The latest in our series of translations of Russian national-conservative thinker Egor Kholmogorov.
Translated by: Fluctuarius Argenteus; slightly edited by AK.
Socialism Not Dead: Paradoxes of an Unsolved Problem
It may seem strange that, at the turn of the 21st century, the word “Socialism” is back in the popular political idiom. The final decade of the preceding century seemed to have been the time of its complete (and, so it would seem, irreversible) annihilation.
Soviet-style “Real Socialism” ended in a pathetic disgrace, striking its colors at the sight of a sausage pointed at its heart. Who would have thought that churning out missiles, dams, and factories wouldn’t be enough to sustain a planned economy based on communal property? It was also necessary to grant the Socialist people access to consumer goods at least remotely comparable to those available under Capitalism; otherwise, falling behind not only in living standards but also in technology became inevitable. Soviet Socialism collapsed under the weight of this contradiction, while China enacted reforms so deep that, while looking at Chinese billionaires, one can’t help but wonder whether it’s still Socialism or a “Red Capitalist” oligarchy of the Chinese Communist Party – quite probably no worse than any other oligarchy in history.
Meanwhile, the Capitalist world with its triumphant Liberalism seemed to have scored a doubtless moral victory. Not only did it outpace Socialism, it completely consumed it. All more or less sensible Socialist ideas were incorporated into the structure of the “welfare state”, leaving “Real Socialism” with such dubious achievements as complete socialization of property or pedantic ideological censorship. Socialism appeared to have been entirely devoured and digested by a Capitalism that had reached in this struggle a new stage in its historical evolution.
A quarter of a century after this victory over Socialism, the foundations of the global Liberal order are more and more visibly shaken. Within the US Democratic party, Hillary Clinton’s Liberalism, oriented at racial and sexual minorities, has been challenged by “Democratic Socialist” Bernie Sanders who is cajoling White American workers into rising against the 1%, the Wall Street loan sharks. Socialist? US Presidential candidate? Early 21st century? It seems patently absurd. Meanwhile across the pond, the Labour party in the UK eschewed fine-looking bureaucrats in favour of Jeremy Corbyn, a Socialist, an anti-militarist, and general diehard Leftist. One of his first acts as leader of the Shadow Cabinet was creating a committee for a new economic policy, including such anti-inequality fighters as Thomas Piketty and Nobel Prize winner Joseph Stiglitz.
All of a sudden, we not only see a ressurection of Socialism in two of the leading countries of the Capitalist world, but positioning itself as a powerful political political alternative to the dominant Liberal mainstream. If we take into account that this mainstream is also under attack by right-wing populism of the likes of Donald Trump and Marine Le Pen (the program of the latter replete with anti-Capitalist and anti-Globalist vocabulary), the Liberal “end of history” seems to have ended quite rapidly. If this wave hasn’t reached us yet, it is only because both our Liberalism and our Capitalism are quite peculiar, and our political system doesn’t operate under Western-style rules. However, one cannot completely shut oneself off from a revolution of ideas, and it seems likely we will soon hear the march of a new Socialism here in Russia.
What is the cause of this 2010s Socialist re-revolution? The return of economic conditions that had caused the heyday of Socialism in the 19th century and were drastically changed in the 20th. The driving force of the Socialism of two centuries ago was a contradiction between the ideals of civil liberty and equality brought about by the French Revolution and the Enlightenment, and an absolute economic inequality typical of ancien régime Europe. The latter became more prominent and intolerable at the start of the Industrial Revolution, when hundreds of thousands of proletarians became concentrated in the stench and stuffiness of the working-class suburbs of developed countries.
Liberalism was faced with a monstrous and insoluble contradiction: why, after declaring human rights and liberties in thought and politics, giving equal rights to all social strata and doing away with the feudal ladder of estates, should it remain the guardian of a gap between wealth and misery, the protector of economic inequality? The situation of defending equality in the sphere of ideas, less important for most of the people, and championing inequality in the sphere of the stomach, of much greater everyday importance, seemed entirely ridiculous.
