ABSTRACT
Socialist critiques of the new right and economic liberalism more generally abound, and this essay will not add to them. Rather, it is concerned with the half-way houses into which modern revisionist socialists are frequently driven, positions intended to salvage socialism but all too often put its very coherence as a political idea into question. On the one hand, the new revisionists are, rightly, strongly opposed to the new economic liberalism but, on the other hand, they are, rightly, in full-scale retreat from the prevailing twentieth-century conception of socialism based on the triad of collectivism, public ownership, and state controlled centralised planning. Commonly, they imagine that a commitment to democracy will both save socialist strategy, providing a road to political power, and also save the substantive content of socialist ideology, making the struggle for socialism coincident with that for the démocratisation of state and society.The paradox is that such socialists are generally strongly opposed to economic liberalism because of its formalism, that is, the view that the free market shall determine, through its operations alone and with minimal legal or institutional check, the shape of both economy and society, and yet they seek to counter it with an equally radical formalism - democracy. Democracy is a political mechanism as abstract to substantive social outcomes as is the market as an economic mechanism. Democracy is a general concept for a class of decision procedures. Such procedures determine, for example, by elections and the principle of majority decision who shall occupy certain posts of authority or, less frequently and less effectively, what policies shall be pursued by those who occupy such posts. But democracy is a formal power of
majoritarian decision. In its most radical plebiscitarían populist version it advocates ‘put the issue to the people*. In itself such a decision procedure can be no more certain to set certain particular and substantive policy goals or to pursue certain values than the free market. A democratic decision is an open either/or. The ‘people’ can choose Christ or Barrabas, to ban foxhunting or to outlaw homosexuality. Democracy can no more guarantee ‘good’ decisions than unregulated markets can guarantee full employment or balanced growth.1Modern democracy is an idea of roughly the same vintage as economic liberalism. Both are products of an eighteenth-century radicalism that challenged the political and economic order of the ancien régime. Economic liberalism challenged mercantilist state economic policy and a society in which economic capacity depended on status. Political democracy challenged the restriction of political decision-making to privileged positions and a society in which fixed orders of rank stood in the way of the formal legal and political equality of all citizens. Economic liberalism and political democracy both challenged the absolutist state of the ancien régime and yet they were its creatures. Without the creation of an absolutist public peace, the tendency towards passive social levelling that went with it, and the absolutist project of administrative reform that sought to create a homogeneous space of state power, neither doctrine could have had the conditions to appear credible. In the era of religious sectarianism, the idea of democracy was tantamount to the advocacy of civil war. Both economic liberalism and democracy suppose public peace - in the sense of a state monopoly of the means of violence and also in the absence of fundamental conflicts over values. These two ideas appear in the aftermath of the religious civil wars, conflicts silenced by the absolutism that the economic and political radicals opposed, and they appear before the ‘social question’ threatened to wreck both the free pursuit of wealth in the market and the safety of letting the people determine their rulers or their laws.2Economic liberalism and political democracy are doctrines that appeared prior to the questions that socialism sought to resolve. Those questions were the governance of great industry for the benefit of its workers and the removal of the social problems created by the instability of employment and the poverty of a large section of wage workers. Those questions radically increased the
stakes of political reforms that introduced democracy based on universal adult suffrage. As Carl Schmitt showed, liberalism and democracy are in conflict, and this includes economic liberalism.3 Classical liberalism rested on a society in which certain fundamental areas of life were ‘depoliticised*, notably religion and economics. Religious toleration and a market economy make belief and the pursuit of wealth ‘private* matters, matters to be confined to the sphere of civil society.The essence of parliamentary liberalism for Schmitt was that parliament was an arena in which decisions could be made by ‘discussion*, because of the fundamental consensus created by ‘de-politicisation*. Once this ‘de-politicisation* breaks down then everything once again becomes political, as in the era of the religious wars. Democracy then becomes a boundless power of popular decision, actually a power of party politicians legitimated in office by a plebiscite. As such, it can unmake the limits of the liberal era, both civil and economic liberties, in the interests of a majority party will. In this respect, economic liberalism, a formalism in the sphere of economic affairs, is committed to a politically substantive set of values: that the fundamental rights of enjoyment of property - to buy and to sell, to trade abroad, etc., without let or hindrance - are secured by law. Hence the equivocations of Hayek, the most rigorous economic liberal, when confronted with the political formalism of democracy.Socialism has, on the contrary, generally embraced democracy but has sought to surpass both representative democracy and parliamentary liberalism. The commitment of democratic socialists to the prevailing forms of western democracy has been perceived by those most committed to radical and thoroughgoing socialism as a betrayal and a compromise with the existing order. Radical socialists could embrace both democracy and rapid socialisation only on the basis of certain assumptions. The two main assumptions are both dubious and in contradiction with one another.4The First assumption is that the working class form the enormous majority of the population and will, as capitalist society develops, come to be unified around the political aim of socialism. The development of genuine universal suffrage in a bourgeois democratic system will, therefore, assure the victory of the socialist cause. This was the position that both Marx and Engels in later life
