Pragmatism and dogmatism in economy – capitalism versus socialism

As of 2020 in the political discourse on social media there seems to be only two paths: “socialist” or “capitalist”. In reality, the true choice lies between pragmatism and dogmatism, but the line of division between these two is not exactly where most people expect it to be.

What can we learn from rise and fall of USSR?

There's little doubt that USSR was “socialist”, as it not only had “Socialist” in its name, but also, and most importantly, pursued policies of socialist thinkers, specifically #Marx, #Engels and #Lenin. In their socialist economy private for-profit trade was replaced by a transitional solution to #communism, still involving prices and money, but with state owned means of productions and central planning. For-profit private trade was actually a crime (of “speculation”), punished under article 154 of criminal code of USSR.

As result, #USSR experienced a fast growth, shortage of goods, strong industrial production, flourishing black market, free high education and public health, stagnation and secret loans from the “imperialist” powers it condemned in official propaganda.

An important checkpoint was the New Economic Policy of 1922, when Lenin decided to relax the ideological position of the Soviet state and allowed for-profit enterprises, specifically with the objective of stimulating economy.

That certainly was a pragmatic decision and it resulted in accelerated growth of agricultural and industrial production.

Then however #Stalin decided it was too much of a “compromise” and reintroduced harsh collectivisation and nationalisation in all sectors. This step marked USSR's return from pragmatism back to dogmatism.

Was USSR policies dogmatic? Certainly so, placing all private trade and production in criminal code was dogmatic. Was it sustainable? At the time of its dissolution in 1991 USSR owed over $70m to the Paris Club, and was unable to pay not only installments, but even salaries and pensions internally.

Capitalism... or what exactly?

While Marxism-Leninism was a very detailed, even prescriptive ideology that described both social and economic relations at every level of society, most definitions of “#capitalism” are based on presence of a few typical features: private ownership of means of production and for-profit trade.

There's however nothing in “capitalism” that precludes operations of other forms of economic activity: cooperative, state-owned, non-profit enterprises are all widespread and coexist along with private for-profit ones. Pragmatic “whatever works” approach seems to be at the very core of capitalist economies.

As result we have extremely diverse world of economies, that are very different in their social and political organisation, but all share the common features of capitalist economy: Russia, USA, France, China, India and practically all others.

Wait... communist #China? Yes, China is an interesting case because in spite of the country being run by Communist Party of China, it's hard to argue that a country with 60% of GDP produced in small and medium private for-profit enterprises is indeed “communist”. It just defies all postulates of communism, at least in the economic sphere.**

As result of this diversity, when talking about “capitalism” we need to be quite precise which one we mean: French, Russian, some other? Because all of these systems differ dramatically in their policies on income and inheritance tax, social welfare, social housing, public healthcare and dozens of other policies.

A frequent counter-argument here is that Western Europe was forced to introduce socialist elements as result of Soviet Union inspiring workers in the West. In the first place, it's not quite true as social policies predate Soviet revolution by a century.*** But even if it was the case, so what? These policies were introduced specifically because of the “whatever works” attitude and lack of any specific ideological rigidity as seen in USSR.

Dogmatism in capitalist economies

Make no mistake, capitalist economy can drift towards dogmatism just as well: US political discourse is the best example of it.

When people start talking about “#socialism” or “#communism” in response to any suggestion that barely mentions the word “public” (as in “public healthcare”), you know that they have abandoned the pragmatic approach and turned into ideology.

Now, if it's done against outcomes of process efficiency analysis (“ok, at this point having public healthcare might be actually cheaper”), then we are facing precisely the same bias that led USSR to ban private trade against all the experience that suggested otherwise.

This particular bias has its own name and it's called “#neoliberalism”.

Footnotes