“The problem with capitalism is capitalists.
The problem with socialism is socialism.”
—Willi Schlamm, Austrian ex-socialist
Socialists and communists themselves acknowledge that socialism is not separate from communism
It is risk aversion, not revolutionary fervor, that drives socialism
State control is more important to the socialist than egalitarianism
In March 2010, North Korean president Kim Jong Il finished up a pet project of his: resolving economic difficulties resulting from his regime’s failed attempts at currency reform. He accomplished this by abducting and torturing several high-ranking members of his Korean Workers Party, who were beaten so badly that they could not open their eyes or speak as they were lashed to a post on the firing range at a military school in Pyongyang. Just as well for them; there was nothing to see except gun barrels, and nothing they might have said would have made much difference. Each was shot nine times for the crime of committing “treason against the people” in the course of enacting “unrealistic” currency reforms. Hundreds more elite party officials were dismissed, very likely to be sent to labor camps along with their families.
This was not Kim’s first purge. In 1992, anticipating his assumption of power from his ailing father, Kim had organized the execution of twenty army officers and the expulsion of about 300 others. Hundreds more military officers were killed in a 1995 purge when Kim came to formal power. During the famine of 1995–98, which had been preceded by an intense propaganda campaign celebrating the healthful effects of subsisting on one or two meals a day, millions of North Koreans died of starvation due to the disastrous policies associated with Kim’s “Juche Idea” school of economics. According to the view from Pyongyang, the official state ideology—which goes by the irony-proof name “kimilsungism”—cannot fail, it can only be failed. So in reaction to the famine, the secretary of agriculture was denounced as an American spy and summarily executed, and thousands more officials were put to death, sent to camps, or otherwise disposed of. Kim’s political-economic misadventure left as much as 12 percent of his country’s population dead, and many more would have died had the famine not been alleviated by massive food aid from the hated capitalists in the United States of America.
“I was shocked when I heard my uncle, Soo Jo, was looking for me. I didn’t expect him to be alive.”
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Kim Jong Il, President, North Korea, Chosun Ilbo
If North Korea’s experience is extreme, it is not alien to that of other similar nations, including those with more democratic systems than North Korea’s.
A few months after Kim’s 2010 purge, Venezuela was engulfed in political scandal as its state-run groceries ran out of essential foodstuffs such as milk and flour, while huge stockpiles of food were left to rot in government warehouses. A disastrous blend of corruption and incompetence, as fundamental a part of Venezuela’s system as red flags and workers’ slogans, had cost the hungry poor of that country as much as 75,000 tons of food—perhaps as much as one-fifth of the total annual imports of PDVAL, the main state-run enterprise tasked with distributing subsidized food to Venezuela’s thousands of Soviet-style groceries. A former president of PDVAL’s board of directors, all of whom were hand-picked by Chávez and his advisers, was duly arrested and charged with corruption, while Chávez protected a close adviser also implicated in the case.
“‘The private sector seeks profit, and the government seeks the people’s well-being,’ [Venezuelan food minister Felix] Osorio told National Geographic News during a recent visit to the Pinto Salinas Mega Mercal. ‘The free market doesn’t call the shots—regulation does.’
“So sporadic shortages of basic foodstuffs have become routine for many of the country’s citizens.
“. . . When food shortages became critical in Venezuela last year, for instance, Helen Mercado and Luis Boada visited store after store searching for milk for their three-year-old son. But many times the young couple had to settle for liquid yogurt, which is more widely available because it is unregulated.”
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National Geographic, July 2008
Why the food was left to rot was a mystery; the most likely explanation is that PDVAL’s political overseers, who fund their operations with revenues from Venezuela’s state-run petroleum operations, were receiving kickbacks from the overseas suppliers and had never intended to distribute the food, which was stumbled upon by authorities working on an unrelated investigation. They had, the theory goes, simply placed the orders, collected their under-the-table commissions, and left the food to spoil, there being no further profit in actually distributing it.
