The different sources of Socialism, according to Nobel Prize Winning Economist James M. Buchanan

As part of a recent Colloquium on Liberty and the Challenges to Liberal Neutrality hosted by Liberty Fund and Universidad Francisco Marroquín, I had the opportunity to read James Buchanan’s Article Afraid to be Free: Dependency as desideratum. In such article, Buchanan explains that there are at least four different sources or “wellsprings” of ideas that motivate the “extensions in the range and scope of collective controls over the freedom of persons to act as they might independently choose”. Those four sources of collectivism in order to restrict individual freedom are identified as the following: 1. Managerial Socialism, 2. Paternalistic Socialism, 3. Distributional Socialism and 4. Parental Socialism.  I intend on this post to describe the main characteristics of these sources of Socialism based on Buchanan’s arguments.

  1. Managerial Socialism: 

Managerial Socialism refers to the type of Socialism mostly predominant during the 20th century. Buchanan describes it as “The type of socialism that is defined as the collective ownership and control of the means of production, and which involves efforts at centralized command and direction of a national economy as institutionalized through a central planning authority”. This is the type of Socialism that was the focus of the Mises-Hayek theorem of economic calculation impossibility.  Both Mises in his work Socialism and later Hayek through the publication of the Fatal Coinceit, were able to demonstrate that Managerial Socialism represented an intellectual error leading to perverse incentives, gross inefficiency, corruption and the market dis-coordination brought about by the abolition of market prices and private property. Today, this type of Managerial Socialism in its purest form is largely abandoned, although in countries such as Venezuela, this type of Socialism is alive and in full force, with the devastating consequences that Mises and Hayek exposed succinctly during the economic calculation debate of the last century.

One could argue the case that Managerial Socialism is actually alive and in full force, especially in the monetary sphere, through central banking. It is true that central planning of the economy via monetary policy represents a modern form of Managerial Socialism, with all the implications that it entails; however an outright abolition of private property is in the grand scheme of things largely abandoned in the 21st century.

2. Paternalistic Socialism: 

Paternalistic Socialism refers to the type of push by self anointed elites in affirming that only through collectivization of choices, the actions of the masses can be directed toward patterns that “better fit their needs”. According to Buchanan, “The persons who adopt this stance do not necessarily object to capitalism, or rather, the market process, as the allocative means of implementing their objectives. Indeed the market may be left to do the heavy lifting, so long as the incentives are collectively adjusted so as to guarantee results dictated by the normative ideals of such elite”.

We find examples of this source of socialism in the different movements towards the restriction or prohibition of tobacco, and the push to organize the way people eat in efforts to combat obesity.

3. Distributionist Socialism: 

This source of socialism is perhaps the most widely seen in governments across the globe. It is the mantra of the so called “Social Democrats”. Buchanan explains that “the distributionist argument is exclusively about equality, or rather inequality, in the distribution of goods and services, without concern for the makeup of the bundle. The allocative function may be left exclusively to the market, as it responds to the preference patterns of persons as consumers and producers within the post-tax, post-transfer redistributional limits. The focus here is not upon what the market generates, or even on how it operates, but rather on the distributional outcomes that would emerge in the absence of the specifically directed and collectivized tax-transfer structure”.

An important example of nations that are famous for this type of distributionist socialism (social democracies)  are the Nordic countries: Sweden, Denmark, Norway, which are characterized for having market economies with large welfare states. However, one must be careful, as at least when it comes to Denmark, large welfare states and high tax rates are compensated with trade and commerce policies and systems that make markets free.

4. Parental Socialism:

As with Paternalistic Socialism (attitudes of elitists who seek to impose their own preferred values on others), Buchanan explains that ” parentalism refers to the attitudes of persons who seek to have values imposed upon them by other persons, by the state, or by transcendental forces”.

The term “parental” becomes descriptive in its interference that the attitude is akin to that of the child who seeks cocoon-like protection of its parents. The collectivity (the state) steps in and relieves the individual of his responsibility as an independently choosing and acting adult. In exchange, the state reduces the liberty of the individual to act as he might choose. People who vow for this source of parental socialism are willing to sacrifice liberty for comfort.

Why is it important to distinguish the varying sources of Socialism?

For classical liberal and libertarian ideals to flourish, it becomes very important to be able to engage in debates and offer solid responses to arguments proposed by those who believe in collectivist ideals. Often times, freedom advocates become immerse in circle-like arguments which offer no specific answers. For example, although it is true that all sources of Socialism have their roots in the kind of Socialism that Mises and Hayek succinctly debunked in the 20th century, that is Managerial Socialism, all the other sources of socialism remain in full force in the 21st century. And I dare to add that in many cases, people continue to view the role of government as that which provides the main characteristics of distributional, paternalistic and parental socialism. Take for example the case of the Nordic countries: How often do we hear the  following: “Socialism works, look at the case of Denmark” or “Socialism applied the Swedish way, works and its not the same as the Cuban type”. The truth is that all these Nordic nations are Social democracies, consisting of welfare states funded through high rates of taxation, but as explained previously, with market policies when it comes to trade and commerce. By learning to distinguish between different types of socialism, the way Buchanan explained, one can approach somewhat difficult questions about welfare states, social democracies, the tyranny of experts and understand how restrictions of individuals freedom to choose hampers the social coordination of markets and individual harmony that leads to prosperity.

James Buchanan Economist


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