From the inception of the Fabian Society in 1884, Fabians have been interested in socialism, including both social democratic capitalist and democratic socialist economic systems.

In mainstream debate around socialism and capitalism, simplistic, dualistic thinking is often starkly apparent. People often strongly affiliate themselves with either side of the capitalist-socialist divide, but as the lifelong Marxist, Eric Hobsbawm notes:  

“It is worth observing that the simple dichotomy ‘capitalist/socialist’ is political rather than analytical. It reflects the emergence of mass political labour movements whose socialist ideology was, in practice, little more than the concept of the present society (‘capitalism’) turned inside out… Instead of classifying the economic systems of say, the USA, South Korea, Austria, Hong Kong, West Germany and Mexico under the same heading of ‘capitalism’, it would be perfectly possible to classify them under several” (Hobsbawm 1994 p.200).

Simple dichotomies can undoubtedly possess rhetorical and mobilising appeal, and perhaps also a level of psychological comfort or identity. However, dualisms, particularly in their simplest form, can be analytically misleading. The diversity of both capitalist and socialist systems, in theory and practice, make it possible to argue that certain variants of capitalism and socialism have more in common with each other than they do with variants of their own side of the dualism. Oscar Wilde’s argument that ‘the truth is never simple and seldom pure’, is regularly borne out.

The leading socialist intellectual Erik Olin-Wright makes the point that all real-world economic systems are necessarily hybrid in nature, being a mix of (1) state-power (2) market-power, and (3) social-power that is vested in civil society. Olin-Wright’s work usefully debunks the recurrent tendency to advocate for economic systems that seek to exclude, or depend exclusively upon, just one of these three forms of power.

This kind of nuanced analysis is characteristic of the area of study known as Comparative Economic Systems (CES). CES is a sub-field of political economy that looks at different types of economies, both theoretical and real. It is a rich area of knowledge, brimming with useful insights for those seeking to make a better world. As such, it is naturally of interest to Fabians, given their ongoing interest in various forms of social democratic capitalism and democratic socialism.

A little history

Earlier economists, such as Marx, had recognised the existence of different types of economic systems (e.g. feudalism, capitalism, socialism etc). CES subsequently emerged as a clearly identifiable field in the 1930s. The seminal works were Calvin Bryce Hoover’s analysis of Stalinist command socialism in Russia, and capitalism under Hitler.  

CES’s popularity surged during the economic system rivalry of the Cold War (1945 to 1991). For some of that time, the capitalist world not only viewed the socialist world as a military threat but as a competitive economic threat, given that at times the economic growth rates in the USSR were higher than for major capitalist countries such as the US. Given this genuine economic system competition, it is unsurprising that CES was offered by universities around the world.

However, CES declined as the USSR drifted into economic stagnation, and then collapsed altogether in 1991, and post-1978 China transitioned into something approximating state-capitalist. Many simply concluded that ‘capitalism won’ and that CES was no longer relevant, leading to its decline inside universities. To the best of my knowledge, CES is no longer taught in any Australian university. This contributes to a larger problem of curricular narrowness that is steadily killing off the study of economics in both high schools and universities.

Does CES Still Matter?

Has CES had its time, or does it still matter? In the past three decades there have been theoretical and conceptual developments which have great potential to extend our knowledge of comparative economics. And there has been a recent relaunch of CES in Australia. Let me provide you with three reasons why CES remains relevant.

First, CES can survey any type of economy, including the many variants of capitalism, past and present. As such, it provides a rich counterpoint to the often-parochial nature of Australian policy discussion. Real-world case studies allow you to travel through space and time and learn just how different economies can be, in terms of their design and function. A comparative lens also allows you to better benchmark and evaluate the performance of your own economy and society. For example, Scandinavian countries glaringly outperform Australia on a range of economic, social and environmental indicators. As The Australia Institute’s Nordic Policy Centre points out, this presents a well-spring of lessons for Australia about what can be done and how.

Second, because CES demonstrates the dramatic variety of different types of capitalism and socialism it provides an antidote to the simplistic, dualistic thinking that is often found among advocates and defenders of both systems. Some forms of socialism, such as the market socialism of former Yugoslavia, are genuinely different from Stalinist command socialism in terms of how they work and the outcomes they tend to produce. Likewise, many countries we think of as capitalist have significant degrees of government intervention and public ownership which is often not recognised, such as Singapore where 80% of housing is government owned, or Southeast Asian ‘tiger economies’ who have had highly successful industry policies to develop industries seen as having strategic value.

Third, CES provides a much-needed counter to the reductionism of much economic analysis, by analysing the economy as a system of interlocking and interacting elements that come together to form a more-or-less coherent whole. This sets it apart from microeconomic analysis, which is highly atomised. It also differentiates it from much macroeconomic analysis given how often such analysis is microeconomic in its foundations. An economic systems perspective is enormously important when it comes to the nitty gritty of policy design. All too often policies are formulated and advocated without due consideration of how they fit within the larger system. This creates a distinct risk of making the system incoherent.

As the distinguished Sovietologist Alec Nove notes:

“some reformers, or analysts of reform models, imagine that there is a sort of ‘reform supermarket’, and from its shelves one can pick the best features of various models, while leaving the rest. This is not in fact possible. The choice is between packages, the contents of which are functionally or logically interrelated, and some of which are bound to cause difficulties” (Nove 1991 p.120-1).

Developments in CES

Some of the earlier CES scholarship and case studies have stood the test of time very well and can still reliably alert policymakers in advance as to what to expect regarding certain institutional configurations and what might be done to manage any of the predictable challenges. Nonetheless, CES is not static. For example, consider the significant contribution made by the Nobel prize winning economist Elinor Ostrom. Her institutional political economy provides practical guidance for the design of a wide range of formal and informal rules that economies need to function effectively, in particular addressing the problem of managing common social and environmental resources.

Diving deeper into CES

If this article has whetted your appetite for a deeper dive into CES, the only prerequisite is some curiosity and a willingness to contemplate different perspectives. As Ha-Joon Chang points out in this rather brilliant video, 95% of economics can be understood relatively easily and then even the remaining 5% can be grasped in broad conceptual terms. It is just made to look more complicated than it actually is. Economics is indeed for everybody, and a good case can be made that a wide level of critical economic literacy is essential for genuine political democracy.

Economics is all too often used as a way of limiting people’s sense of possibility, but it need not serve such a dismal and dull function. Indeed, any comparative or historical work, and any survey of competing frameworks provides a rewarding and secure foundation in which to think about the challenges in front of us and how we might more effectively respond to them.

Tim Thornton,
June 2025

Dr Tim Thornton is the Director of the School of Political Economy, a Senior Research Fellow at the Economics in Context Initiative at Boston University, and a Senior Research Fellow at the Global Development and Environment Institute at Tufts University.  

References

Hobsbawm, Eric (2009) The Age of Extremes 1914-1991, Abacus, London.

Nove, Alec (1991) The Economics of Feasible Socialism Revisited, Harper Collins, London.

Further study

For those wanting to dive more deeply into CES, one option is to undertake a course with Tim Thornton’s School of Political Economy (SPE). It offers a subject on comparative economic systems, economic history or an introductory subject in political economy and economics that surveys a range of competing approaches that allows people to gauge the strengths and weaknesses of each approach.

SPE is part of a growing network of organisations that provide tertiary level-courses from outside a university system that is widely recognised to be broken or at least deeply dysfunctional. Similar organisations include the Melbourne School of Continental Philosophy and The Brooklyn Institute for Social Research.