and also orthodox social democrats like Karl Kautsky adopted. But a working class democratic victory is only the first stage in a process of political transformation. Orthodox Marxists in the west generally remained convinced that some form of revolutionary action would be necessary to cement a working class electoral victory and that the aim of socialism was to go beyond the limitations of existing forms of ‘bourgeois’ democracy. Kautsky, for example, retained this radical objective even though he sought to attain it through governmental action legitimated by mass electoral support and conforming to the rule of law. More radical revisionists like Eduard Bernstein saw that electoral democracy and the rule of law were inconsistent with revolutionary objectives. Non-revolutionary democratic socialists, like the British Fabians and the Labour Party, rejected the aim of surpassing ‘bourgeois’ political institutions.The second and more radical assumption is that because of the fundamental political unity of the working class, parliamentary forms of democracy based on multi-party elections will become obsolete. The people have a single interest and a plurality of parties is no more than an obstacle to its realisation. But the Marxists who advocated such a new form of democracy, notably Marx in The Civil War in France (1871) and Lenin in The State and Revolution (Lenin, 1964) did not envisage a dictatorship based on a single party. Bourgeois democracy was to be replaced by forms of popular democracy and the direct participation of the people themselves in decision-making: the ‘dictatorship of the proletariat’ was to be the rule of a class not a party.These two assumptions may have been necessary to square radical socialisation with democracy, but their political effects were disastrous. The first assumption was modified and split-off from the second by those who en terta ined the illusion of a ‘parliamentary road’ to socialism. Wherever and whenever socialists were successful enough in competing in elections and pragmatic enough to remain within the limits of the liberal order, parliamentarian ism came to take precedence over the notion of a socialist ‘road’ to revolution by means of democracy. The commitment to liberalism was as much a condition for the electoral success of the revisionist parties as was their espousal of socialism. That commitment to the liberal constitutional order was a fundamental brake on the pace and scale of socialisation, but also
a condition of political survival. It trapped parties like the German Social Democrats in the contradiction of a pragmatic current practice and illusory long-term revolutionary goals. In practice, the more liberal a party and the more displaced the long-term aim of thoroughgoing socialisation, the more successful it was electorally, as was the case with the British Labour Party.Liberal ‘socialist* parties succeeded electorally because they could be trusted politically. They were tolerated as democratic competitors by their opponents and permitted to form governments because those opponents were willing to take the risk that the constitutional order would be safe in their hands. Socialist parties were willing to accept liberal restraint on the boundless power of democratic decision, to accept the placing of obstacles in the democratic ‘road* to socialism. This bowing to the limits liberalism placed upon democracy was inevitable if parties were to survive in the prevailing forms of parliamentary political competition. The potential vote for revolution in a stable parliamentary system is always that of a containable minority. Moreover, the opposition parties would never accept the legitimacy of a revolutionary party should it succeed by an ‘accident* at the polls - its success would create a state of emergency in which the threat to the constitutional order justified the suspension of the liberal rules of the game in defence of that order.Parliamentary socialism was thus confined to a social democratic political practice. It was imprisoned within the constraints of constitutional liberalism and the liberal collectivism of the welfare state and the management of a mixed economy. But the more radical of the democratic socialists constantly chafed against such constraints, for they confined socialism to the status of purely formal party commitment to an ultimate and ever-receding goal. Hence they returned to the dubious assumption of a majority socialist working class. They survived on the hope of a decisive and massive electoral majority for radical social change, that ultimately the working class would turn to its objective interests. This illusion has been a constant of radical democratic socialism from Karl Kautsky to Tony Benn. It simultaneously sustains parliamentarism and disparages the social democratic commitment to remain within the rules of the game.The second assumption led to a different and far worse kind of disaster wherever socialists captured state power without the
