Mrs. Johnson, formerly of the Foundation staff, continues her study of freedom from Torremolinos,
A Fortune editor, reporting last year on a visit to
Although the
To oppose an idea effectively, one must first understand what it means. "To socialize" means to turn over to government officials the ownership or control of the means of production and distribution. Theoretically, both socialists and communists aim at eliminating all private property, and all income other than wages: no profit, rent, or interest allowed to individuals. Theoretically, too, the State is supposed to "wither away," but all history shows that, as a nation has become more socialized, the State has become more powerful.
Why not socialize our economy? Here are at least two vital reasons for choosing liberty:
1. Socialization restricts freedom of choice, thus destroying opportunities for the material, moral, and spiritual development of the individual.
2. Socialization keeps the standard of living for all below what it would be under a system of private ownership with free exchange.
There can be little doubt about the first reason. With government officials owning or controlling an economy, the individuals who make up that society find most—if not all—areas of their lives controlled and directed by their rulers. The freedom of choice left to a person in even the most basic areas diminishes as socialization increases.
Choices of food and clothing are limited to what the rulers decide to produce, and are further limited by faulty planning and failures to produce the quotas demanded. Choice of shelter is first limited (public housing goes to those approved by the government), then lost entirely. A man is allotted space which is his on sufferance. Recently, Boris Pasternak, the Russian poet and writer, has been threatened with the loss of his home, apparently because he was offered the Nobel prize for a book his government didn’t like. In Great Britain, the Compulsory Purchase Act has led to such injustices as forcing owners to sell houses worth up to $5,000 to the government for as little as $1.40 each.
When the means of entertainment—magazines, radio, television, sports—become controlled, even if not owned, by government, then a person’s leisure hours are likewise restricted as to freedom of choice. For example, the Federal Communications Commission has withheld for years permission to the companies that would like to set up Pay Television. This means that a person’s liberty to buy high quality entertainment, or even education, is being restricted. When the State supports or controls or actually opposes a Church or religion, one of our most vital choices is restricted to a degree.
Whether or not a person believes that man is a spiritual being, he usually believes in some degree of moral restraint. Most people, most of the time, refrain from lying, cheating, stealing, murdering. They have learned that they will live more comfortably and produce more efficiently if each tends to his own business. Dishonesty and violence are rightly seen to be disruptive forces. The materialist is disturbed to see the robber unfairly enriched; the religious person sees the robber destroying his own soul.
Limited Choice
Socialization, by planning a person’s life for him—housing, job, pay, recreation, insurance, pension—leaves a minimum of opportunities for moral choice. And moral character can be developed only by the choices a man makes when he is free.
The very basis for moral choice is destroyed when there is no private ownership. If property belongs to the government, it belongs to everybody—which means nobody feels responsible for it. Evidence can be given from widely different sources. In the
People Robbing Themselves
The January 1959 East
"The obvious conclusion to be drawn from this phenomenon is that most East Europeans do not identify the State’s property or interests with their own. On the contrary, they regard this property as the possession of a hated and privileged minority and, for a variety of reasons and resentments, consider it their right to `make use of it’ for their own private purposes whenever the need or occasion arises."
By restricting freedom of choice, an incalculable number of material advances are delayed, distorted, or prevented. Inventions may never be developed because the inventor was not free to seek financial backing from those willing to take the risk. Or the backers may refuse to go ahead with production because it is too costly to comply with myriads of licenses and other red tape. Hitler’s National Socialist Republic of Germany reached the point where multiple copies of forty different forms had to be filled out just to import one item. Many businessmen in the
Other losses, both material and moral, occur when freedom to choose one’s job is affected by government control. Subsidies to inefficient farmers (or featherbedding union labor), for example, may cause untold amounts of waste of land, seed, fertilizer, and other resources. Without the subsidy, the same men might have become efficient milkmen, chemists, or college professors, thus contributing to society instead of withdrawing more than they put in. The subsidized are, in effect, bribed to not develop their own highest potentials.
Now let us examine the second reason for opposing socialization. It keeps the standard of living below what it would be under a system of private ownership with free exchange. This is the inevitable result of bureaucratic, as opposed to profit-and-loss management. Dr. Ludwig von Mises has shown unanswerably (in Socialism, Bureaucracy, and elsewhere) that the former is the only kind of management possible with government ownership of property.
The fact that Russian scientists were able to get Sputnik into orbit as soon as they did, provides no evidence as to a high standard of living. A socialized society can build great dams, big bridges, ICBMs. But what of the millions of individuals who become little better than slaves to produce such achievements? The socialists and communists have adopted their form of government in order, they say, to free men from their "exploiters," to bring men "a better life."
