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

A New Socialism?

Fall 1995

John E. Roemer
Harvard University Press, 1994. viii + 178 pgs.

John Roemer is a brave man. Few American economists today are prepared to defend full-fledged socialism; after the Soviet Union's collapse, even Robert Heilbroner, that quintessential leftist, had words of praise for Ludwig von Mises. Roemer, an economist of unquestioned technical competence, breaks with the current consensus. His book has already won praise from academics saddened by the fall of the Worker's Paradise.

Roemer does recognize that "the Soviet model of socialist society is dead" but, stalwart in his faith, he does not despair. "[T]hat does not mean that other, untried forms of socialism should be buried along with it" (p. 1).

To abandon socialism because of so temporary a setback as Communism's collapse would be to ignore a basic truth. "The Bolshevik revolution was, I think, the most important political event since the French revolution, because it made real to hundreds of millions or perhaps billions of people, for the first time since 1789, the dream of society based on a norm of equality rather than a norm of greed" (p. 25).

Faced with so eloquent and moving a defense of a regime based on cold-blooded mass murder, I was reluctant to subject Roemer's inspiring vision to analysis. But duty calls.

Roemer has had a bright idea. Why not save socialism by abandoning what that term usually designates? Thus, socialists need no longer support public ownership of the means of production. If public ownership has failed, and public ownership is equated with socialism, then socialism has failed. But this would end the dreams of millions, if not billions. Instead, since the pursuit of "equality" defines the "dream of society" even the once hated market may be used in the struggle.

But equality of what sort? As Roemer sees matters, socialists aim at "equality of opportunity for: (1) self- realization and welfare, (2) political influence, and (3) social status" (p. 11). He glides quickly over his three desiderata, evidently taking their goodness to be self- evident. Self-realization, we learn, "is a specifically Marxist conception of human flourishing" (p. 11). Under it, people develop their talents in a way that gives meaning to life.

So vague a goal seems hardly suitable for a political system who determines which abilities are to be realized, and by whom? but minor matters such as this do not faze Roemer. He does not bother to characterize welfare in any specific way, nor does he explore possible conflicts between self-realization and welfare. What if some people would be happier not developing their talents in the fashion the Commissars specify? Judging by his praise for the wisdom of Zhou Enlai, one of our century's foremost mass murderers (p. 130), I rather suspect that individual preferences would not count for much.

But this, admittedly, is speculation. Giving Roemer the benefit of every doubt, however, his principles strike one as radically implausible. His first principle mandates nothing at all about self-realization or welfare, even putting aside the vagueness of these terms. What his rule requires is equality of opportunity to attain self- realization and welfare. A slave society in which all were equally oppressed, then, would outrank one with a hereditary aristocracy, even though in the latter everyone had a high level of self-realization and welfare. The actuallevel of self-realization does not matter: all that counts is that everyone have the same chance at this vague and impalpable goal. Given this principle, Roemer's pining for the glorious days of economic growth under Comrade Stalin becomes understandable (p. 43).

And just why should everyone have the opportunity for equal political influence and social status? Roemer does not tell us, although, commendably, he recognizes that conflicts may arise among his three principles. He does not specify a ranking for the rules in case conflict does arise, but that of course would be asking too much.

Roemer's principles raise a more fundamental question. Why is equality (of welfare, self-realization, influence, or whatever) desirable at all? As must never be forgotten, Roemer is a high-powered intellectual, "brilliant" in the opinion of the eminent Warren Samuels; so he is not without resources. He notes that "political philosophers [working] on egalitarian theories of justice" have established the truth of the egalitarianism on which socialism rests. In particular, John Rawls's A Theory of Justice"accomplished the feat of convincing a large number of social scientists that egalitarianism was not simply a value judgment' that people might or might not hold according to their taste but was, rather, a view of what social arrangements were right, a view that any rational, honest person had to accept" (p. 27).

Here then is the scintillating argument offered by our talented author to support egalitarianism. Political philosophers, especially Rawls, have established it. Period.

Incidentally, he does not even succeed in getting right his account of Rawls. Rawls does not claim that any "rational, honest person" would adopt his theory; on the contrary, his theory proceeds from what he terms a reflective equilibrium among certain moral intuitions. Rawls does not go so far as to make holding these intuitions a criterion of rationality. But accuracy is of little account; after all, the future of socialism stands in the balance.

