The Best Cases of "Actually Existing Socialism".

• Author: Murphy, Ryan H.
• Position: Essay

What is the best case for socialism, historically? In the present day, the two regimes that still fully engage in the collective ownership of the means of production, North Korea and Cuba, are run by totalitarian governments. Venezuela is perhaps the next closest to "true" socialism, but it pairs its brand of socialism with other low-quality institutions as well. This pairing is common historically, ever since countries began adopting socialistic institutions in earnest in the early twentieth century. (1) Scholars sympathetic to socialism are rightly apprehensive toward the association of socialism with the bad historical economic and humanitarian outcomes in countries such as North Korea and Cuba or the Soviet Union and China before reform.

The differences between the economic systems of countries with a professed ideology of socialism and what appears on the pages of Das Kapital has led to the phrase "actually existing socialism," denoting the socialism practiced within Eastern Bloc countries. If the conventional definition of socialism holds and the means of production are collectively held, then the Eastern Bloc countries were socialist, even if this socialism was paired with dysfunctional institutions and repressive political regimes (as is the case in present-day North Korea and Cuba).

Elsewhere, emphasis has been placed on democratic socialism. In practice, this term has often meant democracy with a very heavy-handed intervention in markets. But it can also contrast "socialism" with "capitalism" insofar as economic decision making should reside in the democratic will of the people rather than (in the eyes of socialism's proponents) in the allocative decisions of corporate executives and others holding wealth. This is what is meant by "democracy" in the phrase "economic democracy" and as advocated by, for example, Nancy MacLean (2017). It is in this specific sense that "socialism," taken to necessitate both the collective ownership of the means of production and the allocation of resources determined directly by democratic will, has truly never been tried, though some countries have had or do have collective ownership of the means of production.

But if the missing ingredient of successful socialism is democracy, can a concept of "actually existing democracy," so to speak, be used to identify the best historical outcomes for "actually existing socialism"? Liberal-democratic institutions pervade the world in the twenty-first century and can be readily identified using measures such as the Polity IV Index. Of course, the types of democratic political institutions whereby all allocative decisions are made seamlessly through something akin to direct democracy, as described by socialists, do not presently exist and have never existed. Meanwhile, liberal-democratic institutions tend to be positively correlated with countries that have more economic freedom, if anything (Lawson and Clark 2010; Bjornskov forthcoming). F. A. Hayek (1944) outlined long ago the reasons for the difficulties in making the combination of high-quality, liberal-democratic institutions and socialism work (see also Friedman 1962).

If we use the Economic Freedom of the World (EFW) Index (Gwartney, Lawson, and Hall 2017) to identify the modern-day countries with the least economic freedom and the Polity IV Index as a measure of democracy, the present-day country that best pairs liberal democracy with the absence of economic freedom is Argentina. In 2016, Argentina scored a 9 on Polity IV's -10 to +10 scale, just short of the rating for the most democratic country and actually slightly higher than the score given to the United States. (2) But Argentina also received the fifth worst score on the EFW Index for 2017. Besides Argentina, the countries with the most democracy and least economic freedom are Myanmar and the Central African Republic. Based on those examples, it is not obvious that combining liberal-democratic institutions with socialistic institutions will yield notably better outcomes for socialism than outcomes in North Korea, Cuba, and Venezuela.

"Actually existing democracy" may not operationalize effectively as hoped. So instead of focusing on democratic political institutions to identify the best case for socialism as it has actually existed, we might rather consider the strength of a country's other government institutions. Countries that embrace a socialist ideology--in other words, that score very low on the EFW Index--are frequently governed by regimes that are incapable of actually exerting control over a country's economy. Some countries combine significant statutory intervention in the economy with a state incapable of even spending more than a small proportion of a country's income (e.g., Chad). Other countries with very low EFW scores have long been dominated by populists, such as Argentina under the Kirchners and Venezuela historically first under Hugo Chavez and now under Nicolas Maduro. And countries frequently cited as successful examples of socialism in popular conversations about "socialism," such as the Nordic countries, merely combine extremely effective states with fairly high levels of economic freedom, according to the EFW Index.

Another way to approach the question of what a "good" "actually existing socialism" might look like would be to see which countries historically have combined extremely capable states, similar to those governing present-day Nordic countries, with very low levels of economic freedom. Where has there been a large, effective, functioning state with little economic freedom? Answering this question, especially for the years before the fall of the Iron Curtain, presents data issues because such data were relatively sparse until recently. (3) However, an index more recently developed, the State Economic Modernity (SEM) Index (Murphy 2017), which uses only components of the EFW Index, may help provide an answer. It measures both the pure size of states and their willingness and ability to provide the key public goods associated with justice, law, and property rights. Countries that score highest in this index, as described in greater detail in the following section, are the strongest social democracies in the world. Countries that score the lowest in state economic modernity may have low economic freedom (such as Chad) or may have high economic freedom (such as Guatemala).

Therefore, one question that we can ask is, Which countries have historically had low economic freedom while also being governed by states with high state economic modernity? Although this question is not precisely the one posed by modern advocates of socialism, it does ultimately split the difference between the modern, high-quality social democratic states (e.g., Denmark) and "actually existing socialism" in practice, without invoking the need for the presence of empirically nonexistent political institutions for a country to count as socialist.

When this exercise is performed and applied to the year 1985, three countries can be identified as simultaneously embodying strong, effective modern states and socialist economic institutions: China, Hungary, and Israel. There is a name for the particular brand of socialism practiced in each of these countries--"socialism with Chinese...