Bryan Caplan  

Socialism Was Born Bad: The Case of Oskar Lange

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Oskar Lange is arguably the most famous of the market socialists.  His fans often see him as a great spokesman for "socialism with a human face."  In the early 1990s, I attended a talk where Ken Arrow lauded Lange as a great friend of freedom.

While I always scoffed at this praise, I was still taken aback when I happened to read Lange's famous "On the Economic Theory of Socialism" (Review of Economic Studies, 1937).  His fans notwithstanding, Lange's views strikingly confirm my view that the socialist movement was "born bad."  Though Lange was an exceptionally economically literate socialist, his clarity of thought led him directly to a totalitarian vision that he gladly embraced.

You need not take my word for it.  Just read Lange's case against socialist gradualism - and remember that this is the era of Stalin.  [All italics original].
The opinion is almost generally accepted that the process of socialisation must be as gradual as possible in order to avoid grave economic disturbance. Not only right-wing socialists but also left-wing socialists and communists' hold this theory of economic gradualism. While the latter two regard a speedy socialisation as necessary on grounds of political strategy, they nevertheless usually admit that, as far as economic considerations alone go, a gradual socialisation is decidedly preferable. Unfortunately, the economist cannot share this theory of economic gradualism. An economic system based on private enterprise and private property of the means of production can work only as long as the security of private property and of income derived from property and from enterprise is maintained. The very existence of a government bent on introducing socialism is a constant threat to this security. Therefore, the capitalist economy cannot function under a socialist government unless the government is socialist in name only. If the socialist government socialises the coal mines to-day and declares that the textile industry is going to be socialised after five years, we can be quite certain that the textile industry will be ruined before it will be socialised. For the owners threatened with expropriation have no inducement to make the necessary investments and improvements and to manage them efficiently. And no government supervision or administrative measures can cope effectively with the passive resistance and sabotage of the owners and managers.
Why not compensate owners to forestall these problems?
[T]o be fully effective the compensation would have to be so high as to cover the full value of the objects expropriated. The capital value of these objects having been maintained on an artificially high level by monopolistic and restrictionist practices, the compensation would have to be far in excess of the value of these objects in a socialist economy (and also under free competition in capitalism). This would impose on the socialist government a financial burden which would make any further advance in the socialisation programme almost impossible. Therefore, a comprehensive socialisation programme can scarcely be achieved by gradual steps. A socialist government really intent upon socialism has to decide to carry out its socialisation programme at one stroke, or to give it up altogether. The very coming into power of such a government must cause a financial panic and economic collapse. Therefore, the socialist government must either guarantee the immunity of private property and private enterprise in order to enable the capitalist economy to function normally, in doing which it gives up its socialist aims, or it must go through resolutely with its socialisation programme at maximum speed. Any hesitation, any vacillation and indecision provokes the inevitable economic catastrophe. Socialism is not an economic policy for the timid.
Macabre words to write four years after Stalin's decidedly "untimid" collectivization program.  Is it possible that Lange was a concern troll trying to destroy revolutionary socialism from within?  Highly unlikely.  His conclusion, though mannerly, is vintage romantic socialism in the spirit of Lenin - or even Sorel.
Marshall placed caution among the chief qualities an economist should have. Speaking of the rights of property he observed: " It is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life." But he did not fail to indicate that the great founders of modern economics were strong not only in caution but also in courage. Caution is the great virtue of the economist who is concerned with minor improvements in the existing economic system. The delicate mechanism of supply and demand may be damaged and the initiative and efficiency of business men may be undermined by an improvident step. But the economist who is called to advise a socialist government faces a different task, and the qualities needed for this task are different, too. For there exists only one economic policy which he can commend to a socialist government as likely to lead to success. This is a policy of revolutionary courage.
At least Lenin was honest enough to call his policy revolutionary "terror."  But it's just two perspectives on the same policies.  For Lange - like the other founding fathers of socialism - courage is the courage to practice terror.

COMMENTS (25 to date)
Tom West writes:

Sounds pretty standard for any truly revolutionary movement - be it Communist, Socialist, or dare I say, Libertarian.

Of course, I'm not in favor of any revolution, just evolution. But I do know you don't get to any of those three extremes in baby steps.

