Socialism in the 21st century - First part

Table of contents

 

1. Introduction

2. Socialism of the twentieth century

            2.1. Rise of the socialist ideology

            2.2. Implementation of the socialist ideas in the Soviet Union and failure of the system

3. Socialism of the twenty-first century

3.1. Evolution of socialism in Venezuela

            3.2. Recent developments in Venezuela

4. Conclusion

 


The article was written in cooperation with Lena Gudd and Mithe Herremans, both UM Students European Studies


1. Introduction

 

The world will be dominated by a “clash of civilizations”. This is how Samuel Huntington predicts future global conflicts with a special focus on the Islamic world versus the Western hemisphere. However, what Huntington did not see coming are the current developments in Latin America: the radical changes in government, the rise of socialist parties and the rejection of Western capitalism. What is happening in Venezuela suggests an “economic clash of civilizations” between the West, America and Europe, and Latin America. Accordingly, many Eurocentric and American centered theorists argue that socialism seems to be on its way back in a transformed version to become a dominant economic system again after its demise with the fall of the iron curtain in 1989. Hence, most capitalists fear the threat towards capitalism from a newly emerging form of socialism. This paper investigates the evolution of socialism in the Soviet Union until its current shapes in Latin America.

Thus, in order to understand the foregoing developments, it is crucial to establish the concept of socialism in general. According to Temkin socialism is the

 

“[p]redominance of public-state-ownership of natural resources and factors of production except labor, [the] predominance of centralized planning as the coordinating mechanism of economic activities-substituting the market with its price system [and the] predominance of wages and salaries as the main source of the population’s individual income” (Temkin, 1996, p. 25, 26).

 

Using this definition, the first section consequently investigates and explains the dream of socialism in the nineteenth century. Hence, with regard to the economic implementation, it will further investigate the failure of these ideas in the Soviet Union. The second section analyzes developments of socialism in Latin American countries, with special regard to Venezuela, and elaborates how and why those trends were possible and whether a new kind of socialism is emerging. Additionally, the paper analyzes and explains the current situation in Venezuela and presents the pros and cons of Chavéz’s policies on an economic level. Finally it concludes that socialism is on the rebound in Latin America in a transformed shape called “new socialism”.

 

2. Socialism of the twentieth century

 

2.1. Rise of the socialist ideology

 

The idea of socialism dates back to the nineteenth century, when the industrial revolution spread factories over Western Europe, leading peasants to move to the cities and to aspire to a job as a worker. While the economy boomed under the increasing urbanization, many of the laborers who came for a better future were confronted with poverty, bad hygiene and exploitation. It is against this background that the new ideology of socialism rose in the industrial societies. Of many different types of socialism, two merit further investigation as they predominantly came into application when socialism rose as a form of state organization: Utopian socialism and Marxism. The Utopians established the ground of socialist thought by imagining a better communal life than the exploitation of the have-nots by the haves. In this respect, the Utopian socialists Robert Owen and Charles Fourrier developed ideas of model cooperative communities in which people should live in “universal togetherness” (Grant & Brue, 2007, p. 150). In these model towns, Owen believed, “one should try to serve the community and thereby achieve one’s own highest happiness” (p. 162). The way to do so was by surrendering private ownership to the community and by promoting the idea that not property, but work alone yielded value to the people (Crozier, 1987, p. 4). These measures established communities with theoretical equality among their members, regardless of their origin or socio-economic standing.

