The doctrines of socialism have been with us for more than 150 years, but no one had really tried it in a total way until the advent of the Soviet Union from the 1920s to the early 1990s. During that period, a number of communist/socialist revolutions occurred in Asia, Cuba, and Africa, all of which provided a laboratory to observe how these socialist economies would perform.
The socialist economies failed spectacularly, as Ludwig von Mises had predicted. His works on socialism published in 1920 and in 1923 show that, as an economic system, it was doomed before it ever was implemented because it had no practical system of economic calculation. Despite the propaganda beamed at people both from socialist governments and the western media that socialist economies were lifting vast numbers of people from poverty, the reality of socialism was what Mises had predicted.
By 1989, even die-hard socialists like Robert Heilbroner had to admit that socialism had been a huge failure. Indeed, by the mid-1990s, the only countries attempting to continue with the socialist experiment were Cuba and North Korea, and neither economy was one to be envied. Heilbroner wrote in The New Yorker:
The Soviet Union, China & Eastern Europe have given us the clearest possible proof that capitalism organizes the material affairs of humankind more satisfactorily than socialism: that however inequitably or irresponsibly the marketplace may distribute goods, it does so better than the queues of a planned economy…. the great question now seems how rapid will be the transformation of socialism into capitalism, & not the other way around, as things looked only half a century ago.
Yet, Heilbroner—echoing Joseph Schumpeter’s belief that capitalism could not survive in the modern age—was not convinced that a capitalist economy would do well under the cultural and political assaults coming from academic, social, and government elites that would always demand more from it than it could produce. Heilbroner admitted that Mises was right, that a socialist economy lacked the necessary economic calculation to flourish, but he could never get himself to endorse the capitalist system itself.
Today, when we see poverty, prices of goods increasing, housing shortages in New York City, or high food prices, the usual suspects blame capitalism, and they blame what has become the overriding symbol of capitalism—the billionaire. It does not matter that the housing problems are caused by rent control and other supply-restricting government interventions, that inflation is a government-caused phenomenon, and that Federal Reserve policies of creating financial bubbles have created a lot of on-paper billionaires, as the critics will blame free markets no matter what. Their arguments do not need to be coherent or logical to have an effect. As I recently wrote, many of the most economically-illiterate people in our midst have become wealthy by making public statements on economics. In our modern media age, even the most ignorant sage is considered an “expert” if one has the “correct” politics.
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