Economic Update: 3 Basic Kinds of Socialism

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[S9 E22] 

This week on Economic Update, Professor Wolff discusses the three basic kinds of socialism as anti-capitalist ideologies grow in the U.S. and more people are looking toward socialist alternatives. Prof. Wolff lays out the importance of grasping key differences among the alternative kinds of socialism. The first half of the show is an examination of those differences among (1) the moderate or "democratic" socialism ( a la Scandinavia), (2) the communist kind of socialism (in the USSR and People's Republic of China) and (3) the new socialism focused on democratizing the work place. 

The second half of the show focuses on  how doing better than capitalism will require deciding which of these three kinds of "socialism" (or what combination of them) will be a better economic structure for the masses.

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This transcript has been edited for clarity. 

A recent poll by NBC and the Wall Street Journal showed the 25% of voting Americans believe that socialism is an attractive quality in a candidate when they think about who they're going to vote for. Well that kind of blew my mind after over half a century of endlessly demonizing anything and everything having to do with socialism, that a quarter of the American voting population feels they would be drawn to a candidate who said of himself or herself “I'm a socialist,” tells you something about change in America, beyond what a million other surveys might show. Socialism is on the agenda and so I think it might be useful to become clearer than most of the conversation has been about what socialism means. I wish I could tell you that this is the definition of socialism but if I did such a thing you look elsewhere, because anybody who tells you that this is socialism is either ignorant or misleading you.

Socialism has been around for 150 years. It has spread all over the world, and the end result, inevitably is that different people mean different things by that term. Capitalism is what we call the economy in the United States. It's also what the leaders of Saudi Arabia call their economic system; it's also what the people in Ireland call theirs; and it's also what the people in Nigeria call theirs, therefore it obviously means different things to different people. I want to go over with you the three major ways this idea of socialism is understood, because those ways are relevant today, those ways are fighting it out amongst themselves in terms of the allegiance, feelings and thoughts of people around the world, and they're going to shape our future.

Here's the first one. In this view, socialism has to do with the government. The government is to come in and regulate, control a private capitalist economy; an economy governed by private enterprises, owned by private citizens, who trade with one another in an institution called the market; where they buy and sell their labor, their work, their products, their services. It's a capitalist economy, private enterprise markets, but one in which the government is brought in. Some people mean socialism by that; and they mean particularly, that the government is brought in, in a certain way. Number one, the government is to regulate what the private enterprises do, so that they are less self-serving, profit oriented, and are more socially concerned. That's why minimum wage is something socialists always supported. Many of them want there to be limits on how much prices can be raised by corporations, or how much profits can be earned by the.

The second reason socialists want the government to come in, is to redistribute wealth, because capitalism has this tendency to concentrate wealth in very few hands, and deprive the mass of people. The Socialists want the government to come in, using taxes and using government spending, to do a bit of redistribution; to equalize a system that turns unequal very quickly. For these people, socialism means that the government comes in, regulates and taxes to make what we might call capitalism, because it leaves it, leaves business in the hands of private enterprises and markets, but we could call it capitalism with a humane face, capitalism with a certain welfare focus, welfare of all the people. Here are some examples: Denmark, Norway, Germany, Italy, France.

Those countries are often referred to as socialist; their governments are often governments of socialist parties, and that's what those parties mean. They will have the government regulate and redistribute. That's one concept of socialism around the world. It's pretty close to what Bernie Sanders means in the United States, or what Jeremy Corbyn means in Great Britain.

But, here's the second one. In the second view, this first one doesn't go far enough, because, yes the government comes in, controls things, and redistributes. But it's in a perpetual war, which the government often loses with those very private enterprises who try to get around the government regulations; who try to get around the government taxation. We're all familiar with those examples of companies. For example, Amazon which has earned billions in profits the last two years, and paid absolutely no taxes to the United States government. Indeed, this last year they're getting a refund in excess of a hundred million dollars.