Although criticizing some of its ideas, Karl Marx built upon the Utopian thoughts to establish his idea of communism, in which a perfect socialist state would be created due to a revolution of the working class against the bourgeoisie. His ideas would lead to the rise of socialist states all over the world, most prominently in Russia and China. Marx mostly based his theory upon the idea of class struggle, by blaming wealthy owners of land and factories for the exploitation of the poorer class. In his view, the entrepreneurs gained more economic value from the workers’ class than they paid them in wages, thus exploiting them and becoming richer at their expense (Grant & Brue, 2007, p. 177). In a communist society, on the other hand, everybody should be equal in status and property. Consequently, Marx asserted that capital goods and land be owned by the state as a whole, not by private individuals. Like Owen, he held that the associated value of a good or service should only be considered in terms of the labor time necessary to afford it, not in comparison with the value of other means of property (p. 176). Once property was no longer a factor for social ranking, Marx had eliminated the class difference. With regard to differences in intellect and ability of the citizens, Marx promoted the credo: “from each according to his ability – to each according to his needs” (Crozier, 1987, p. 30). In a society where everybody looked after everybody in such a manner, the superposed construct of the state would eventually “wither away” and give way to a communist society without government (p. 30).

 

2.2. Implementation of the socialist ideas in the Soviet Union and failure of the system

 

A true communist state never came into being, but the socialist ideas and most importantly Marx’s theory of the communism led to socialist societies in states around the whole world, most significantly in the Russian federation of the early twentieth century. The revolutionist Wladimir Iljitsch Uljanow, called Lenin, founded the first socialist state on earth in the Soviet Union after the socialist revolution of 1917 (Crozier, 1987, p. 67). For almost a century, the socialist system asserted itself against the western capitalist system in economic and ideological terms (Abouchar, 1979, p. 34). However, eventually its centrally directed economy (CDE) proved inferior to the market type economy (MTE) of the West and it was mainly due to its economic impracticability that the Soviet system collapsed in 1989.

Arguably, one of the greatest deficits of the Soviet economy was its failure to match supply of goods and private consumer demand, which prevented the self-sufficiency of its market. Due to greater facility in central planning, and in order to provide capital goods with a long-term utility for future generations, the central planning bureau (CPB) decided to focus national investments on the heavy industry, not on consumer goods (Crozier, 1987, p. 70). On the one hand, this led to a shortage in domestic supply of consumer goods and even of nutrition (p. 75). In order to meet private demand, the Soviet Union had to import consumer goods, leading to a growing trade deficit with the West in the late 1970s and to massive state debt (p. 83, 87). On the other hand, the focus on heavy industry caused an oversupply of capital goods which did not meet public demand. Consequently, a “mountain of unsold goods began to accumulate” (p.73), while private savings increased by almost 70% between 1971 and 1976 alone (p. 73).

While the conscious decision of the CBP to focus on heavy industry was a direct reason for the economic failure of the socialist system, the structure of the CDE was another. According to G. Temkin, the CDE failed to provide economic actors with the necessary information to match demand and supply (Temkin, 1996, p. 25). Accordingly, in an MTE producers could read consumer demand off the rise and fall in the product price and adjust the level of production to the current demand (p. 32-3). In a CDE, the CBP set the price and gave out the desired amount of output. Consequently, suppliers produced fixed amounts of output independently of consumer demand, leading to over- or undersupply[1]. In addition, Abouchar (1979) argues that the CBP set the wrong incentives for producers. Firstly, it decreed a minimum level of required output in specifying the desired total weight or the total quantity of the commodity (p. 88). Consequently, producers could modify the particular product in size or design in order to minimize production cost, even if this product was not desired by the consumers. Secondly, it promised the producer a premium payment for fulfillment of the plan requirements, which were fixed according to the capacity of the production facility (p. 87). The producer could thus indicate a lower maximum capacity of the factory, which promised him more premium pay for fulfillment but reduced the level of output that could potentially be produced. Thirdly, Abouchar asserts that the output plan deterred producers from innovating their factories (p. 89). Why would they risk changing their production process and missing the production requirement, if the current situation already guaranteed them a secure premium pay?

