The Primacy of Politics and the “Other” Socialism

Republicans in the U.S. have been sounding the alarm about socialism for a long time. They call everything that comes from the left “socialist,” that is, aimed at socializing property, performance, and responsibility. Are they conjuring up a mere bogeyman? Recently, we also heard from Peter Sloterdijk that we in Europe are living in semi-socialism or even three-quarter socialism, given the high public spending ratios of around 50 percent. Is he, too, a polemicist?

The primacy of politics over economics tends to be socialist because it competes with the free power of disposal over the means of production, which is subject to personal risk.

Socialism means socialization, i.e., the nationalization of the means of production of enterprises, factories, machinery—of capital in general—but also of real estate, land, and agriculture as a whole. Socialism means the politicization of the economy with the goal of political centralization, economic planning, and control— and “democracy”, but in name only. All this, of course, is for allegedly social reasons: to overcome poverty and exploitation, and to create a just world.

At first glance, such a scenario seems far from the current reality. But let’s take a closer look, as Friedrich Hayek did in his 1944 book The Road to Serfdom. The book contained the dedication “to the socialists in all parties.” At the time, there was a general euphoria for economic planning that permeated all political sides. “Planning” was the fashionable demand of the time. The “market” was discredited; only the planning state, it was thought, could have a salutary and social effect.

Every era has its buzzwords—today it is the “primacy of politics.” What that means is the primacy of politics over the spontaneous development of the economy and the logic inherent in it: the logic of property-based power of disposal over the means of production aimed at profitability and profit. The primacy of politics appears as a categorical demand—because so many things must be saved from the private actors’ grasp, which is not at all aimed at the common good: the euro, the banks, the environment, the climate, indeed planet Earth as a whole—and now, as a result of the fight against the pandemic, the economy itself. The state took it, and the state will give it back to us, greener, more climate-friendly, more society-serving—praise be to the primacy of politics!

The “Cold Heart” of Capitalism Creates Prosperity

In fact, we have already come very close to socialism. By no means with any form of actually existing socialism, but with the thinking that has always been the prerequisite for it. The primacy of politics over economics tends to be socialist because it competes with the free power of disposal over the means of production, which is subject to personal risk. Socialism takes the primacy of politics only to its ultimate consequence.

Any step that seeks to somehow restrict, direct, or regulate the free use of private means of production (or capital) for reasons of concrete political goals (the “common good”) tends to be socialist—even if in the process private ownership remains legally and formally in place. What is non-socialist, on the other hand, is the conviction that it is precisely private ownership of the means of production and their free use—in combination with risk and liability—that ensure the best use of resources and capital for the common good, since that is where innovation and growth in labor productivity, and thus increases in real wages and the general standard of living, come from.

This is exactly what has happened over the last two hundred years, as the Frankfurt economic and social historian Werner Plumpe—once a Marxist and member of the DKP—shows in his history of capitalism, published under the main title Das kalte Herz in 2019. It was precisely private property that allowed capitalism to become the most socially beneficial of all economic forms to date. For capitalism is based “on the evolutionary interplay of decentralized private property structures as engines of variation, on price-forming markets as catalysts of market success” that ensure optimal selection, and ultimately “on the political stabilization of these evolutionary mechanisms.”

Socialist thinking and socialist-leaning policies… are a perennial issue, constantly re-legitimized on the basis of false historical narratives about the allegedly antisocial capitalism of the past.

Yes, it is true that the heart of capitalism is “cold,” its language and its motives are not those of the socially-minded or of the common good. But it was, in Plumpe’s words, “from the beginning always an economy of the poor and for the poor (more precisely, the lower classes).” Capitalist mass production produced consumer goods affordable to all, products that had previously been luxuries of the rich, and produced steadily improving standards of living. Thus, capitalism became the source of wealth for the poor and previously destitute masses, who often despised it at the same time. The rich did not need capitalism.

The State as Savior

Socialist thinking and socialist-leaning policies, on the other hand, are a perennial issue that is constantly legitimized anew on the basis of false historical narratives about the allegedly antisocial capitalism of the past. In their spirit, socialist temptations are transforming and are manifesting themselves today, for example, as anti-freedom prescriptions of climate policy or—also in the name of the primacy of politics—in the increasing purchase of corporate bonds by the ECB, which is thus advancing a creeping nationalization of the corporate sector.

