The Failure of Socialism

Blog Post - The Failure of Socialism

The failure of central planning and radical egalitarianism:

There are few better examples of the hubris and failure of central planning than the former Soviet Union.

In markets coordinated by prices, also known as “capitalism,” prices send signals that allocate scarce resources with alternative uses to where they are most VALUED, protecting against waste and inefficiencies that lower the standard of living for everyone.

They also provide the impetus and the incentive for individuals in the market to produce MORE of that high valued good in pursuit of those “evil” profits (sarcasm). The higher the price, the more potential for profits, more firms enter the market therefore increasing the overall supply and bringing down prices (supply and demand). Firms then innovate in a competitive market to lower costs even further to gain an edge on their competition, lowering their prices, making the product more affordable and available to more people.

Nowhere can this be seen more clearly than in places where prices are not allowed to coordinate the economy.

As simple as the idea of supply and demand is, there are some that believe central planning to be more equitable or “fair.” Soviet central planners did this by manipulating prices arbitrarily, leading to surpluses for goods they attached high prices to, and shortages for goods they attached low prices to. There is no way a small group of planners could possibly coordinate the prices of 24 million goods as efficiently as the market itself.

As Soviet economists Nikolai Shmelev and Vladamir Popov declared:

“No matter how much we wish to organize everything rationally, without waste, no matter how passionately we wish to lay all the the bricks of the economic structure tightly, with no chinks in the mortar, it is not yet within our power.”

This idea became more than obvious by lifelong communists Mihail Gorbachev's and Boris Yeltsin's confusion at the massive amount of selections and goods at markets in the west. In 1989, Boris Yeltsin, who later became the first post-Communist leader in Russia, was shocked to see the results of what capitalism could accomplish.

“When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people,” Yeltsin wrote. “That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.

Yeltsin was saddened by the abject failure of central planning in Russia after visiting that store in Houston, troubled by thoughts of the long lines of people seeking the most basic of goods, often times to find the shelves empty. He sat “motionless” with his “head in his hands. ‘What have they (Communists) done to our poor people?’ he said after a long silence.”

We have become so accustomed to living with capitalism, insulated from the horrors of socialism and the reality and hardships it causes, that many actively seek its implementation here by supporting politicians like Bernie Sanders--who once praised the Soviet Union. Seduced by the slogans and mantras of "income equality" and "living wages," few seek reality over rhetoric. Let history and reality be a lesson to us.

Will Ricciardella

Sources:

http://www.nytimes.com/…/23/world/europe/23cnd-yeltsin.html…

http://theorybiz.com/…/th…/14-the-role-of-prices-part-8.html

Sowell, T. (2011). The Thomas Sowell reader (4th ed.). New York: Basic Books. pgs 18-19. 


 

 

 

 

 

 

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