Friedrich August von Hayek, Review of S. and B. Webb, Soviet Communism: A New Civilization

Hayek’s newspaper review, originally published in 1936 as “A ‘Scientific’ Civilization: The Webbs on Soviet Communism” and reprinted with editorial notes in 1997, combines substantial praise for Sidney and Beatrice Webb’s investigation with a fundamental criticism of their interpretation of Soviet planning. Its central distinction is between describing an administrative system and explaining how that system coordinates production economically. The Webbs’ command of institutional detail makes their book an outstanding source, but, Hayek argues, their sympathy with a deliberately constructed, “scientific” civilization prevents them from recognizing the economic function of profits and market prices.

The review proceeds from the structure of Soviet government to the operation of planning, then broadens into a criticism of the intellectual outlook shared by the Webbs and Soviet leaders. Hayek praises the first volume’s account of government and social organization as exceptionally comprehensive, detailed, and instructive. Their lifelong commitment to social reconstruction is not simply an obstacle to understanding: combined with investigative competence, it has produced a “labour of love.” Yet the second volume, addressing the system’s functioning, exposes the limitations of that commitment. The Webbs anticipate permanently successful planning and extraordinary increases in wealth while endorsing the exclusion of the profit motive.

But, like the Communists themselves, the authors have a curious blind spot which makes them unable to see either the function which profits serve in a capitalist society or the need for an alternative in a society differently organized.

This is a functional objection, not merely a defence of profit-seeking as an incentive. Hayek asks what performs the coordinating and evaluative work of profits when profitability is abolished as a criterion. His argument therefore does not depend on claiming that Soviet workers lack motivation. Indeed, he credits the Soviet system’s partial restoration of market mechanisms with considerable success.

This is particularly true in the labour market, where they have succeeded in making the price system work with an efficiency which, on account of the trade unions, exists nowhere in capitalistic countries.

The concession is pointed: capitalist economies themselves can obstruct the price mechanism, while a communist economy can use it effectively. The relevant distinction is between working and suppressed mechanisms of coordination, not simply between political labels. Piecework and a competitive labour market can encourage individual effort without securing efficient organization of production as a whole. Hayek thus separates the performance of individual workers from the direction and combination of their labour.

The Webbs recognize widespread industrial inefficiency despite strong incentives, but they follow Soviet explanations in attributing it to insufficient enthusiasm and loyalty among intermediate administrative personnel. Hayek instead treats the difficulty of measuring administrative work as a symptom of the missing profitability test. Bureaucracy cannot be overcome merely by demanding greater commitment from officials. Nor does rigorous bookkeeping resolve the problem if the prices entered in the accounts are fixed by the plan rather than responsive to economic conditions.

For cost accounting, and book-keeping generally, serves as a test of efficiency only because it is based on prices which reflect the relative scarcity of the different materials and productive factors, and thereby indicate to what extent it is necessary to economize them.

This passage supplies the review’s central economic explanation. Accounting is useful not simply because it makes operations numerically precise, but because its prices convey information about scarcity. Administrative accuracy cannot substitute for that information. Hayek asks whether planners have found a way to determine and continually adjust the relative social value of innumerable commodities; the Webbs’ exposition, he says, provides no such method. His criticism concerns what their account fails to establish, despite its abundance of institutional and technical detail.

Under “A Task Unsolved,” Hayek crystallizes the difference between technical accomplishment and economic coordination:

The real problem of maximizing production does not consist, as they seem to believe, in using all existing resources somehow, but in using existing resources in the most effective manner.

Mobilizing resources is not equivalent to allocating them effectively. In Hayek’s assessment, Soviet planning has not independently solved this problem: its successes rely on restoring prices or copying methods already found profitable in capitalist economies. The conceptual move is to shift attention from whether production occurs to how competing uses of scarce resources are evaluated. More effort, fuller employment, and sophisticated engineering do not by themselves demonstrate economic efficiency.

The closing sections place this confusion within a broader intellectual history. Hayek associates both the Webbs and Soviet leaders with late nineteenth-century rationalism, especially the prestige acquired by natural science and engineering. Their mistake is to treat methods successful in those fields as exclusively authoritative for organizing society. Reason becomes overconfident, claiming not only to prescribe legitimate inquiry but to determine the course of future development. Hayek consequently questions whether this “scientific” civilization offers the best conditions for intellectual, and ultimately material, progress.

The conclusion joins the Soviet “cult of science” to a “disease of orthodoxy.” Hayek values the Webbs’ enthusiastic account as evidence for future historians, while ending with Beatrice Webb’s earlier concern that this creed demands individual subordination to a scientifically trained mind’s working plan. That ending brings the economic and intellectual criticisms together: the authority of a comprehensive plan is not proof that it can coordinate production effectively or sustain free development of thought. The review’s enduring relevance lies in its compact distinction between technical control, economic knowledge, and the freedom required for further discovery.