The Politics of Socialism

Even if you’re willing to ignore the economic costs, socialism brings a political cost most people — particularly in America — would find unacceptable. Socialism eventually leads to the loss of liberty and tyranny.

In previous posts, I’ve explained the impracticality of socialism as an economic system. We cannot deliver full value to workers when we don’t know the price of the final products, and we can’t separate the contribution of labor versus the contribution of capital. Although I want to focus primarily on economics in this blog, socialism causes a political price that I don’t think most people would be willing to pay.

Central Planning

Having workers own the means of production sounds like a wonderful program. But, have you ever experienced large groups making decisions? When groups get together and try to make decisions in unison, they tend to be impractical and ineffective. The larger the group, the worse the results achieved. So, imagine a nationwide economy depending on all the owners of production making decisions in unison.

Even ardent socialists agree with this picture. They know that having all the members of society deciding together how resources get distributed simply would not work. Socialism, therefore, requires central planning. When initially presented the idea of “central planning” seems quite reasonable and harmless. Why not let the representatives of the workers decide how does distribute resources and work?

Was it Lord Acton who pointed out the problem of corruption that arises from power? Whether the attribution is correct, the observation certainly is. Central planners would discover the benefit of having the power given to them, and they would do their best to increase that power. The end result would be something we’ve seen in most, if not all, socialist countries: absolute tyranny.

But couldn’t this be avoided with a democratic form of government and a socialist economy?

Democratic Socialism

Democracy, as pointed out by Alexis de Tocqueville and Hans Herman Hoppe, has its own set of problems. But, even in the idealized form of democracy, the socialism part of Democratic Socialism would drag the system down.

In the economic system known as socialism the countervailing power of open markets does not exist. Elected officials would have far more power than they would under a democratic government and a market economic system. Since those who have power tend to strive for more, the system would ultimately break down, and some form of tyranny would arise. Look, for example, at the “democratically” elected president of Venezuela. Not working too well.

Socialism, even under a democratically elected form of government, would eventually lead to lost liberty.

Lost Liberty

The Lurking Threat of Socialism

Regardless of the form of government socialism will always lead to a loss of liberty. In the abstract, that may not seem too bad. Most people would give up a certain amount of liberty in exchange for a bit more certainty on the economic front. Who wouldn’t prefer to have education, healthcare, retirement, and other essential economic concerns guaranteed by someone else?

At a more personal level, however, lost liberty would mean, particularly for Americans, the loss of a reasonable lifestyle. How would you like to have someone else to decide what you do for work, where you go to school, what you eat, whether you eat, where you live, who you associate with, and anything else that you control through your own free choice?

Free stuff comes at an extremely high price.

Conclusion

Socialism represents such an outrageously impractical economic system it seems incredible that anyone would suggest it in the first place. But, even in an idealized form, socialism comes at a price that includes a lot more than the loss of economic well-being.

Under any political system, socialism robs you of free choice and your very humanity.

Serious consideration of socialism represents a far greater threat to humanity than climate change, volcanoes, asteroids, or any other natural disaster. For the sake of your economic well being and your personal liberty, reject the concept now.

 

The Importance of the Individual

The discrete nature of humans makes the individual the center of all market activity. They decide what has value and how much. Their actions based on those evaluations make free markets operate effectively and efficiently.

The subjective theory of value reveals that the individual plays the most important role in the development of all economic theory. The effective and efficient allocation of resources throughout an economy always depends on satisfying the needs and wants of individuals.

I will mention briefly some of the reasons why individuals are so important to understanding free markets:

Discrete Nature

Like all things in nature people will always remain separate. Individuals simply cannot form collectives. Communities of all sorts consist of networks of individuals. They have separate minds and the act separately. The subjective theory of value remains consistent with this fact.

Market Power

Because individuals provide the source and measure of value they also represent the predominant market power. All market transactions result from the actions of individuals. When organizations act, they do so as a result of the consensus of individual decisions.

The idea of individuals as a source of market power turns most economic theory absolutely on its head. Market power comes from the bottom of the hierarchy; not the top.

Inverted Cost Structure

The fundamental role of individuals inverts the popular model of market cost structure. The amounts that buyers willingly pay for goods and services determine the costs of retailers, distributors, and manufacturers, not the other way around. Goods cost what they do at every level of the production structure because of the demands of consumers for other products requiring the same resources.

When attempting to determine the cost of any good or service don’t look to the source of the resources used. Look to what buyers willingly give up to receive that good or service.

Determination of Market Prices

The bidding of individuals to purchase goods determine market prices. The competition between suppliers does not play the dominant role in holding down market prices. The bidding of individuals for goods actually stimulates competition between suppliers.

Determination of Wealth Distribution

Many people misunderstand the determination of the distribution of wealth. A good only has market value when individuals willingly offer something in exchange. The same holds true of the market value of resources. They only have value if they produce something for which individuals willingly exchange.

This fact holds true of the market value of financial assets. The ownership of a particular stock signifies wealth only because others desire to own that stock. Without legitimate demand — demand backed by substance — the stock becomes worthless.

Political Power

Like market power, individuals determine the source and level of political power. An individual gains political power when others delegate that person to exercise illegal or unauthorized force against another individual — or individuals. This does not change the original source of power i.e. the individual.

The role of the individual in the distribution of political power becomes important with a discussion of market intervention. I have previously defined free markets as those free of violent intervention—markets free of political power.

Conclusion

No process exists that eliminates the role of the individual in the operation of markets. Individuals determine what they value and how much they value it. No other source exists. As a result, the individuals reside at the center of the operation of any market.

I have only touched briefly on some of the aspects that make the individual so important to the development of economic theory. I will allude to the importance of the individual many times in the course of my blog posts.