You Can’t Deny that Venezuela is a Socialist Calamity – Foundation for Economic Education – Working for a free and prosperous world

Source: You Can’t Deny that Venezuela is a Socialist Calamity – Foundation for Economic Education – Working for a free and prosperous world

 

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Economists have long understood the dynamic at work here. Marx and other socialists thought that those in charge of the planning process, and for Marx that was the whole community, could rationally determine what to produce and how best to produce it in the absence of markets, exchange, and prices. Since Mises’s famous essay in 1920, however, we have known that doing so is not possible.

Genuine market prices are necessary for people be able to make determinations of value in anything larger than a household. Without prices, there is no way to know, not just what people value but (more importantly) how to make what they value using the least valuable resources possible.

In other words, rational production decisions are impossible without market prices, and market prices can’t exist without exchange and therefore there has to be private ownership, especially of the means of production.

But what happens when those given the power to make such decisions realize they cannot achieve their perhaps well-intentioned goals? The power does not go away. More often than not, the first reaction is precisely what we’ve seen in Venezuela: crack down harder on producers for not living up to impossible demands and ration goods to punish consumers for “hoarding.” And when that doesn’t work, go to more draconian authoritarianism, and do whatever it takes to hold on to power.

After a while, these exercises of brute power have consequences. They attract those with a comparative advantage in exercising such power (and perhaps those who have a high consumption value for doing so) into positions of power. Marxism is not Stalinism, but the inability of Marxian socialism to live up to its promises creates the conditions that make Stalinism possible and likely. In other words, Stalinism is an unintended consequence of Marxian socialism.

In addition, as state control becomes more clearly ineffective, people start to work around it by establishing distorted forms of market exchange. Bribery of politicians and bureaucrats, threats to producers, cronyism, and nepotism all become the ways of getting things done. Scarce resources have to be allocated somehow, and markets are like weeds in that they will grow in the cracks left by the failures of planning.

Intellectual Negligence

To the outside world, corruption and poor implementation caused socialism to fail. But that gets matters completely backward: corruption and ineffective political actors are not the cause of socialism’s failure, but a result of that failure. When you make real markets illegal and when your attempts at planning inevitably fail, what you get is the bribery and corruption of black markets. Once again, these are not what Marxism intends, but they are an inevitable unintended consequence.

My Childhood as a Renegade Entrepreneur – Foundation for Economic Education – Working for a free and prosperous world

Source: My Childhood as a Renegade Entrepreneur – Foundation for Economic Education – Working for a free and prosperous world

It’s Only Fair If Everyone Profits

One day, the administration decided to host a club fundraising festival where each club was allowed to sell one item purchased from a grocery store at lunch in order to raise funds for its club—the only time they ever broke the cafeteria monopoly.

I left campus to purchase 150 burgers from Wendy’s for $1 each. I then sold them for $5 per burger on campus, and gave away a free Arizona Iced tea with the burger, which undercut the two other vendors selling Arizona Iced tea.

We eclipsed the rest of the fundraising group that day by over 200 percent and the school accused us of cheating and being greedy.

They confiscated most of the funds and distributed it among the other students to make it more “fair.”

At last the truth had come out in full. It had taken almost eighteen years but I had the answer they had never given me before: my teachers hated the free market.

The administrators regarded commerce as dirty. They didn’t see the value I created for students who wanted something better than cafeteria food for lunch. They saw value that had been acquired at the expense of others.

Socialism Requires a Dictator – Foundation for Economic Education – Working for a free and prosperous world

Source: Socialism Requires a Dictator – Foundation for Economic Education – Working for a free and prosperous world

We begin with what Thomas Sowell calls the battle between the “constrained” and the “unconstrained” vision of humanity.

This highlights a fundamental difference in the conception of man in the classical liberal versus socialist worldviews. Does man have a basic and invariant human nature that may be multi-sided and complex, but no less fixed in certain qualities and characteristics? Or is human nature a malleable substance that can be remolded like clay in the sculptor’s hands by placing human beings into radically different social arrangements and settings?

Classical liberals have argued for the former, that human beings are basically what they are: fairly reasonable, self-interested beings, guided by goals of personal improvement and betterment as the individual comes to define those for himself. The social dilemma for a humane, just, and widely prosperous society is how to foster a political and economic institutional order to harness that invariant quality in human nature so that it advances human betterment in general rather than becoming a tool of plunder. The classical liberal answer is basically Adam Smith’s system of natural liberty with its open, competitive, free market order.

Members of what was emerging as the socialist movement in the late eighteenth century and into the nineteenth century argued the opposite. They insisted that if men were selfish, greedy, uncaring and insensitive to the circumstances of their fellow men it was due to the institution of private property and its related market-based system of human association. Change the institutional order in which human beings live and work and you will create a “new man.”

