The Obvious Appeal of Socialism – Part 1

It should be evident that collective ideologies fail miserably in their stated objective of creating a more equitable and prosperous society compared to the alternative system of private property and market-based exchanges (generally labeled capitalism.) The empirical evidence that socialism fails is overwhelming to the objective observer and the analytical support for why it fails is not hard to understand. Yet, socialism’s appeal continues among a broad coalition of groups in many societies, even those that are fairly liberal.

We’ll go into the analytical reasons why socialism fails in the next part. Here I am going to focus on the simple matter of deciding whether socialism indeed fails to deliver. To that end, we just need to ask in which direction people prefer to move — from socialist countries to capitalist countries or the other way around? From the US, Canada, the UK, Australia, New Zealand, South Korea, Japan, Germany, etc., to Venezuela, Russia, China, Cuba, North Korea, etc., or the other direction?

People overwhelmingly move from socialist countries to capitalist countries. Which reminds me of a joke. These two guys were arguing whether Russia or the US was nicer. The Russian said to the American, “You Americans only care about money. We in the USSR care about people.” The American replied, “I agree. That’s why we Americans lock up our money, and you lock up your people.”

Anyway, people move from socialist countries to capitalist countries because capitalism delivers more material prosperity compared to socialism, and people prefer having more to having less. Surely, that’s pretty compelling evidence that capitalism works better than socialism. Not just in terms of  material prosperity, there’s greater individual, civic and economic freedom under capitalism, all of which is also valued by people. Indeed it’s those freedoms that enable the material prosperity of free-market capitalism. We’ll explore that in the next part.

However, the stubborn attachment to and the appeal of the idea of socialism despite all the evidence of its failures requires some explanation. So let’s begin with our socialization. That process begins at childhood and as children we are imprinted with our cultural attitudes, and acquire values and habits that persist for life. That programming is almost hardwired and that is not easy to reprogram without a major investment in time and massive cognitive effort.

The family is the first and only institution we become intimately familiar with. It is a socialist/communist collective. There’s no private property in a family. Everyone knows and cares for each other. Everyone values the welfare of everyone in the family. Things are shared evenly. The rule we learn to follow is to “give in accordance with one’s abilities and take according to one’s needs.” Share and share alike. We learn that our parents are wise and beneficent, we learn to depend on them for everything — nurture, safety, comfort, guidance and instruction. In exchange we give them our love, our unquestioned loyalty and undying devotion.

What we learn as children is hard to unlearn even as adults. The child is the father of the man. Or as Aristotle put it, “Give me a child until he is 7 and I will show you the man.”

We learn in childhood to resent others who have more than what we believe to be their fair share. We know that there is only so much to go around, and we should all have equal shares of what there is. The pie doesn’t get larger even if we wish. There’s only just that much. We want our parents to redress any imbalance, especially if we have less than we believe we deserve. 

With that early socialization, we are predisposed to socialism since it promises that goodies — which we know doesn’t grow larger — will be shared equitably, and no one will be allowed to have more than we do. And it is the job of the government to do the redistribution of the limited stuff, just like our parents did. We are predisposed to paternalism. We depend on a father even when we are no longer children.

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I have noticed that many economists whom I greatly admire have confessed to being socialists when they were growing up. That includes Friedrich Hayek and James Buchanan, two of the greatest exponents of free-market capitalism. Buchanan said that he was a socialist because he did not like the evident maldistribution of income and he believed that somehow Wall Street was implicated. He thought that a democratic means of redistribution was justified. At that time he did not know how markets operate. Six weeks into a graduate-level course on price theory by Frank Knight, whom he later recognized to be his most influential teacher, turned him into a committed free-market economist.

I think that many economists enter the profession because they are motivated by a concern for the poor and seek some way to help them. Socialism’s message of economic equality instinctively appeals to them. But in short order, that instinct is overthrown by logic and evidence. They realize that they were wrong and become ardent proponents of free markets and private property rights. 

I confess I was never a socialist. When I was growing up, I did not question the status quo, perhaps because I was too ignorant and unaware. I knew that inequality exists but accepted it as a neutral fact of nature — neither good nor bad, just that it was what it was. I guess I was not socially aware. My education was limited to science and math in school, and later engineering in college. I never got exposed to ideas outside those disciplines. I now think that I would have liked it if I had met someone like me when I was growing up. I would have been introduced to a world of ideas outside of science and engineering, and that would have changed my life. 

