Democratic socialism has been offered as a solution. A scientific study of democratic socialism is, therefore, necessary. Fortunately for us, the experience of countries which have experimented with it is available.
Socialism has no commonly accepted definition. There are so many definitions that C. E. M. Joad observed that socialism was like a hat which had lost its shape because too many people had worn it. But, for a scientific economic analysis, socialism can be divided into two parts: its objective, and methods employed to achieve that objective. The objective: “a society of the free and the equal.” The methodology: state ownership of the means of production, distribution and exchange, by nationalisation of existing enterprises, and through the establishment of a Public Sector (or state enterprise); and centralised comprehensive planning of all economic activities under the auspices of the state. Democratic socialism uses this methodology through parliamentary means and relies on evolutionary changes. Communism, also described as “scientific socialism,” relies on the dictatorship of one party and revolutionary changes.
Several European countries like Great Britain and Sweden have experimented with democratic socialism, while Soviet Russia, Poland, Yugoslavia, Communist China, etc. have experimented with Communism or “scientific socialism.” Their experience is worth close study because the universally acceptable objective of human welfare itself is considerably affected by the socialist methodology.
The swing today is away from both state ownership and centralised comprehensive planning in socialist and Communist countries. A well-known British economist, Graham Hutton, has commented: “Private property, private enterprise and private enterprisers provide a democracy’s dynamic. Take these away and you take away both democracy and its dynamic, as we have long seen in communist countries. This is a dilemma in which Europe’s Social-Democrats called by Communists ‘reformist socialists’ today, but formerly termed ‘capitalist lackeys’ have been landed with what used to be called “socialism.” The changing ideas of European socialists are expressed in a remarkable book entitled : “Socialism in the New Society”. The author is Mr. Douglas Jay, a leading member of the British Labour Party and a close associate of the former party leader, the late Mr. Hugh Gaitskell. Having observed the effects of socialist methods, Mr. Jay concludes that “absence of private property is also a denial of freedom.” Dismissing the socialist concept of “perfect equality” as impractical, he pleads for “not equal shares, but fair shares; not equality, but social justice”.
While on the one hand state ownership and nationalisation thus stand discredited among socialists, on the other, communist countries, notably Soviet Russia, are progressively finding that the socialist method of centralised, comprehensive planning does not lead to rapid economic growth. To appreciate this changed thinking, one must understand what is meant by centralised comprehensive planning. Essentially it means (a) mobilisation of all resources by the state and their use on the basis of a comprehensive plan drawn up by a planning board or commission according to its ideas of priority; (b) the strategy of concentrating on heavy industries at the cost of agriculture and consumer goods industries; (c) management of industries through state enterprises and of farming through state farms or collectives also known as joint co-operative farms;(d) and, finally, administration of all economic activities by the Government through a framework of extensive and intricate controls at every stage of production, distribution and exchange. This form of economic activity ignores some basic laws of economics such as incentives as a means of greater production, consumer preference as a source of investment decision and rational allocation of resources in the economy, and the cost factor in production. But these factors are slowly finding their entry into the Soviet economic system.
Just as the economic waste of centralised planning and the price of ignoring incentives are being realised, the failure on the agricultural front and in the production of consumer goods is also making a dent on doctrinaire thinking in the Soviet Union. The emphasis has shifted from heavy industries to agriculture. Having been put to the necessity of importing food grains from free enterprise countries like Canada, “the Central Committee of the Party is presently planning to carry out such measures which will make it possible to lay a stable foundation for our country to obtain big guaranteed harvests, especially of grain.” Years of experimentation with joint co-operative or collective farming have had disastrous results on production of food grains. Once again, principles of free enterprise have been vindicated even in this sphere. A survey by the U.N. Food and Agricultural Organisation, in October 1962, revealed that private small holdings accounted for about a third of Soviet agricultural output. It said that the family plot of farmers of every collective or state farm represented not only a “compromise between the persistent individualism of the peasant and the communist doctrine” but also met current Soviet economic needs.
With growing realisation of such inadequacies under centralised planning, Russians are introducing free enterprise features in their economy. For instance, trade marks and advertising have been introduced. One Soviet economist says: “The trademark makes it possible for the consumer to select the goods which he likes. This forces other firms to improve the quality of their own product in harmony with the demands of the consumer. Thus the trademark promotes the drive for raising the quality of production.” Dr. Marshall Goldman, of Harvard’s Russian Centre, has disclosed that in 1963 Soviet enterprises would spend about 40 million dollars (about Rs. 20 crores) on advertising. There were already over 30 advertising agencies as a link between the producer and the consumer.
Thus free enterprise features are not only changing socialist economic institutions in Russia, but also finding vigorous proponents there. It is amusing to read the advice offered by Soviet economists to Communist China. Recent Soviet press articles have chided Chinese leaders for ignoring “objective economic laws.” A Soviet economist is quoted as saying that Chinese leaders had ignored “all laws of economic development” and had sought to replace “planning and cost accounting” by “volitional decisions.” These policies and the setting up of communes, he declared, had led to an “abrupt drop in the living standard” of the Chinese people.
This essay is part of a series from the Indian Liberals archive, a project of the Centre for Civil Society. The following is an excerpt from the Indian Libertarian Journal, titled: “Make English The Lingua Franca of India,” published on 15 January 1964. The original version can be accessed here.