It’s Not Socialism, It’s Clientelism

Socialism has enjoyed something of a renaissance in the US over the past few years, with the rise of populist politicians like Bernie Sanders and Alexandria Ocasio-Cortez, who proudly embrace the label. Opponents associate socialism with the crimes of Stalin and the failures of Chavez; proponents argue that this is a strawman, and insist that democratic socialism is something entirely different from authoritarian socialism.

In spite of the appearance of special pleading, however, there is something essentially different about the arguments for the new socialism. There have been few outright calls for nationalizing the means of production. Rather, political energy has been geared towards redistribution of both resources and status, along interest group lines. This is not Soviet socialism: if we grant it the name of socialism at all, we might call it socialism of the Latin American pattern. A more apt term, though, is clientelism: a method of political administration based on the exchange of favors for loyalty. The pining for it unites today’s self-styled anti-capitalists with many on the populist right, where it has yet to distinguish itself by a clear label. They, similarly, are not fascists at all—as the accusation goes, though few self-describe that way—but clientelists. The fact that their client groups are different should not cause us to overlook this basic similarity.

This is not a defense of either position: historically, clientelism has proven an even more potent way to kill an economy than either socialism or fascism.

What Is Clientelism?

First, we need to distinguish between economic systems and administrative systems. Capitalism and socialism are alternative economic systems: different ways of answering the question who owns the means of production? Clientelism, on the other hand, is an administrative system. It is not opposed to capitalism, but to bureaucracy. (Democracy vs. authoritarianism would be a third distinction.)

Administrative systems are the structures through which organizations make decisions. These systems are ubiquitous: you encounter them at work, at places of worship, in your school and community groups—anywhere people come together and establish procedures to accomplish a goal. In the private sector, administration is called management, but it takes on particular significance in political bodies, where we can’t count on profit and loss to weed out dysfunctional systems.

Though organizations will be established with a goal in mind, the people within them can have a variety of interests, opinions, experiences and so on, not all of which will align. Some may not want to work hard. Some may have other ideas about how the organization should achieve its goals, or what those goals should be. Others may just want to accrue power and influence. As the ubiquity of office politics attests, harmonizing this diversity is by no means a trivial endeavor.

The fundamental problem of administration, therefore, is what economists call the principal–agent problem. Given the variety of interests, opinions and work ethics in any organization, how do you incentivize the people under you to work hard and do their jobs the way you want them to?

Bureaucracy and clientelism are two ways of answering this question. A bureaucracy makes decisions based on objective and prespecified rules. This is both the greatest strength of bureaucracies and the principal complaint about them. They are cold, inhuman and sometimes even Kafkaesque. And yet, the functional bureaucracy is one of the most remarkable widespread innovations of the past few centuries, part of what I’ve called a rise in organizational capacity—remarkable for exactly the same reason as strong but limited states: they both manage to answer the question, how do you make sure that the people enforcing the rules have an incentive to follow them?

This question is extremely hard to answer reliably. The developed world has apparently stumbled upon an answer, but it’s not clear that we understand entirely how we’ve made it work, or that such an understanding is even possible in principle. Which is why, historically, bureaucracy has been far less common than clientelism.

By contrast with a bureaucracy, a clientelist organization solves the principal–agent problem through networks of personal obligation. If it’s too difficult to ensure my loyalty to the organization as a whole, I can at least be made loyal to my boss, who protects my sinecure and defends me from other departments. In this case, the boss is my patron and I am his client: this is the fundamental relational molecule out of which clientelist structures are built. My boss, in turn, is a client to his own patron, and I may have my own clients under me. Motivation is quid pro quo: information and loyalty flow up the hierarchy from clients to patrons, benefits flow down from patrons to clients.

Clientelism and bureaucracy also characterize the interface between the organization and the people it serves. In the market, especially locally, I might frequent the laundromat down the street not because it’s the most convenient, but because I know the proprietor. In local politics, aldermen may entrench themselves as patrons of their local constituency, and provide an interface between that constituency and their patrons further up the government hierarchy. In this case, constituencies are organized into identity groups through which benefits are dispersed, and which ensure loyalty through their own internal structures.