Jim Caton writes:

Stalin admitted that he used terror, but the question for the Fabians was "does socialism work?" There was a strong belief that it did. This was not only from Lange in the 1930s. The belief lived on when the Chinese, under Mao, implemented the Great Leap Forward (if it was a "leap", that society fell on its face upon landing). Even in the 1950/60s the Chinese, or at least certain Chinese leaders, believed that it would work because it had supposedly worked in Russia. Given this narrative, I think your treatment of Lange is unfair, even if he was a naive Fabian.

Jim Caton writes:

On my above comment, upon rereading, I withdraw that he was a naive Fabian. He was simply naive.

Randy writes:


"Property" is neither Law nor constant. It is a set of rules created by a political class to define and justify its right to exploit a working class.

The problem with "Socialism" is not that it seeks a redefinition of the rules of property, but that it is necessarily organized and operated by a political class.

Pajser writes:

As far as I see it, Lange only advocates fast instead of gradual nationalization of the means of production. The most you have is that Lange should know that fast nationalization is 'more likely' to 'result' in terror than slow nationalization. All that has little to do with socialism. Fast introduction of any politics, including capitalism (Reign of Terror 1793) or open borders (recent riots in France) is 'more likely' to 'result' in terror or violence.

Tracy W writes:

The quoted Lange parts don't strike me as that bad, in and of themselves. He's not advocating terror like in the Russian Revolution, of killing objectors, and banning freedom of speech. Just that there are a bunch of reforms that all need to be done very quickly if they are to work.

Although I find myself deeply doubtful about his arguments that they must be done all at once, or inevitable economic catastrophe will follow. The UK and NZ, for examples, stumbled along with some nationalised industries along with private sector activities. And didn't the USSR only nationalise again after the NEP in stages?

Glen Smith writes:

One very "good" way to move towards socialism is via so-called privitization.

R Richard Schweitzer writes:

@ Randy, who wrote:

"Property" is neither Law nor constant. It is a set of rules created by a political class to define and justify its right to exploit a working class.

The problem with "Socialism" is not that it seeks a redefinition of the rules of property, but that it is necessarily organized and operated by a political class.

Here is a suggestion to consider:

The term "Property" is a label applied to a concept of a relationship between humans and material things.

Creating, obtaining and having that relationship, in its various forms, is what comprises the "Right" to "Property."

That "Right," like all rights of any humans is sustained by obligations, in this case constraints on the conduct of others not to interfere with the relationship.

The idea that "government" by providing "security" is the source of that relationship is not logically consistent with the fact (supported by historic examples) that individuals have successfully and continually defended that relationship with both violence and cunning from the beginning of recorded time, and as evidenced in the information from archaeology and anthropology.

Most "Socialist" oriented thinkers and Political Positivists (et simuli) conclude that a social order may be benefited by limitations or constraints on the availability of, or open access to, that form of relationship by individual members of society; but, instead, restricted to determinations by a select, designated group of persons, assigned in accordance with particular "qualifications" according to the ideology desired by those thinkers.

Recent historical experience with the "qualifications" (power of violence, e.g.) point to the difficulties which Oskar Lange chose to ignore in his associations during the latter part of his life. Among Socialist oriented thinkers that is not a unique expression of the attitude toward human individuality and the value of individual life.

@ Pasjer:

Capitalism is not a political system. It is a resultant condition from the forms of relationships of individuals in the manner of conducting exchanges in a society in which there are divisions of labor, methods of production and preferences or needs of consumption.

Mercantile capitalism was a condition of the French social order long before 1793. The burdens imposed upon it, and constrained it, contributed to the actions that led to the events of 1793.

Randy writes:

@ R Richard Schweitzer,

Re; "The term "Property" is a label applied to a concept of a relationship between humans and material things."

I agree that it is a relationship. But I think it a power relationship between human beings rather than a relationship between human beings and material things.

Re; "Creating, obtaining and having that relationship, in its various forms, is what comprises the "Right" to "Property.""

I think that a pure definition of "Property" would include the results of creation only, as resources can be obtained, and relationships resulting in access to resources can be established, by political means (force, manipulation, and traditions which rely on force and manipulation). Indeed, I believe that access to resources (and the resulting claim of right by "Property") is far more commonly a case of political exercise than an act of creation.

Re; "The idea that "government" by providing "security" is the source of that relationship is not logically consistent..."

I think that political behavior plays a very large part in a given distribution of what many consider to be "Property", so I am willing to listen to those who believe that political behavior can or should also be used to modify the rules of property and or the distribution. Which is not to say that I am a fan of political behavior - I happen to believe that political behavior is THE original sin. I simply recognize that political behavior is a given, and that it must therefore be incorporated in an understanding of "Property".

