What does it mean to be a socialist in the 21st century, in the wake of a century of failed socialist and communist social experiments? We have already seen the use of the phrase “21st century socialism,” particularly in the work of Heinz Dieterich Steffen, who has been influential in Latin America. Dieterich has been a professor at the Universidad Autónoma Metropolitana in Mexico, D.F. since 1977; I first heard about him when I was in Ecuador in 2009. Dieterich has been closely associated with the left-leaning governments of Venezuela and Bolivia.

Partly under Dieterich’s influence, and partly simply using his slogan of socialism of the 21st century, Venezuela, Bolivia, and to a lesser extent Ecuador engaged in a so-called Bolivarian Revolution. But the Bolivarian Revolution has fizzled. Recently there was a good critique of the movement in Foreign Policy magazine, The Bolivarian Legacy by Douglas Farah, subtitled, “Hugo Chávez and his leftist allies will leave little behind other than failed economic policies, massive corruption, and shrinking political freedoms,” which pretty much sums up the author’s conclusions. I would have framed it even more strongly. There is absolutely nothing whatsoever “new” or “revolutionary” or “twenty-first century” about caudillo-style politics masked by claims to represent “the people.”

So much for twenty-first century socialism in Latin America. Now it seems that we are to find out want twenty-first century socialism means in France under the new president François Hollande. This, I think, will be rather more effective and more of a movement to reckon with, than the tendentious ideological formulations of Heinz Dieterich. Hollande is a career politician, and he will act as a politician, which is to say he will rule by policy, in the context of his party, and employing the institutional structures of the French government, which has been a strongly centralized state since the Sun King turned France into an Enlightenment superpower united under absolute monarchy. This is more about institutions than it is about personalities. By all accounts, Sarkozy was much more of a “personality” than Hollande.

The Financial Times ran two stories in today’s paper, Wealthy hit hardest as France raises taxes by Hugh Carnegy in Paris, and France: Ready to jump ship by Hugh Carnegy and Scheherazade Daneshkhu, both detailing French plans to dramatically raise taxes and to place salary caps on executives.

These policies will have a strong selective effect. Some wealthy people will leave France and take their businesses with them — perhaps many will do so. David Cameron has already promised to welcome French “tax exiles” to the UK:

“If the French go ahead with a 75% top rate of tax we will roll out the red carpet and welcome more French businesses to Britain and they will pay taxes in Britain and that will pay for our health service, and our schools and everything else.”

Thus France will lose some of its wealthiest citizens, some of its businesses, probably some international investment, and it will likely decline in growth, productivity, and competitiveness. If you want to start a dynamic new business in Europe, and believe that it may come to be worth a lot of money, you certainly won’t try to start that business in France.

That being said, is this policy necessarily ruinous for France? The answer to this depends upon how you define “ruinous.” I have no doubt that there are many who will characterize the developments in France as ruinous, or something similar, but it is to be observed that Hollande is not trying to foment a social revolution, he isn’t proposing the European equivalent of a Bolivarian Revolution, and he isn’t laying plans for mass nationalizations and confiscations, although the tax levels are already being called “confiscatory.”

I would not be at all surprised to see France settle into a comfortable if stagnant and ever-so-genteel decline — a decline that may be as comfortable to the majority of French citizens as Japan’s “lost decade” was to a majority of Japanese. Japan was and is a very wealthy country. It no longer aspires to great power status, and so its people could be relatively comfortable even in the midst of extended stagnation. Similar observations hold for France: France was and is a wealthy country; it no longer aspires to great power status, and so its people could be relatively comfortable even in the midst of extended stagnation. Moreover, mass sentiment in France may well be on the side of an economic leveling that will eliminate France as a major global economic competitor, but will nevertheless confirm the people in their moral rectitude; and in feeling that they are in the right, the people may be more satisfied with this moral stance than they would be with higher economic growth rates, especially if part of the growth rate is eaten up by executive salaries and shareholder dividends.

What I am saying is that Hollande’s variety of socialism may well be sustainable, especially in France, and perhaps also elsewhere in Europe. France could become a place that is perhaps not very economically vibrant, but one where the needs of the people are met with a reasonable degree of comfort (rather better than the comfort provided by the socialist economies of Eastern Europe behind the Iron Curtain), where freedoms and human rights are respected (rather more respected, again, than behind the Iron Curtain), and where the gap between the poorest and the wealthiest is systematically narrowed by legislation.

A sufficient number of “true believers” in the cause of France will remain in France to keep the major enterprises functioning, even if they could earn many times more if they went elsewhere. As I noted above, Hollande’s policies will be strongly selective. Those for whom wealth is of paramount importance will choose to leave; those for whom France, and being French in France, is of paramount importance, will choose to stay. From this selective process, France may gain in French nationalism even as it declines in economic competitiveness. A socialist France cannot expect to be a global economic competitor, but if it can keep the lights on and the people fed, this may be more important to the French masses than improving standards of living.

