The twentieth century has witnessed the beginning, development, and end of the most tragic experiment in human history: socialism. The experiment resulted in tremendous human losses, destruction of potentially rich economies, and colossal ecological disasters. The experiment has ended, but the devastation will affect the lives and health of generations to come. The real tragedy of this experiment is that Ludwig von Mises and his followers — among the best economic minds of this century — had exposed the truth about socialism in 1920, yet their warnings went unheeded. – Dr. Gary North quoting Yuri Maltsev (1990)
Dominant Social Theme: Free markets can't be trusted.
Free-Market Analysis: Gary North has written an interesting article entitled "Socialism Is Dead. Let's Move On. We Won" that incorporates his usual rigorous logic. It is posted at his website and also at LewRockwell.com.
It is interesting because it provides an insight of which we were not aware. In fact, if you asked us if socialism was dead before reading this article, we would have insisted that socialism was alive and well. But here is Dr. North to remind us that words have meanings and that those meanings need to be respected.
Socialism is dead as an ideology and also as a political movement. It is an example of a god that failed. Socialism is a very specific form of economic opinion. A socialist believes that the civil government should own the means of production. This is what socialism has always meant. When Ludwig von Mises refuted socialism in 1920, he had in mind exactly this outlook regarding the economy.
Here was his argument. If the government owns a nation's capital, meaning the tools of production, the planners cannot establish the value of these tools. There is no free market for pricing these tools.
Without free-market pricing, there is no way for any central planning agency to determine what the most desired consumer goods are in society. There has to be a free market in order to price consumer goods and capital goods. There is neither in a socialist economy. Therefore, said Mises, socialist economic planning is inherently irrational.
There is no disagreeing with Dr. North, nor would we wish to do so given the acuteness of his insights and frame of reference. He further buttresses his argument by invoking the fall of the Soviet Union.
The collapse of the Soviet Union, he writes, provided support for Mises's argument. We remain uneasy with this phenomenon because like so much of modern history (the reasons for World War One, for instance) we can't find any compelling reason for why it happened.
But taken at face value, it certainly supports Mises's perspective. "Multimillionaire leftist economics professor Robert Heilbroner believed that it did. Dr. North points out that he "said so in print in an article in The New Yorker: 'After Communism'," that appeared in 1990.
He said that socialism was simply a dead ideology. Today, there are virtually no people outside of North Korea, Latin America, and Zimbabwe who straightforwardly argue in favor of socialism. North Korea and Cuba officially are Communist. They are poverty-stricken. They have no influence anywhere. Nobody is using them as a model. Zimbabwe is run by a tribal Marxist, and nobody is imitating it, either.
Again, there is no arguing with Dr. North. Adhere to definitions and indeed "socialism is dead." One can bring up the welfare state, but for Dr. North, the welfare state is not socialism. "These people believe in the private ownership of most capital. They believe in some market pricing … [though] they believe that government officials can intervene into the markets and redistribute wealth."
For Dr. North, Keynesianism is not socialism. "Keynesianism is capitalistic, and it always has been. Keynes was a defender of capitalism. He believed that the state should intervene by either creating money out of nothing or by borrowing from capitalists. He wanted the state to buy goods and services in order to stimulate the economy. He wanted to see an expansion of capitalism."
And Dr. North believes that communism (as a variant of socialism) is dead, too. "Communism as a means of economic production did not survive the collapse of the Soviet Union in December 1991. … There are those in the West who do not understand or even recognize what happened to the Soviet Union in December 1991…. They still want to fight the old fights."
International socialism is dead. Individuals espousing it "have not been around in a quarter of a century … Obama is not a socialist. The Democrats are not socialists. I have not heard Bernie Sanders call for the nationalization of America's corporations. They are defenders of the welfare state."
How does he describe supporters of the welfare state? "[Supporters] want to tell the private owners what they can or cannot do with their capital. They want to direct the productivity of capitalism. They do not want state ownership of the means of production."
Parasites don't want to kill their hosts. Socialism is an economic philosophy of killing the host. The Left today is made up parasites, do-gooders, and virtually no Communists or socialists … They are not the wave of the future.
So thanks to Dr. North for providing clarity as to the modern socio-political and economic structure of the world today. These are significant observations.
On the other hand, what we face now as individuals trying to determine the Way the World Really Works is perhaps a more insidious socio-political structure. It is what we call "regulatory democracy" and in the 21st century, as we have noted, it is rapidly evolving into something else that we might call technocracy.
Regulatory democracy and technocracy are more subtle paradigms than socialism and communism. One could refute socialism and communism rhetorically, as Mises did, by pointing out that both ideologies did away with price discovery and thus were destined to fail. Regulatory democracy and technocracy, on the other hand, do not abolish price discovery, though they make it a good deal less effective.
Since this is an article about definitions, we should try to be precise about what regulatory democracy and technocracy actually are.
Regulatory democracy is the rule of the mob leavened by dirigisme. The state itself is charged with developing agents (regulators) to modify the results of mob rule and unrestrained competition. The underlying structure remains "capitalistic."
Technocracy is the rule of elite servants of the state. Technocrats are produced by the educational and economic workings of regulatory democracy but operate as a kind of priestly caste, adding credibility to the system by virtue of their competence and rigor. The underlying structure remains "capitalistic."
Regulatory democracy and technocracy are rooted in capitalism, but are not as easily quantifiable as socialism and communism. Technocracy is currently being developed to bolster regulatory democracy, which is currently losing credibility in this Internet era.
The system of regulatory democracy with its overlay of technocracy is an attractive one on its surface but beneath the surface it is intensely authoritarian. We should therefore conclude with the observation made in the other article in this issue, which is that one needs to observe countries and culture with one's eyes "wide open."
There are plenty of places to live or travel to, but you will do better if you have an understanding of the underlying sociopolitical and economic trends prevalent in a given region. And better understanding of terminology can bolster that process.