Chávez’s response to the scandal was unequivocal. “We won’t rest,” he thundered. “We will get to the bottom of this case. But this will not divert us from our route toward our main goal—socialism!”1
Venezuela’s experience is not entirely alien to the United States, either. And it is worth keeping in mind, for context, that Americans are only a few generations removed from the experience of real hunger. That has not stopped the U.S. government from adopting socialist policies that keep food off of Americans’ dinner tables. Consider this report from Ann Crittenden, writing in the New York Times in 1981: “From afar, it looks like a red haze on the horizon. But . . . it [later] becomes clear that what lies in the distance is actually mounds of oranges. Stretching in all directions are millions and millions of navel oranges . . . all abandoned to rot under the California sun. The oranges have been dumped under what is known as a Federal marketing order.”2 In a later report, “Forbidden Fruit,” Doug Foster wrote, “Oranges are left rotting so as to keep prices high for farmers and to keep consumers from buying oranges at lower prices. Does the government know what it is doing? Does it care? The response of USDA bureaucrat Ben Darling is, ‘Oranges are not an essential food. People don’t need oranges. They can take vitamins.’”3
There is a long history of such strange activity in the United States. John Steinbeck reported from a similar scene during the Depression: “The works of the roots of the vines, of the trees, must be destroyed to keep up the price, and this is the saddest, bitterest thing of all. Carloads of oranges dumped on the ground . . . . A million people hungry, needing the fruit—and kerosene sprayed over the golden mountains. There is a crime here that goes beyond denunciation.”4 But unlike the rotting food in Venezuela, the spoiled provisions in the United States—oranges, corn, silos full of grain—were not a crime; they were the intended result of public policy enacted during the New Deal and carried out through the Reagan era.
“Socialism” is a word that means many things to many people, and socialism has taken many forms in the world. Socialism applies, with equal accuracy, to the totalitarian regimes of Kim Il-Jong, Joseph Stalin, and Fidel Castro, the authoritarian but nominally democratic government of Hugo Chávez, and the social democracies of Sweden and India. Some countries practice totalitarian socialism, in which all aspects of life are brought under political discipline; this is generally what we mean by the word communism, regardless of whether that political discipline is overseen by an organization calling itself the Communist Party.
Socialism’s apologists insist socialism and communism are utterly different and non-comparable things; authoritarian apples and democratic oranges. This is entirely untrue; for that we have the socialists’ own word and the communists’ testaments as well. The most hardcore communists in the modern era—the rulers of Soviet Russia, Red China, and North Korea—routinely refer to their systems as “socialism,” and especially, as “scientific socialism,” the grand old Marxist term. Today’s socialists, in unguarded moments (and often when speaking among themselves) acknowledge that socialism is socialism is socialism, and that while the question of form is not negligible (life under Stalin was immeasurably worse than life in the socialist England of the 1970s), it is a question of variation within a species, not variation between species. In a 2010 symposium in the socialist journal Dissent, Michael Walzer wrote,
“Which socialism?” In the not-so-distant past, when Norberto Bobbio, the Italian political theorist, first asked this question, it was (or so it looks today) relatively easy to answer. There were only two choices: the version of socialism that prevailed in what we might think of as the Long East, which stretched from North Korea across the Soviet Union all the way to Albania, and the version that prevailed in the Short West, from the Bonn republic to the British Isles.5
Some countries practice limited socialism within the context of an otherwise liberal democracy, with the pre-Thatcher United Kingdom being a typical example. And other countries have what civics textbooks sometimes call “mixed economies,” with broadly liberal free-enterprise systems existing alongside state-owned or state-managed industries. Some nations are almost entirely dependent on a single socialized industry, such as the Arab oil emirates and their state-owned petroleum corporations. In many Western European social democracies, the healthcare systems and some heavy industries are socialist enterprises. In the United States, education, agriculture, and healthcare are to varying degrees operated by the state or subjected to socialist central planning through regimes of regulation, subsidies, and redistribution. This book will argue that it is possible to examine socialism both within fully socialist systems and within the socialized sectors of mixed economies, and that socialism, in all those contexts, exhibits consistent characteristics.
“If you understood what communism was, you would hope—you would pray on your knees—that one day we would become communist.”
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Jane Fonda, University of Michigan speech, 1970
What are those characteristics? How can programs as different as North Korea’s collective farms, Venezuela’s state-run groceries, India’s state-managed enterprises, and American public schools all be categorized as part of the same kind of system? And if the definition of socialism is that flexible, how can it mean anything at all?
To answer these questions, we must ask another: what is socialism? It’s often difficult to get an honest or rational answer to that question. Idealistic socialists in the West usually will tell you that “socialism” is anything other than what actual socialist governments have achieved in the real world. What is important to keep in mind is that socialism is not a particular set of political conditions, but a specific kind of economic arrangement. Socialism is not identical with left-wing politics, and socialism is not confined to the Left. The various kinds of political systems that have arisen from socialist economies, from Soviet authoritarianism to India’s “license raj,” are in no small part responses to the inadequacies and contradictions inherent in socialist systems of production and distribution—systems that seek to ignore or to subvert the laws of economics.
