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Source link: http://archive.mises.org/5991/the-end-of-socialism-and-the-calculation-debate-revisited/

The End of Socialism and the Calculation Debate Revisited

December 8, 2006 by



On this day in 1991, the Soviet Union was dissolved. Murray Rothbard explains what led to the economic collapse. “If I may be pardoned a moment of nostalgia, four-and-a-half-decades ago, when I entered graduate school, the economics Establishment of that era was closing the book on what had been for two decades the famed ‘socialist calculation debate.’ And they had all decided, left, right, and center, that there was not a thing economically wrong with socialism: that socialism’s only problems, such as they might be, were political. Economically, socialism could work just as well as capitalism.” FULL ARTICLE

{ 23 comments }

Saud December 8, 2006 at 5:56 pm

430 trillion dollars (usa) outstanding deriviates world wide. How is socialism dead when uber wealthy get government protection and zsero taxes plus laws which allow this none snese to be included for all pension funds ivestments vehicals. Sopcialism for uber wealthy; captialism for none. Can’t build wealthy equal to royalty of europe when your ancestors lost key battles and forced into serfdom for centuries.
African descendents of 400 years forced zero income plantation slavery will never build wealth to match slave owners descendents’ “trust funds”
Western Hemisphere Indian tribal members must be paid “ground rent”. Absent such easily infinite returns for ocupiers of Indians’ lands/natural resources and condo “atmospheric air space”.

David White December 8, 2006 at 6:26 pm

Saud:

Sounds like you’ve come to the right place here at the Mises Institute, as we libertarians fully acknowledge that socialism is alive and well here in the USSA (Union of Socialist States of America). All you have to do is read The Communist Manifesto to see that our “federal” government has betrayed every principle of its founding and implemented, either directly or indirectly, every tenet of Marx & Engel’s ten-point plan for the creation of a communist utopia.

So welcome to the fight (with apologies if you’ve posted here before).

Sam December 8, 2006 at 9:45 pm

As this article reminds us that Socialism, whilst it looked as though it was a good idea, it doesn’t actually work in practice. But some people still look to the way in which Socialism was supposed to better on the thought that it had a sense of ‘Social Justice’ about it, whereas Capitalism is more individualistic, it would seem, perhaps ruthlessly so.

Yet, as I have asked before, what of Democracy then? Is it the same idea except it applies to rule than economics? Do both Socialism and Democracy propose the concept of ‘Social Justice’ which, in reality, a buzzword for a free ride? Where the ‘have-nots’ try to get a piece of the ‘haves’ money without working for it? Is the concept of ‘Social Justice’ the great Evil Seed idea behind both whereas ‘Individual Self-Responsibility’ is the proper idea for proper living?

Does it not mean that if Socialism must go then so should Democracy? If Socialism goes and Democracy remains, then the Seed is still there and Socialist trappings will keep reappearing from time to time?

Ohhh Henry December 8, 2006 at 10:53 pm

A nice little article.

Emerging gloriously out of the rubble of the collapse of socialism are a myriad of Misesian economists, to whom socialism is little more than a grisly joke.

But there are ironies even in this, because obviously although it is true that most of the more thoroughly socialist regimes collapsed or reformed themselves drastically, socialism is still very much with us. I find it interesting that in North America at least, socialism does not even speak its own name. A typical George W. Bush speech will pay a little lip-service to small government and freedom, then jump to a very long list of socialistic programs which he hopes to introduce or expand (either at home or in the Middle East). And this is a man whose first impulse would probably be to punch anyone who accused him of being a socialist.

It is the same in Canada – even the most socialistic political parties would never describe themselves in public as socialists, nor would they ever use the word “capitalistic” to denounce what they dislike about free markets. Conservative parties never describe themselves as capitalistic, never even mention the word capitalism, and never use the word “socialist” in public, as a description of their opponents’ policies. In fact there seems to be a cottage industry among left-wing party hacks, googling various online sources of old speeches, blogs, etc. by conservatives and exposing to the public any instance where they may have described as “socialism” a government program which most Canadians seem to accept as a normal and desirable.

