Quora Answer: Does a Socialist Economy Require Growth?

The following is my answer to a Quora question: “Does a socialist economy require growth?”

Firstly, we have to understand what sort of socialist economy we are talking about.  When people, especially Americans, think socialism, they actually think communism or Marxism, with a planned economy.  Socialist economic theories encompass a vast field, from Karl Heinrich Marx, on the extreme left of the spectrum, to the theories of Janos Kornoi, to the works of socialists such as John Maynard Keynes, whose theories underpin much of modern fiscal and monetary policy in capitalism.

Socialism itself is a philosophy that can be roughly described as the needs of the collective superseding the needs of the needs of the individual.  The opposite of socialism is not capitalism, but libertarianism.  And just like libertarianism, there are many forms of socialism, from the radical agrarians, to the social anarchists, to socialist democracies of the modern nation state.  The latter are mixed economies.

On one hand, we know that Marx and Friedrich Engels were not trained economists, and their ideas of planned economies have proven to be failures.  That is why no truly communist state has ever succeeded.  People are not the same, and to enforce that artificial uniformity means bringing everything down to the lowest common denominator.

On the other hand, the predatory capitalism of Ayn Rand is also not the answer.  Society cannot thrive when it cannibalises the lower classes.  When there is a vast disparity in wealth, and little to no social mobility, we get a large underclass that is disenfranchised.  It is no longer in their interest for the state to continue as it is, and this leads to revolution.

This brings us back to the original question, which is actually a non sequitur.  All economies require growth, because the opposite of economic growth is recession.  The question between planned, capitalist and mixed economies is about how that growth can be achieved, and at what cost.  The planned economy emphasises distribution of wealth over growth, which stagnates growth.  The capitalist economy emphasises growth over distribution of wealth, which leads to economic imbalance, followed by a cycle of growth and collapse which is unsustainable in the long term.  As such, all sensible governments have some form of a mixed economy, mixing socialist and capitalist economic theories.  The very concept of a central bank is socialism.