Socialism/Communism and Scale

I've just read a very interesting draft article by Canadian philosopher Joseph Heath.

I don't always agree with Heath, but his work is usually very challenging (in a good way - i.e. interesting).

It is currently available on his academia.edu page, though he may remove this in the future if it gets reviewed and published.

His argument is that just as computer architecture has to be able to cope with the amount of data required of it so social relations must be able to cope with the amount and nature of social and economic interactions.

He discusses GA Cohen's well known short book 'Why not socialism?' in which Cohen points out that camping trips work fine without a market so why can't society? (He even indicates the reasons why it wouldn't in his book so it isn't a very effective analogy in its own terms).

Heath goes to the trouble of pointing out why - small scale societies have methods to work and these are attractive to us. Which is unsurprising as much of our genetic ancestry would have been based in such societies.

However, the way that these societies function is simply not scalable past about 150 people. So attempts to bring about socialism on a larger scale inevitably result in the kinds of terrible things that Mao and Stalin did in the hope of enforcing their utopia.

Heath is certainly no market fundamentalist - all the other work I have read by him has challenged market thinking (Cattalactic bias as he calls it). However, he concludes that on a social scale markets are a very effective method of allowing economies to function on a huge scale and so capitalism is therefore the normatively required economic system for advanced societies.

Heath's argument is a development of the common conclusion most people have reached (that communism isn't viable for societies of more than 150 people) but he has developed an interesting and well-researched way of presenting it.

What is wrong with capitalism?

Some people think capitalism is a terrible evil that must be fought and destroyed. At the other extreme there are those who think that laissez-faire capitalism is the perfect economic system. I think both of these views are hugely mistaken but that the question what is wrong with capitalism is still an important one.

Anti-capitalists think that capitalism is wrong in itself for at least one of two reasons. One is that an alternative system would enable people to become more than they can be under capitalism. The second is that these alternatives could avoid terrible things like exploitation or alienation that are inherent to capitalism. At the other extreme some Libertarians (particularly Randian objectivists) think that laissez-faire capitalism produces the right distribution of goods in society and governments that interfere with the market more than necessary are exploiting those who are required to pay taxes or the costs of regulation.

I am not unusual in thinking both of these views are wrong-headed. But it is interesting to consider how you can argue the inherent rightness or wrongness of an economic system. After all an economic system is not an agent that can be held responsible for what it does—it is what is collectively brought into effect and enforced by our society.

Presumably an argument for or against a type of economic system will have to be teleological. An economic system has a particular purpose and if it does not or cannot achieve that purpose then it is wrong. My (uncontroversial) view is that the purpose of an economic system is to provide people with the stuff that they need and want for themselves and those who depend upon them in a way that is fair to all members of society. In follow-up blogs I will consider somealternative purposes for economic systems and some further arguments against markets.

Capitalist systems do a good job of achieving the above ends because:

1.       They provide people with incentives to work and invest in activities that will produce things that others want.

2.       They allow the transmission of information via prices without the need for any direct oversight.

If we are judging economic systems as I propose above then it is impossible to take the extreme pro- and anti- capitalist positions above. There are innumerable variations on capitalist systems and these should all be judged against any reasonable alternative when choosing which economic system (or range of systems) to support. As a liberal political philosopher I obviously think that we need to adopt the best available theory of distributive justice to decide. But what if we just think in terms of economic systems in general?

Given the position I take above, we should not ignore the consequentialist libertarian (think F.A. Hayek or Milton Friedman) arguments for leaving markets to do their work. In one sense the market is a bottom-up one in the way that left-wing anarchists claim of their proposals. However, instead of people voting to come up with a single communal position on everything under capitalism people vote with their money for what will be produced.

However, the libertarian (dis)utopia provides a good warning against following this market logic too far. Capitalism will tend towards inequality and monopoly, something which 19^th century left-wingers thought obvious from observing their societies and which some researchers such as Thomas Piketty and Tony Atkinson have been attempting to prove more recently. Following the money-voting analogy above you have a system of voting where some people are born with the chance to have a lot more votes than others.

There is an overwhelming case for creating a form of capitalism that is regulated to stop people being in a position to take advantage of one another and to ensure that the benefits of the capitalist system are shared among all those in society and not just a fortunate few. Ideally, people would have the opportunity to obtain a reasonably similar amount of money ‘votes’ over what is produced in society and how much of it they get compared with others.

The position I take above is fairly standard, but I wanted to link it to my tax and benefit reform proposals. The aim of my CLIPH-rate tax proposal is to allow capitalism to do its job in the production of goods while interfering with it in the (mal)distribution of goods.

This is done by taxing those who receive large amounts of income or wealth without having to work for it at the highest possible rates and to provide the maximum possible support those who work long hours at low wages, all while maintaining (or replacing) incentives to work that capitalism provides.

The laissez-faire capitalist state is productive because the poor have to work long and hard to avoid destitution while the rich are encouraged to invest and work long and hard by the huge financial incentives offered to them.

My proposal is to link people’s lifetime income to the amount of hours they have been credited for working (or been excused from working). This means that people will all start from a much more equal economic position (since they cannot benefit heavily from gifts early on in their lives but only over time as they gain more hour credits). It also provides a method to bring closer together the incomes of those who do very well and those who do less well in the economy.

Everyone is in the same economic class as all need hour credits in order to gain an income, and there are strong work incentives. Individuals will benefit from earning more money as they do under all capitalistic systems but they also benefit from working longer and gaining more hour credits. The rich and talented cannot hold the rest to ransom by claiming they will withhold their labour or investments if they are not provided with immense riches in return.

While individuals have their prospects drawn closer together the productive system can be perfectly ruthless. Companies will need to be competitive and innovative in order to survive and succeed and those which do not will face bankruptcy or take-over. There is no need to weep for companies which go bankrupt as these are not persons in any moral sense (though we might feel sorry for investors and workers who lose out having been duped by criminal executives).

The idea behind my CLIPH-rate tax and hourly averaging proposals is to take the best of capitalism while mitigating against the worst in capitalism, thereby creating the best available economic system.