But the laws of economics can no more be set aside than can the laws of physics or biology. The political responses to the economic contradictions of socialism inevitably are conditioned by the culture in which the socialist system is operating. Cuban socialism was never going to look like the socialism of India, the socialism of Sweden, or the socialism of the U.S. public-school sector. But with a little work and the proper critical approach, it is possible to distinguish, for example, which qualities of Indian socialism are Indian and which are socialist, which features of U.S. public-school systems inhere in our national culture and which derive from its socialist nature.
To do that, we will need a better working definition of socialism. Our model of socialism will have two main parts: 1. the public provision of non-public goods, and 2. economic central planning.
Socialism means, among other things, using political agencies to provide goods and services that otherwise would be provided privately in the marketplace. In its most extreme form, socialism means government direction of the economy as a whole. Socialism in its milder expressions takes the form of nationalized industries (the Chilean copper-mining industry under Allende, Pakistan’s petrochemical sector and heavy industries under Bhutto), government ownership or direction of firms (Alfa Romeo under Mussolini, the Japan National Railway), direct government provision of goods and services (the British Health Service), or government management of nominally private marketplace activities (farm subsidies in France, Fannie Mae in the United States).
A slightly more technical definition of socialism is this: the public provision of non-public goods. “Public goods” is a loose phrase, of course, and it means different things to different people.6 For the purposes of this discussion, the expression will be used in its technical economic sense: “public goods” does not mean things that are good for the public or things that the public wants, but goods that by their nature cannot be easily provided by the free market, goods such as national defense, law enforcement, and certain kinds of public services.
Every government undertaking engaged in the public provision of non-public goods is an instance of socialism, at least at a trivial level. But socialism of that sort probably is better described as “welfare statism.” As a practical matter, all modern governments engage in some public provision of non-public goods, and, therefore, engage in what we might call low-level socialism, or ad hoc socialism. That does not mean that every government is, in a meaningful sense, socialist, or that it would make sense to describe every government that runs a public school or a state highway as socialist. There are questions of degree, and questions of judgment, and the answers to those questions will vary from case to case.
“A government can’t control the economy without controlling people. And [America’s Founding Fathers] knew when a government sets out to do that, it must use force and coercion to achieve its purpose.”
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Ronald Reagan, “A Time for Choosing,” 1964
So what distinguishes a garden-variety welfare state from a system that well and truly deserves to be identified as socialist? Beyond the public provision of non-public goods, a second factor—economic central planning—will be crucial to identifying and understanding what differentiates real socialism from the normal mishmash of welfare-state policies typically found in Western liberal democracies and affiliated forms of government.
What is important to realize is this: socialism, as we will be discussing it, is not entirely synonymous with welfare-statism. Socialism is not simply about the redistribution of wealth or income through taxes and government-assistance programs. Socialism is often described as a system that makes charity compulsory, but it is much more (and, at the same time, rather less) than that. Socialism means central planning. A food-stamp program is welfare; government-run farms and grocery stores are socialism. A government housing subsidy is welfare; government-run housing projects are socialism. A school voucher is welfare; a government-run school system is socialism.
Every advanced society engages in some form of charity, and, in practically every advanced society, some of that charitable activity is routed through the mechanism of the government. There are many reasons for that, including popular psychology and self-interest, but the reasons do not, for the most part, include efficiency or the ability to effectively serve the needs of the poor and vulnerable. One of the reasons for using the state in this manner is that government provision of services is thought to guarantee at least a minimal level of services. In reality it does no such thing, but it does create at least the illusion of a “social safety net.” And that feeling of security, even though it is only tenuously based in reality, is politically valuable.
One of the real emotional fault lines running through all politics in advanced societies is the question of risk aversion. Small-business owners, entrepreneurs, self-employed people, professional investors, and innovators are less risk averse than is the general population—almost by definition. Highly risk-averse people do not start businesses; instead, they tend to go to work for well-established businesses or, in many cases, for the government, particularly in education. They tend to work in and trust large institutions. That risk-averse population is the natural political home of socialism in the developed world, and particularly in the United States and the other English-speaking countries.
Highly risk-averse people are willing to trade some amount of efficiency, innovation, and progress for security. For instance, risk-averse Americans prefer the guaranteed low returns of the Social Security system (which in fact are, for most black men and for other shorter-lived Americans, guaranteed losses) to the higher returns and manageable risk of private savings and investments. They prefer the guaranteed mediocrity of the government school system to the possibility that a largely privatized system would poorly serve some students. In the recent debate over American healthcare reform, many of the better-informed and intelligent progressives understood that greater government management of the healthcare system would lead to losses in efficiency, innovation, and quality, but were willing to accept that trade-off in exchange for guaranteed access to care, even if that care is of diminished quality.