DEMOCRACY constraints imposed by powerful ‘bourgeois’ opposition parties and without being committed to the liberal constitutionalist ‘rules of the game*. Popular democracy has never been a credible doctrine of governance of large and complex states. The absence of any better and more pragmatic doctrine of governance for a socialist society within Marxism has led revolutionary socialists to create more or less oppressive forms of tyranny. The boundless formalism of majoritarian democracy and the commitment to revolutionary socialisation have gone hand in hand in justifying change forced through by unrestrained and centralised state power. To call these forms ‘people’s democracies* or ‘socialist republics* is to mock any notion of democracy, whilst endorsing its boundless formal power of change.Democracy and liberalism are potentially in contradiction. But the twentieth-century experience of pitiless tyrannies claiming to act in the service of a higher form of democracy than mere bourgeois liberalism has breathed life into constitutional liberalism. It may restrain democratic change, but it is better than forms of ruthless change claiming to represent new forms of democracy, whether that of the ‘democratic dictatorship of the proletariat* or the Führer-Prinzip. H itler and Stalin have become the best legitimations of parliamentary democracy and liberal civil rights. Nazism is a vanished abomination, but the political legacy of Stalin is still with us. Perestroika will have to proceed far before his spectre and that of all the lesser but still brutal contemporary tyrants like Pol Pot or Ceausescu cease to blight the prospects of all but the most timid parliamentary socialism in the west.The history of socialism’s relationship to democracy is thus both compromised and fundamentally compromising. This above all else has confined its political appeal. But the other core component of twentieth-century revolutionary socialism - centralised economic planning - has proved to be an equal obstacle to socialism wherever electorates have had a political choice. Centralised economic planning was claimed by revolutionary socialists to offer both an end to the ‘anarchy of capitalism’ and to permit forms of technical change and economic modernisation more radical than even those of capitalism itself. But such planning has proved to be neither economically efficient nor consistent with political liberty. Centralised planning requires the concentration of decisionmaking power in certain state apparatuses and has failed to deliver
levels of popular consumption and prosperity comparable with capitalist economies. Hayek has prospered as the leading apostle of economic liberalism largely on the strength of his long-term unequivocal denunciation of such planned economies and because he has identified all lesser forms of intervention as no more than way stations to full state control of the economy. Hayek argued that any attempt to substitute for the free workings of the price mechanism would lead to the authoritarian and inefficient corruption of economic rationality by administrative allocation.But curiously this critical stress on the irrational intervention of authority hides the fact that the socialist commitment to central planning involves a parallel if different economic formalism to that of economic liberalism. Both are at one in seeking the greatest possible production of utilities by the most efficient means. Both seek to subordinate economic institutions to the logic of economic calculation. For central planning to work, enterprises must follow plan targets and indicators, just as firms must follow market signals. Moreover, enterprises are as much a convenience of economic decision making in such a socialism, a consequence of certain plan priorities and the resource allocations coincident upon them, as is the firm in free-market economics. Planned resource allocation and market allocation both regard the whole structure of the economy and the enterprises in it as the malleable substance of calculation, up for grabs if planners or entrepreneurs so decide.Central planning is thus in many ways as formalist with regard to the society and institutions under its sway as is the classic conception of the perfectly competitive market Indeed, planned economies have always been seen as agencies of radical transformation and modernisation and never as the defence of given rights and privileges, the stabilising of institutions, and the preservation of certain forms of social order. The end to the ‘anarchy* of capitalism could only be achieved by total and unimpeded economic change. Yet such defence and stabilisation is often what attracted workers to socialism in the west. It offered an end to uncertainty, unplanned change, and economic insecurity. The fear of unemployment, of the loss of skill, of the destruction of traditional social surroundings are a powerful source of support for socialist and labour parties, but they imply a conservatism fundamentally at odds with the boundless goals of
economic and social change implied in socialism. Socialists have been inconsistent in this matter. Karl Kautsky’s The Class Struggle (1971) at one and the same time castigates the uncertainty and change inherent in capitalism and offers a planned and ordered socialist future. That the latter involves changes as vast and unsettling as the former escapes him.Socialism cannot thus stand in opposition to free-market economies in the way the economic liberals would have it, as if the latter pursued economic action based on formally rational calculation and the former did not. Actually both theories of formal economic rationality are far from the institutional complexities of capitalist economies and socialist ‘centrally planned* economies. Western economies are as far in practice from the model of a perfectly competitive market as soviet style economies are from the model of an efficient centralised plan that substitutes for the free working of the price mechanism. The success of western economies - their greater GDP per capita, productivity, and consumer satisfaction compared to the Soviet system - has many causes, and the existence of perfectly competitive markets is not one of them. ‘Centrally planned’ socialism has generally been implemented in economically backward areas and has been used as the lever of economic modernisation and industrialisation at the expense of consumption and the traditional rural economy.That economic liberalism involves a commitment to the