Finally, another reason for the fall of socialism in the Soviet Union can be found in the conception of the individual: As alluded to in the former examples, self-interest remained a strong factor of motivation for producers and workers. Consequently, Temkin (1996) asserts, that the relationship between economic actors and the CBP responds to the principal-agent problem (p. 37). This problem denotes a business relationship in which an individual – the principal – wants a service done on his behalf and hires another individual – the agent – to perform it (Grant & Brue, 2007, p. 151). Both have their own interest in this partnership and these interests need not converge. In order to make the partnership efficient, the principal has to set incentives which make the agent pursue an interest convening to his own. The CPB failed to do so, leading to diverging interests of producers and planners and thereby strengthening the individual self-interest of the producers. Consequently, Owen’s thought that “one should try to serve the community and thereby achieve one’s own highest happiness” (Grant & Brue, 2007, p. 162) and Marx’s idea that each should be given only according to his own needs were not achieved, showing that the socialist ideology was not entirely compatible with the social reality. Consequently, the socialist ideals not only failed because they were economically impractical, but also to some extent because the positive picture that Marx and Owen had of the human being did not stand the confrontation with the social reality of the Soviet Union.

 

3. Socialism in the twenty-first century

 

3.1. Evolution of socialism in Venezuela

 

The failure of the socialist system of the Soviet Union in the twentieth century raised the belief in many capitalist countries that capitalism successfully proved its prevalence as the only right ideology. Thus, that it would remain the dominant and successful political system in the world. However, by the end of the century, the rise and success of socialist parties in Europe and Latin America put the capitalist system of the west under pressure again. Especially in the EU and the USA whose member states are long established capitalistic democracies fear the rise of a socialistic counterforce in Latin America. In fact, a lot of the Latin American countries experienced the elections of mostly radical presidents with socialist ideas, for example Luiz Ignacio Lula de Silva in Brazil, Lucio Gutierrez in Ecuador and Nestor Kirchner in Argentina, but in particular the current movements in Venezuela and its president Hugo Chavéz attract their attention. Since Venezuela is the prime example of the current transformation processes in Latin America, it can provide answers to the questions whether the old socialism was re-established or whether we are experiencing the rise of a new socialism in the twenty-first century.

            Even before the election of Chavéz as the Venezuelan president in 1998 was the government influenced by socialistic ideas (Reform and Revolution, 2006), it was Chavéz, however, who made socialism to the maxim of the government. In fact, since 2005, he speaks eloquently about his aim to establish a “new socialism of the twenty-first century” (Glüsing, 2006, p. 1; Reform and Revolution, 2006, p. 3; Wilpert, 206, p. 1,). The new motto of his government “zero misery” (Rosenberg, 2007, p. 15) clearly defines his motives as the guardian angel of the poor. Consequently, Chavéz aims to transform Venezuela into a “Global Player” (Glüsing, 2006, p. 2) while claiming to better the position of the poor in his country by investing in education, living conditions, and social programs but also by guaranteeing them more say in the political sector. These claims seem revolutionary and more than desirable for the lower class people, nonetheless, Chavéz’s promises sound unrealistic for a country which makes extraordinary profits with its oil resources since the 1920s. In fact, Rosenberg (2007) claims that oil-rich countries are often infected by the so called Dutch disease, namely, they concentrate their wealth in the state, thus, tending to be highly corrupt (p. 4). Therefore, according to an OPEC study, the situation of the poor is especially bad in those nations which are dependent on their oil resources (p. 3). Venezuela had become one of those countries as well, it had, according to Rosenberg (2007), become a “rich country of poor people” (p. 4). With this misery of the poor as condition, Chavéz, promised to use the high oil revenues to better the situation of the lower class people and not to reinvest it in further oil production. Consequently the question comes up whether Chavéz, like so many before him, is mainly pledging empty promises in order to win the sympathy of the hugest part of the population – the poor, or whether he actually does improve their situation by reorganizing economic structures. To answer this question is important to find out if Chavéz is really establishing a new socialism of the twenty-first century. 