But you will practically never meet an entrepreneur who believes that Social Security is a better way to organize Americans’ retirements than private investment accounts. Likewise, you will practically never meet a public-school teacher who believes otherwise. That is the covert psychology of socialism in advanced societies.
Unlike in nineteenth-century Europe or twentieth-century Asia, it is not revolutionary fervor that undergirds the movement toward socialism in the advanced world—in fact, it is its opposite: risk aversion. The Achilles’ heel of socialism is that political organization of a given activity does not in fact eliminate risk, or even reduce it in a reliable and predictable way. As of this writing, the U.S. Social Security system is many trillions of dollars short of having the funds it needs to actually pay the benefits it has supposedly guaranteed, and it is almost certain that some combination of higher taxes, means testing, and benefits reduction will result in millions of Americans’ failing to receive the benefits they were promised. In other words, the government guarantee of benefits is no guarantee at all.
“Through its own internal feuding . . . the SP [Socialist Party] exhausted itself forever and further reduced labor radicalism in New York to the position of marginality and insignificance from which it has never recovered. The story is a sad but also a chastening one for those who, more than half a century after socialism’s decline, still wish to change America. Radicals have often succumbed to the devastating bane of sectarianism; it is easier, after all, to fight one’s fellows than it is to battle an entrenched and powerful foe. Yet if the history of Local New York shows anything, it is that American radicals cannot afford to become their own worst enemies. In unity lies their only hope.”
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Princeton undergraduate thesis by Elena Kagan, U.S. Supreme Court Justice appointed by President Obama, New Yorker, June 4, 2010
Similarly, the failing government-school system does not guarantee that poor and minority students will escape the crippling, lifetime burden of receiving a shoddy education at exorbitant expense, but the opposite—it guarantees that the great majority of them are deprived of the educational opportunities enjoyed by the white middle class. (And they will pay a higher price for their “free public education,” too: federal tax policy lavishly subsidizes homeownership for middle-class Americans, offsetting the modest property-tax bills that accompany it. Conversely, the poor tend to live in rental housing, struggling to pay rents inflated by the higher real rates of taxation levied on apartments and other commercial real estate.)
Socialist central planning always works best for the class that produces the central planners, who can see to it that their own interests are relatively well served, which is why in the United States socialism is a phenomenon of the middle class, not the working class. It is, contrary to the Hollywood version of American politics, also a corporate phenomenon; Big Business is a reliable friend of central-planning regimes, because large enterprises believe, correctly, that they will be able to use the planning apparatus to serve their own interests, for instance, by using heavy regulatory burdens to prevent new competitors from entering their markets.
And yet socialism retains a certain allure, even though in the United States and some other countries it usually is forced to go by another name—liberalism, progressivism, “putting people over profits,” etc.
Beyond risk aversion, another main source of ideological sustenance for socialism, rarely spoken of in public, also is psychological: using the apparatus of the state to enforce charity gives one the delectable satisfaction derived from the exercise of virtue—with none of its costs. This is why socialists make so much of their commitment to the poor—a theoretical commitment whose practical fruits are hardly anywhere to be seen in the socialist regimes with which the world has documentable experience. It is also why socialists intentionally conflate socialism with welfare-statism and simple charitable impulses. Socialism, the writer and publisher Roger Kimball notes in The New Criterion,
is optimism translated into a political program. . . . Socialism is also unselfishness embraced as an axiom: the gratifying emotion of unselfishness, experienced alternately as resentment against others and titillating satisfaction with oneself. The philosophy of Rousseau, which elevated what he called the “indescribably sweet” feeling of virtue into a political imperative, is socialism in ovo. “Man is born free,” Rousseau famously exclaimed, “but is everywhere in chains.” That heart-stopping conundrum—too thrilling to be corrected by mere experience—is the fundamental motor of socialism. It is a motor fueled by this corollary: that the multitude unaccountably colludes in perpetuating its own bondage and must therefore be, in Rousseau’s ominous phrase, “forced to be free.”