Private corporations do everything in their power to use their profits to use their political power to undo, to evade all of those socialistic regulations and redistributions. This has led some socialists to say you have to go further, it isn't enough to regulate and redistribute. The government should directly take over the enterprises. There shouldn't be private enterprises, because those will always be run for the profit of the private owner. If you want the economy to serve everybody, then the agent of everybody, the government that we all elect, at least in theory, should take over and run the businesses so they behave in the way that's good for everybody, and there isn't this perpetual war between a regulating government and private enterprise. Moreover, we shouldn't allow the market to decide who gets what, because the market always delivers whatever is scarce to the people with the most money. It's an institution for those who are rich, and who stay that way by using the market. These socialists go further. The government should take over enterprises, literally own and operate the factories, stores and offices, and instead of the market deciding who gets what, it should be planned in terms of what we want for the society as a whole.These kinds of socialists after the 1920s took the name communists, to signal that they went further than the other socialists in order to take over, through the government, the apparatus of the economy.

For some people, socialism means the government regulates a private capitalism to make it more humane, to make it less unequal. For other people, socialism means that the government takes over the enterprise, and plans the distribution of output, rather than leaving it to the market. This second group of socialists, not always, but often takes in the communists, to show how they're different from the first group. In those kinds of experiments, the Soviet Union, the People's Republic of China, and for parts of their history, Cuba, Vietnam, and so on, are examples.

Now let's get to the third kind of socialism that's contesting to become the important kind in the world today; to become the kind believed in and followed by most people; to win your interest as well. This approach is in a way an evolution out of the other two. It's a kind of critical evolution because it is advanced by people who see some merits in the first kind of socialism -government regulation - the second kind -government operating enterprises - but argue, we don't think that's enough in one way, and it's too much in the others.

Here's how it's not enough. It's not enough because it doesn't change the workplace, the place where the mass of people do their economic thing, using their brains and muscles to transform objects into the goods and services we all need to live the lives we want to live. It doesn't change it enough. Meanwhile, it does something too much. it gives too much power to the government. A government that has this much power to regulate and redistribute, let alone a government that takes over owning and operating, is a government that runs us the risk that it'll do a lot more than these economic things, using its power for political, or cultural controls of a society, that we have seen, and we don't want again. These kinds of socialists have a new focus. For them, what will really make a difference, what will take us beyond capitalism, and be a better way of organizing society, focuses on the enterprise, the workplace.

Our economic system has its good points and it's bad points, in large part because we don't allow democracy into the workplace. These socialists say capitalism never allowed for that. Capitalism is a hierarchical way of organizing an enterprise. A few people, the owners, the shareholders who have the big blocks of shares, run capitalist enterprises. The mass of us have no control at all. The capitalists run it for them. The way to change society, to make it better, is to have the people who work in an enterprise, all of them, one-person, one-vote, have democratic control of the workplace. This is just as important as having democratic control of the community in which you live in, the neighborhood in which you exist, and so on.

This kind of socialism is micro-focused. It says: let's not talk only about the government and private enterprise. We don't mind private enterprise. The government doesn't have to control everything; there has to be some coordination. But the big issue for us, say these socialists, is the transformation of the workplace, the socialization of the workplace, so it becomes a community run democratically, rather than something run by a small number of people who put their benefits, the so-called bottom-line, as profits for them, rather than a good life for everybody.

Those kinds of socialism are arguing with one another for your attention and your allegiance. To be interested in socialism, doesn't mean you're necessarily the believer of one or the other. Most real socialist societies have mingled the control role/function of government with the ownership function of government. What most experiments have not done is really tried that other kind of socialism, that revolutionizes the workplace, brings democracy to the workplace for the first time, and says that's the way to get beyond the limits of capitalism, its inequalities, its instabilities, its injustices.