Indeed, they raised to the ultimate human societal ideal, a world in which the individual would live and work for the collective, the society as a whole, rather than only for his own bettered circumstances, presumably at the expense of others in society. Socialism heralded the ethics of altruism.

Socialism argues for the “unconstrained” vision: human nature is infinitely malleable, and all you need to do is tweak it to get the society you want. Classical liberalism argues that human nature is constrained by traits that are “hard-wired” in to the design of the human being, and that will not be changed no matter what you do.

The dilemma, Marx explains, is that even after the overthrow of the capitalist system, residues of the previous system would permeate the new socialist society. First, there would be the human remnants of the now discarded capitalist system. Among them would be those who want to restore the system of worker exploitation for their own ill-gotten profit gains. Equally a problem would be the fact that the “working class,” although freed from the “false consciousness” that the capitalist system under which they had been exploited was just, would still bear the mark of the capitalist psychology of self-interest and personal gain.

Thus, there had to be in place and in power a “revolutionary vanguard” of dedicated and clear seeing socialists who would lead “the masses” into the bright, beautiful future of communism. The institutional means of doing this, said Marx, is the “dictatorship of the proletariat.”

In other words, until the masses, the workers, are freed from the individualist and capitalist mindset that they had been born into and mentally made to act within, they needed to be “reeducated” by a self-appointed political elite that has liberated their minds, already, from the capitalist false consciousness of the past. In the name of the new socialist-era freedom-to-come, there must the reign of a dictatorship made up of those who know how humanity should think, act, and associate in preparation for the full communism awaiting mankind.

At the same time, the dictatorship is necessary to suppress not only any attempts by the former capitalist exploiters to restore their power over the, now, socialized property they used to own. These voices from the capitalist past also must be prevented from speaking their self-serving lies and deceptions about why individual, self-interested liberty is morally right, or that private property serves the betterment of all in society including workers, or that freedom means those “bourgeois” liberties of freedom of the press, or speech or religion or democratic voting. The masses must be brought to, and indoctrinated in, the “true” consciousness that freedom means the collective ownership and direction of the means of production and the selfless serving of society that the socialist revolutionary vanguard in charge knows to be true.

This also explains why the socialist phase of the “dictatorship of the proletariat” could never end in any of the Marxist-inspired revolutionary regimes over the last one hundred years. Human nature is not waiting to be remolded like wax into a new human form and content. Human beings seem generally not be hardwired to be altruistic, selfless eunuchs. Thus, self-interest always rises to the surface in people’s conduct, and if it is to be ethically denied, there must be political force to keep repressing it and trying to constantly extinguish it.

In addition, as long as there were capitalist enemies anywhere in the world, the dictatorship of the proletariat had to be preserved in the socialist countries to assure that the reeducated minds of the workers already lucky enough to live under socialism were not re-infected by capitalist ideas coming in from outside the people’s collectivist paradise. Hence, the “iron curtain” of censorship and thought control in the Marxist parts of the world, in the name of the people over whom the revolutionary vanguard ruled.

Socialist Economic Planning Equals Commanding People

Also, once private enterprise was abolished through the socialization of the means of production and brought under the control and direction of the socialist government, a central economic plan was now essential. If not the profit-motived individual entrepreneurs in directing the private enterprises under their ownership to satisfy consumer demands guided by the competitive price system, then someone must determine what gets produced, where, when and for which purpose and use.

The direction of “the people’s” collectivized means of production requires a centralized plan concerned with designing, implementing and imposing it on everyone for the good of the society as a whole. This means not only lumber and steel must be assigned a use in a particular place in the socialist society, but so must people. Hence, in the communist economies of the twentieth century the state’s central planning agencies determined who would be educated for what skills or expertise, where they would be employed and the work they would do.

Since the state educated you, assigned you work and served as your only employer in that job, the state also determined where you would live; not only in what city, town or village, but what apartment in which government-owned residential building would be made your abode. Recreational facilities, places for rest and vacations, the types of consumer goods to be produced and distributed where and for whom: these, too, were all centrally determined by the socialist planning agencies following the orders of the dictatorship of the proletariat.

Not one corner of everyday life – its form, content, quality, or characteristics – was free from the control and determination of the all powerful and all-encompassing socialist state. Its design and attempted implementation was truly “totalitarian.” It may have been Benito Mussolini, the father of fascism, who coined the term, “totalitarianism” as meaning “everything in the State, nothing against the State, nothing outside the State.” But nowhere over the last century was this more insistently, pervasively, and coercively imposed than in the communist countries molded on the model of the Soviet Union as created by Vladimir Lenin and horrifyingly institutionalized by Josef Stalin and their successors.