The penultimate chapter of Shawn Ritenour’s Foundations of Economics deals with socialism–what it is, why its supporters advocate it, and why it always fails.
Socialism is defined as an economic system in which the State owns all the means of production: land, labor, and capital. As the owner of the means of production, the State coordinates and directs all production. Socialism can function under a communist system, where State ownership is direct, or under a fascist system, where private property is preserved in name, but in reality the State controls production through detailed regulation and other types of controls on wages, prices, etc.
Socialism has a lengthy intellectual pedigree stretching back to the ancient world (as anyone who has frequented this site over the last couple of years knows), but the most famous and influential socialist thinker is Karl Marx, who introduced important innovations to socialism, including the notion of “polylogism” (different social classes operate according to different logics, and thus criticism of socialism can be dismissed as “bourgeois” logic).
Marx also stressed the idea of the omnicompetence and omniscience of the State, as well as the “scientific” certainty that the coming of socialism was inevitable. Marx’s belief that the foundation of society is technological and that all culture and beliefs are part of an “ideological superstructure” led him to conclude a violent revolution would result whenever the technological base changed without the ideological superstructure keeping pace. Marx believed that the final revolution of the working class against the capitalists was imminent in the mid-19th century, and in the 20th and 21st centuries billions of people have lived under regimes dedicated to his thought.
In a brief reply to Marx, Ritenour notes that many of the foundations of his theory have been proven invalid. For example, much of Marxism hinges on the labor theory of value, which holds that value is objective. However, we have seen that value is a subjective quality of goods and services from a human perspective. Furthermore, Marx failed to realize that technology results from people’s ideas, whereas there can be no scientific way to prove the reverse.
Ritenour outlines three major problems with socialism in general (I will mention them here only briefly because I know I’ll be dealing with them in much more detail in later posts in this project):
- The incentive problem: under socialism, the benefits of one’s work are widely dispersed, but the costs are concentrated; on the other hand, the benefits of shirking one’s work are concentrated, but the costs are dispersed. Such an arrangement provides a powerful incentive for shirking.
- The knowledge problem: the knowledge required for effective economic management is dispersed widely throughout the economic system, and no individual or central board will ever be able to amass it all or process it efficiently.
- The calculation problem: because the State owns all means of production, no market prices exist. This fact prevents the calculation of profit and loss by entrepreneurs and results in an inefficient use of resources, corruption, and a failure to satisfy consumer wants. Impositions of quotas and other measures that have been tried to address this problem have uniformly failed.
Socialism thus fails on both theoretical and practical grounds. Nevertheless, many people, including many Christians, continue to advocate socialism because they believe it would bring about a more just distribution of wealth in the society. Many of these people understand on some level that socialism does not “deliver the goods,” but they insist that because “man shall not live by bread alone,” an egalitarian system that produces less wealth is better than a market system that produces more wealth. They also cite passages in the book of Acts that portray the early Church living communally as a model for society.
Ritenour devotes the final section of the chapter to an ethical critique of socialism. In doing so, he keeps in the forefront the idea of the cultural mandate of Genesis 1, that God created human beings to fill and subdue the earth. This is the focus of the book’s final chapter, so here I’ll state only briefly Ritenour’s contention that to fulfill the cultural mandate we must have a division of labor and market prices to allocate resources. Thus we must have private property. Moreover, numerous passages of scripture, including the Eighth Commandment, assume the existence of private property and charge society with defending it. Thus socialism is out.