The question that's being fought out, is not the question capitalism versus socialism, or at least it's not only that. It's also a struggle going on among these different definitions and meanings of socialism, that are just as important to what's going on, as the so called struggle between capitalism and socialism, that was so crucial in the last hundred years.

How do these different kinds of socialism, these different ideas of what socialism means, affect us? How have they affected us as individuals working and living our lives? Let's start with the first question. We can call it moderate socialism; some people call it democratic socialism. It has a lot of names, but it was that kind we talked about earlier. Namely, you leave enterprises in the hands of the private owners and operators, as you have in capitalism, you leave the market as the basic institution to distribute goods and services, but the government comes in to regulate and to redistribute the wealth, because of the tendencies towards inequality, that capitalism, without government, tends to show us over and over again. On the one hand, people in that kind of a socialist society are usually quite supportive of it. Scandinavian countries in a number of the Western European countries are kind of prime examples of this sort of thing, or, the image of what mr. Bernie Sanders wants for the United States, and he himself refers to, Denmark, and so on, as models at least in part. You get the impression that what this means is that working people have two sources of well-being. They work and earn a wage, or a salary; and they have a very generous supply of public services made available to them by that socialist government.

If you look in Europe's history for example, Scandinavia, or France, or Germany, or Italy, you will see that it was the Socialists who pushed for the National Health Service that they have, the unemployment compensation system that they had, the subsidized transportation, the subsidized public education. These were all ways for the government to come in and make life better for the average person. There's a sense of support for the Socialists in those countries and for the socialism they have, which is one explanation for why it has been so durable over the last century in which it was established.

The problem or this kind of socialism, if you like, and we have to weigh the costs and benefits of all of these, is that it is very insecure. Let me explain. If you leave the ownership and operation of enterprises in the hands of private people, then those private people are in all cases a very small minority of the society. They sit at the top of the economic system; they are the ones who own the bulk of the shares; they are the ones who sit on the board of directors; and they are constantly struggling to use those positions they have, which includes getting the surplus or profits of this society into their hands, to diminish the regulations, to be freer to do things their enterprises lead them to believe will be profitable. They don't want to be hemmed in by regulations, and they don't want their wealth taken from them by a redistributive government. So, they begin to push back; and they have the incentive, but they also have the resources to push back; and so they take away the very socialist benefits that have been captured in earlier periods of their history. This means that this kind of socialism is fundamentally insecure.

Here's a second problem of that kind of socialism redistribution. When governments use taxes to move wealth, at least in part, away from those at the top, and spread that wealth out more evenly across the society, this leads to incredible social tensions. Wherever redistribution happens, that is a result. I use this example to explain: you take your children to the park, and you have two children, and now it's time to get ice cream cones. You get two ice cream cones, and you give them to one child. You quickly realize this isn't fair and you redistribute, you pull one cone away from the one child to give to the other. By doing so, you're creating a level of tension you would never have had to deal with, if you had given each child one cone at the beginning. When we have a government step in to redistribute we invite intense social struggle, intense social animosities amongst us as a people, it's not smart. That kind of socialism is constantly bedeviled by struggles among people over a redistribution you would not have if you distribute it less unequally to begin with.

Let's turn to the second one: the communist alternative. When the government takes over running and owning enterprises, and plans the output, well, what we have is interesting results. First these sorts of economies have been stunningly successful in achieving one of their central goals, which is economic growth. This comes as a shock to Americans, but it has to be repeated, so we are not living in a fantasy world. The two most spectacular stories of economic growth of a society, going from poverty to wealth in record time, is this Union of Soviet Socialist Republics and the People's Republic of China. Wow!

Communist China, communist Russia are examples in which having one central authority, the government, mobilize and focus on economic growth, of ending centuries of policy of poverty, have been extraordinarily successful. Those are their achievements. They can get economic achievement on a scale that other societies, both capitalist and the other kind of socialism, the regulatory kind, have not been able to achieve. That has to be faced; that is a virtue of those systems. But, they too have their problems. let's look at them.