It has become an almost irritatingly repetitive commonplace that mathematicized economics cannot account for all the forces and complexity of an economy. I do not deny that this is true. A mathematical model is always a simplification that derives its predictive power precisely from being simpler than reality. There is no point is constructing a model that is a duplicate of the phenomenon to be modeled; the map, as we all know, is not the territory. Usually when this “criticism” of economics is made it has a strong moral slant to it, but surprisingly the criticism often misses some of the most important moral truths of economic life: that sometimes people will prefer to be poor and proud rather than to be slightly wealthier but at a moral cost they are unwilling to pay.

This is one formulation of socialism — trading moral rewards for economic rewards — though not one the socialists are likely to endorse. The tradition of socialist and communist thought is so steeped in absurd fantasies of maximized abundance in which, “each man’s share of labour would be light, and his portion of leisure ample” (in the words of Malthus), that it is all but impossible to get them to see that they are trading wealth for moral rectitude. And if that is what people want, that is what they will get.

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Grand Strategy Annex

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Last Monday I posted The Use and Abuse of Inefficiency, in which I suggested that a society might choose to have an inefficient economic system in order to forestall the economic equivalent of tyranny, just as the inefficiency of parliamentary democracy is sometimes put forward as a mechanism to forestall political tyranny.

In that discussion I several times touched on the issue of popular sovereignty and its place in contemporary political systems. It would not be hyperbole to say that the relation between the state and its people — or, if you prefer (and in the interest of greater precision), between a given nation-state and its population — is not only one of the great political issues of the modern age, but also one of the great moral issues of our time. For while nation-states putatively represent the interests of a given nation, that is, the interests of its people, this de jure concern is not always, not even often, realized in de facto institutions.

France is one of the scenes of the great struggle between people and government, state and population. The French state has been centralized since the middle ages, and this centralization has been strengthened by modern developments. On the other hand, France was the scene of the most radical of the political revolutions that swept away the feudal order and replaced it with a recognizably modern political order. Thus in France we see a strong centralized nation-state, as well as a population that has repeatedly sought political revolution, attempting to overturn the centralized nation-state.

The dialectic of state and people is played out in France in a very concrete way, and often with spectacular violence. It is a little difficult for someone from North America to appreciate it, but even a tourist’s view of France can provide some telling clues. Everyone knows what it is like to try to go to an museum in France only to find that the staff is on strike. The French strike often and strike with gusto. Sometimes, perhaps even often, these strikes turn violent. I recall walking around the base of the Eiffel tower and seeing several police vans parked in the area. I looked in their windows and saw lots of riot gear: helmets, truncheons, and shields.

It was utterly peaceful and quiescent that day at the Eiffel Tower, but the police were ready for a riot to break out nonetheless. The police in France are always ready for a riot to break out, and sometimes one does.

The relation between state and people in France is something like the relation between management and workers in a contested and often violent industry. To use the terminology of that sometime Parisian, Rousseau, this arrangement constitutes something of a social contract. The people of France are accustomed to a strong centralized government that often uses its police power with some brutality, and the government of France is accustomed to a population that sometimes riots violently. Is this an efficient arrangement? Perhaps not, but the French have learned to live with it. It sounds like I’m talking about Italy, where spectacular inefficiencies are often accepted as a matter of course in daily life, but that just goes to show you that societies strike all kinds of deals, and these deals have much more to do with history than with reason or rational planning.

This is the moment, then, when we can assert American Exceptionalism, for in the US, a society created during the Enlightenment, and shaped to reflect Enlightenment values, much is in fact the result of reason, rational planning, and rational compromise. And while the political left likes to remind us of violence of labor history in the US, on the whole life in the US is quite peaceful and orderly, important exceptions noted.

We have, over the past year, seen a financial crisis that has not only destroyed enormous fortunes, but has also devastated the savings and investments of ordinary middle class and working class Americans. Many who have saved a lifetime and have done the responsible thing have suddenly found the value of what they own cut in half. It is a painful experience. But you will notice that there is little or no rioting in the streets. As with the burst of the dot com bubble (or the burst of the Enron bubble), so with the burst of the real estate bubble, Americans accepted their ruin with remarkable equanimity.

Recent financial shenanigans have also included a couple of spectacular pyramid schemes, those of Bernard Madoff and Allen Stanford. The collapse of these enormous schemes devastated fortunes great and small. People were angry, and they shouted their anger to television cameras, but overall, things remained peaceful. A few years ago a pyramid scheme collapsed in Colombia and there were riots. A few years before that, pyramid schemes collapsed in Albania and there were riots in which people were killed.

The upshot of this is that, in the US, there is a different social contract than those which prevail in France, Colombia, or Albania. In each case, observe, there is a formal constitution, but there is also a tacit social contract that involves its own assumptions, expectations, and conventions. Is the tacit social contract more or less important in the life of the nation than the explicit and formal constitution, or vice versa? We all know that there are nation-states that utterly ignore their written constitutions, and others that regularly change their constitutions, and nothing else much seems to change. Thus the life of a nation is much more than its formal constitution.

It is to be expected that the observations concerning the political life of the nation also hold for the economic life of the nation, with similar distinctions between implicit social contracts and formal economic institutions as well as the difference among nation-states between both of these. And it is not only the difference between formal and informal institutions (the fact that these institutions exist in parallel), but the tension between the two, that defines the unique economic climate of a nation-state.

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