A heavy blanket of obfuscation has been thrown over political debate. The two great competing ideologies are only referred to using code-words: “greed” and “individualism” are how capitalism is described by left-wing parties whereas their own socialistic policies are described as “progressive” or simply “fair”. Right-wing parties describe their opponents’ policies as “lacking incentives”, compared to their own policies which “provide choice”. And these conservative parties show their greatest stupidity and misunderstanding of what they supposedly stand for, when they promote tax reform measures as likely to “increase revenues to government”.

Professional economists, outside of the Mises Institute and a few Marxists who are not afraid to call themselves such, contribute not a single ray of light whatsoever to the political or economic debate, in terms of exposing and contrasting the two major ideologies. Instead these mainstream economists pretend that the only real struggle is to find the perfect balance of nationalized versus private industries – and the most satisfactory means for the leviathan government to raise money to sustain its spending. None of them question the need for stock markets, private ownership of land, etc. but neither would they ever question the existence of any of the major governmental institutions (of which central banks are foremost). It is the unstated and nearly universally held belief that the “right” or “safe” path is somewhere here in what is assumed to be the “middle of the road” or the “third way”. It is as if the great debate and the great struggle between capitalism and socialism never happened.

But it should be obvious that this path we’re on is not “right”, because virtually none of these “right thinking”, middle-of-the-road countries has a stable currency, a balanced government budget, or a sustainable demographic trend when compared to future government obligations. Is it not ridiculous that no one remembers or gives the slightest thought to the great intellectual problem of economic calculation by bureaucrats versus entrepreneurs, when for example government is investing public money in high tech companies, guaranteeing loans to airlines or steel mills, or setting subsidy levels for farmers? Not to mention the growing clamor for governments to interfere in the provision of “dwindling”, “strategic” or “climate changing” energy. It is as if in 1989 a mysterious vacuum sucked Western countries’ political and economic common sense down into the rubbish pile along with the remains of the Eastern Bloc.

Ed December 9, 2006 at 5:08 am

Last book i read, in respect to this debate: “From Marx to Mises, post-capitalist society and the challenge of economic calculation” -Ramsay Steele.
Great book that digs deeply into the calculation debate.

However I missed more debate about how socialist economies “really” worked. Not only the black market was relevant. It “helped” that after Stalin certain “castes” or families (mafia-like), started to appropiate the productive aparatus. After all a black market is a market, ie, you need “owners” willing to come to the market. And it also helped that firms started to de-specialize, forming vertical combines, and relying on in-house providers of basic/intermediate goods.Thus the debate simplified by producing “Robinson-like” firms or combines able to produce a wide range of goods and services.

Angelo December 9, 2006 at 9:22 am

I had in mind possible objections Rothbard would have had to Kirzner’s view of entrepreneurs while reading Competition and Entrepreneurship. However, if he had such a major objection, why does he praise Kirzner’s book?

Jacob December 9, 2006 at 1:58 pm

Angelo,

Mises would often praise the work of people who were intellectually opposed to him (Max Weber comes to mind in many instances). A person can contribute something to the overall study of a subject, and yet still miss the mark. It’s a rare instance that someone ever puts forward a theory that is totally consistent or follows completely from its premises.

Consider that Mises proved that socialism simply cannot operate because money prices are not present to direct action. However, Mises was a minarchist, and somehow believd that the government had a role in producing defense, even though no money prices would be present to determine the right level of investment or expenditures on defense. Rothbard corrected this error.

By any event, the point is that someone might be praised for the accomplishments they have achieved, while still being criticized for the fialures of their thinking.

Gavin December 9, 2006 at 6:00 pm

Jacob,

But, was Mises really a minarchist? In his book on Liberalism, he states that the right of seccession should be given to the individual. The only barrier was the technical problems involved. Since Mises was a utilitarian, it was understandable.

M E Hoffer December 9, 2006 at 7:02 pm

I think using an Algebraic calculator (with an “=” sign) is a(n), potentially, unintended, affront to Mises.

Much better, in my view, would have been to use a Hewlett-Packard variant, still operating RPN, without an “=” sign.

They, HP, still, at least, make one (HP-12C).

