Sam Ghandchiسام قندچي State Economy as the Foundation of Despotism

Sam Ghandchi

اقتصاد دولتي ستون اصلي استبداد در ايران


After the experience of all the communist countries, some people still do not want to take a clear stand on the issue of state ownership as the main form of the country's ownership.  Dominant role of state ownership, makes the state in the undeveloped countries, to be the main owner of the country, and it becomes the economic foundation of the dictatorship.  Therefore the need to clearly pronounce the opposition to any attempt to make state ownership the main form of ownership in the country, is a very important program topic for futurist Iran.


Is Socialism More Just? After so many examples of Soviet Union, Eastern Europe, China, Vietnam, North Korea, Cuba, and others in the last century, it seems like nobody would deny the lack of democracy in state socialism with command economy and after seeing the luxury of the state elite in all those countries, nobody denies that none of them were examples of social justice and egalitarianism either.


Nonetheless, the Left still insists that socialism is an ideal which is more *just* than a property-owning democracy, and therefore they keep advocating the leftist platform, with the hope of creating the ideal liberal democratic socialism, instead of developing the property-owning democracy and working on how to get social justice designed into the latter.  They think still socialism is the quick road to social justice thru eradicating the property-owning democracies of the West, albeit this time by replacing them with a liberal democratic socialism. 


The forces advocating this new left agenda in the West, have no real impact on the economics and politics of the Western countries, except for mostly siding with the old economy in most of these countries, and not the new post-industrial economy, and are active against globalization, nonetheless they are not anything of significance outside of some university departments in the West, and this is why nobody really spends the time to write critique about them.  But new left has quite an attraction for the intellectuals in countries like Iran.  Why?




The intellectuals in countries like Iran see the socialist solution to be a panacea, a shortcut, which is a lot easier to implement, to arrive at a just system, than trying to build justice into a property-owning democracy.  Because for the latter, one would first need to create a property-owning democracy in Iran, which is a formidable task by itself, and then one would need to break up some of the state-owned enterprises, create progressive taxation, institute anti-trust laws, establish nongovernmental social welfare, as I have noted in A Futurist Viewpoint,  and many other basic changes in the economy and social structure need to take shape (, to be able to build justice into such a property-owning democracy, and cannot be achieved by simply issuing a command after taking power.   


We are talking about a country that people have hardly paid any taxes and the state has always been the biggest owner and has owned the oil industry which is 90% of all the revenue -generating capital that the country owns and the state has been paying the citizens and not the taxpayers paying the state.  So it is a pretty tough undertaking, to plan a property-owning democracy for Iran, and wanting to build-in justice into that system.  Whereas in the eyes of the leftist intellectuals, there is a shortcut of socialism where one can just make the ownership of the means of production to be public, and social justice to follow.  Easy and quick panacea to all the social ills in one easy shot.


Of course, the new leftists, separate *public* and *state-owned*, because they know well that the synonymy of the two in the Communist countries, meant the tyranny of the state, and they know nobody would buy repeating the experience of Soviet Union and China, and are well aware that such a program is a total failure for both freedom and justice.  So they call for a liberal democratic socialism.


The scenario they depict is very enticing even to those who have already witnessed the failure of the Soviet Path, Chinese Path, Cuban Path, Albanian Path, North Korean Path, Vietnamese Path, and all other paths of Communism.  Even some of those who have seen the stagnation of the path of Socialism of the Second International in Sweden, Austria, and many other West European countries, may think the new left plan may not end in the same stagnation, because at times, it talks of strong force of market (although contradicting itself).  Why is it enticing?  I think Karl Popper had summed it up pretty well when he asked the same question personally from himself in his autobiography and answered it as follows:

"I remained a socialist for several years after my rejection of Marxism; and if there could be such thing as socialism combined with individual liberty, I would be a socialist still. For nothing could be better than living a modest, simple, and free life in an egalitarian society.  It took some time before I recognized this is as no more than a beautiful dream; that freedom is more important than equality; that the attempt to realize equality endangers freedom; and that, if freedom is lost, there will not even be equality among the unfree." [Karl Popper, “Lessons of This Century”, 1997, P.5]


Therefore simultaneously achieving freedom and social justice, as I have discussed in Wealth and Justice in Future Iran,  is very complex.


