Why Socialism Must Always Fail

This is an article that appeared in Capitalism Magazine. It is a down-to-earth exposition and elaboration of the problem of economic calculation posed by Ludwig von Mises. The economic calculation critique has continued to be the best explanation of why people should reject any form of socialism. It appeared in the 1920s but several people have not grasped or continue to ignore the impossibility of socialism. For this, I want to do my part of helping to educate as many as I can that only free markets are based on reason and thus desirable.

The article is quite long, which is why I will only quote certain excerpts. But, interested readers are given a link by which the full text can be accessed.

 

http://www.capmag.com/article.asp?ID=600

 

Why Socialism Must Always Fail: Ludwig Von Mises on Economic Calculation under Socialism

by Emmanuel Forgolou  (June 25, 2000)

"Without calculation, economic activity is impossible. Since under Socialism economic calculation is impossible, under Socialism there can be no economic activity in our sense of the word ... All economic change, therefore, would involve operations the value of which could neither be predicted beforehand nor ascertained after they had taken place. Everything would be a leap in the dark. Socialism is the renunciation of rational economy." -- Ludwig von Mises, Socialism, 1981, pp. 103-105.

Von Mises Socialism

First published in 1922 (under the title Die Gemeinwirtschaft), Mises' masterpiece Socialism was the lone dissenting voice to challenge the prevailing intellectual orthodoxy of his time.

In the aftermath of the Russian Revolution, an entire army of "useful idiots" (as Lenin contemptuously called Western intellectuals) were proclaiming the superiority of socialism. Blind to the massive evidence of socialism's failure that started accumulating as soon as the Bolsheviks came to power, collectivists throughout the world were singing paeans to the wave of the future that would allegedly sweep the outmoded capitalist methods of production into oblivion.

An essential aspect of Mises' exposition of the irrationality inherent in socialism is his concept of "economic activity." Mises does not use this notion to describe any processes entailed in producing goods. Arbitrary production plans set by the caprice of some commissar or planning board do not constitute economic activity. To qualify as economic activity in Mises' use of the term, production must be guided by rational principles.

The context in which Mises establishes the irrationality of socialism rests on the fundamental economic difference between capitalism and socialism, which economically consists of the private vs. communal ownership of the means of production.

 

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Although Mises' analysis is purely economic, it illustrates the effects of an abstract philosophic principle in an economic practical context. That principle is that capitalism is the only economic system based on reason, while socialism rests on arbitrary whim. While capitalism cannot be effectively defended solely on economic grounds, Mises' exposition is of tremendous value to philosophical defenders of capitalism.

Mises' conclusion can be combined with the defense of capitalism on the basis of the rational moral code defined by Ayn Rand (in "The Virtue of Selfishness" and "Capitalism: The Unknown Ideal"). In a brilliant demonstration of the power of integration, the philosophy of reason and sound economic theory concur to uphold the rationality of capitalism and expose the patent irrationality of socialism.

The truth of Mises' analysis was confirmed by historical experience. The irrationality of socialism was revealed in the fate of all socialist experiments conducted throughout the twentieth century. Stalin's Ukraine famine, the widespread starvation brought about by Mao's "Great Leap Forward," the decadent misery that is a daily fact of life in North Korea, Vietnam, Cambodia, Cuba, and all other socialist utopias is writ large for the full slate of the practical manifestations of Mises' conclusion that "Socialism is the renunciation of rational economy."

Now if only the economic professors at Yale and Harvard could grasp this fact.

Posted via web from Elevic Pernis @ Posterous