R Richard Schweitzer writes:

@ Randy

"I happen to believe that political behavior is THE original sin."

If so, the dogma of Immaculate Conception can be widely extended.

as posited:

Creating, obtaining and having that relationship, in its various forms, is what comprises the "Right" to "Property."

If we are discussing the creation, obtaining and having of a "relation" (not the object of the relation)as comprising a "Right" rather than the **means** of that creation, obtaining or having, then the definition of the "Right" stands.

Randy writes:

@ R Richard Schweitzer,

I don't think the idea of "original sin" has anything to do with conception. It is, rather, about the possibility of an innate immorality. The reason I use the term, and apply it to the political class, is because the natural and basic function of the human mind is to exploit its environment, and it is as ready to exploit other human beings as any other resource. The members of the political class are those who specialize in the arts of exploiting human beings.

As for definitions, I find the very idea of "definition" intriguing. Who gets to define? Who is required to memorize and accept the definitions? To what end? And, clearly, many definitions are meant to deceive or obscure. We live in a world as chock full of legends, myths, and propaganda as any that has ever existed - and most of this is deliberate. So finding the truth absolutely requires a reexamination of the definitions.

Pajser writes:

Randy: "the natural and basic function of the human mind is to exploit its environment, and it is as ready to exploit other human beings as any other resource. "

Great. But "political class" seems wrong target - except if you use some private definition. Obama is the most successful member of the politician class in the world but with income of some $500 000/year he is not very successful exploiter. Bill Gates looks as more successful exploiter to me.

I think that root of exploitation is in individual attempt to pay as little as he can, instead of assessing fair distribution directly. If John, apple picker from US earns $10/hour and he pays $1/hour to Pablo, banana picker in Ecuador, John exploits Pablo. And what if market price of Ecuador picker Pablo is $1? It doesn't excuse John, he is not obliged to pay $1, he can pay $10 as well. He doesn't because he is selfish.

Randy writes:

@ Pajser,

Re; "But "political class" seems wrong target..."

Its all about exploitation. Managers exploit workers directly. Capitalists exploit workers indirectly by hiring managers. Politicians exploit workers directly via regulation, income and payroll taxes, mandates, conscription, etc., and they exploit workers indirectly via regulation and taxation of managers and capitalists.

I use the term "political class" to summarize it all because it is the political system that the exploiters have in common, and that they together have created. Don't be fooled by the fact that political factions fight amongst themselves for the most lucrative positions within the organization, or that they all claim to be somehow "representing" workers. The truth is that the basic function of any political system, past or present, is to exploit workers.

All that said, I am not saying that there is a readily apparent better way. What I will say is that the current system is unfair - and that it is deliberately unfair. I will also say that there is no possibility of a "political" solution to the unfairness, because political systems have always been, and always will be the property of the exploiters.

Pajser writes:


I see. It is partly semantic misunderstanding. Your meaning of the political class is very extensive. But also, you're more radical - and more pessimist - than I am.

I think people make political systems primarily to accomplish common goals. For instance, ship doesn't have captain (and whole hierarchy) because of exploitation. Ship requires smart, fast, consistent decision making and choosing experienced sailor as captain ensures it. Even hypothetical perfectly unselfish specie would organize some hierarchy on ship. Then, hierarchy also provides opportunity for exploitation. Perfect unselfish specie wouldn't use the opportunity - but people use it.

Does it make sense?

Which ideological current do you belong?

Randy writes:

@ Pajser,

To the extent that the captain of the ship is a worker, i.e., that he creates value, I absolutely agree that the ship has a captain because he is needed. It also explains why he would make more than the deck hands, and why engineers and doctors make more than technicians.

But it doesn't explain why the owners, managers, and political functionaries take 90% of the profits from the operation while the hands who do 90% of the actual work are paid somewhere between a minimum and living wage. That is, it doesn't explain why the rules of property give 100% of the credit for an idea to the owner of the idea, while those who actually create the value made possible by the idea on a daily basis are treated as mere human resources.

But you're right that hierarchy does explain it. More precisely, the political nature of hierarchy explains it.

As for which "ideological current" I belong to, that's tricky. I am a sort of libertarian who believes that the rules of property are inherently political and therefore not sacred. I am a sort of Marxist to the extent that I think that Marx correctly understood the problem, but I also think that his prescribed political solution was (and will always be) a complete disaster. What I favor is understanding - shoveling away the mythology to discover the truth. And perhaps a cultural shift on the order of the Reformation...