M E Hoffer December 9, 2006 at 7:08 pm

Also, this: “All you have to do is read The Communist Manifesto to see that our “federal” government has betrayed every principle of its founding and implemented, either directly or indirectly, every tenet of Marx & Engel’s ten-point plan for the creation of a communist utopia.”– Should be well known. If any of y’all haven’t read The Communist Manifesto, I suggest you do so, and see for yourself exactly how correct Comrade White really is.

I’ll submit that our Tovarich is spot-on.

billwald December 9, 2006 at 8:42 pm

Star Trek: the crew of the Enterprise had no need for money as long as they stayed on the ship.

Sam December 9, 2006 at 9:39 pm

To M E Hoffer,

When you said that Marx & Engel 10 point plan betrayed every principle of the ‘founding fathers’ (which I presume means betraying the U.S. Constitution), what did you think of the Sen. McCarthy Era of flushing out suspected Communists? Some proponents of the era would have argued they were protecting freedom and Captalism. Though it did seem to achieve that goal they were acting in a way that some would seem as unconstitutional too . . .

M E Hoffer December 10, 2006 at 1:58 am

Sam,

McCarthy, his ownself?, was a reactionary within the scope of a Gov’t that was Un-Constitutional.
Were his actions, however aimed, Un-Constitutional? But, of course.

Pick a date: 1933, 1913, ~1900, 1861, …, 1789.

The Fraud, the Un-Constitutionality, is The Constitution. The impressed “need” of a Strong Central Gov’t (1789) was the derailment of the American Experiment. Other episodes led it further off-track.

As per usual, Patrick Henry was correct, “smell a rat”, he properly did, in Philadelphia, during the ConCon.

That we have been stripped of the limits, of even a gross over-sanctioning of a “Federal Power” held within the Const., is our most grievous loss.

We can pretend, all we want, that the fact, of Today, isn’t as such, but pretense is Fable, as much as “Strict constructionism” is re: our departed Const..

That it has been, from the extra-Jurisdictional powers, improperly cleaved, is an issue for us all. Of course, we can continue on, improperly blinkered, stumbling on, to our ignoble, and damnable end.

The choice, ours to make, is but of two, one, the same, toward chains, the other, to break, toward Freedom, anew.

P. Henry, brave he was, left us the clue: Freedon, or nothing, worthwhile, at all.

David White December 10, 2006 at 8:57 am

Comrade Hoffer:

In assocciation with the Manifesto’s second tenet — “A heavy progressive or graduated income tax” — the adoption of the fourth tenet — “Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly” — sealed our country’s fate.

In the first place, the second tenet fueled the fires of class warfare while sewing the seeds for the growth of a monstrous bureaucracy — the IRS — and a tax code that now requires some 6.6 billion man-hours to comply with each year, at a cost of over $265 billion:

http://www.taxfoundation.org/publications/show/1962.html

Second, since even a confiscatory income tax could not keep up with the voracious demands of the welfare state that emerged from the (government-caused) Great Depression, money had to be corrupted to the point that it now bears no resemblance to, and is created in open defiance of, the metal-backed money mandated by the Constitution and specified in the unrepealed Coinage Act of 1792:

http://en.wikipedia.org/wiki/Coinage_Act_(1792)

Which is to say that the “dollar” no longer exists, having been replaced by the Federal Reserve Note, which is issued not by the government but by twelve private banks that not only have a monopoly on the issuance thereof, but can do so without anything backing the note beyond “the full faith and credit” of a government that, as a direct consquence of this massive fraud, is now the largest debtor in the history of the world.

And this, frankly, is the sword upon which our nation will soon fall, as our welfare-warfare colossus goes the way of all empires, a comparison to its Soviet counterpart being nothing less than bone-chilling:

http://energybulletin.net/23259.html

M E Hoffer December 10, 2006 at 10:06 am

DW,

Know that I was merely teasing, with the Comrade crack.

Right, you are, in your suppositions.

No need to convince me of such. As I was trying delineate, inelegantly, it turned out, above, the train of our State, once properly called Liberty, has, long ago, parted from the vector toward Freedom.

David White December 10, 2006 at 10:17 am

I would add that the tenth tenet — “Free education for al children in public schools” — assured the requisite indoctrination (e.g., pledging allegiance to an “indivisible” nation that was founded on the exact opposite principle), as well as adherance to the lowest common deminator, thus dumbing the masses down and assuring both their docility in war and their dependency at home.

