You may have thought that Socialism had
been definitively discredited when the greatest experiment ever conducted, the Soviet Union, collapsed with the Berlin Wall in 1989; yet
socialist ideas and parties, some of whom don’t dare call themselves by their
true name, still live on. Socialism ought to have been discredited when the
Berlin Wall went up in the first place in 1961, demonstrating to the world that
Socialism is a giant maximum-security prison.
But Ludwig von Mises, the Austrian
(later American) economist, demonstrated that Socialism could never fulfill its
promise no matter what variation was attempted nor how wise and virtuous the
men running it. He did this in 1922.
Think about that for a minute:
1922. The smoke and mustard gas of WWI
was barely clear. The Bolshevik ‘experiment’ in Russia
was only 4 years old and Stalin the Butcher of the Soviet
Union had not yet risen to power. Nobody had heard of Hitler or
Mao or Castro or Kim Jong Il or Idi Amin or Pol Pot. At that time, the
Socialist movement was ascendant all over the world, even in the United States;
intelligent men and women of goodwill could reasonably believe it held out hope
for a better, more prosperous and just world.
But Mises burst the bubble. He
demonstrated logically that every wage and price control, every tariff, tax,
privilege, prejudice, manipulation and regulation that does NOT derive from
government’s legitimate need to prevent and punish murder, robbery, assault,
fraud, theft, rape, persecution and conspiracy – every such interference
distorts and destroys information necessary for rational economic
planning and action. If some collective entity like the state owns or otherwise
controls all capital goods, all land, natural resources, factories, machinery,
health care services etc. then
·
there is no market for these goods
·
no buying and selling,
·
no bargaining and haggling,
·
no Supply and Demand.
·
If there is no market then there are no prices. Prices constitute the indispensable
information system for signaling the needs and scarcities in an economy,
and the cost of available alternatives. There are a hundred different ways to
build a building, and dozens of alternative materials and techniques for each
component. Which combination is the most economical? Who knows? Without prices,
there is no way of knowing. There is no other metric that can adequately
substitute for market prices.
·
Economic planning cannot function without these numbers.
That is why Socialism fails every time
it is tried: Economic calculation is impossible under Socialism.
And then there’s the bureaucracy. With
no markets there is no competition, neither incentive nor reward for better
customer service or to provide a higher quality product at a lower price. The
entire economy becomes like a giant post office or Department of Motor Vehicles,
with self-serving, inner-directed bureaucracies with languages and cultures of their
own, foreign to the rest of us, with iron-clad privileges, job security and
pensions that do not vary with how well or poorly they serve willing customers.
When you accuse liberals of leading us
down the path to Socialism and state bureaucracy with their massive government
programs, they scoff and wave you off like you’re some kind of nut case. “We’re
not socialists, we’re progressives”, they say. “We only want the best of both
systems, the Middle Way.”
But there is no ‘middle way’, in the
sense of a happy medium, best of both worlds.
Every forcible intervention in the economy, every wage and price
control, every tax and regulation that does NOT derive from government’s
legitimate need to prevent and punish murder, robbery, assault, fraud, theft,
rape, persecution and conspiracy, every such interference distorts and destroys
information necessary for rational economic planning and action and is a step
toward socialism and crisis.
Mises had been an Austrian artillery
officer on the eastern front during the Great War (1914-19). Where did he get the time and resources to
sit down and carefully think through profound philosophical and theoretical
issues? There was no History Of The Gulags
Of The Soviet Union or of the genocides of communist China
and Cambodia.
Yet Mises saw it all coming. To paraphrase Albert Einstein: ‘there is nothing
quite so practical as a good and valid theory.’
So, how come you’ve never heard of
Mises? The main answer is that he lost the popularity contest among
politicians, even Republicans, to Keyenes. (Remember Richard Nixon?: “We’re all
Keynesians now”.) Mises’ vision of limited government and individual liberty
does not glorify politicians and their grand projects.
A second reason is that much of Mises’
writing, such as his 900-page magnum opus Human Action, is written in thick,
academic prose that is inaccessible to most lay readers. But there is one work of his that is short
(100 pages), covers his complete philosophy, and is written in plain language: Economic
Policy: Thoughts for Today and for Tomorrow. This was distilled from a
series of lectures that he gave in Buenos
Aires, Argentina,
in 1959. Now there’s a country that could have profited from his advice, if
only they had taken it.