Clientelism may seem like an aberration from the perspective of first-world bureaucracies. We’d probably describe it as corrupt. But it’s an ancient strategy, older than either capitalism or socialism, and remarkably resilient. Clientelism is how all large-scale political bodies were organized prior to the seventeenth century, and clientelism is what bureaucracies collapse back into when they lose the inclination to abide by their own rules. The key to this resilience is the fact that the quid pro quo element ensures that everyone who matters is invested in the system, even if it harms growth in the long run.

In the US today, we are seeing not only a passive devolution of our bureaucracies: we’re seeing open calls to replace them with clientelism.

What’s Wrong With Clientelism?

If some of the examples from the previous section sound benign enough, like patronizing the grocer you know, it’s because scale is the crucial variable.

The human mind developed in a small social environment and is adapted to keep track of social obligations on that scale. Clientelism builds directly on this capacity. Indeed, there’s something particularly human about it. Clientelism feels personable; it feels warm; it feels like belonging. And, at small enough scales, it is. There’s certainly no moral or practical imperative to abandon your neighborhood grocer and switch to Amazon to save a few dollars. There’s no need to organize the local PTA as a formal bureaucracy. We rightly feel that something would be lost by expunging these elements of community and personal obligation from our lives. Context, loyalty, understanding—these are all important parts of a healthy community, which bureaucracies are particularly inept at taking into account.

But things change as we consider larger organizations. Healthy community shades imperceptibly into good-old-boy networks, even at the scale of small-town administration. At larger scales, it shades into smoke-filled rooms and then into outright graft and corruption. All this suggests that what naturally repulses us about bureaucracies is perhaps not bureaucracy itself, but simply large administrative bodies as such. If large administrative bodies are necessary in the modern world—and experience suggests that they are—the humanizing appeal of clientelism is a false allure.

But is our revulsion at these examples of scaled-up clientelism justified?

Consider the dashed hopes of Russia and its post-Soviet satellites after the collapse of communism. The conventional wisdom went like this: Soviet communism is a repressive and inefficient system of central control. Dismantling it, privatizing the state-owned enterprises and subjecting them to market competition should foster efficiency, innovation and—ultimately—accelerated economic growth.

With a few exceptions, this has not been borne out. Indeed, in most post-Soviet states—including, most significantly, in Russia—growth rates have been lower than under communism. How could that have happened?

The conventional wisdom was not wrong in its evaluation of Soviet communism. Economically, the system was inefficient, and, politically, it was repressive. Where the conventional wisdom erred, however, was in overlooking the importance of administrative systems. While there were important areas in which it was necessary to know someone to get something done—and, in this sense, clientelism was a way of routing around unworkable bureaucratic rules—Soviet Russia had a relatively effective bureaucracy, which (sometimes brutally) tamped down more blatant forms of corruption.

Because the Soviet system had closely linked economic and political functions, dismantling the command economy also dismantled those administrative structures. In Russia, the privatization process was co-opted by a nakedly corrupt kleptocracy, in which the assets of Russian firms, representing vast amounts of wealth, were funneled away to well-connected elites and offshored. Subsequent administration in Russia and its satellite states has been similarly kleptocratic. In the years following the collapse of communism, Russian GDP contracted by over 40% and the country was only saved from complete bankruptcy in the early 2000s by rising oil prices.

Venezuela is another example. Like most Latin American growth disasters, its spectacular ruin is not a function of socialism proper (though Chavez’ extensive nationalizations certainly did Venezuelans no favors), but rather the collapse of a lavish clientelism, previously propped up by the distribution of oil revenues in exchange for political support. Naturally, when the benefits dry up, the hierarchy collapses. An economy can hobble along under an impure form of socialism, but sudden fiscal implosions in wealthy countries happen because patrons can’t afford not to dissipate any windfalls in favors to their clients.

Finally, look at the hockey stick graph of global economic growth. Compared to the vast increases in wealth we’ve seen starting from around the 1700s in Western Europe and more recently elsewhere, every other episode of growth in history barely registers as a blip. Many have asked: why didn’t the Industrial Revolution happen in Rome? Or China? Or anywhere else? One crucial element seems to be that northwestern Europe was the first to escape from clientelist administration. Countries outside of Europe have since managed to grow to the extent that they’ve been able to establish effective bureaucracies in place of ordinary clientelist networks.

So how does that lead to growth?

