James Buchanan

Buchanan, James M. - at George Mason University

Socialism Is Dead; Leviathan Lives
By James Buchanan
THE WALL STREET JOURNAL EUROPE THURSDAY, JULY 19, 1990

Mr. Buchanan, a Nobel laureate in economics, is professor of economics at the Center for Study of Public Choice at George Mason University.
This article is adapted from a speech he delivered in Sydney, Australia, in March.

More than a century ago, the German philosopher Friedrich Nietzsche announced the death of God. This dramatic statement was intended to suggest that religion had ceased to serve as an organizing principle for the lives of individuals or for the rules of their association. Since Nietzsche, the God pronounced dead was replaced by man’s consciousness by “socialism.” And I want to match Nietzsche’s announcement with the comparable one that “socialism is dead” - a statement that seems much less shocking than Nietzsche’s because it is being heard throughout the world in 1990.

In a very real sense, the loss of faith in socialism is more dramatic than the loss of faith in God, because the god that was socialism took on forms that were directly observable. There were no continuing unknowns waiting to be revealed only in another life, and the promised realization of the socialist ideal could not be infinitely postponed. Socialism promised quite specific results; it did not deliver.

One can only look back in amazement at the monumental folly that caused the intellectual leaders of the world, for more than a century, to buy into what F.A. Hayek called the “fatal conceit” that socialism embodied. How did we come to be trapped in the romantic myth that politically organized authority could satisfy our needs more adequately than we might satisfy them ourselves through voluntary agreement, association and exchange?

Socialists Everywhere

This fatal conceit was almost universal. Let us now beware of current attempts to limit acceptance of the socialist myth to those who were the explicit promulgators and defenders of the centrally planned authoritarian regimes of the Soviet Union and its satellites. There were socialists everywhere, in all societies and, even in the face of the evidence that continues to accumulate, there are many who still cannot escape from the socialist mind-set. And even for those of us who have, however begrudgingly, acknowledged that the socialist god is dead, there may not have emerged any faith or belief in any non-socialist alternative. We may accept socialism’s failure; we may not accept the alternative represented by the free market or enterprise system, even as tempered by elements of the welfare state.

Socialists everywhere, confronted with the evidence that economies organized, wholly or partially, on socialist principles’ cannot deliver the goods, are now making desperate efforts to redefine the term “socialism,” which British socialist and scholar Alec Nove defined in 1987 as a society in which “the means of production of goods and services are not in private hands.”

It is now almost universally acknowledged that a private-ownership, free-enterprise economy “works better” than Mr. Nove’s socialized economy, in which decisions are made by state or cooperative agencies. The individualized market economy “works better” than the socialized economy in the sense that It produces more goods. But It also works better in the sense that it allows individuals more liberty to choose where, when and to what purpose they will put their capacities to produce values that they expect others to demand.

Between the early 1960s and today, socialism became ill and died. What happened? There were two sides to the coin: “market success” and “political failure.” The accumulation of empirical evidence must ultimately dispel romance. And the evidence did indeed accumulate to demonstrate that free-market economies performed much better than politically directed or planned economies. Contrast, for example the West German Wirtschaftwunder with the demonstrable failures of the socialist experiments in Britain in the late 1940s and early 1950s. Honest evaluation suggested that the centralized economies of the Soviet Union, China and East European countries were not successful in producing goods and services.

Ideas also matter. And here the record of the academic economists remains, at best, a very mixed bag. The welfare economists of the early and middle decades of this century were almost exclusively concerned with demonstrating the failures of markets, in order to provide a rationale for political interferences. But the public choice revolution in Ideas about politics, and political failures, was also sparked primarily by academic economists.

When the behavioral models of economics are applied to “public choosers” —to those who participate variously in political roles, as voters, politicians, bureaucrats, planners, party leaders, etc. — the romantic vision that was essential to the whole socialist myth vanishes. If those who make decisions for others are finally seen as just like everyone else, how can the awesome delegation of authority that must characterize the centralized economy be justified?

This loss of faith in politics, in socialism broadly defined, has not, however, been accompanied by any demonstrable renewal or reconversion to a faith in markets, the laissez-faire vision that was central to the teachings of the classical political economists. There remains a residual unwillingness to leave things alone, to allow the free market, governed by the rule of law, to organize itself. We are left, therefore, with what is essentially an attitude of nihilism toward economic organization. There seems to be no widely shared organizing principle upon which persons can begin to think about the operations of a political economy.

It is in this setting, which does seem to be descriptive of the era into which we are so rapidly moving, that the natural forces that generate the Leviathan state emerge and assume dominance. With no overriding principle that dictates how an economy is to ‘be organized, the political structure is open to exploitation by the pressures of well-organized interests. The special-interest, rentseeking, churning state finds fertile ground for growth in this environment. And, depending on the relative strength of organized interests, we observe quite arbitrary, politicized interferences with markets.

This setting, which I have referred to as Leviathan, has much in common with the mercantilist-protectionist politics that Adam Smith attacked so vehemently in “The Wealth of Nations” in 1776. The same barriers that Adam Smith sought to abolish are everywhere resurging; and the same arguments are heard, both in support and in opposition. The arguments for Leviathan’s extensions are not versions of the socialist’s dream; they are, instead, simple efforts to claim a public interest in a single sector’s private profit.

Constitutional Constraints

There will be no escape from the protectionist-mercantilist regime that now threatens to be characteristic of the post-socialist politics in both Western and Eastern countries so long as we allow the ordinary or natural outcomes of majoritarian democratic processes to operate without adequate constitutional constraints. If we know that politics fails and that its natural proclivity is to extend its reach beyond tolerable bounds, we must incorporate constraints into a constitutional structure. A depoliticized economic order is within the realm of the possible, even if the accompanying faith in market organizations is not fully regained. We can protect ourselves against the appetites of the monster that the Leviathan state threatens to become.

The organized polities of the nation-states, and the associations among those states, must be kept within constitutional boundaries. The death throes of socialism should not be allowed to distract attention from the continuing necessity to prevent the overreaching of the state-as-Leviathan, which ‘becomes all the more dangerous because it does not depend on an Ideology to give it focus. Ideas, and the institutions that emerge as these ideas are put into practice, can be killed off and replaced by other ideas and other institutions. The machinations of interest-driven politics - are much more difficult to dislodge. Let us get on with the task.

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