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The predisposition to paternalism explains why some people trust the government. The government is considered to be some kind of benevolent despot. A despot because its commandments are binding and benevolent because it is composed of people who know what’s good for everyone and who merely seek to attain what is just, true and beautiful, just like our father did when we were growing up. (This idea finds expression in the monotheistic faiths as “our Father who art in heaven”.) People don’t admit the possibility that those in positions of power are people just like the rest of us — that they are motivated by their self interest just like us, that they are as ignorant as we are, and are as powerless to attain the goals they advertise. They are not self-sacrificing angels, they are not omniscient, they are not privy to some secret of the universe that’s denied to us mortals, that they don’t have super powers. Like the rest of us, they don’t have some esoteric knowledge of what is true, good and beautiful.

The government is patently not the father; mistaken popular belief that it is cannot be the entire story that explains socialism’s appeal. Most people do eventually realize the human predicament everyone faces, politicians included. However that is overridden by a more powerful human emotion, namely envy. To envy others is an universal human emotion. To overcome envy is not given to most of us. Therefore any agency that promises to “level the playing field” has its appeal to those who consider themselves as holding the short end of the stick.

The poor are naturally drawn to any ideology that guarantees what they consider to be a “just distribution” of the goodies. The belief is that, just like in the days of our childhood when father would take care of the unjust distribution of candy, we can rely on the government to right the wrongs that the capitalist system has wrought. 

The poor support socialism because they are envious of the rich, even if the “poor” are rich compared to the rich in socialist countries. And the poor in poor countries certainly support socialism because they figure that any alternative is better. The poor constitute a significant segment of the population of poor countries. Therefore it is easy to explain the appeal of socialism in poor countries, such as India. 

But the poor are not alone in their support of socialism. Another important constituency is the government sector which has politicians and bureaucrats. Socialism requires a large and complex mechanism for control of the economy. That implies more power for politicians and bureaucrats. Free-market capitalism basically says that the government must stay out of meddling in the economy, and that bureaucratic interference is harmful.  Therefore those in government would be in favor of socialism. 

So we have accounted for the poor at the bottom of the socioeconomic pyramid. Then we’ve checked on the politically powerful at the top. Now it’s time to examine how big businesses like socialism. They don’t like the socialist idea of the public ownership of capital. But they know that the politicians would love to get their hands on capital. So they have to bribe those politicians and bureaucrats. That’s “protection money.” They are the cronies of the socialists. That’s why we have crony socialism.

Alright. So we looked at these segments of the population. First, those who have not been able to escape their infantilization are stuck in that phase where they need protection by a father figure. Then there’s those who get to be in positions of power, and therefore support socialism. Then there are the very rich who can bribe those in government to limit competition in the market. 

There is another segment that has an enormous influence on society, and that is pro-socialism. They are the “intellectuals.” I put that word in quotes because it needs to be defined precisely so as to avoid misunderstanding. 

I go with Hayek on this one (as I usually do one every other thing.) He defined intellectuals as “second-hand dealers of ideas.” That includes journalists and authors of popular books. These people are not those who have original ideas; they are merely selecting those ideas that appeal to them, and they then disseminate their selected ideas to the rest. 

The intellectuals, as defined by Hayek, have a particular dislike for the market system and therefore are inclined to collectivist ideas. It goes like this. The intellectuals are favored by the system when they are in schools and colleges. They were the “teachers’ pets” because they were academically gifted and could jump through the hoops that showed them to be smart. However, success in school does not easily translate into commercial success. The academically successful notice that their less academically successful classmates do very well in the capitalist system. They resent it because they believe that they are denied the acclaim they expected in the grown up world of capitalism where success is a result not of intellectual brilliance but rather of success in the capitalist marketplace. Therefore the capitalist system must be corrupt, and the socialist system must be the one that will give them their due. 

Thus intellectuals support socialism. They do so directly in their rhetoric and their public outreach. They have to do that because they are resentful of the success of those whom they consider inferior to them. The poor support socialism for the same reason — envy of those who are successful in the free-market system. Those in government want socialism because it alone gives them control over others that capitalism would not give them. 

Where does that leave the rest? The rest are not that many. They are those who have escaped their childhood programming and realize that wealth is not some fixed amount that is “distributed” by some grand authority; wealth is created by people who are motivated to do so out of their self-interest; that wealth creation is what we can do, and forced wealth redistribution kills wealth creation; that inequality is a fact of nature that cannot be wished away and cannot be rectified without serious damage to the system that generates wealth; that top-down control is impossible because of what is called “the knowledge problem”; that leaving things that you don’t know alone — laissez-faire — is the best policy; that there are severe limitations to social engineering because people are not inanimate pieces on a chess board but rather are creatures with wills and goals of their own who will not submit to grand plans; that grand plans fail because they always involve force, and people always rebel against force.

In the next bit of this, I will explore the analytical reasons why socialism (and its elder sibling communism) must necessarily fail. And after that I will get back to the other essay on the nature and cause of poverty. 

Be well, do good work and keep in touch. 

{Go to part 2.}