They generally tend to be less unequal then the other kind of socialism usually can be. They have that in their favor. But in those societies, you have arrogated, you have taken an extraordinary amount of economic power, and put in the hands of a government. Putting that amount of power into the hands of the government, runs the risk that such a government will use its economic power to also dominate politically and culturally, as seen in both Russia and China. Remember, if the government takes over the enterprise, it means that instead of the private individuals running the business of the country, it'll be government officials who do it. That is still a small part of your society; it means a minority. In one case, it's private capitalists, in the other case, it's government officials calling all the shots. That is politically dangerous, and we've learned that lesson.

So, in the struggle to ask yourself what life would be like if you were in the first kind of society, a socialism ala Scandinavia, versus the next kind of socialism, the communist variety, as you had it in Russia and China, working people, you and I, would have to ask what will life be like in that kind of arrangement. We don't have mass unemployment; we have government services on a scale we don't in other societies; and we have economic growth. But, we also have the uncertainties, the instabilities, and the concentration of power that might be a problem.

Now, let's ask what the third kind of socialism would mean for us, a socialism that focused on the enterprise in the workplace more than on the overall running of this society. What would it mean for you and I to go to work every day, five days a week, 9:00 to 5:00, and walk into a place where we don't just have a particular assigned function - do this, work there, live with that machine, do this activity - we would also be part of what owns and operates the enterprise. We would have to be a leader, not a choice. Just as it's not a choice for most people to go to work, and do the particular function at the job, you would not have a choice here either, in the sense that a job always means both a particular activity within the division of labor at your workplace, but also, your participation in making all of the basic decisions: what to produce, how to produce, where to produce, and what to do with the profits that you helped to produce, just like every other worker. You'd be part of a community at the workplace; you'd have one vote for each person; decisions would be made democratically: the design of the work, the pace of the work, how you interact with other people on the job. All of those things would be decided collectively, and not imposed by a minority. You'd have to think, is that a better way to work? Is that kind of workplace something that has attracted people for centuries to co-ops, to worker co-ops, to collective forms of labor? What does it mean in your own life?

I think the idea of this third socialism is to achieve something in your daily life that the other two socialisms never did; that when the first kind had the government regulation, or the second kind, the communist kind had the government takeover, the transformation of the workplace never happened. You were still the worker, who comes and does what he or she is told for the eight hours or more, and then goes home. This third kind of socialism is a whole new world, that's why it's probably the one you will be hearing most about in the years ahead, because it is new, and it doesn't have quite the problems that the other ones do.
But, here are some problems that the new one will have too. How do these worker co-ops, these communities, in each factory, in each store, in each office, interact with one another? Will they use markets to buy and sell from one another? Will they employ some kind of collective planning of how they interact with one another? It will be a new world this socialism, because it is composed of people who are really in charge of their economic lives in a way that was never true under capitalism, and not true under other forms of socialism either, because they were focused on running the system on the overall, and not on the particular in each workplace.

We’ll have to discover in this new socialism, if and when it happens, how we interact with one another, when all the details of the work are collectively decided; when everybody is a boss as well as a bossed person; when we rotate whatever particular functions have to be in leadership, so that we don't get one group that are leaders all the time, and everybody else who isn't. All of those things will change. We will have to learn new ways of interacting with one another. But, if the idea of socialism really is, as it was once said it would be, to go beyond capitalism, to do better than capitalism, well then, that third one is by far the most transformative for people's lives of the three that are contesting. But in any case, here's the bottom line: the next time you hear somebody talk about socialism, pro or con, please be aware, and make sure you enter into that conversation knowing that there are different kinds, knowing that they are very important in their different implications for what it means to be a human being, and to be an active member of a society. Socialism is on the agenda, but more accurately socialisms are on the agenda. Being aware of them and dealing with them puts you one step ahead of those who think there's one universal kind. That hasn't been for decades and there isn't one now.

Transcript by Maria C. 

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