Recall that clientelism is an exchange of benefits for loyalty. As Douglass North, John Wallis and Barry Weingast have documented, large-scale political bodies find it easiest to generate these benefits by creating valuable privileges and bestowing them upon supporters. This was the basis of feudalism in Europe, where the main privilege in question was land tenure, but—in some way or another—all political bodies prior to the 1700s held themselves together this way. North, Wallis and Weingast even call this the “natural state” of political organization.

These privileges, of course, are zero-sum—they don’t create value: they transfer it from outgroups to the ingroup. And, as William Baumol has argued, when the best way to get ahead in a society is by playing zero-sum games, the energies of the best and the brightest are diverted away from positive-sum activities like commerce, invention and exchange: the basic elements of economic growth. To a greater or lesser extent, this was the situation everywhere in the world prior to 1700.

Clientelism in the US Today

The establishment of well-functioning bureaucracies, through which an organization can enforce its own rules without siphoning off value to ensure loyalty, is one of the most precious achievements of the modern world, one that has allowed the bulk of creative energies to flow into positive-sum outlets for the first time in human history. This is precisely what the new clientelists threaten.

It is important, therefore, to be able to recognize clientelism. Republicans frequently accuse Democrats of standing, in effect, in a patron–client relationship to America’s ethnic minorities. In the past, this has been dismissed. But the so-called socialism of AOC amounts to essentially this, and respectable opinion is quickly catching up. The rule of law, the ideal of meritocratic bureaucracy, the idea of formally neutral rules at all, whether administrative or legal, are all now commonly castigated as structurally racist. Once again, the inhumanness of bureaucracy is brought to the forefront: its refusal to make exceptions, to take context into account, to allow outcomes to be second-guessed.

Essentially, a significant power bloc of society now feels that it can divert more value to itself by replacing the fixed rules of bureaucratic administration with what Noel Johnson and Mark Koyama have called “identity rules.” Such rules explicitly organize the identity categories that have become increasingly salient in recent decades into permanent interest blocs and embed them in a clientelist administrative structure, through which benefits are distributed. This is not uncharted territory: this is simply a bureaucracy gutted of its self-conception devolving into the stable, zero-growth administrative structures of the premodern era. As the devolution progresses, intra-left fights over whether identity rules should be structured along ethnic or class lines can be expected to intensify.

This is by no means a purely left-wing phenomenon, however. The modern progressive left is unique in building up an ideological superstructure to legitimize its favored clients, but the Trumpian right has indulged in a great deal of opportunistic clientelism—though, of course, with different clients. Trump’s speeches betray a conception of politics as an exchange of favors for support. The administration’s open nepotism is another concrete manifestation of this, and the selection (and regular replacement) of cabinet members, as well as (to a lesser extent) civil servants more broadly on the basis of loyalty is a disturbing atavism. More dangerous in the long run, however, are the efforts to dismantle hard-won bureaucratic safeguards against clientelism, most importantly, the merit system in hiring. The alternative has been aptly called a patronage system: patronage is simply clientelism looked at from the top of the hierarchy, rather than the bottom.

Conclusion: What Now?

Whether principled or opportunistic clientelism poses a greater danger, I cannot say. But, in the American context, the fight for good governance, for bureaucracy over clientelism, is not a partisan fight: it cuts through both parties. We must resist the temptation to let political battles devolve into a question of whose clients shall receive the spoils of politics—a state from which politics in most developing nations has yet to emerge, and to which we may yet regress.

Clientelism is mankind’s default way of organizing large-scale administrative structures, especially with salient ethnic cleavages. It is not surprising that it has assumed various names. Socialism, anti-capitalism, Trumpism, Perónism, populism—none of these get precisely at the phenomenon in question, and, if we misidentify it, we cannot fight it. If socialism was the greatest existential threat to the developed world in the twentieth century, the twenty-first century presents us with a new one, more insidious because it is not new and radical, but ancient and comfortable. We must, therefore, be wary of the false allure of humanizing our bureaucracies, of the all-too-easy temptation to placate power brokers by creating and distributing privileges and outsourcing governance along identity lines. We must resist the exploitation of our empathy in the service of clientelist governance, and stand up proudly for the crowning achievement of effective and meritocratic administration, that for the first time in history, released human creative energies to achieve their full potential and, in just a few short centuries, lifted most of the world out of extreme poverty. It would be to our eternal shame to let ourselves slip back.