May 1, 2020 Reading Time: 4 minutes

On May 1, 1886, some 300,000 workers around the United States took direct action and went on strike, demanding an “Eight-hour day with no cut in pay.” The date had originally been proposed in 1884 by the Federation of Organized Trades and Labor Unions. 

Two days later, violence between workers and police at McCormick Reaper Works in Chicago led to a called rally at Haymarket Square on May 4. The Americans’ eight-hour workday movement launched a global movement to celebrate May 1 of every year as International Workers’ Day. In the United States, “Labor Day” is celebrated in September in part to separate it from the socialist and communist origins of May 1 as the date for International Workers’ Day.

These origins make it a good time to reflect on socialism, communism, and the world they almost destroyed in the twentieth century. It would seem like support for socialism would have crumbled like the Berlin Wall in 1989 or dissolved like the Iron Curtain in 1991, yet here we are a mere three decades later, roughly, with renewed and rising interest in socialism around the world. Henry Hazlitt, it appears, was right: the good ideas need to be relearned every generation while the bad ideas are intuitive.

Socialism is both: it is a bad idea, and it is intuitive. It is intuitive because it evokes what seems like noble aspirations. Who doesn’t want to see the hungry fed and the naked clothed? People are socialized in families, which are, after all, small socialist enterprises where production and allocation decisions are made by central authorities (the parents) and in which the strong provide for and protect the weak. Socialism appeals to our innate sense of fairness. It also appeals to our desires for comfort, safety, and protection. Very importantly, it also appeals to our desire to protect others from want and oppression. Socialism appeals to the familial instincts that make us leap to the defense of our children and siblings.

Even though it tugs at our heartstrings, it fails every time it is tried. It doesn’t fail because the people aren’t worthy of the system. It fails because it is fundamentally, cripplingly, and irredeemably broken at its most basic conceptual level.

To be sure, a great many communists have been butchers. In his foreword to a reissue of Eugen Richter’s Pictures of the Socialistic Future, Bryan Caplan argues, following Richter, that “the (socialist) movement was born bad. While the early socialists were in fact ‘idealists,’ their ideal was totalitarianism.” in an EconLog post, he quotes one Cuban revolutionary’s “one-page hop from bleeding heart to mailed fist,” first explaining how his heart bleeds for the illiterate and then a few sentences later suggesting that Fidel “have an incinerator dug about 40 or 50 meters deep, and every time one of those obstinate cases [of delinquency] came up, to drop the culprit in the incinerator, douse him with gasoline, and set him on fire” so as to “make an example of him for future generations.”

Socialism, however, cannot be fixed or solved or implemented smoothly simply by putting the right people–the right kind of idealists, presumably the non-totalitarian kind–in charge. Ludwig von Mises’s “Economic Calculation in the Socialist Commonwealth” was first published 100 years ago, in 1920. It started the socialist calculation debate. I think it should have ended it, as well. Mises argued that even if we peopled the socialist commonwealth with omnipotent, perfectly benevolent angels, it would still “fail” in that there would be no way to evaluate alternative production methods in the absence of the prices necessary for monetary calculation. Meaningful prices, in turn, could only emerge in a setting where people are voluntarily trading private ownership of the means of production. Economic “calculation” in the absence of prices, profits, and losses becomes, as Mises argues, a fundamentally arbitrary groping-about-in-the-dark that tends not toward order and prosperity but toward disorder and poverty.

In his article “The Use of Knowledge on Society,” Friedrich Hayek emphasized exactly how and why socialism would not work. He pointed out that the economic problem–what “we wish to solve when we try to construct a rational economic order”–is not that posited by the defenders of socialism. Their solution follows readily from their assumptions: with perfect information about the stocks of productive factors, consumers’ preferences, and the menu of possible technologies, “the problem which remains is purely one of logic.” However, he points out, “(t)his, however, is emphatically not the economic problem which society faces.” As he continues,

“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate ‘given’ resources–if ‘given’ is taken to mean given to a single mind which deliberately solves the problem set by these ‘data.’ It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.”

This passage reminds me of something John Maynard Keynes wrote about the wholly private economy: it is only by “accident or design” that it would wind up at full employment. One of the problems with socialism is that if it were, by some miracle, to settle upon the most efficient patterns of specialization and production, it would have to be by accident. 

The inescapable conclusion of the Mises-Hayek argument about socialist calculation is that an efficient socialist society cannot be designed. The “dispersed bits of incomplete and frequently contradictory knowledge” are rendered legible by voluntary market exchange. As Kristian Niemietz documents in his 2019 book Socialism: The Failed Idea that Never Dies, central planners cannot solve the problem whether they are wearing velvet gloves or mailed gauntlets.

The specter of communism haunted Europe when Marx and Engels published The Manifesto of the Communist Party in 1848. A related specter haunts Europe and the rest of the West today, only it is a milder specter that we call “democratic socialism.” Better than totalitarian communism of the Stalinist or Maoist variety? Definitely, but this is to damn it with faint praise. Socialism of any kind, no matter how implemented and how noble its advocates, is destined to fail.

Art Carden

Art Carden

Art Carden is a Senior Fellow at the American Institute for Economic Research. He is also an Associate Professor of Economics at Samford University in Birmingham, Alabama and a Research Fellow at the Independent Institute.

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