In Monday night’s Venezuela post, our wise commenters said:
socialism doesn’t work because it is an unjust economic system. the people in power take things from people that work…
The wrong people will ALWAYS be in charge, because for socialism to work you have to have completely altruistic people in charge…
Yes. Except, it’s even worse than that 😉 The biggest problems with socialism are:
- It wrecks the Price Mechanism. Even if you had truly altruistic people in charge, such an economy still can’t function.
- Only bad-or-stupid people want a wrecked price mechanism. Thus, only bad-or-stupid people advocate socialism. And the bad people know how to shepherd the stupid people; thus, the bad people always end up in charge.
By Price Mechanism, I mean free markets discovering and signalling the prices of things. To review how that works:
- All goods and services must be rationed, by one means or another.
- because human needs are infinite
- whereas human time (used to produce goods and services) is not
- Markets ration things by having people pay a market price for the available supply.
- If something is in short supply, those who have the highest “score” in terms of being both able and willing to pay, will get it.
- “Willing” as in, free will / the person’s choice.
- The market price moves up and down, accomplishing two big things as it does so.
- It coordinates people’s consumption activities. (Those who are unwilling or unable to pay for a thing at its current price, look for substitutes.)
- It coordinates people’s production activities. (As a thing’s price moves higher, it induces people to produce more of it.)
- The coordination is spontaneous and responsive to changing conditions, because it is voluntary.
- If you interfere with the price mechanism, you interfere with (or even block) that coordination.
OK, so the price mechanism is objectively great. It induces voluntary coordination among vast numbers of people – thus enabling the Division of Labor. Who would want to mess with that?
The answer is: People who gain by interactions that are not voluntary. People such as moochers, thieves, thugs, politicians and bureaucrats. People who lack the ability or willingness to produce. People who hope to live by altering or preventing market outcomes. People who think they can plan and control others better than those others can. People who are willing to gain by keeping others down.
In short: People who gain by dictatorship. Arrogant people who enjoy using force on others to prevent the peaceful activities and outcomes that people would otherwise create on their own.
That’s the nature of socialism. It’s not a noble ideal. It’s a curse, an evil. Like the Mafia, it’s always led by bad people because it *is* bad, in its nature. It can never be desired by people who are both good-hearted and knowledgeable. Therefore, it can never be led by them. And, even if it were somehow, it still wouldn’t function – because of the wrecked price mechanism.
This feeds into how the term “socialism” is defined.
- An old, strict definition is: public ownership of the means of production.
- But people today use the word with a much broader meaning: Any system where a governing authority intervenes in markets, preventing the market price mechanism from operating.
The socialist planners always proclaim their good intentions. And they always make things worse. And it’s not an accident or a failure to apply socialism; it’s inherent in socialism.
Wrecking the price mechanism kills spontaneous, voluntary coordination; and that’s the point of the thing. It’s why stupid-or-bad people love socialism. They WANT to control others and prevent market outcomes. It’s not a proverbial “unforeseen consequence”; it’s the point.