Whereas, the social justice in the model of a liberal democratic socialism is a very enticing proposition, as it claims to usher in freedom and equality at the same time, without all the headache of progressive tax systems, anti-trust efforts, welfare initiatives, and continuous checks and balances, etc. 


Let’s examine the different systems with regards to the issue of social justice and see where the liberal democratic socialism will stand.




John Rawls in his rigorous works on justice as fairness addresses the issue of justice independent of any comprehensive systems (including the liberal system), and comes up with the following two principles to define justice, which is pretty much acceptable:

“(a) Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all; and

 “(b) Social and economic inequalities are to satisfy two conditions: first, they are to be attached to offices and positions open to all under conditions of fair equality of opportunity; and second, they are to be to the greatest benefit of the least-advantaged members of society .. [John Rawls, “Justice as Fairness”, 2001, P. 42]”

The above pretty much summarizes the meaning of justice in two complimentary ways:


1-  On the one hand it means guarantee of all the basic liberties that people should be *equal* in having, and one finds them spelled out in documents such as the U.S. Bill of Rights.


2-  On the other hand it means *equal* opportunity to compete  for a position in the state or a job where  people are *unequal* in having, as fought for in all the civil code, etc.  And the greatest benefit of the least-advantaged members of society which is what Rawls has always emphasized on moving the social minimum to the highest point thru equal opportunity (and welfare in systems that accept it).


It is interesting that Rawls mentions the ideas of Marx and Marxists in this regard, that property-owning democracy creates forces that block the above ideals of rights and equal opportunity, and in response, he Rawls notes that real liberalism cannot be compared with ideal socialism, and vice versa.  But real liberalism should be compared to real socialism which is way worse than real liberalism in realizing both principles of justice.  Then he continues his discussion of the five ideal systems.


Keeping these two criteria in mind, we can easily see which systems are better foundations for achieving social justice in our times.  Actually John Rawls himself enumerates five kinds of regimes viewed as social systems, complete with their political, economic, and social institutions, which pretty much sums up all systems that one can find in the world today and in the following paragraph, he lists them and sums up the main questions that can help one to evaluate them:

"(a) laissez-­faire capitalism; (b) welfare-state capitalism; (c) state socialism with a command economy; (d) property-owning democracy; and finally, (e) liberal ( democratic) socialism.  Regarding any regime four questions naturally arise. One is the question of right: that is, whether its institutions are right and just. Another is the question of design: that is, whether a regime's institutions can. be effectively designed to realize its declared aims and objectives. This implies a third question whether citizens, in view of their likely interests and ends, as shaped by the regime's basic structure, can be relied on to comply with just institutions and the rules that apply to them in their various offices and positions.  The problem of corruption is an aspect of this. Finally, there is the question of competence: whether the tasks assigned to offices and positions would prove simply too difficult for those likely to hold." [John Rawls, Ibid, P.136]

Rawls does not focus on the last questions, which most of the conservative thought focuses on, when refuting the inefficiencies of the welfare state.  Not that the issues of corruption and their relation to the design of the state, and the conflicts of interests of the citizens as functionaries and customers of the state, and the issue of competence needed to handle such functions, are unimportant in his eyes.  But the focus of Rawls is on whether the structure, as an ideal case, is just.


I need to note that for countries like Iran, the issue of design of the state, and corruption, are very important topics to study, and even having a true democracy in Iran, although it brings the corruption more to the open, but it will not make the problem go away.  If the design of the system requires state employees, who can hardly make a minimum wage, but at the same time gives them the authority in a state office to make decisions that can have the value of millions of dollars, corruption is built into such a system.  Also if the design requires certain skills, but the system is unable to pay for such skills, there will be high inefficiencies in the state apparatus,  which again will cause corruption.  I will not discuss this further here and suffice it to say that this is an issue that hopefully I will address in a separate paper, in the future, when the time allows.  For example a system may allow the equal opportunity, but may create the environment to make the realization of it impossible.  In this treatise, the assumption is that all these systems work as the ideal they are supposed to be, so let’s continue our discussion of the topic.


