Tuesday, 16 June 2015

Socialism Is Fine If You Keep It Away From Economic Policy

I often find myself having to write about where I think socialists are going wrong, but I've also spoken in the past about the relationship and the distinction between the socialist in the socio-personal economy and the socialist in the market economy, which does explain why many socialists think as they do, but also does at least attempt to find as much common ground as possible, and acknowledge the merit in the socialist aspiration. The main thing socialists are getting wrong is that in their attraction to the economic left many young people are confusing the socio-personal economy (our social behaviour) and the market economy (our financial behaviour) by lumping them together in a way that misses the important distinction.

When it comes to the evolutionary socialist in us - the one that assents to kinship, inter-personal bonds and shared-interest groups, the predominant force is the socio-personal economy, explaining our natural assent towards sharing, being generous and kind, and mutually assisting one another. This legacy has primed us for millennia, long before any such thing as a market economy of trade came into place. Consequently, on grounds of adhering to our socio-personal make-up, we are justifiably faithful to a socialistic framework in our ways of thinking. In other words, in terms of our social behaviour, most of us are socialist to a great degree.

That is not the same, though, as saying that because of our mindful social behaviour we can justify socialism on market economy grounds. As the history of hard left economics taking root in China and Russia shows, and as is still being shown today several EU countries, the market economy operates under a different arrangement to the socio-personal.

In the socio-personal world our affinity with friends and family is based on bonds of attachment, either blood-connection (relatives) or like-mindedness (beloveds, friends, and social groups). But the market economy extends way beyond these affinity rings, where success isn't just about familial bonds or connecting with like-minded people, it is about connecting with the rest of society too - the vast majority of people who are not like us. I may have little in common with the Indian chef who cooks my chicken biryani, or the garage mechanic who fixes my car, or the vet who cares for my auntie's cat, but what connects us is our ability to specialise in a market economy where goods and services create value, and where diversity augments that value through multiplicity.

The qualities of the affinity rings related to the socio-personal are not the sort of qualities that can be artificially engendered from on high in a top-down organisational hierarchy, which is why socialism in the market economy is futile as well as being empirically imprudent. The economy is too complex, and people's tastes and incentives are too multifarious to be governed from the top down. What's happening with the economic left is that they are trying to rivet on to their (our) socio-personal socialism a justifiable market socialism, which is a bit like trying to justify sleeping at work on the grounds that we sleep at night in our own homes.

There is a natural limit to manageable social groups, beyond which socio-personal factors like kindness, generosity and reciprocity start to peter out. That's just another way of saying that the ties you have with strangers are weaker than those with people close to you. You've probably heard of the Dunbar number - its Robin Dunbar's suggested cognitive limit to the number of people with whom folk can maintain stable social relationships. The Dunbar number maxes out at about 150, after which maintenance of that social circle becomes prohibitive. Socio-personal socialism remains at its strongest in those Dunbar groups, but becomes diluted as we add more and more people to the mix.

If there's one thing that causes a chasm between economic socialists and libertarians it's that economic socialists have never made the proper distinction between the socio-personal economy and the market economy. It is through knowing that distinction that one can then realise that an increased number of participants increases the range of goods and services available, that then increases the value created in society by increasing the number of customers willing to partake in the mutually beneficial exchanges. It is through the socio-personal economy that value is created amongst friends and loved ones, but it is through the free market economy that value is created in the wider society.

In that sense, trade is a bit like doing good things for strangers. To succeed in the market economy requires innovation and ingenuity, as well as good character and reputation. Just as in biology copulation mixes up combinations of genes so that heritable survival traits occur more frequently for natural selection to act on the genotype, similarly the market economy produces survivability in business and commerce, where less-good suppliers are out-competed by better ones. A socialism that extended beyond the socio-personal into the market economy would be bound to retard innovation and progress, just as trying to organise biological organisms from on high would inevitably be less successful than the mechanism of natural selection already working in nature.

The upshot is, socialism only works successfully in small groups, and the market economy is not a small group - ergo, socialism doesn't work in a market economy. The benefit of the market economy is that trading with strangers transcends the limitations of the Dunbar-esque socio-personal economy, bringing about huge mutual benefits, not just for both buyer and seller, but also to everyone in society too. To try to arrange such an economy in an attempt to mirror the socio-personal economy, as socialists try to do, is a bit like being in a field full of 30 million bees trying to make them all fly clockwise. 

* Photo courtesy of invyn.com