Convergence Theory

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Convergence Theory


As early as 1848 in the Communist Manifesto Karl Marx contended that human civilization developed in stages from pastoral to communist harmony, driven by an ineluctable historical dialectic. Capitalism from his perspective was an internally contradictory phase destined to be destroyed by a proletarian revolution ushering in a transitory socialist epoch before arriving at the end of history. Private property for Marx was the original sin that caused humanitys expulsion from the Garden of Eden. It provided a legal basis for concentrating community wealth in a few powerful hands, the emergence of market exploitation, the class struggle, and in Marxs view communisms inevitable triumph. Economies featuring private ownership of the means of production and markets consequently were intrinsically inferior (exploitive, inegalitarian, and unjust), and could not be blended with, or supersede, communism.

Vladimir Lenin and his Bolshevik successors accepted these concepts. Markets of various sorts could and did exist according to Soviet ideologists during the socialist interlude following the destruction of capitalism, but not in the final stage of historical dialectic.

However some Western liberals, like Francis Fukuyama, used similar historicist logic to reach the opposite conclusion. They argued that private ownership of the means of production was essential for individual utility maximization. Original sin for them was any power including the state that prevented people from achieving consumer sovereignty in the private sector, and democratic sovereignty over the provision of public goods. Peoples appreciation for the virtues of democratic free enterprise was weak before the eighteenth-century Scottish economist Adam Smith, but Fukuyama claimed that momentum is building and democratic capitalism will be the end of history (equated by many with globalization). As in the Marxist concept there is no room for blended solutions. Proletarian dictatorial democracy, and private propertyless capitalism are oxymorons. Capitalism and communism cannot converge, and socialism cannot be anything but transitory.

Consequently, Nobel Laureate Jan Tinbergens assertion in the late 1950s and early 1960s that Soviet and Western market systems were immutably converging provoked a heated reaction from Marxists, democratic free enterprisers, and those who preferred various third ways. True believers of both Marxist and Fukuyamaist persuasions predictably rejected convergence out of hand, while those who supported cold war reconciliation without committing themselves to communism or democratic free enterprise welcomed Tinbergens theory. Social democrats were especially pleased because Tinbergens vision prefigured the eventual triumph of the emerging European Union. The end of history would blend democracy, private ownership of the means of production, individual utility seeking, and markets with planning and state-supervised social justice. Of course, as the economist Ota Sik pointed out, the blending could go the other way, substituting authoritarianism for democracy, and Stalinist injustice for the welfare state, but supporters were confident that reason would preclude negative outcomes in the long run.

It is possible to dismiss Tinbergens musing as partisan wishful thinking. Rationalist historicism is not physics. But convergence theory was predicated on a legitimate insight. Robert Dorfman, Paul Samuelson, and Robert Solow among others had used linear programming to demonstrate that there was a perfect duality between computopic (ideal, but unachievable computer based simulations of optimal market equilibria) planning and competitive market outcomes where planners and consumers preferences were identical. It followed that the gulf perceived by Marxist and democratic free enterprise theorists between communism and capitalism was only a matter of efficiencythe practical effectiveness of markets and plansnot a matter of technology or ideals. In an imperfect world where markets are sometimes exploitive and plans inefficient, neither communism nor perfect democratic free enterprise is attainable, and once this is appreciated, Tinbergen claimed democratic socialism would gradually become universally accepted as the pragmatic second best.

This conjecturealthough seemingly supported in the 1960s by converging growth rates, institutional adaptation including European indicative planning, and the Soviets partial introduction of profit-based managerial bonus incentives (Liberman reform)however was not consistent with all the facts. The Soviets had not rescinded their criminalization of private ownership of the means of production, business, and entrepreneurship (Marxist national ownership of the means of production and state monopoly of business) as Tinbergens theory required. European social democracy did not rely on physical systems management. And the ideal mixing of optimal planning and perfect markets never materialized.

Nor have subsequent developments been more confirming. Postcommunist reassessments of Soviet economic growth have shown that East-West growth convergence was an illusion. Indicative planning, central to Tinbergens theory, has been largely abandoned by states, and the USSR never relinquished physical systems management, despite the economist John Kenneth Galbraiths predictions to the contrary. And most tellingly of all, the Soviet Union collapsed and Eastern Europe rejected communism in the early 1990s instead of converging. North Korea and Laos have stayed the communist course rather than blend. And post-Soviet Russia and China failed to transition to social democracy despite adopting mixed economic arrangements. Other nations are resisting transition, and liberalization is altering social democracy as Tinbergen understood it. The evidence suggests that while rationalist historicism has widespread popular appeal convergence like all end-of-history hypotheseshas little predictive value, a point lost on many theorists who continue to try to show using dubious official aggregate growth trends that alien systems are fundamentally alike, or are converging to a common high economic frontier.

SEE ALSO Capitalism, State; Cold War; Decentralization; Democracy; Galbraith, John Kenneth; Liberalization, Trade; Marx, Karl; Russian Economics; Samuelson, Paul A.; Socialism; Socialism, Market; Solow, Robert M.; Tinbergen, Jan


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Steven Rosefielde

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Convergence Theory

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Convergence Theory