. . . The socialist pretends to have glimpsed paradise on earth. Those who decline the invitation to embrace the vision are not just ungrateful: they are traitors to the cause of human perfection. Dissent is therefore not mere disagreement but treachery. Treachery is properly met not with arguments but (as circumstances permit) the guillotine, the concentration camp, the purge.7
Kimball is surgically correct about the socialist pathos, but it has little to do with the socialist program as it actually operates. Government-enforced charity is of course coercive by its nature; the use of the state to execute the redistribution of wealth, income, or other goods is both morally and economically complicated. But it is not sufficient, on its own, to constitute socialism. Central planning, not simple redistribution, is the defining feature of socialism. Under socialism, THE PLAN is everything. The presence of THE PLAN, and the empowerment of THE PLANNERS, is to socialism what the Eucharistic sacraments are to Christians, what the Mosaic Law is to the Jews, what enlightenment is to the Buddhists: it is the fundamental expression of what is good and true.
When THE PLAN conflicts with the desire to redistribute income or to subsidize the poor and the working class, THE PLAN always prevails. Indeed, even Mikhail Gorbachev, a committed socialist who believed he could save the Soviet Union by reforming it, gave up on the idea of equalizing incomes when doing so interfered with the ability of central authorities to implement THE PLAN. “Wage-leveling,” he told the Soviets’ Central Committee in a 1988 speech, “has a destructive impact not only on the economy but also on people’s morality, and their entire way of thinking and acting. It diminishes the prestige of conscientious, creative labor, weakens discipline, destroys interest in improving skills, and is detrimental to the competitive spirit in work. We must say bluntly that wage-leveling is a reflection of petty bourgeois views which have nothing in common with Marxism-Leninism or scientific socialism.”8 Such sentiments would be at home at the annual luncheon of any American Chamber of Commerce—except for the scientific socialism part.
What Gorbachev is making clear here—and what too many critics of socialism fail to understand—is that the necessary thing from the socialists’ point of view is not egalitarian economic outcomes, but state control. And that control need not be enacted nationwide or imposed by a single-party dictatorship of the Chinese or Soviet sort. State direction comes in many degrees and can take many forms, from Venezuela’s nationalizations to FDR’s cartels to Richard Nixon’s regime of wage-and-price controls. American socialists for years have been eager to use the Medicare/Medicaid system to impose a system of price controls on pharmaceutical companies and other medical-service providers—and the 2010 legislation we know as ObamaCare today lays the groundwork for empowering them to further do so. Stalin argued for “socialism in one country,” while American progressive argue for socialism in one industry—or, one industry at a time.
The modern experience suggests that the economist Ludwig von Mises was only partly correct when he wrote, “The socialistic State owns all material factors of production and thus directs it.”9 That was true for the authoritarian, single-party powers of his day. In our own time, the converse is a more accurate description of the real economic arrangement: under socialism, the state directs the material factors of production as if it owned them. The state does not have to actually own factories, mines, or data centers if it has the power to dictate, in minute detail, how business is conducted within them. Regulation acts as a proxy for direct state ownership of the means of production.
Even in its more dispersed modern forms, socialist central planning is fairly easy to spot because it has an easily identifiable signature: failure. Socialism reliably produces economic dysfunction when applied nationally (the USSR, China, India, Chile, Vietnam), when applied in modified forms across mixed economies (postwar Britain’s nationalized industries), and when applied to particular sectors within largely capitalist economies (national healthcare programs). Pockets of socialism found within largely liberal countries can be evaluated—as socialism—regardless of the fact that they are operating within a largely non-socialist context, just as the limited free-market activities that were permitted within Soviet Russia or Deng Xiaoping’s China can be evaluated as free-enterprise initiatives. Socialist economic failures spring from well-understood defects within the form of organization itself; those failures are not dependent upon the intelligence, goodwill, or moral character of those who are attempting to implement a socialist system, though often enough venal human failings have magnified the inherent problems of socialism.
Socialism’s main defects are the inability of political decision-makers to make rational decisions without the information provided by prices generated by marketplace transactions; the misalignment of incentives and resources; and the subjugation of economic necessities to political mandates with no basis in material economic reality. It is the last of these, above all, that makes socialism dangerous. As Mises’s colleague F. A. Hayek argued in The Road to Serfdom, central planners frustrated by their inability to mold the economic world to their will inevitably are tempted to run roughshod over the rights and interests of the individuals they purport to serve. Sometimes this takes the relatively innocuous form of high-handed officials in the Canadian public-health service denying a procedure or timely access to care; sometimes it takes one of the diverse forms explored with such horrific vigor by Kim Jong Il.
Hayek’s diagnosis, which is widely misunderstood and exaggerated, is not perfect, but he was correct that there is a path that connects the various permutations of state planning; in other words, those rotting oranges in California, that soured milk in Venezuela, the petty depredations of India’s license raj, and the purges of Castro and Kim are all stops on the road to serfdom.