“Everything lives or dies by politics because of its capacity when benign to allow all around it to flourish and when malign to make all around it wither.”
Krauthammer’s observation applies so appropriately to socialism because socialism is malign. It is malign because it relies on envy (the most dangerous of the social passions) for its popularity, and because it distorts incentives in a malign way. It channels the desire for power, authority, and prestige all into politics, i.e. a power struggle, and away from productive activities in a free market. The best bulwark against the malign operation of envy in politics is a commercial republic. It is difficult to run a business, small or large, in a competitive environment. Socialism removes most of the rewards from running a business and also makes it much more difficult because of excessive regulations that must be complied with and because most of the profits are taken by taxes making it far more difficult to grow the business. Karl Marx had it backwards. It is profits that produce capital, not the other way around. Socialism is about maximizing power, not profits, and profits are what make innovation and productivity improvements possible.
Schumpeter’s theory (shared by Jonah Goldberg) that capitalism sows the seeds of its own destruction by subsidizing a whole class of intellectuals that are hostile to it seems validated by the left’s increasing dominance of academia, the media, entertainment and other influencers of public opinion.
The theory holds that the large intellectual class that the success of capitalism makes possible by creating both the demand for it and the funding will become so influential (and antagonistic to the inequality that capitalism produces) that it is able to undermine capitalism itself. As Goldberg explains it, the intellectual class, or clerisy, is always jealous of the success and prestige of the producing class. The intellectuals look down on the producers as intellectually inferior and feel that the prestige and perks the most successful are awarded are unjustified. The insight that envy is the most dangerous of the political passions goes a long way to explaining the appeal of socialism which springs from several human tendencies, both rational and sub-rational, but envy is dominant.
Radical Islam of the type that encourages suicide bombers to blow people up in the belief that they will immediately enter paradise is even further removed from rationality than socialism. Do prospective suicide bombers ever ask themselves what sort of paradise they can expect from a God who tells them that the noblest thing they can do with their lives is to kill many people who have never done them any harm, for the sole reason that they do not share their religious faith? What could be a clearer illustration of the principle that the more radically wrong your concept of God the more devout you are the worse you are?
The title of a book about how crowd behavior can absurdly inflate the price of certain investments, Extraordinary Popular Delusions And The Madness Of Crowds, appropriately and more importantly fits extraordinary political and/or religious delusions of which the persistence of socialism and radical Islam in their various forms are easily the most important. The 20th century suffered from the results of political delusions more than any other time in history. Nazi-ism and communism together accounted for the deaths of well over 100 million people and immiserated billions. In spite of this recent history and current conditions in Venezuela and Cuba the popularity of socialism is currently on the rise.
Frederick Hayek’s explanation of why free-market capitalism works better than any other system of societal cooperation and of why it works so well even though it is not always consistent with virtuous behavior is hard to improve on. Those who wish that the system under which society is organized rewarded virtue (achieved “social justice”) rather than business success fail to recognize that it is impossible for people to freely agree on virtue. Making people agree on virtue can only be done through the political system, i.e. through force. The free market is the only system under which society can be organized that gives maximum opportunity for responsible individual liberty and minimizes the ferocious political fights over what is right and who has the power. The free market encourages strangers to cooperate in a way that no other system does because it allows people to produce what others need and the market is a wonderful winnowing device for determining what people need and want. Socialism means that most of the more important economic decisions are made politically and by people in government so they necessarily greatly reduce economic freedom, innovation, and voluntary cooperation.
Social justice advocates are seeking greater redistribution of wealth in an attempt to achieve an economically more egalitarian society rather than attempting to reward people according to some idea of individual virtue.
People are inherently attuned to hierarchies and naturally seek the highest rank they can obtain. In a socialistic system the hierarchies are politically determined and foster a struggle for power through the political process. In a free market the hierarchies are much more free-form and flexible – constantly changing. Rankings within hierarchies within the free market are constantly shifting due to relative economic success which is in turn determined by the success of products and services produced for the market. The advantages of a free market over a socialistically controlled market are enormous – consider how decisions are made and who makes them. In a market system innumerable decisions are made by many millions of people continually in a very flexible system. In a socialistic system a greatly reduced number of people make the decisions and their decisions can be disastrous because they are not spontaneously self-correcting. The people who make the more important decisions under socialism are not nearly as close to the information needed to make appropriate decisions as in a market system where decisions can be made at a much lower level in the hierarchy.
In both a socialistic and in a free market system a great many people work in a bureaucratic environment. However in a free market system the bureaucracies are less rigid and it is much easier to measure the relative value of the contributions of the different individuals employed in the organization. In any bureaucracy the political and diplomatic skills of the individuals have a lot to do with their compensation and likelihood of promotion, but in a government run organization internal politics are so much more influential than in a for-profit organization where the productive value of each individual is much easier to measure and given a far greater weight. Government has no profits and no price mechanism to tell it the value of what it does.
Socialism now covers a wider scope than its original meaning of government owning the means of production. It can range from mild socialism with very limited government ownership of major industries, but with a lot of regulation, heavy government influence on the economy and a very comprehensive welfare system, usually including national healthcare; all the way to hard socialism (communism) with a brutal totalitarian political system, government owning the means of production and making all significant economic decisions, forced collectivism, and extensive secret police apparatus, etc.
Of course, during a major war when the nation’s existence is threatened, the government necessarily takes on a far larger role in the direction of the economy than it does during peacetime. It has to do this to direct the war effort and direct the production of war fighting materials. During a major war a huge part of the economy is devoted to production for war rather than primarily to produce the goods and services that would be most desired by the citizens during peacetime.
The fact that heavy direction of the economy by government during war seems to work so efficiently has fooled the progressives into thinking that the same type of heavy government control of the economy would work more efficiently during peacetime as well. It doesn’t of course. The government obviously is the only entity that can direct production for war; it is not nearly so capable of directing production for the benefit of its citizens during peacetime as the citizens themselves through the spontaneous operation of the market.