Excuses invented for explaining why some people are poor and some rich pushed those who considered this to be an injustice to certain solutions. “Private property is inviolable, you have no right to infringe upon it, therefore, you dare not touch the wealth of others,” said the wealth apologists. “It simply means that property is theft, and it must be destroyed or redistributed to close the gap between wealth and poverty,” replied the champions of the poor. “Liberty is not the equality of results but that of opportunities. We should be equal at square one, and then let each one gain according to his energy and talents,” said the wealth apologists. “Then we should socialize the work effort, and then we’ll have a common result: From each other according to their ability, to each other according to their needs. Also, let’s create truly equal opportunities, because the prospect of equal chances for millionaires and have-nots is a bald-faced lie,” replied the champions of the poor.
The ideas, methods, and moral high ground of the Socialism of yesteryear stemmed from a European yearning for equality, described by Alexis de Tocqueville, and the angst caused by the monstrous material inequality in the Europe in an age when the gaps between wealth and poverty were insurmountable. These gaps are the subject of a spirited dialogue between a young Rastignac and a cynical, conniving Vautrin in Honoré de Balzac’s Le Père Goriot. Vautrin explains to Rastignac, then a young idealist, that his chances of making good money thanks to learning, personal qualities, and industriousness are equal to zero. The only way of winning a fortune is getting it from somebody who already has it, by way of inheritance or marriage. The only way of becoming rich is being rich.
The world that spawned most Socialist theories, especially those of Saint-Simon, Proudhon, and Marx, was not a liberal world of free competition and equal opportunity. It was a polarized world devoid of a middle class: the 1% of haves and the 99% of have-nots.
What did this mean in practice? All talk of alleged opportunity in life granted by a Liberal version of Capitalism seemed naught but a myth. Big money was a magnet that attracted even bigger money. The lion’s share of national income, regardless of the pace of its growth, was distributed in the same proportion that was fixed in the structure of national capital. Simply put, those who controlled the majority of wealth gained the majority of income while making little to no effort.
America was the sole exception, with a lower concentration of wealth and a higher share of income distributed through free competition. Hence the image of the USA as a Promised Land, a land of opportunity, a magnet for migration. A good way of making money in Europe was moving to America (with the possibility of returning to the Old World with newfound wealth in tow left open).
No industrial growth, no Socialist attacks on the government or the bourgeoisie could change anything in the structure of this world until the start of World War I. This explains the revolutionary character of European socialism and the borderline utopian radicalism of its proposed solutions: Total socialization of industry, expropriation of the ruling classes, dictatorship of the proletariat, dreams of a World Revolution.
Source: Capital in the 21st Century by Thomas Piketty. Not part of Kholmogorov’s article.
This World Revolution did come to pass – but it started not in 1917, but in 1914. As brilliantly demonstrated by Thomas Piketty in Capital in the 21st Century, the Great War kickstarted a default of old European wealth. The horrors of war, the collapse of world trade, the Russian Revolution with its devastation and expropriation of the wealthy classes, the defeat and hyperinflation in Germany and Austria, the demographic crisis and budget deficit in the UK and France, the impeding dismantlement of colonialism – all of this led to a catastrophic decline in capital concentration in Europe.
Source: From Soviets to Oligarchs: Inequality and Property in Russia 1905-2016 by Filip Novokmet, Thomas Piketty, and Gabriel Zucman (2017). Not part of Kholmogorov’s article.
The revolutionary role of Russia, whose bourgeoisie was sacrificed at the altar of transformation, consisted not so much in socializing property and launching the Socialist experiment as in crashing the world rent. The enormous Russian debt that had fed millions of rentiers all over Europe turned into dust in the blink of an eye and doomed the rentier civilisation to extinction.
From the 1920s to the 1940s, the level of capital concentration in the world capitalist system continued its decline. Contributing factors included the Great Depression that had finally made its way to America, the devastation of World War II, the post-war wave of nationalisations, and tax deductions for national reconstruction. The ratio of capital to national income fell from 6:1 under the old regime to 2:1, i.e. the entirety of concentrated capital (be it in the form of real estate, shares, or foreign assets) became equal to only two years’ worth of national income.