Returning to the topic, John Rawls notes that out of the five systems noted above, the first three do not meet the requirements of the principles of justice. 

“Laissez-faire capitalism (the system of natural liberty) secures only formal equality and rejects both the fair value of the equal political liberties and fair equality of opportunity. It aims for economic efficiency and growth constrained only by a rather low social minimum.  Welfare-state capitalism also rejects fair value of political liberties and has large inequality in property ownership, for example most of the productive assets and natural resources are owned by the state.  And state socialism with a command economy supervised by a one-party regime violates the equal basic rights and liberties, not to mention the fair value of these liberties. A command economy is one that is guided by a general economic plan adopted from the center and makes relatively little use of democratic procedures or of markets (except as rationing devices).”  [John Rawls, Ibid, P.137]

Thus we are left with property-owning democracy and liberal socialism.  Rawls continues that

“both a property-owning democracy and a liberal socialist regime set up a constitutional framework for democratic politics, guarantee the basic liberties with the fair value of the political liberties and fair equality of opportunity… While under socialism the means of production are owned by society, we suppose that, in the same way that political power is shared among a number of democratic parties, economic power is dispersed among firms, as when, for example, a firm's direction and management is elected by, if not directly in the hands of, its own workforce. In contrast with a state socialist command economy, firms under liberal socialism carry on their activities within a system of free and workably competitive markets.  Free choice of occupation is also assured.”  [John Rawls, Ibid, P.138]

Rawls notes that the right to property which is included in the first principle of justice does not mean private property in productive assets and thus he does not refute liberal socialism on that ground.


He notes that “background institutions of property-owning democracy work to disperse the ownership of wealth and capital, and thus to prevent a small part of society from controlling the economy, and indirectly, political life as well”.  This is a very important point.


Regardless of how democratic liberal socialism to be, it will end up with small part of society to control the economy as had been seen by the elites in the socialist countries.  Because they are the ones who will represent the productive assets and lack of ownership in the means of production means that such small elites *are* the owners.  In contrast, the property-owning democracy avoids this, by ensuring the widespread ownership of productive assets and human capital, and this is why equal opportunity as well as political liberties are supported to make the system fair.



Nevertheless, let me emphasize that showing property-owning democracy to be superior to liberal socialism, for democracy and justice, does not mean that the current capitalist societies are the best that post-industrial society can achieve. 


In fact, to maximize the minimum of the basic needs in society that John Rawls emphasizes in his book “Theory of Justice” in 1971, and his venture into enlightened self-interest are beyond the current Western societies.   He always notes that for fairness, the "greatest benefit of the least-advantaged members of society" is to be guaranteed.  In other words supporting the first principle, meaning political liberties, and ensuring to maximize the social minimum, does not mean to stop the motivation for activity, which is killed in the socialist societies of even the Swedish type, because is is achieved here, thru the second principle of  justice, i.e. equal opportunity, and not by charity.


In conclusion, let me note again that showing that socialism is less just than the property-owning democracies, in meeting both principles of justice, does not mean to stay at the level that Western democracies are today.  It means to understand that going for socialism is *not* going beyond these systems, and those who believe socialism is taking them beyond these systems, are dreaming of an old solution for a new problem. 


To go beyond the existing democracies, one should look into advancements of property-owning democracies, in light if the post-industrial developments, whether in the area of Democracy or  Social Justice.


Hoping for a democratic and secular futurist republic in Iran,


Sam Ghandchi

March 6, 2005


This article is from Chapter 7 of the new edition of Futurist Iran book
















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For a Secular Democratic & Futurist Republican Party in Iran