A lot has actually changed in Venezuela’s political, economical and societal structure since Chavéz is holding the presidency.  Hence, Venezuela finds itself in a process of deep transformation, namely in a process of economical restructuring. In the governments focus is now, thus, the expansion of non-private forms of ownership like “cooperatives, co-management, and expanded state management” (Wilpert, 2006, p. 2). Since the active support of cooperatives, meanwhile ten percent of the Venezuelan population is involved in these businesses. In the case of co-managements, the government is still experimenting, giving the workers not the total control but enable the society, though its representatives, to have a say in the business (p. 3). Further, some enterprises in the sectors of “telecommunications, air travel, and petrochemicals” (p. 3) are now state-owned, for example the oil company Pdvsa. Furthermore, the Chavéz government also introduced a new economic production unit, the “Social Production Enterprises” (p. 3), whose maxim is the subordination of profit making to terms like “solidarity, cooperation, complementarity, reciprocity, equity, and sustainability” (p. 4). Accordingly, members are seen as equal, work is highly valuated and social discrimination prevented. Those businesses are mostly run under “state, collective, or mixed ownership” (p. 3). Additionally, Chavéz established a “[p]articipatory democracy” (p. 5), which implies citizen participation in recently created “missions” (p. 5), and integrated the military with the citizens, thus, bringing it closer to the civilian population (p. 6)

Paradoxically, the high oil revenue which is said to have made the Venezuelan government corrupt in the past, is in fact the “grease” with which Chavéz is able to finance his socialistic programs (Rosenberg, 2007, p. 3), consequently, giving his political agenda an additional name: “oil socialism” (p. 16). A huge part of the revenues goes to “social spending[s]” (p. 13) which demonstrable reduced the number of people living in extreme poverty by nearly the half from 1998 until 2006 (p. 16). Consequently, with regard to ownership and control over the means of production, Chavéz evidently transformed the country with socialistic means. This still raises the question whether Chavéz’s “Bolivarian Socialism”, named after the South American liberator Simón Bolívar (Glüsing, 2006, p. 1) is indeed different from the socialism of the twentieth century.

As has been shown, Utopian socialism focused on “universal togetherness” Grant & Brue, 2007, p. 150), hence, it emphasized moral values and focused on the task to better human beings. Chavéz, however, stresses rather the economical convergence of the people than the amelioration of their happiness. Similarly, the developments in Venezuela do not resemble the state socialism of the 20th century either. Wilpert argues that the “new socialism” is more libertarian since it actually aims at involving citizens in political decision making (p. 7). Hence, fulfilling all three aims of the French Revolution, liberty, equality and fraternity, the new socialism sets itself clearly apart from the state socialism. According to Reese (2004), Chavéz faced different conditions than Stalin did by the end of the 20th century, namely, the old Venezuelan system was corrupt and falling apart, thus, creating the best chances for socialists since 1970 to “rebuild a movement that can challenge the existing system” (p. 5). Accordingly, Chavéz’s new socialism is not the one Marx intended to install either, since it neither seeks to exploit the workers nor is it built on the assumption that only labor produces profit. But although Chavéz’s new socialism does not presuppose that a bourgeoisie state has to be overthrown by the means of a class struggle to establish a dictatorship of the proletariat it shows a resemblance to Marx’s theory of history in regard to the belief that capitalism failed and socialism has inevitably to be installed. Additionally, both Marx and Chavéz aimed at introducing co-operatives. As has been shown, the developments in Venezuela show strong tendencies towards a movement away from capitalism, away from private means of production and away from the dependence of capital. Actually, governance in Venezuela is no longer guided by “private interests” (Wilpert, 2006, p. 4) anymore. Thus, it is evidently that the implementation of the “new socialism” is quite different than the shapes it took before, like Chavéz never fails short so mention, it is not like state socialism like in Soviet Union or Cuba today, rather more “pluralistic and less state-centered” (p. 1). Concluding, it is socialism what Chavéz established, and it is new, as well. As has been shown, it has similarities with shapes of socialism which dominated the twentieth century, but it can also be clearly differentiated from the former kinds: “a little Marx, a little Jesus, a little anti-imperialism and a lot of the whim of Hugo Chávez” (Rosenberg, 2007, p. 3).