What were the socioeconomic consequences of this Great Default? The grip of Capital loosened, its magnetic effect wasn’t as far-reaching, and the problem of economic equality was tackled within the framework of global Capitalism, without employing the radical recipes of fin de siècle Socialism. More precisely, those radical recipes were relegated to countries that were lagging behind in industrial development, such as Russia and China. The main goal of this radicalism was a wilful, determined achievement of an industrial breakthrough. Socialism in so-called Socialist countries was most concerned with productivity and not wealth redistribution.
Western countries, however, having no need for a “great leap forward”, were able to afford the luxury of a “Socialism sans Socialism”. Social Democracy, Christian Socialism, Swedish Socialism, Social Reformism all followed the same model. Without abolishing private property as such, without creating a dictatorship of Leftist parties, by limiting themselves to a selective nationalisation, they achieved economic equality by fostering a system of high wages and a well-developed social sphere, ushering in the welfare state. Essentially, it was a huge Ponzi scheme organized according to Keynesian precepts: The state took away a sizable portion of incomes via taxation in order to redistribute this money, also as income but under a more egalitarian distribution.
This was the zeitgeist of the treinte glorieuses of 1945-1975, when all Western governments followed, with slight variations, a single socioeconomic policy targeted at bringing social inequality as far down as possible, raising national income redistributed as salaries to the detriment of rents, dividends, etc., and widening the social responsibilities of the state. It was the age of a rising middle class, the 40% that follow the 10%-strong strata of the wealthy; this class laid claim to 30-40% of national wealth as opposed to just 5% before World War I. The 50% of the poor were stuck with the same 5% as before, but at least they gained a much greater chance of breaking out of poverty by dint of education, good work, entrepreneurial spirit and general savvy.
The social lifts seemed to be working. A peculiar anthem of the era is Chuck Berry’s tongue-in-cheek 1964 song You Never Can Tell, the accompaniment to John Travolta’s and Uma Thurman’s wild gyrating in Pulp Fiction. It’s the story of a young Black couple from New Orleans that makes decent money, buys a house, mail-order furniture, a fridge, a phonograph, even a used jalopy… New capital growth was slow but steady, not in the form of rent or foreign bonds but mostly as real estate, shares and equity.
The most positive Soviet-era memories of those who were impacted by the system are based on largely the same processes, just disguised with red banners and “Glory to the Communist Party” posters. The income levels of Soviet workers were incommensurably lower, as was the quality of consumer goods offered by the market (it took a long time to realise that the Western market of the era was just a mechanism for redistributing wealth that was gained through not entirely market-based means). However, the Soviet system was infinitely more helpful with regards to restoring and accumulating… capital. It was even explicitly called “capital construction.” Most Soviet citizens were granted, entirely free of charge, real estate that was worth many years of individual income and still commands an impressive market price. And so construction proceededly rapidly apace to build the cosy, even slightly bourgeois world of 1970s Soviet comedies.
The Socialist system, like that of the West, followed the route of reconstructive capitalism. Meanwhile, Socialism as an idea gradually fell out of favor over the 20th century as its main raison d’être, inequality, disappeared. The semi-Socialist policies of Western countries created a perfect model village of Capitalism: Low inequality levels, broad opportunities, intensive social lifts, high levels of welfare, a wide availability of consumer goods thanks to a developed and flexible market. All of it seemed like a brilliant alternative to Socialist experiments: Socializing not wealth, not industry, but revenue, redistributing it so that everyone could decide where to spend it within a wide spectrum of options.
An ideal world of freedom and equality finally seemed to be within grasping distance. It also had a place for racial and gender equality, the 1960s becoming a triumph for equal rights activists of all stripes. At the same time, Socialism was quagmired in internal antagonism, the total control of the state eroding all freedom and neutering the enjoyment and variety of everyday life.
Source: Capital in the 21st Century by Thomas Piketty. Not part of Kholmogorov’s article.
