Stubborn allure of socialism despite its abject failures (Temba Nolutshungu, Free Market Foundation)

Link: https://www.freemarketfoundation.com/article-view/the-stubborn-allure-ofsocialism-despite-its-abject-failures Please see link above for original text, embedded hotlinks and comments.

The stubborn allure of socialism despite its abject failures 01 January 2020 Temba A Nolutshungu The almost simultaneous implosion of socialist and communist systems throughout the world is arguably the single most significant political event of the twentieth century. The year 1989 is particularly poignant because in that year the Berlin Wall was dismantled. This event signalled the beginning of the end of socialism in Europe and hastened an already growing worldwide disillusionment with socialist ideology.

Yet the creed of socialism and its corollary - nationalisation - still persist in some parts of the world. Belief in their efficacy persists despite the fact that contemporary implementation of socialist policies has had demonstrably negative results: socialised or nationalised enterprises have been costly failures and the countries where socialism has been adopted have become poorer.

It is even more intriguing that socialist ideology still persists in China, even as the present-day Chinese government has implemented some of the most radical ‘capitalistic’ economic policies in the world. These policies have resulted in unprecedented social and economic progress for most of China’s huge population and have made that country the second biggest economy in the world; all this achieved in a mere four decades.

The dogged obstinacy of socialist ideologues becomes even more alarming when one reflects upon the history of West Germany and Japan as they emerged from the ruins of the Second World War to become, respectively, the biggest economy in Europe and the second biggest economy in the world, also in a matter of decades. It is instructive that the common thread that ran through these countries’ achievements is ‘capitalistic’ free market economic policies.

Yet despite the overwhelming empirical evidence, the socialist creed stubbornly persists. This emperor has no clothes. To demonstrate this, the meaning of the ideology has to be confronted and demystified.

In a socialised economy the state, represented by a group that operates as though endowed with infallible wisdom and intellect, usually presenting itself as possessing a unique empathy and care for poor people, seizes the whole economy, or targeted sectors of it, with the express purpose of redistributing wealth to the poor from those who have it, inevitably the producers who own the more productive sectors of the economy.

1

Abracadabra! An egalitarian society comes about. Nobody is poor, the income gap is closed and there are neither rich nor poor people. All in line with the creed, “From each according to his ability, to each according to his needs”, as Karl Marx proposed. Nirvana has been achieved. But alas! As implementation begins, the theory ends and socioeconomic demise begins. In this regard the words of Pope John Paul are germane: “The historical experience of socialist countries has sadly demonstrated that collectivism does not do away with alienation but rather increases it, adding to it a lack of basic necessities and economic inefficiency.”

The paradox of lofty goals begetting disastrous consequences comes about because ideologies are generally not compatible with human nature. By definition, ideology is imposed on society irrespective of the consequences, and the affected individuals are obliged or coerced into operating in conformity with the ideology. This causes conflict as the ideology is enforced on the hapless populace and human nature has to succumb. The most important characteristic of human nature is the fact that humans invariably act in their own self-interest, as they see it. This character trait is so intrinsic to human nature that it motivates and defines, across all cultures, people’s actions and decisions whenever they interact with their fellow-humans or engage in utilising material or intellectual resources in order to achieve their goals.

Public officials (more appropriately called the apparatchiki) who are in charge of state enterprises have no real incentive to manage them on a profitable basis. They do not themselves own the enterprise or enjoy the profits (or take the losses), so their selfinterest leads them to focus instead on job security and empire building. They are more inclined to be responsive to the dictates of their political masters than to the needs of the consumers of their products or services.

The business decisions made by public officials with respect to investment, maintenance, expansion, diversification, etc. do not demand the same careful consideration as would be the case if the enterprise were privately owned and faced stiff competition from other private enterprises. In the private sector, satisfying the consumers in order to realise returns is the lifeblood, the very raison d’être of an enterprise. Everyone involved in the enterprise is at personal risk. The investors, the management, in fact the entire workforce, are all at personal risk if the enterprise fails to satisfy consumers in the face of competition. If the enterprise fails, profits will be lost and in extreme cases those involved will lose their livelihoods.

Winston Churchill once said that “Socialism is a philosophy of failure, a creed of ignorance, and a gospel of envy; its inherent virtue is the equal sharing of misery.” It is at best downright reckless, at worst utterly irrational, to place a whole economy, targeted industries, or individual enterprises under political ownership and control when the politicians or their appointees know almost nothing about those industries and those placed in command do not derive their incomes from the success or failure of the enterprise. Under such conditions, the welfare of the enterprise will be of no real relevance or consequence to them. This explains why governments in charge of nationalised industries resort to commandeering taxpayers’ hard-earned incomes to prop up failing state enterprises. In South Africa, we see this in the case of Eskom, the SABC and South African Airways.

2

When governments interfere with the private sector (often in the name of empowerment of the poor) the results are generally costly to the enterprise and in some cases catastrophic. In the United States successive administrations applied political pressure on financial institutions to extend mortgage loans to people who were not creditworthy. This ill-advised political action eventually precipitated the ‘sub-prime’ mortgage crisis. Politicians try to exonerate the government and themselves by blaming the disastrous consequences on the alleged ‘greed’ of financial institutions, which have become a convenient scapegoat.

In conclusion, I quote Mohandas ‘Mahatma’ Gandhi (1869-1948) who, referring to socialism and communism poignantly stated: “I look upon an increase of the power of the State with the greatest fear, because while apparently doing good by minimising exploitation, it does the greatest harm to mankind by destroying individuality, which lies at the root of all progress.”

Ultimately the struggle is between the claims of ideology and the human instinct of individual liberty, which is the basis of a spontaneous, natural order. Socialism persists in attracting ideologues despite its abject failures because the benefits of individual liberty are not properly understood.

Author: Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

3