free market is a commonplace. But free markets are defended for a theoretical reason in that they are claimed to provide a power-neutral and quantitative information system to the rational economic agent. They permit calculation by independent economic agents of the most rational use of resources, and that rationality is expressed in comparative prices and profits. Ultimately, therefore, the free working of the market as a price system is a pre-condition for the formal rationality of the calculating agent. The entrepreneur and the consumer are both such agents and neither of them has any substantive commitment to any particular production process, method of working, or product The search for the greatest profit and the cheapest price will lead both of them to revolutionise the existing state of affairs, if need be. The social organisation of the economy and all institutions directly supporting it must be potentially fluid and subject to change. Formal calculation requires a social order willing to tolerate any
amount of social, occupational, technological, and locational change necessary to economic rationality. The social order is at the behest of the calculating agent. Economic liberalism thus proposes a state of economic permanent revolution based on the free market but a revolution that operates within a stabilised political and constitutional settlement in which political liberalism sets substantive limits to the formerly boundless power of democracy as a decision procedure. The free market is claimed to benefit the great mass of consumers, but it requires those consumers as workers or producers to accept ceaseless social and technical change; ultimately they will benefit from the economic insecurity of the free market permanent revolution.Such a view has always been subject to intense criticism from those who have seen the economy as necessarily embedded in relatively stable social institutions and who have argued that unrestrained change at the behest of sovereign calculating agents could only undermine the very foundations of ordered economic life itself. The names of Karl Polanyi and Emile Durkheim spring immediately to mind.5 Similarly, countless economic critics have pointed out that such ceaseless change in pursuit of the individually rational goals of economic agents leads to results that are unacceptable in aggregate: that such a system cannot secure full employment, avoid large-scale poverty and gross inequality, and prevent the damaging of the environment These criticisms are familiar and they cut little ice with hardened economic liberals because they see the defence of given institutions and patterns of occupation, and the substantive goals that go along with them, as a dangerous brake on economic growth and technical progress. Moreover, the mixed economy and the welfare state do not merely reduce welfare - in addition the public sector serves as a base from which socialism can slowly and insidiously advance until it has suffocated the free market. The road to serfdom is paved with the good intentions of the welfare state and the mixed economy.Accumulating social rigidities and the protection of existing producer interests leads to relative economic failure and this is exposed by international competition. However embedded in social institutions the economy may be, a nation that defends the existing structure of production by protecting employment and output in given enterprises is doomed to failure in the face of more flexible international competitors. Expanding public sectors and
DEMOCRACY large nationalised industries provide the political base for such imposition of limits to market action and technological change. There is an element of truth in this, as the success of Mancur Olson’s The Rise and Decline of Nations (1982) shows.But all it shows is that the accumulation of powerful interest groups with the capacity and the desire to defend given institutions and privileges will lead to a block on change. It does not show that societies that promote technical change and productive efficiency either rely on a free market to do so or actually change the social institutions that sustain the economy in order to promote change in the economy. In fact, the best arguments against economic liberalism are not those relating to employment, equality or pollution. The economic liberals have no answer to mass unemployment, large-scale poverty, or environmental crisis, but it would be a rash socialist who honestly believed that they in turn, had an answer. What economic liberalism cannot guarantee are the two things central to its claim to economic rationality - technical innovation that promotes productive efficiency and the levels of investment necessary to resource it. There are good reasons to suggest that weakly regulated markets and the close interaction of different markets lead both to a short-term view of profitability and efficiency, and to a steady drift of profit seekers towards activities where market information alone is sufficient to economic action - markets in securities, national currencies, commodities, and property are obvious examples.There is good evidence to suggest that those regions of those states that have proved economically most successful in the more uncertain, more competitive, and rapidly changing international economy of the later 70s and 80s are those in which strong continuity of institutions and enterprises has precedence over the free market.6 Technical change and productive flexibility are more likely to be sustained and accepted where they can be contained within appropriate institutions and thus not disorder the whole ensemble of social relationships. Thus, societies like Japan that accept rapid technical change, do so on the basis of a deep social conservatism. This conservatism in Japan may involve the wholesale reinvention of tradition after the débàcle of 1945 but it is none the less real and effective. Central to such conservatism in Japan are the family and the enterprise, which cushion their members against change and make them more adaptable at work.
