Margaret Thatcher famously replied to a question about her greatest achievement with the answer, “Tony Blair and New Labor”. She believed that her success in leading the Conservatives to three straight electoral victories (plus another for her successor John Major) had forced the Labor Party to give up its commitment to socialism and common ownership and instead embrace Blair’s Third Way, a sort of compassionate neoliberalism.
It occurred to me that one could say something similar about communism. Its greatest achievements were not in what it accomplished in the countries where a communist party ruled, but in inspiring the ideas and policies of others living in democratic and free market states. Below is my litany of communism’s backhanded accomplishments in the realm of policy and ideas. I would say it is an impressive list, far superior to what was accomplished in the lands behind the iron curtain.
The world of policy
Welfare state. The earliest version of the welfare state was Bismarck’s insurance policies which were designed not because Bismarck believed in them, but because he saw them as a way to draw workers away from the socialists and communists. More to the point, Bernstein’s creation of social democracy as a distinct economic and political ideology which justified the welfare state and gradual improvement of the conditions of the working class owed much to his criticism of Marxism (see Sheri Berman’s great work on this). The communists decisively rejected such efforts and instead insisted on immiseration and revolution (as Lenin put it, “the worse, the better”). More speculatively, the flowering of Western welfare states during the Cold War probably owed something to ideological competition with the Soviet Union for the allegiance of the working class. Indeed, some argue that our current neoliberal era and rising inequality are connected with the lack of an ideological rival rhetorically committed to workers.
Cold War liberalism. One could make a similar case for cold war liberalism, what might be called the operative philosophy of the US during the 1950s and 1960s. The philosophy, championed by figures like Isaiah Berlin, Raymond Aron, and Judith Shklar, “put the imperative to avoid cruelty and atrocity first” and “was directed primarily against Marxist philosophies of history”. While this school of thought has its critics - Samuel Moyn’s new book argues that it is too conservative - it also has its defenders, like Jan-Werner Muller, the author of the quote above. One might put the US civil rights movement in this box as well and note how it gained from the USSR’s rhetorical commitment to racial equality (and I would emphasize the word rhetorical). Some would even define Cold War liberalism more broadly and include Roosevelt’s fourth freedom, “freedom from want”, and thus the welfare state here as well.
Big push. The idea of the big push is that underdeveloped countries need a massive, coordinated program of state investment in order to develop a modern, industrial economy. The intuition is that building, say, a single factory or industry is doomed to fail because it lacks the needed suppliers and customers (backward and forward linkages in Albert Hirschman’s terms). All of these things need to be built in one massive, coordinated effort. I’m a bit unclear on the provenance of this idea, which emerged in the 1940s, but I assume that it owes something to the Soviet approach to industrialization minus of course its collectivization of agriculture and starvation of the peasantry. One version of the big push was in fact called an “Anti-Communist Manifesto” and its appeal was partially that it was not Marxist or revolutionary. The concept is naturally controversial (though less so than central planning), but continues to have supporters among mainstream economists (Brad Delong and Dani Rodrik both mention it positively as does Krugman in the link above).
Economic ideas
Hayek and information. Arguably the central idea in Hayek’s thought is the way that markets efficiently distribute knowledge across society. As Alex Tabbarok puts it, “a price is a signal wrapped up in an incentive.” This idea alone is enough for Tyler Cowen to rank Hayek as one of the greatest economists and it emerged from Hayek’s critiques of socialism and debates with its defenders like Oskar Lange. Again, my knowledge of the actual history here is weak, but it seems telling that Hayek’s popular exposition of these ideas in The Road to Serfdom was dedicated to “socialists of all parties.” One could go farther and add Hayek’s idea of a spontaneous order as a contrast to central planning. Bruce Caldwell in fact links much of Hayek’s thinking to arguments with socialism. Mises’s main contributions lay similarly in his analysis of the socialist calculation problem and the necessity of prices.
Friedman and freedom. As memorably expounded in his Capitalism and Freedom, one of Milton Friedman’s central ideas is the connection between economic and political freedom. I typically have trouble explaining this idea to students who are more likely to see threats to liberty from billionaires and corporations. The argument really only makes sense when the contrast is to a centrally planned economy like the Soviet Union, which my students only have a hazy sense of. I thus end up explaining how giving so much power to the state necessarily limits political freedom. This is precisely the contrast that Friedman emphasizes in his book and presumably influenced his development of the idea.