However, the economic developments of the treinte glorieuses were the gravedigger for both Soviet Socialism and Western Welfare Capitalism. They signed their own death warrants themselves. A natural accumulation of capital was underway, via saving a part of income in the West or direct capital giveaways by the state in the USSR. But a feature of capital is that it “magnetizes” and draws income. The owner of capital tends to rent-oriented, not work-orientated, behavior. This “capitalist” wants to gain interest and rent, to make his capital inheritable, to pay the lowest taxes he can, and thoroughly despises the have-nots whose claims to a share of his income seem to him most outrageous.
The late 1970s saw the rise of a new Capitalism with many faces, from British Thatcherism to US Reaganomics to the waves of privatization that swept away the Soviet system and its socialist economy. It was a massive uprising of capital that wanted back its right to extract revenue and spend it on itself without sharing with society. Just like the pendulum swinging towards Socialism in the early 20th century, its return towards pure Capitalism at the end of the century was most pronounced and most socially destructive in Russia. A savage, dog-eat-dog oligarchic Capitalism that took sway in the country freed itself from practically all burden of social responsibility. It was a tyranny of wealth limited only by the garrotte in the hands of thugs, be they mafia racketeers or bureaucrat raiders.
However, it would be unreasonable to claim that the nature of the processes that transpired in those decades was drastically different in Russia, Europe, and the US. It was a time of large predatory fortunes, scams and profiteering, social polarization, and growing inequality everywhere. Americans and Western Europeans, accustomed to slogans of “equal opportunity,” suddenly once again found themselves in the era of Rastignac, when the only way to get rich – was to be rich. Also, the very notion of wealth had changed: It was no longer a reasonable, comfortable prosperity, but a blatant, tacky luxury.
In The Price of Inequality, Stiglitz describes the behavior of modern American business as “rent-oriented.” Nobody wants to improve real economic indices, nobody wants to make money, everybody wants to live as a rentier off unfounded bonuses, “golden parachutes,” and other forms of self-financing so common in American corporations. Is it that different from Gazprom cleaning women?
At the other end is the growth of inflamed poverty: according to Stiglitz, the life expectancy of US White men with no college education is plummeting at the rate of 1990s Russia. Over the last 15 years, everyone and their mother have talked about the “death of the middle class.” Piketty projects that at the current rate of increasing inequality, Europe will return to 19th century levels by 2050: 10% of the population will own 80% of capital, and 60% of all income.
The society built by the global anti-Capitalist uprising of the early 1900s is becoming a thing of the past, as is faith in market-based self-regulation of Capitalism, allegedly evolved enough to solve social issues. It turns out that self-regulation played no part whatsoever, and the growth of economic equality occurred due to a catastrophe that had wiped out the “old money,” paving way for a unique Social-Capitalist system. Conversely, growing capital concentration, seemingly normal for a self-regulating capitalism, simply reproduces inequality.
A Neo-Socialism is the natural response of a society that enshrines equality to the emergence of a new inequality. Will it be different from classic Socialism? It will be, and rather strongly so.
Destruction of private property and socialization of the means of production proved to be a rather dubious road to Socialism. In practice, they only led to the creation of a new class – the nomenklatura, a decline in individual initiative, logistic and planning errors leading to shortages and even famines. And, in the long run, they failed to prevent the restoration of Capitalism in its most savage incarnation. In addition, small-scale private property continued to develop even if when it all private property was nominally abolished.
The utopia of complete socialization is opposed by the following fact: As material progress unfolds, a human being demands more, not less space for individual existence and self-expression. The ideal of a normal human, as it turns out, is his own house, not an army barracks. Collectivism invariably leads to a tyranny of mediocrity and dooms the societies that adopt it to backwardness in scientific-technical development.
Under these conditions, Neo-Socialism presupposes, above all, the socialization of income and prohibitive measures on capital concentration. The world of future Socialism is a world where all offshores are annihilated and each and every fatcat is subjected to high income and property taxes, with inheritance laws hampering the transfer of super-wealth. This nullifies the magnetic effect of large capital, and most of income is redistributed as wages in the context of free labor and a free market. From an instrument of optimizing income, the market turns into an instrument of optimizing expenditure.
