Two weekend stories in the Wall Street Journal remind us of two weaknesses of socialism or, for that matter, of any collectivist control of the economy.
The first story reports on how the federal and state governments have blundered in distributing a trove of money to landlords and tenants in order to prevent evictions due to the Covid and lockdown recession (Andrew Ackerman, “End of Eviction Moratorium Puts Many Tenants at Risk of Losing Their Homes,” Wall Street Journal, July 23, 2021):
“The capacity to process applications does not match the volume of need,” said Jim MacDonald, chief community investment officer at the United Way of Greater Kansas City, which is helping distribute about $30 million in the area.
In other words, the capacity to process applications does not match the volume of free goodies that people want. One could argue that the problem is due to partnerships with private organizations (United Way in this case) that are typical of American governments—an objection related to the lack of government “capacity” criticized in Daron Acemoglu and James Robinson’s latest book, The Narrow Corridor (Penguin Book, 2019).
But even a more monopolistic and bureaucratized delivery system has its limits. Governments cannot have all the information about individual preferences and circumstances of time and place that are necessary for efficient central control; nor do they have good incentives to respond to whatever information they have. This problem is illuminated in The State and Revolution (1918) where Lenin defends the ideal of the whole economy organized like the state postal service. Speaking of the “first phase of communism” (that is, the socialism of the proletarian state), he wrote:
A witty German Social-Democrat of the seventies of the last century called the postal service an example of the socialist economic system. This is very true. …
To organize the whole economy on the lines of the postal service so that the technicians, foremen and accountants, as well as all officials, shall receive salaries no higher than “a workman’s wage”, all under the control and leadership of the armed proletariat—that is our immediate aim.
The second story is about Leonard Erdman, a New Mexico mechanic and body shop expert, who spent several months restoring a 1952 Ford pickup and inventing a new purple color for it. Speaking of his restored pickup, he said (see A.J. Baine, “He Invented a New Shade of Purple for His Souped-Up Ford,” Wall Street Journal, July 24, 2021):
I tinkered with it for eight months until I came up with a vision of what I wanted to do. I wanted it to be in your face, almost like something you would see in a comic book. My vision included purple paint. Everyone told me I was crazy—even my wife. I kept saying, “It’s going to be OK. Trust me.”
(The color invented by Mr. Erdman is roughly reproduced on the featured image of this post. Look up the Wall Street Journal if you have access to it.)
A Marxist may reply that this sort of esthetic venture is exactly what Marx had in mind when he described the ultimate stage of communism (The German Ideology, 1845):
In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.
The economic problem here is quite basic. Resources are scarce in relation to human desires. Once all factors of production are deemed to be “our national resources” or “our collective resources,” why would the collectivity permit a little mechanic to divert his labor to a time-consuming hobby, not to mention the material inputs (all the parts) that went into “his” old Ford pickup, while, as our democrat socialists in DC would say, American children are hungry and people lack medical care? Any Supreme Soviet would find this unacceptable and contrary to the collective priorities. Any woke government would force the crazy mechanic to devote to feeding children or building medical equipment the time that he selfishly spends restoring old cars, hunting, fishing, or literary critique.
The two lessons are that (1) government management of the economy is at best bureaucratic and inefficient and that (2), at worst, it requires the arbitrary control of “our” national or collective resources, that is, of us individuals.
READER COMMENTS
Jens
Jul 26 2021 at 4:22am
A very basic reply to the second thesis would be that it is incorrect. Of course, there is no doubt that many socialist systems have put tremendous energy into plowing under their workforce, for interesting reasons. But e.g. in the GDR there were clear working time regulations and sufficient free time for all working people. They also needed them because they sometimes produced and repaired more in their free time than during working hours (which may explain something about incentives). But there were certainly educational offers and leisure activities. The idea that the entire personal workforce and time had to be put into the service of collectivist requirements does not apply.
But it is of course true that Marx’s quote, if interpreted only as a statement about the division of labor, seems somewhat inefficient. There are certainly many people who have a keen interest in ensuring that the highly qualified neurosurgeon does not only work part-time. But it is also dangerous to tear Marx’s statements out of time and context. Marx observed some extreme working conditions in the 19th century. But Marx was enthusiastic about the capitalist productive forces. He had a problem with the balance of power that they created, maintained and depended on. I think Marx only wanted to point out with the quote that all people have a right to a good and diverse life. His assessment of international political economy today would likely surprise observers on all sides of the political spectrum. I think his main theme would be (still) internationalism.