Wes writes:


Are workers capable of exploiting employers? I'm just wondering if the relationship can work both ways. A worker will always own his/her labor. The "power" relationship may be skewed inn favor of the entreprenuer, but the so-called "worker" can always be an entreprenuer in something -if not immediately then eventually when enough skills/experience are learned. Can't the worker simply use the employer to get the skills neccessary to move off on his/her own?


LD Bottorff writes:

I agree with Bryan; Socialism was born bad and it is bad to the bone.

Concepts of ownership are as old as humankind. Accumulation of capital is difficult, but often that work is invisible; therefore the laborer who has little or no capital does not understand why someone who has capital should earn on that capital. Throughout history, owners of capital have been vilified. To the extent that capitalists fear that their capital will be expropriated, they invest less and everyone suffers.

Randy writes:


I wrote you a rather lengthy reply which seems to have gotten lost or been removed, and, sorry, but I don't really have the energy to do it again. The short version; You are correct that the power relationship is very heavily skewed in favor of the political class.

@ LD Bottorff,

Re; Concepts of ownership are as old as humankind.

So too are systems of exploitation.

[Just for the record, I haven't removed any of your posts in this thread.--Econlib Ed.]

Randy writes:

Thank you, Lauren. Its entirely possible that I previewed and forgot to submit as I was in a hurry to be somewhere else. Oh, well... the shorter version is probably better anyway...

george writes:

yes socialism is terror,unlike todays capitalism and neoliberal ideas that are not....#not ....

Tracy W writes:


"Property" is neither Law nor constant. It is a set of rules created by a political class to define and justify its right to exploit a working class.

As a definition, this seems out of tune with how the word "property" is normally used. Many rules for example that are used to exploit the working class aren't regarded as property, while some forms of property are used by some members of the working class to exploit members of other classes.

For example, the grain laws banning imports of grain into Britain drove up the cost of bread for the working class, but they weren't regarded as the property of landowners, though they were much to their benefit. Similarly for most other tariffs and quotas.
On the other side, taxi medallions allow taxi drivers, generally regarded as working class, to drive up prices for the users of taxis (generally the wealthier) and also deprive other working class people of the chance to earn an income driving taxis, but I think are pretty commonly defined as property.
(And lets not go into the complexity of all the cases where rich people use politics to extract money from other rich people).

Randy writes:

@ Tracy W,

Re; "As a definition, this seems out of tune with how the word "property" is normally used."

I agree. My intention is to shake the certainty of those who think of property as something sacred and private. It isn't. It is entirely political.

Re; "Many rules for example that are used to exploit the working class aren't regarded as property"

True, but property rules are political rules.

Re; "some forms of property are used by some members of the working class to exploit members of other classes."

I define the political as those who exercise political behavior, and political behavior as behavior which exploits human beings. It is possible, therefore, for some to be both part worker and part political. When I speak of the political class, I refer mostly to those who specialize in the arts of exploiting human beings, but I am aware that nearly all human beings have the ability to exploit others, and that they do exercise that ability from time to time (see the short discussion on original sin above in the comments). The specialists, of course, are much better at it, are organized for it, and therefore reap by far the greatest part of the rewards from it.

Russ Nelson writes:

When markets are free there is no exploitation. The political class exploits workers, managers, executives, and everybody else, when it intervenes in the marketplace.

Randy writes:

@ Russ Nelson,

1. There may be truly free markets somewhere, but the modern labor market is not one of them.

2. The way I see it, managers and executives (and capitalists) are very much a part of the political class. They get upset about not always getting their own way in the political sphere. But in the bigger scheme of things, they mostly do get their own way (e.g., the right to take the credit for 100% of profits while treating workers as human resources).

Russ Nelson writes:

Ahhhh, the truly free market, as opposed to a merely free market. The unicorn, the mythical beast, never to be seen. You want to get rid of exploitation? Then stop government intervention in markets. I didn't say that's what we've got now, I said that is the solution you seek.

Workers consume most of the income of any business. Capitalists get (historically) 5%, although that's less, now that the Fed is handing out money for free. Entrepreneurs get whatever profits they can get, which is sometimes a large positive number, and sometimes a large negative number, but when markets are free, the duration of that income is limited by the ability of the market to adjust. And ... again ... that ability can be curtailed by government intervention, so again, you want your free markets.

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