Abstract
We have defined socialism as an institutionalized policy of redistribution of property titles. More precisely, it is a transfer of property titles from people who have actually put scarce means to some use or who have acquired them contractually from persons who have done so previously onto persons who have neither done anything with the things in question nor acquired them contractually. For a highly unrealistic world—the Garden of Eden—I then pointed out the socio-economic consequences of such a system of assigning property rights were then pointed out: a reduction of investment in human capital and increased incentives for the evolution of nonproductive personality types.
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Notes
On Marxism and its development cf. L. Kolakowski, Main Currents of Marxism, 3 vols., Oxford, 1978; W. Leonhard, Sovietideologie. Die politischen Lehren, Frankfurt/M., 1963.
When one speaks of socialism Russian style it is evident that one abstracts from the multitude of concrete data which characterize any social system and with respect to which societies may differ. Russian style socialism is what has been termed by M. Weber an “ideal type.” It “is arrived at through the one-sided intensification of one or several aspects and through integration into an immanently consistent conceptual representation of a multiplicity of scattered and discrete individual phenomena” (M. Weber, Gesammelte Aufsaetze zur Wissenschaftslehre, Tuebingen, 1922, p. 191). But to stress the abstract character of the concept by no means implies any deficiency in it. On the contrary, it is the very purpose of constructing ideal types to bring out those features which the acting individuals themselves regard as constituting relevant resemblances or differences in meaning, and to disregard those which they themselves consider to be of little or no importance in understanding either one’s own or another person’s actions. More specifically, describing Russian style socialism on the level of abstraction chosen here and developing a typology of various forms of socialism later on should be understood as the attempt to reconstruct those conceptual distinctions which people use to attach themselves ideologically to various political parties or social movements, hence enabling an understanding of the ideological forces that in fact shape present-day societies. On ideal types as prerequisites for historico-sociological research cf. L. v. Mises, Epistemological Problems of Economics, New York, 1981, esp. pp.75ff; the same, Human Action, Chicago, 1966, esp. pp.59ff. On the methodology of “meaning reconstruction” of empirical social research cf. H. H. Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung, Opladen, 1983, chapter 3, esp. pp.33ff.
For the following cf. in particular L. v. Mises, Socialism, Indianapolis, 1981.
Of course, this complete outlawing of private investment, as stated under (2) only applies strictly to a fully socialized economy. If next to a socialized part of the economy a private part also exists, then private investment would only become curtailed and hampered to the degree to which the economy is socialized.
The related, crucial difference between capitalism and socialism is that under the former, the voluntary actions of consumers ultimately determine the structure and process of production, whereas it is the producer-caretakers who do so under socialism. Cf. in particular Chapter 9 below.
Writes Mises, “The essential mark of socialism is that one will alone acts. It is immaterial whose will it is. The director may be anointed king or a dictator, ruling by virtue of his charisma, he may be a Fuehrer or a board of Fuehrers appointed by the vote of the people. The main thing is that the employment of all factors of production is directed by one agency only” (L. v. Mises, Human Action, Chicago, 1966, p.695).
Cf. L. v. Mises, Socialism, Indianapolis, 1981, esp. part 2; also Human Action, Chicago, 1966, esp. Chapters 25, 26.
On the following cf. also F. A. Hayek (ed.), Collectivist Economic Planning, London, 1935; Journal of Libertarian Studies 5, 1, 1981 (An Economic Critique of Socialism).
On the free market as the necessary prerequisite for economic calculation and rational resource allocation cf. also Chapters 9, 10 below.
Incidentally, this proves that a socialized economy will be even less productive than a slave economy. In a slave economy, which of course also suffers from a relatively lower incentive to work on the part of the slaves, the slaveholder, who can sell the slave and capture his market value privately, would not have a comparable interest in extracting from his slave an amount of work which reduces the slave’s value below the value of his marginal product. For a caretaker of labor no such disincentive exists. Cf. also G. Reisman, Government Against the Economy, New York, 1979.
Cf. H. H. Hoppe, Eigentum, Anarchie und Staat, Opladen, 1987, esp. Chapter 5, 3.2.
To be sure, Russia was a poor country to begin with, with little accumulated capital to be drawn on and consumed in an “emergency.” On the socio-economic history of Soviet Russia cf. B. Brutzkus, Economic Planning in Soviet Russia, London, 1935; also, e.g., A. Nove, Economic History of the USSR, Harmondsworth, 1969; also S. Wellisz, The Economies of the Soviet Bloc, New York, 1964.
On the economic system of the Soviet-dominated East bloc cf. T. Rakowska-Harmstone (ed)., Communism in Eastern Europe, Bloomington, 1984; H. H. Hohmann, M. Kaser, and K. Thalheim (eds.), The New Economic Systems of Eastern Europe, London, 1975; C.M. Cipolla (ed.), Economic History of Europe. Contemporary Economies, vol. 2, Glasgow, 1976.
On everyday life in Russia cf., e.g., H. Smith, The Russians, New York, 1983; D.K. Willis, Klass. How Russians Really Live, New York, 1985; S. Pejovich, Life in the Soviet Union, Dallas, 1979; M. Miller, Rise of the Russian Consumer, London, 1965.
Cf. L. Erhard, the initiator and major political exponent of post-war economic policy, Prosperity through Competition, New York, 1958; and The Economics of Success, London, 1968. For theoreticians of the German “soziale Marktwirtschaft” cf. W. Eucken, Grundsaetze der Wirtschaftspolitik, Hamburg, 1967; W. Roepke, A Humane Economy, Chicago, 1960; the same, Economics of a Free Society, Chicago, 1963. For a critique of the West German economic policy as insufficiently capitalist and ridden with inconsistencies which would lead to increasingly socialist interventions in the course of time cf. the prophetic observations by L. v. Mises, Human Action, Chicago, 1966, p.723.
For comparative studies on the two Germanys cf. E. Jesse (ed.), BRD und DDR, Berlin, 1982; H. v. Hamel (ed.), BRD-DDR. Die Wirtschaftssysteme, Muenchen, 1983; also K. Thalheim, Die wirtschaftliche Entwicklung der beiden Staaten in Deutschland, Opladen, 1978. An honest but naive empirically minded comparative study which illustrates that at best, economic statistics has very little to do with reality as perceived by acting persons is P. R. Gregory and R.C. Stuart, Comparative Economic Systems, Boston, 1985, Chapter 13 (East and West Germany). For a valuable critique of economic statistics cf. O. Morgenstern, National Income Statistics: A Critique of Macroeconomic Aggregation, San Francisco, 1979. For an even more fundamental criticism cf. L. v. Mises, Theory of Money and Credit, Irvington, 1971, part II, Chapter 5.
On life in East Germany cf. E. Windmoeller and T. Hoepker, Leben in der DDR, Hamburg, 1976.
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Hoppe, HH. (1989). Socialism Russian Style. In: A Theory of Socialism and Capitalism. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7849-3_3
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