Soft budget constraint. Are there elements of standard economic analysis that emerge directly from the functioning of the communist economy? Hayek’s arguments are of course important, but somewhat abstract.1 Janos Kornai was probably the greatest scholar of the actual functioning of the communist economy and one of the central ideas in his work is the soft budget constraint. The theory describes the distortions induced when governments bail out loss-making industries, that is to say, allow them to produce beyond their means. The results include endemic shortages as well as all manner of corruption. The concept has since had wide applications, for example, in theories of federalism, but its origins are in the communist system. For a more general appreciation of Kornai’s contributions to economic thought, almost all drawn from study of the communist system, see this piece by Gerard Roland.
Institutional roots of markets. The transition away from communism was another place where communism provided inspiration, though now from its deathbed. Perhaps the main one was a renewed appreciation for the institutional roots of a free market economy. While liberalization and privatization were central to a transition away from communism, reformers arguably underestimated the importance of institutions necessary for the functioning of markets, things like cadastres, a functioning banking system, or financial regulations not to mention overall state capacity. I am personally a bit skeptical of whether this knowledge would have changed the transition much, due to both political economy considerations and the difficulty of building institutions, but knowledge is knowledge.
Political and social ideas
Popper’s theory of science and the open society. Karl Popper was a Marxist in his youth, but his disillusionment with its theory and practice laid the basis for many of his best ideas. His concept of falsifiability as a key criteria of science owes much to Marxism’s continual introduction of ad hoc hypotheses and reliance on dialectics whenever its predictions were not fulfilled (the same tendencies in psychoanalysis probably played a role here as well). His critique of historicism - the belief that history develops according to necessary laws - as “theoretically misconceived and socially dangerous” similarly is a direct response to Marxism. Indeed, Popper saw it as incompatible with an “open society” where individuals were free to criticize; the main enemies of that society were tellingly Plato, Hegel, and Marx. Though these ideas have their critics, falsifiability remains at least a part of many conceptions of good science and the open society has had practical impacts, not least in the philanthropy of George Soros.
The psychology of true belief. I’m not sure how to precisely phrase this idea, but I wanted to get at the main points of work by Czeslaw Milosz, Eric Hoffer, Arthur Koestler, and perhaps even George Orwell in the way that individuals could persuade themselves to embrace things that they know to be untrue. Partly this involves what Milosz calls ketman, the dual personality where one can publicly praise communism but privately nurse disagreement with it (see also Kuran on preference falsification). It also links to the way that ideology provides an escape from the self (Hoffer) and that history will absolve one of wrong behavior (Koestler). All of these theories found exemplars in the devotees (and sometimes ultimately victims) of communism.
The political importance of language. Orwell’s famous “black is white”, “war is peace”, and “2+2=5” as well as much of the rest of 1984 was of course inspired by the manipulation of language and thought under communist regimes (2+2=5 was actually used in the Soviet Union to propagandize for the five-year plan).2 Others pushed this analysis further. Vaclav Havel, for example, showed how the regime forced ordinary people, his greengrocer, to mouth much smaller lies in support of the regime as a way to show its power over them for all to see. In both cases, language is used to prevent us from seeing the truth. And these ideas remain relevant today. See, for example, Jacob Levy’s argument that they help to understand and combat Trump and other populists.
Can we go farther? I can’t really say how much Keynes’s ideas were influenced by the communist experience. My sense is that the Great Depression in the West was enough for him, but given his enormously broad interests, he presumably drew lessons from communism, which he detested. Were Buchanan and Tullock influenced by communism in the development of the public choice school? I couldn’t find strong evidence that they were. Meanwhile, I think the concept of the authoritarian personality probably owes more to the Nazi than the communist experience. I could have mentioned Kantorovich’s development of linear programming as central to contemporary economics, but it doesn’t really fit the point of this piece, which is the ricochet rather than direct impact of communist regimes. The same might apply to Esping-Andersen’s idea of decommodification which draws from Marx’s analysis of commodities.
Conclusion
My surprise in writing this piece was in how easy it was to find ways that the failures of communism inspired policy making and intellectual ferment outside of the communist region and intellectual community. It was a similar feeling to what Paul Poast describes in noticing how Russia is at the center of many theories of international relations and international security. Could we say that Russia is in a perverse way also at the center of the theory and practice of the modern economy?
And to go further, can we ask the counterfactual? What happens to policy and economic ideas without the communist experiment? I’m afraid to dive into this one. It is not quite as simple as looking at citations of Marx before and after the October Revolution and constructing a synthetic control (and maybe that wasn’t so simple either). But it seems likely that both our economy and our economic theories would look different without communist systems.
Though Cowen notes that Hayek directly inspired many successful entrepreneurs.
Orwell wrote that 1984 “was based chiefly on communism, because that is the dominant form of totalitarianism, but I was trying chiefly to imagine what communism would be like if it were firmly rooted in the English speaking countries.”