Here, however, the New Socialism faces several classic pitfalls, already singled out by Joseph Schumpeter in the mid-20th century. The impossibility of super-wealth, limiting unfair and imperfect competition, monopolism, and profiteering lead to the waning of that very entrepreneurial spirit that nurtures the Capitalist economy. There will a dearth of those interested in starting a new business to beat all competitors and make a nice buck. And, needless to say, an “inventor and innovator” certificate is a feeble substitute for super-incomes.
The only remedy to entrepreneurial crisis within Neo-Socialism could be a change in business philosophy: Stop chasing big money and instead take pride in the individuality of your business, its attractiveness and social relevance. This, however, only works for small and middle-sized businesses, while bigger enterprises require investments (including non-returnable ones) and risks so enormous that a small-time businessman can only afford it if he is aiming for a super-income. An alternative is a planned, state-run innovation policy, a “Communism of ideas” that will be of dubious long-term efficacy.
A society that guarantees a relative equality of income would be doomed to low economic growth. However, it is precisely the form of economic growth stabilization – especially within the core of the Capitalist system – envisioned by Neo-Socialist economists, Piketty above all.
Another question inevitably brought forward by Neo-Socialism is its relations with globalization. In a Neo-Liberal world, globalization is a world market system that forces the expenses of wealthy and developed countries on the poor and undeveloped by creating “common markets” that stifle economic development. They confine poor countries to the lower stages of technological chains while keeping the rights to ideas and the final product in the hands of developed countries. This is exactly the principle of the Transatlantic and Trans-Pacific Partnerships, modern attempts to cement the eternal commercial dominance of the US.
An alternative to this economic globalism is economic Nationalism; the greater the drop in economic growth and surge in inequality, the more that will it be visible. Countries with independent industrial potential and inner market resources will isolate themselves from the rest of the world as much as they are able to, from imports to economic immigrants, in order to maintain their development level despite in spite and at the expense of others.
This Nationalist alternative is seen as the greater threat to the Neo-Socialist project. Its defenders keep putting a lot of effort into criticising Nationalist and Protectionist ideas and rallying to the defence of Smithian dogmas of “relative advantage” that lead to international division of labor and creation of common markets.
Nevertheless, preserving global markets under a Neo-Socialist policy would require a serious “leveling of fortunes” everywhere on the planet. Wealthy countries, much like wealthy people, would be compelled to spend most of their wealth to improve the living standards of the poor up to a certain “golden mean.” According to modern GDP per capita statistics, it would be represented by the living standards of a Turkey or a Mexico – probably even lower in reality, because rich countries create much of their GDP and national income by virtue of being rich. Were they to be more modest in their lifestyle, much of their national product simply wouldn’t be produced.
Is it possible to downgrade the living standards of rich countries and prop up the poor ones to even slightly reduce global inequality? One may well doubt this, especially considering that for most of humanity, it is the quality of life in the developed countries that really matters, not the tyranny of averages. Everyone in the world dreams of a Lexus, not a Zaporozhets.
And now we re-encounter a fundamental contradiction within the Socialist dream. It is inspired by a global historical trend towards equality and social justice, but the justice in question turns out to be a tyranny of mediocrity, the erasure of extremes of arrogant wealth and abject poverty. But how is the value of this justice comparable with the imperative of development that presupposes certain extremes? To move forward, one must desire to be the best, which is impossible without a certain, sufficiently wide score chart – even if it comes at the expense of others.
Combining the values of justice and equality with the values of development is a task yet unsolved by the New Socialism.
 Allusion to a news item at around the time of this article’s writing featuring a woman employed as a cleaner in the Gazprom office who had reported the theft of her Christian Dior handbag worth $26K.
 Allusion to the Soviet practice of rewarding technical and industrial innovators with honorary diplomas and certificates, as opposed to patent rights or other, more substantial awards.
 A cheap rear-wheel-drive supermini mass-produced in the USSR (and then, briefly, in independent Ukraine) in 1958-1994 that became a byword for shoddy, uncomfortable, and breakage-prone cars in (post-)Soviet culture.
 On January 23, 2017, the US announced its withdrawal from the Trans-Pacific trade agreement.
The article was written in April 2016 and reflects the political and economic situation of the era.