Why Socialism Is Dead

Why Socialism Is Dead
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Karl_MarxReprinted from

Socialism was a specific philosophy of government ownership of the means of production.

The democratic welfare state was never a variety of socialism. Marx, the most famous socialist, despised democracy. He despised all attempts at economic amelioration through legislation. He wanted a proletarian revolution. He preached — the correct verb — a religion of revolution. That was the thesis of my first book, Marx’s Religion of Revolution (1968). You can download it here.

He was silent about how the state would allocate resources under his system. He published nothing about the actual operations of the post-revolutionary society, socialism, and its final successor, communism. Late in his career, in his final major publication, little more than a pamphlet, he wrote this: “Between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.” (Critique of the Gotha Program, Pt. IV, 1875) This was a purely political focus. He was silent throughout his career about how the state should or will or can run the economy.

He provided some famous slogans. He offered rhetoric about the inevitable triumph of the proletarian class. But he offered no guidelines for the leaders of the victorious proletarians.

Socialists in the nineteenth century were equally silent about how the state can allocate production so as to create the good society. In the twentieth century, there was no major detailed theoretical treatise on the economics of socialism that went into detail about the actual operations of central planning agencies in a world where the state owned the means of production. There was no equivalent of Ludwig von Mises’ Human Action or Murray Rothbard’s Man, Economy, and State or George Reisman’s Capitalism.

In retrospect, this seems incredible. Here was a movement that captured the Soviet Union and China. Yet there was not a single book, let alone a shelf of books, available to Lenin in 1917 and Mao in 1949 that could serve as a guide to the kind of economic organization that they should impose. There was no treatise that could serve as a blueprint for the socialist New World Order, whether non-revolutionary socialism or Marxist communism. Yet Marx said that his was scientific socialism — not utopian socialism, like the works of his critics.

Utopia meant “nowhere.” They were all utopian socialists, including Marx.

Socialism has always been a movement based mostly on rhetoric. There was never any logic to it. There were endless promises about how politics or class revolution could bring in a socialist paradise, but there was nothing written about how this paradise would operate.

Marx offered his famous ten steps in The Communist Manifesto (1848), but they were mere slogans. The fact that he included a central bank (#5) is indicative of how confused he was about the transition from capitalism to socialism to communism. He never went into any further detail. He had plenty of time to offer details. He died in 1883.

Here is what defenders of socialism refuse to face: there is no theory of socialist economic planning. Socialist economic theory has always been missing in action. There is also no practical treatise that has served as a guide for socialist economic planners after their national revolutions. Socialist economic planning has been chaotic. No theory of socialist planning ever emerged from this chaos.

When we look at the history of socialism, meaning the state ownership of the means of production, there are few examples. The USSR and Communist China did come close, but the black markets always operated in both societies. There have been tiny Communist states: Albania, Cuba, and North Korea. None have produced a theory of socialist planning.

The Labor government of Great Britain from 1945 to 1951 nationalized coal mining and much of medical care, but it did not extend control over the capital markets of The City, the separate legal jurisdiction of the bankers in the center of London. The Bank of England maintained most of its sovereignty. Labor nationalized it in 1946, but then failed to exercise control. It remained Keynesian.

In short, there are no working models of socialism. This is fitting because there are no theoretical models of socialism. It has always been based on rhetoric, not logic. It has never been based on any system of economic causation. It has no theory of economic sanctions comparable to the sanctions in the free market of monetary profit and loss.

This was pointed out in 1920 by Mises in his classic essay, “Economic Calculation in the Socialist Commonwealth.” He argued that socialism is inherently irrational in theory. It has no system of private property. It, therefore, has no capital markets. But without capital markets, there can be no prices for capital. Without prices for capital, central planners do not know how to allocate capital to serve the wants of the people. So, he argued, pure socialism cannot survive.

This argument was never successfully refuted by any socialist. Polish immigrant and University of Chicago Professor Oskar Lange wrote several articles in the late 1930’s on Mises’ arguments, but they were strictly theoretical. When he went back to Communist Poland in 1945, and was later put into positions of authority in planning bureaus, nothing that he had written in his famous essays was actually implemented by the Polish government. His hypothetical socialist planning board always remained pure theory. It was based on the idea that central planners can do trial and error pricing to allocate capital. But there are no consumer-generated prices in a socialist commonwealth. More to the point, there were no economic sanctions attached to them. If there is no system of monetary profit and loss, there are no meaningful economic sanctions placed on the planners. But there are surely political sanctions, as the planners discovered under Stalin and Mao. It wasn’t that the dictators liquidated capital. It was that they liquidated political opponents and bureaucrats who lost their favor.

There have been very few Marxist economists teaching in American universities. They have had zero influence on the profession. There have hardly been many more socialist economists on the campus. There was a flurry of publicity in the late 1960’s regarding a tiny group of these people, who call themselves the Union of Radical Political Economists. It had the unfortunate acronym of URPE, which was pronounced “urpee.” I studied under one of its major figures in grad school, Howard Sherman. He lectured coherently. He wrote in English. He did not use equations. He never presented the case for socialism in the classroom that I attended. If he converted anybody to socialism, it must have been in private.

The socialist professors are confined mainly to the sociology departments and the English departments. These people have never taken an economics course. They do not comprehend the logic of economic causation. Like their predecessors in the nineteenth century, they confine their comments to rhetoric.

We see crowds of undergraduates who claim to be in favor of socialism. But none of these people has ever read a book on socialist economic theory. This is understandable since there isn’t one.

They are motivated by rhetoric. Rhetoric is all they have been exposed to. They go to large mass meetings to protest this or that aspect of capitalism. But they have no agendas. They don’t have a personal agenda, and they don’t have a social agenda. In this sense, they are just like Karl Marx.

The difference is this: they are not going to find sugar daddies like Frederick Engels, who ran his family’s textile plant in Manchester and used a little of his money to put Marx on the dole for four decades.

These people are noisy, but in terms of pursuing a systematic agenda for turning the United States into a socialist commonwealth, they really are harmless.

When Deng Xiaoping inaugurated an agricultural reform in 1979 which relied heavily on private ownership, he launched the most impressive period of economic growth that any large country has ever experienced. But that ended socialist economic planning. When, on December 25, 1991, Mikhail Gorbachev announced that the Soviet Union was going out of business, that ended the lure of socialism among the intellectuals. They had always clung to socialism because they expected that their class would exercise power in a socialist regime. When it became clear that the Soviet Union was too feeble to impose its will on the Russian masses, that was the end of their infatuation with Communism and socialism. It was always about power. It was never about the logic of socialism.

So, in this month, the 100th anniversary of Lenin’s Bolshevik revolution in Russia, we can rejoice in the fact that socialism is dead. From a theoretical standpoint, it was never alive. It was a corpse from day one. It was sustained by rhetoric, not logic.

If you want to visualize the future of socialism, think of Lenin’s corpse in Lenin Square. It’s all dressed up with nowhere to go.

Profile photo of Gary North

Gary North is the author of Mises on Money. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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