Some backwards people may prefer to found political philosophy on the right of self-ownership. This principle, however much it may offend egalitarian sensibilities, has at any rate the merit of clarity. But to adopt it, Roemer thinks, would be to fall victim to a drastic mistake. "Libertarians use the postulate of self-ownership to deduce the injustice of redistributive taxation; those Marxists for whom self-ownership is the foundation of the attack on capitalism must therefore explain why they reject libertarianism's animosity toward the welfare state" (p. 16). Self-ownership must thus exit the scene: were it to be accepted, it might lead to the rejection of socialism, which is of course absurd. Q.E.D.

Perhaps, though, I have been overly harsh in assessing Roemer. He is by training an economist, not a philosopher; so whatever the problems of his forays into political theory, his book may have value for its contributions to economics. And indeed, Roemer makes some useful points. Surprisingly for a socialist, he maintains that Friedrich Hayek got the better of Oskar Lange in their famous debate over socialist calculation. Lange endeavored to solve the challenge posed by Mises: lacking a price system, a socialist economy cannot allocate resources efficiently. Lange ingeniously suggested that a socialist economy could mimic the market. Why not use the market to achieve socialist goals?

To this, Hayek had in Roemer's view a convincing reply: "to the extent the planners would require anything (other than profit maximization) of the firm managers, the managers could not then be held responsible for losses the firms incurred; thus, any interference with the market by the CPB [Central Planning Board] would let the managers off the hook and, in effect, place all responsibility on the planners for the outcome. This point brilliantly foreshadows the political sociology of the soft budget constraint as developed by Janos Kornai . . . some thirty years later" (pp. 31 32).

Further, Roemer usefully criticizes socialists who propose that firms be managed by the laborers who work in them. As Roemer notes, firms of this type may be reluctant to take risks that threaten the discharge of some of these managers. "Indeed, it is possible that adopting the form of labor management for all firms in an economy could have the result that everyone is worse off than they would be in an economy with mixed management firms" (p. 123).

If the socialist calculation argument of Mises and Hayek works, and if worker management is not the pearl of great price, why not abandon socialism altogether? Oh, but this would be to ignore the surpassing philosophical merits of egalitarianism, which we have already had occasion to examine. What, then, is Roemer to do? His philosophical views mandate socialism, but economic analysis speaks against it. How can he restore consistency to his beliefs?

He does so by advocating a new version of market socialism, which incorporates even more market features than Lange's plan. In Roemer's scheme, firms receive capital from publicly controlled banks. Each bank would monitor the firms in its group; by withdrawals or increases in the supply of capital, it would impose economic discipline on its firms. Thus, the problem, in Roemer's view, that has plagued hitherto existing market socialism at last is solved. No longer are the firms in a market socialist order subject to arbitrary interference from the state: instead, they are subject to publicly controlled institutions whose independence is constitutionally guaranteed. If stockholders can control managers in a capitalist market, Roemer asks, why cannot banks do so as well under market socialism?

Roemer, as it seems to me, errs in thinking that the "agency problem" poses the principal difficulty for market socialism. Suppose that he is right that in his system firms will do as bankers dictate. What in his system channels money from banks unskilled at meeting the wishes of consumers to those better able to do so? He asks: how do investors in a capitalist economy get managers to do their bidding? But he does not ask: how does the stock market promote efficiency in investment?

And what Roemer grants with one hand he withdraws with the other. In his view, the state ought to play a large role in directing investment. But does this not bring back exactly the problem that, Roemer agreed, fatally flawed Lange's system, the "soft-budget constraint"? As he says himself: "A basic challenge to any model of investment planning is that some political process must be used to choose the investment targets, and this opens up the Pandora's box of rent-seeking, the wasteful use of resources for the benefit of interest groups who aim to influence the outcome of that process. It is beyond the scope of this essay to engage this challenge" (p. 106).

Yet we have not yet reached the most incredible part of Roemer's argument for socialism. As mentioned earlier, Roemer is a technically accomplished economist; and he constructs a model of a market socialist economy which outperforms a rival capitalist model (pp. 60ff). But his "argument" simply assumes the key points he needs to establish.

He postulates that the rich are more likely to generate a "public bad" than the poor: hence a system that restricts the growth of the former will promote the general welfare.

Suppose, using Roemerian tactics, one wishes to show that socialism fails. One need only construct a model, one of whose assumptions is that the socialist planners are a gang of homicidal maniacs, while capitalist entrepreneurs are decent and economically rational. One could quite easily "prove" the capitalist regime superior; but I hardly think Roemer would find this argument convincing. And yet its assumptions are considerably closer to reality than those of the models our author has devised.

Roemer's technical tools thus avail him little in his endeavor to promote socialism. He offers a "future" for socialism only in an Orwellian sense.


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