Surely a "better life" can be defined as one in which men live lives of their own choosing, subject only to the restriction that they not interfere with each other’s choices. To call the reverse, which amounts to slavery, a "better life" is an absurdity. A better life depends on being free to earn and own property if men wish, as well as to use it or dispose of it as each sees fit. And by property I mean anything that can be exchanged in trade: goods, ideas, land, wages, services, money, tools.
Profit-and-Loss Management
Granted private property and the opportunity of free exchange, businessmen develop a system of profit-and-loss management. That means that if a producer is able to find buyers for his product at a price that allows him a profit on a transaction, then he is contributing to society, and buyers will support him in that business as long as they are satisfied. He may get very rich; he may expand into a world-wide enterprise; he may become the only seller of that particular product; but as long as such a position was arrived at honestly, without any government-granted privileges, then the producer has earned justly all that he may have.
The "Russian bosses" would, of course, deny that. What do they propose instead? Socialization. And what are the results? They are indicated in the following comparisons of output between
In nearly every example, the Russians of 1913 were more productive, relative to the Americans, than were the Russians of the
Yet, some people would socialize the
Why has the Russian government fallen so far short of its goals? Is it that the men carrying out the successive Five Year Plans were not clever enough, or not zealous enough, or not experienced enough? They had power—all of it, and enough labor—all the Russian people, and enough time—forty years.
But they also had bureaucratic management. That means they had, and have now, no freely fluctuating price system, except in isolated spots where it has been allowed out of necessity. Therefore, the planners had no way of knowing whether or not any given enterprise was making a profit or loss. Which means they had no way to tell how, when, or where scarce raw materials were being wasted. Nor had they any fair way to distribute goods.
|
Number of Years that Russian Production Lags Behind 1913 1937 1955 |
||
Steel Ingots |
21 years |
32 years |
29 years |
Electric Power |
13 |
21 |
16 |
Crude Petroleum |
14 |
26 |
34 |
Mineral Fertilizers |
43 |
24 |
16 |
Paper |
44 |
47 |
54 |
Butter |
21 |
38 |
35 |
Boots & Shoes |
23 |
44 |
44 |
Woolen & Worsteds |
43 |
67 |
69 |
This dilemma of socialization is like sailing the seas without a compass.
There is no way out of this dilemma. A bureaucracy must be run by strict rules. Persons of initiative and imagination have no place in office: only blindly faithful servants. That is sufficient if the government is limited to police functions, but economic affairs cannot be run successfully in that fashion.
The Function of Prices
Prices, in a free market, are indicators which help the producer plan his course of action. He tries to buy materials at as low a price as possible, and to sell his finished product at as high a price as he can get. Though prices are not determined by costs, costs must be recovered in the long run or the producer will be forced out of business. In a socialized economy, the government does not go out of business, but instead, the standard of living is reduced for all as a consequence of wasted resources.
Without a free market, how can a government official decide what prices to set on all the goods and services? George Shea, referring to the possibility of price controls in the
"When prices are studied by an agency seeking to control them, it must try to analyze those very economic forces which if left to themselves do the setting of prices. The agency cannot act in a vacuum. It must seem to act in a nonarbitrary fashion. But its task is to find an answer different from the one the economic forces have found—or there would be no reason for its existence. Thus, it must take account of the economic forces, but also must render a decision in effect stating that one or more of these forces are wrong, thus in actual fact doing a completely arbitrary thing."
In a purely socialist State, should butter be sold for 5¢ a pound, or $2.00 a pound? Nobody knows what the cow cost: it was allotted to the collective by the State. Nobody knows what the hay cost: it was distributed by the State. Who can tell what the transportation cost? The trucks are owned by the State. Nor is there a free market price to reflect the supply-demand situation. The truck driver, dairyman, and farmer are paid partly in produce, partly in housing, and partly in cash. What is the price paid for their labor? The whole problem must remain insoluble.
Without the possibility of profit or loss, the producer cannot discover whether the consumer wants more—or less — of anything. In a free market economy, financial loss is an immediate and powerful indicator of waste. No matter what the cause, this fact makes it clear that something has been made which too few, if any, want to buy at the asking price. As an economy is socialized, or controlled, the clues of price and profit are removed, so that producers must make their plans blindly.
It is absolutely necessary to know costs and market prices in order to avoid waste and achieve a rising standard of living. Every bit of wasted material signifies wasted human energy. That energy could have gone into producing something that would have been used instead of being left to spoil. New ideas, new inventions, new processes, discovery of new resources, more efficient use of old resources, are all necessary to maintain an expanding population. These things are achieved automatically and naturally when men have freedom of choice.
When men are free to earn, to save money that does not lose its value, to invest in capital equipment, to labor or to provide jobs for others as their judgment and ability dictate, then they can produce bounty from the earth. A sense of responsibility will develop as each decision is made. During well-earned leisure, men can develop themselves, their minds, and their spirits.
Socialization limits man’s material comfort, degrades him morally, and may end by breaking his spirit. Those are some of the reasons for not socializing our life and economy.