Jon Murphy
Jul 26 2021 at 7:38am
Check out the movie The Lives of Others. I think you’ll find the idea of “leisure time not in service of the collective” is entirely a fiction in the GDR.
Pierre Lemieux
Jul 26 2021 at 10:44am
Jens: A few rejoinders that may cool down your doubts about some implications of economic planning.
(1) Planned economies are economies of shortage, even if the legendary discipline and obedience of the Germans probably made it less flagrant in the GDR. So there are few resources made available for hobbyists and tinkerers. There are no Home Depots. There are no car part retailers for ordinary consumers. And when you have to queue for bread or boots, there is anyway little time left to restore old cars. For sure, this is partly due to the inefficiency of a command economy, but the rulers certainly have no incentive to make sure that resources are diverted for the prols’ leisure, except if it contributes to make them better “citizens.”
(2) To a different extent, we observe the same tendencies in any system based, if only partly, on central decisions about what will be produced. This implies a corresponding allocation of labor. In the foreword to the 1956 edition of The Road to Serfdom, Hayek observed that, in 1941, the Labour Party’s issued a government order that would have allowed the government to punish workers who would not accept jobs that the government considered high priority.
(3) We see this even in authoritarian minds in our own countries (at a lower extent, of course, but wait…). Bernie Sanders declared:
And Trump (in his typical baby-talk):
Mark Z
Jul 26 2021 at 1:28pm
Marx liked technology produced by capitalism but hated the market forces that led to their creation and believed they were unnecessary (or even counterproductive) for further innovation. He also didn’t merely believe that people ‘have a right to a good and diverse life’ but that they *don’t* have a right to make voluntary wage contracts with one another because such relationships were intrinsically exploitative. Reimagining Marx as merely being some kind of social democrat requires, well, imagination. In his own time was vicious toward even other socialists who favored compromise in the slightest with the market economy or gradualism.
Gene
Jul 26 2021 at 2:21pm
When considering the old saying, “To each according to his need, from each according to his ability,” never forget to add the unspoken final phrase: “… whether he agrees to it or not.”
David Seltzer
Jul 26 2021 at 3:26pm
“… whether he agrees to it or not.” Bang On!
David Seltzer
Jul 26 2021 at 3:08pm
Pierre said,
“But even a more monopolistic and bureaucratized delivery system has its limits. Governments cannot have all the information about individual preferences and circumstances of time and place that are necessary for efficient central control; nor do they have good incentives to respond to whatever information they have.”
Spontaneous order makes your point. As I understand the concept, self-interested persons are not intentionally attempting to create order via planning. I was a market maker on the CBOE and AMEX for several years. I saw this play out repeatedly. Markets were in equilibrium until a new piece of information arrived. Extra ordinary earnings surprises sent traders who were short hurrying to cover and new equilibrium was spontaneously established. As for Lenin, in 1921 he employed what is known as the NEP. A market based a attempt to grow Russia’s economy after her costly war with Japan. The hard line Communist ideologues forced a return to the disastrous central planning of her economy.
John Mark Brady
Jul 27 2021 at 2:40pm
The second, and final, attempt to centrally plan the Russian economy took place during Stalin’s first Five-year plan, and that was quickly reversed.
I recommend reading War Communism, Mark Two (pp. 102-103) in David Ramsay Steele’s “The Failure of Bolshevism and Its Aftermath” (1981) here: https://cdn.mises.org/5_1_6_0.pdf, or the revised version in From Marx to Mises (1992).
Frank
Jul 26 2021 at 7:57pm
Speaking of the former East Germany, it is clearly hard to compare standards of living between centrally controlled and market economies. However, one does have physical consumption data of an important commodity for both East Germany and western countries — alcohol. The more, the less merry at the margin.
“Liquor consumption continued to rise steadily until East Germany ranked as the world leader in per capita sales of distilled spirits. GDR citizens also achieved the highest per capita levels of beer consumption in the world by 1989… .” Only the expensive wine never made it.
Wasn’t enough drinking to stop people from thinking. The Wall came down that year.
Mark Brady
Jul 27 2021 at 2:30pm
It seems that the GDR did not (do much to) prevent its citizens from consuming alcohol. It was (and is) a rather different story in the good old USA!
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