Variants of Socialism (1): Soviet Communism

Socialism has been selling under many names: Marxism, Revisionism, Leninism, Stalinism, Trotskyism, Titoism, Maoism. Castroism, to mention only the most popular ones. These variants o socialism di er in tactics but not in nature. Says Mises: !The essence o Socialism is this: "ll the means o production are in the exclusive control o the organi#ed community. this and this alone is Socialism. "ll other de initions are misleading.! $Lud%ig von Mises, Socialism, p. &''(

Soviet Communism
The Soviet type o socialism )oppe de ines as !a social system in %hich the means o production, that is, the scarce resources used to produce consumption goods, are *nationali#ed* or *sociali#ed*! $)oppe, " Theory o Socialism and Capitalism, p. &+(. Socialists substitute the alleged !anarchy o production! by collective o%nership in the hope that !the chaos o the market!, !%aste!, !ruinous competition!, !the absence o coordinated action! be abolished. The more radical such a policy is implemented, the more egalitarian and organi#ed a society becomes, the more society %ill be absorbed by state. The trans er o private property to collective o%nership, ho%ever, implies t%o more things $ibid.(:

Collective o%nership means that !nobody o%ns the sociali#ed means o production!. Their use is determined by !caretakers!. ,o one can enter into private investment or create ne% means o production. !-nvestment can only be done by caretakers o things, never or private pro it, al%ays on behal o the community o caretakers %ith %hom the possible pro its rom investments %ould have to be shared.!

The socialist argument o superior e iciency rests on t%o pillars:

Power of Control )oppe notes that in both a capitalist and a socialist caretaker economy !the problem o determining %hat should be done %ith the means o production ... must be solved someho%.! "s soon as there is disagreement . a normal assumption since %e are dealing %ith scarce resources . there must conse/uently be ine/uality bet%een protagonists and antagonists. !The di erence bet%een private property economy and a sociali#ed one is only how %hose %ill prevails in cases o disagreement is to be determined. -n capitalism there must be somebody %ho controls, and others %ho do not, and hence real di erences among people exist, but the issue o %hose opinion prevails is resolved by original appropriation and contract. -n socialism, too, real di erences bet%een controllers and noncontrollers must, o necessity, exist, only in the case o socialism, the position o those %hose opinion %ins is not determined by previous usership or contract, but by political means.! $ibid.(

Coordination -n a sociali#ed economy the multitude o decision.making units is replaced by only one planning agency. 0ut an ans%er has to be given !to the problem o determining ho% to coordinate the uses o di erent means o production, giving the act o di ering vie%s among people on ho% this should be accomplished.! $ibid.( The ans%ers given by capitalism and socialism di er: !Capitalism coordinates actions by constraining people to respect previous user.o%nership. Socialism, on the other hand, instead o letting people do %hatever pleases them, coordinates individual plans by superimposing on one person*s or group o persons* plan that o another disagreeing person or group regardless o prior o%nership and mutual exchange agreements.! $ibid.(

There are t%o implications to observe:

Such a system avors nonuser and noncontractor over user and contractor The process o redistribution avors the nonsavers over the savers

Effects of socialization of the means of production (ibid)

Reduced -nvestment or relative drop in the rate o investment resulting in o Less saving and more consuming
o o o

Less %ork and more leisure Lo%er standard o living Shado% economy

Misallocation or %aste ul use o the means o production

o

Changes in consumer demand, in technological kno%ledge, in the natural environment o production re/uire !constant and never.ending need to reorgani#e and reshu le the %hole structure o social production.! $ibid.( -n the absence o market prices, the caretaker.producer cannot correctly evaluate the cost or the means o production 1rop in the value o the output o consumer goods Misallocation o means o production %ith %astes and shortages

o o

2verutili#ation or relative impoverishment

o

1i erent rom a private o%ner, the caretaker has no incentive to utili#e the capital employed and thus keeps producing useless items

The caretaker also shares %ith other caretakers the receipts rom the sale o products so that his incentive to produce and sell is %eak !The caretaker*s incentive to increase his private income at the expense o capital value is raised!. This results in capital consumption, overuse o existing capital, and endemic corruption.

3hat had been said about production also applies to labor: !sociali#ation implies lo%ered investment, misallocation, and overutili#ation.! $ibid.(

Less investment in human capital The monetary cost o using labor can no longer be established The caretakers try to supplement their private income at the expense o loss in capital value o labor

Effects on the character structure of society

The adoption o Soviet Communism gives !a relative advantage to nonusers, nonproducers, and noncontractors The personalities o people %ho increasingly engage in nonproductive and noncontractual activities %ill be changed and any change back %ill become a pain ul learning process Since the assignment o di erent positions in the production structure is a political matter, people develop and need their political talents or promotion at the expense o their productive skills Sociali#ation increasingly produces incompetent !politicians!