Groucho Marxism

Critics of socialism (or Marxism) love to point out how many people died in socialist regimes. Particular examples they like to cite are the Soviet Famine of 1932-1933 which killed around 6 million people, and the Chinese Famine of 1959-1961 which killed around 30 million people. These numbers seem shocking, but as any quantitative social scientist will tell you, numbers like these are largely meaningless on their own. In order to give them some meaning we need to place them into context. The best way to do that is to compare them against a counterfactual – that is, to try to figure out how many people would have died from these or similar events if the regimes they occurred under had been capitalist rather than socialist.

This is of course very difficult to do in practice, as who knows what would have happened if the Soviet Union and China had been capitalist at those times. The Soviet Union would have had a different name for a start! What we can do though is compare these events with mass death events that occurred under capitalism. Here, capitalism does not fare too well. The deadliest event in human history was WWII, which killed around 80 million people; and before that there was WWI, which killed around 20 million people. The total death toll from these events was around 100 million, way above even the most inflated estimates of the total number of people killed by Stalin and Mao. These wars were both started by capitalist countries. Even so, does it really make sense to attribute these deaths to capitalism?

If critics of socialism want to attribute deaths that occurred under socialist regimes to socialism, then by symmetry they must attribute deaths that occurred under capitalist regimes to capitalism. Conversely, if they don’t want to attribute deaths that occurred under capitalist regimes to capitalism, then they cannot attribute deaths that occurred under socialist regimes to socialism. Otherwise, they are cherry-picking data to fit their narrative. Such a critic may counter that of the 80 million that died in WWII, around 25 million were citizens of the socialist Soviet Union. Indeed, some particularly exaggerated estimates of the death toll under socialism include these 25 million deaths. But this makes little sense when these people died as a result of a war started by a capitalist country (Nazi Germany).

It must be understood that both WWI and WWII were imperialist wars driven by capitalist interests. It is entirely appropriate therefore to attribute the deaths that occurred in these wars to capitalism as an ideology. By the logic set out above, we must therefore also attribute the deaths that occurred in the Soviet and Chinese famines to socialism. This doesn’t really paint either system in a very flattering light. It seems that under both systems there is likely to be an event that will result in mass deaths; the only difference is that under capitalism this event is more likely to be a war, whereas under socialism this event is more likely to be a famine. I think that this tells us something about the nature of the two ideologies.

The Hungarian economist Janos Kornai argued that the key distinction between capitalism and socialism is that the former is a demand-constrained system, whereas the latter is a supply-constrained system. A demand-constrained system is one where employment and output in the system are what they are because of the level of aggregate demand is what it is; if the level of demand increases then output and employment in the economy will increase, with little increase in prices. By contrast, a supply-constrained system is one where an increase in the level of aggregate demand, say because of larger investment or larger government expenditure, does not have the effect of raising output and employment in the economy, but instead increases prices.

The fact that socialism is a supply-constrained system means that if demand for basics such as food goes up, the supply does not respond, which creates shortages – and in extreme cases, famines. Capitalism does not have this issue, but inevitably leads to war due to the inherent need for competition, expansion, and profit, which can escalate to conflict between nations vying for resources, markets, and geopolitical power. It may seem therefore that both systems are equally bad; but I think this is wrong-headed. It generally better for a system to be supply-constrained, as then actual production is matched to production potential. If a system is demand-constrained then either production potential is under-utilized, or production is unsustainable. On that basis, socialism is clearly the better system.

The issue with socialism arises when the system’s production potential falls too low to meet demand. This was the cause of both the Soviet and Chinese famines in the mid-twentieth century. In theory this would also be an issue if socialism was implemented now, as global demand for goods and services is currently higher than the Earth’s production potential: humanity currently uses the equivalent of around 1.8 Earths to provide the resources consumed and absorb the waste produced. However, it is precisely capitalism’s lack of a supply constraint that is the cause of this over-consumption and the resulting environmental devastation. The future of out planet relies on us curtailing our economic activities to a level within planetary boundaries. Such a curtailment will never occur under capitalism.