Lack of innovation, no credible response: Reasons why socialism failed

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January 8, 2020 2:16 AM

Capitalism has marginalised socialism by its capacity for innovation. Socialism as an ideology has to master the new forces of capitalism to fashion a credible response, or perish

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In the latest election last December, the British Labour Party put forward the most radical manifesto with nationalisation of public utilities, strengthening trade union rights, generous increase in public expenditure and steep progressive taxation. The Labour leader Jeremy Corbyn was the most left-wing leader of the party since 1983. Even so, the party scored the lowest number of seats since 1935, losing 60 seats, and the Conservative Party, which had just a single theme manifesto—getting Brexit done—won a majority of sixty seats.
The Labour Party has now suffered four defeats since 2010. It was in power between 1997 to 2010; but those years of Tony Blair government are not thought to be socialist enough. Before then, the party was out of power for eighteen years. In the 64 years since 1945, it has been in power for 30 years, but even in those, it enjoyed a comfortable majority in only 22 years.

It is not just the UK. In France, the Socialist Party didn’t make it to the final round of the presidential elections, and is now in a minority in third place. In Italy, the Socialist Party is in a precarious alliance with a populist party, and in Germany, though the party is in a coalition, it has steadily lost voter support.

Socialism was meant to improve upon, if not, replace capitalism. In the years since the Great Crash of 2008, socialist parties of Europe lost support rather than gaining it. Populist or just conservative, right-wing parties have gained ground round the world. In Latin America, Evo Morales lost in Bolivia though he tried to manipulate the result. In Brazil, the left lost to a right wing populist party. Only in Mexico can one say that there is a socialist government. Maduro in Venezuela has wrecked the economy, though he is still in power.

Why have socialist parties lost? In the century since 1917, and the Bolshevik Revolution, the contest was between the Leninist brand of socialism—communism and the democratic socialist parties, or in what are now long forgotten labels, the third international versus the second international. Except China, communism has lost support and has embraced capitalism with enthusiasm relative to its first-forty years. China has embraced many capitalist features and benefited.

It is difficult to believe now how strong the communist movement was in India during its first-fifty years after independence. Indian National Congress adopted socialist pattern of society as its ideal goal, and Indira Gandhi put the word socialist in the Preamble during her years of dictatorship. It is so vacuous, that no one even discusses it as they do the other adjective ‘secular’, which also was added by her in the Preamble. What passes as communism is naxalism, which is involved with tribal people engaged in a pre-capitalist mode of production in a backward part of the economy.

Why did socialism just become obsolete? The answer is that the varieties of socialism—Leninist or democratic, were built around a model of capitalism with manufacturing dominant with industrial workers forming the rank and file of the party. Capitalism in the rich countries began de-industrialising way back in the 1970’s after the oil crisis. Now the dominant activity is services rather than manufacturing. Of the four biggest corporations listed on the Stock Exchange—Amazon, Facebook, Apple and Google, not one is in manufacturing. Most low- and medium-tech manufacturing has moved to East and South-East Asia, where governments are in symbiotic relation with domestic capitalists—Japan, South Korea, Malaysia, Singapore.

While capitalism has innovated and engaged in what Joseph Schumpeter called ‘creative destruction’, the political ideology of socialism is still stuck in the 1950’s. Issues of public versus private ownership. Socialist ideology is still ‘statist’. The doctrine is that the political movement will win power on behalf of the working masses and take over privately-owned industries.

Capitalism has in the meantime increased incomes despite cycles and crashes. Though there is income inequality, absolute incomes have gone up. The number of people living at under $1 has significantly declined thanks to ‘capitalist’ industrialisation in Asia, especially China. Now, poverty is reckoned in terms of $2 per day. So while the concern is of the gini coefficient, the rise in absolute incomes over the 75 years since 1945 across the world, has been unprecedented.

No doubt one can improve the quality of life in many ways. Climate change, health, water and other scarce resource preservation, lower inequality are all respectable ideals. But, no one believes you need a post capitalist economy for that. Capitalism has marginalised socialism by its capacity for innovation. Socialism as an ideology has to master the new forces of capitalism to fashion a credible response, or perish.

The Author is a prominent economist and labour peer. Views are personal.

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