing.

The reason in question is the great economic success of China under a system controlled by worker-owned firms. "This 'incoherent' market socialist economy has been strikingly successful, averaging an astonishing ten percent per year annual growth rate over the past fifteen years." (p. 8). Mr. Schweickart does find one fly in the ointment: "China is not inspirational now the way Russia was in the aftermath of the Bolshevik Revolution, or as China was for many on the Left in the 1960s or as Vietnam or Nicaragua or Cuba have been" (p. 8). Well, you can't have everything.

Our author has not managed to think of a ready-to-hand explanation for China's "astonishing" growth rate. China under Mao made such a mess of things that any move toward normality will generate substantial growth rates. (If you blow up your house and then rebuild it, your growth rate will be very high.) I hardly think this is much of a point in favor of the Chinese economy.

Even if Mr. Schweickart's case for cooperatives is weak, his arguments have not been theoretically refuted. What can be said against them? Here Mr. Hillel Ticktin, a Trotskyite and an expert on the history of Bolshevik economics, contributes something of value. Like Mises, though from an opposite perspective, Mr. Ticktin argues that socialism and capitalism do not mix.

"The Marxist answers that market socialism cannot exist because it involves limiting the incentive system of the market through providing minimum wages, high levels of unemployment insurance, reducing the size of the reserve army of labor, taxing profits, and taxing the wealthy. As a result, the capitalists will have little incentive to invest and the workers will have little incentive to work. Capitalism works because, as Marx remarked, it is a system of economic force. In market socialism, that force is insufficient to provide an incentive to make the system work" (pp. 60-61).

Mr. Ticktin goes further in his apparent Misesianism. He remarks that in a socialist economy, "any privacy would be purely artificial. In this respect...Mises was correct against Lange, in their well-known debate on calculation in a socialist society" (p. 160).

Given Mr. Ticktin's insights, a question will no doubt have occurred to you. Why did I include him among the crazies? Is he not entitled to exemption, along with his market socialist opponent Mr. Schweickart? Do we not have here another example of my usual meanness of spirit?

I venture to hope that further exposure to Mr. Ticktin's profundities will reinforce my original verdict. True enough, he thinks, a socialist system cannot calculate; but so what? Calculation through prices is needed only under capitalism, where the law of value obtains. (By this he means that in capitalism, the value of a good is the socially necessary labor-time needed to produce it.) Socialism abolishes the law of value, and abundance now comes into being.

Scarcity, contrary to bourgeois purveyors of pessimism, is not a permanent feature of the world. Socialism means abundance; and where scarcity does not exist, the lack of a rational method of pricing works no harm. Everyone can have as much of everything as he wishes.

With the other two contributors we may be more brief. Mr. Lawler wishes to show that, although sympathetic to market socialism, he remains a simon-pure Marxist. Not for him the blandishments of revisionism! To prove his orthodoxy, he endeavors to prove that the Master Himself thought that a system of market socialism would prevail during the first stage of socialism. With considerable success, Mr. Bertell Ollman argues that Mr. Lawler has misread his Marx. Both authors are fond of invoking dialectics, and I leave their debate to those interested in such matters, or amused by them.


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