This in fact is what is so dangerous about the “Collapse Gap” that Dmitri Orlov depicts in my previous post. For so clueless are the American people about their plight that they are putty in the hands of those who would mold them even more to their purpose, using one “national emergency” after another to do so.

Which is what makes an EU-like North American Union increasingly likely, as the solution to the failure of federalism will be deemed by the controlling elites (on both sides of the aisle) to be further centralization, the ultimate goal being a world state with a single world currency.

M E Hoffer December 10, 2006 at 10:25 am

DW,

No kidding. If we weren’t the subject Subjects, the design, of the designs on us, would be admirable in their effeiciency of effect.

M E Hoffer December 10, 2006 at 11:44 am

effeiciency=freedon, sorry for the spelling errors.

David White December 10, 2006 at 12:24 pm

MEH:

Of course you were teasing, as was I, but in any case, where efficiency enters the equation is where freedom is tempered by a rule of law, the sole function of which is to protect the individual’s right to life, liberty, and property. To the extent that the members of society respect this right, they are then free to do as they will — i.e., to exchange goods, services, and ideas to their mutual benefit — the efficiency of the process lying in the fact that they are otherwise unencumbered.

Conversely, the less that the members of society respect the individual’s right to life, liberty, and property, or the more that the right is obscured via the perversion of law (legal positivism), the less efficient society will be and thus the less able to realize its potential.

Paul Marks December 10, 2006 at 1:54 pm

Be careful of the R. Steele book, a lot of the stuff in it is flawed.

For example, the book goes very easy on the German “Historical School” (the “Socialists of the Chair”) implying that they were strong antisocialists because they came out with half hearted antisocialist points (whilst they demanded ever more government programs and regulations).

As for interventionism and the Welfare State in nations today. Well it is true that government is vast (sevaral times bigger than it was even in Imperial Germany), but this is still not full “socialism”.

True even in the Soviet Union there was some private enterprise (and not just the black market – there were also peasant plots and the like) but there is still a very big difference between the Soviet Union (with all its reliance on having the greatest store of natural resources in the world, and its copying of market prices for capital goods) and the mordern United States.

Yes taxes, government spending, regulations and the government supported credit money bubble mean that Americans are far worse off they otherwise would have been (and may yet lead to a nasty economic breakdown), but it is still incorrect to call the United States (or even Britain) “socialist”.

As for “Star Trek”.

The old (1960′s) Star Trek was broadly mixed economy, welfare state (in that this was a ship that was financed by the taxation of the private economy), there was talk of government “schools and hospitals” (at least in the aid Captain Kirk offered to planets when the script writers forgot about the “Prime Directive”). Basically it was “L.B.J. in space” – and a lot of Kirk’s speeches could be from the mouth of George W. Bush now (although they spounded better from the Kirk character).

The Star Trek New Generation show did sometimes go further – implying that money was no longer needed and that all economic scarcity no longer existed (not just on the ship, due to “replicators” and the like [of course the replicators would still require vast amounts of energy and their would be a cost in producing that energy, and their is the matter of gathering the raw matter....], but off it as well).

This tended to be in the early episodes. In later episodes (and in the Deep Space Nine show) the future shown was far less “utopian” and the Hollywood leftism was less extreme.

This was not an accident – the rather open attacks on America made in the early episodes were one of the reasons for the show’s low ratings. When changes were made ratings went up.

David White December 10, 2006 at 2:42 pm

Paul Marks:

I would argue that any economic system built on centralized, fractional reserve banking is socialistic in that it contravenes the basis of a free market, which is money of, by, and for the people. Without it — i.e., without sound money — inflation becomes a way of life, robbing the people every hour of every day and turning them into debt slaves, even as the government itself lurches toward bankruptcy.

Michael A. Clem December 10, 2006 at 2:58 pm

I think it would be most fair to say that the U.S. has a “mixed economy”, part socialist, part capitalist, although the proportions of the mixture are certainly arguable.

David White December 10, 2006 at 7:46 pm

Michael A. Clem:

To my mind, the only thing that is arguable is how long an economy infected by Monopoly money can last, as the latter is an oil that can never mix with the water of social cooperation.

Just watch.

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