And finally—thank Heavens—they show up in the monster bailout funds of the EU and individual states. Bridge loans and compensation payments for the consequences of state-imposed lockdowns are of course demanded by justice. But the “other” socialists, the ones who despise the free market and private property, are lying in wait to seize the moment and perpetuate the expansion of state power at the expense of freedom. The policy of state support of unproductive enterprises threatened with bankruptcy—as long as they do not harm the environment—may have noble motives, but if allowed to prevail, it will once again produce just another variant of “real existing socialism,” and that means more poverty for all. Because state-fed enterprises—typical of socialism, and in capitalism now called “zombies”—do not create additional wealth but tie up resources that could otherwise generate general wealth.

Socialism, which always makes the same accusation that private property only creates prosperity for the rich, today also appears in the sheep’s clothing of the demand for industrial policy: The state is supposed to discover and promote particularly viable innovations, key technologies or to “lead markets with future potential.” Or there is the demand for the “entrepreneurial state” (Mariana Mazzucato): The state—because private actors supposedly have a worse nose for marketable innovations than the state—should finally create those real values that meet the true needs of the people. At the same time, a social policy is demanded that above all redistributes and makes the citizen a “social subject” (Ludwig Erhard). Social security stands above everything for the socialist, whereas individual freedom, which is associated with risk and personal liability, is under blanket suspicion for him, and he considers it in need of justification.

Where Does Socialism Begin?

“Property obliges” was said in the Weimar Constitution (1919) and so it made its way into German Basic Law, which adds: “Its use shall at the same time serve the common good.” This originates from a world of thought in which it was not yet clear that under the conditions of modern capitalism, according to the logic of the system, private property as such serves the common good. Admittedly, there are contexts in which the expression makes sense, the context of almsgiving, sharing, private welfare, charity and solidarity. It is absurd to use the truism that property obliges as a weapon against capitalism. Not only is it wrong, in fact, but it also shows that one has not understood how mass poverty is overcome and how general prosperity is created.

So where does socialism begin? It begins where property and private power of disposal over the means of production and resources—and their fundamental economic function of enabling competition, innovation and thus increasing prosperity—are restricted or even abolished in favor of social and ecological objectives. I am not referring here to regulatory requirements, such as for water protection or air pollution control, which do not constitute an encroachment on property rights. Rather, I am referring to regulatory interventions that restrict the power of disposal itself, such as a rent cap or redistribution-motivated requirements in building law that de facto devalue real estate property or make economically profitable use more difficult or even impossible. The same applies to the labor market—e.g., nationwide minimum wages—or climate policy, which may well be designed in line with property and market considerations but can also be misused to restructure the economy and thus also the system of private property. The transitions may sometimes be fluid, but that is precisely why policy restraint is called for.

What is happening is that here, by regulating restrictions on the power of disposal over private property in the means of production, socialism “begins,” but precisely to the extent that it begins, it hinders the wealth-creating—and as we also know today: environmentally and resource-friendly—dynamics of the market economy. The beginning of socialism, and thus the primacy of politics, is like sand in the gears of a free economy, but at the same time it reinvokes calls for the state to act as the fixer for the direct and indirect damage persistently blamed on capitalism, but actually caused by the primacy of politics.

Legal Framework: Yes—Politicization of the Economy: No

The state’s legal framework should act as an incentive to unleash the innovative potential inherent in capitalism’s creative logic of variation and selection. In other words, it should consciously forego the primacy of politics with regard to the concrete shape taken by innovation. The “other” socialism, by contrast, begins its triumphant march precisely when belief in the creative power of freedom fades and gives way to the “primacy of politics,” which now takes the place of a private power of disposal over the means of production in a self-designing, regulating, and ultimately always planning, capacity.

From a legal point of view, private property continues to exist, but its concrete use is increasingly controlled according to political objectives. Thus, it largely loses its wealth-creating economic function. And since every anti-market state intervention in the structure of the free economy leads to an intervention spiral, we may ask: Are we perhaps on the road to a new kind of serfdom through the state and through politics?

This question—or warning—is once again directed to the socialists of all parties.

 

This article appeared in a slightly modified and shorter version under the title “Der andere Sozialismus” in the Neue Zürcher Zeitung of March 13, 2021, p. 40. It is also available online at nzz.ch.

Translation from German by Thomas and Kira Howes

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