Socialism Is a Seductive Idea, but It Is Incompatible with Freedom and Prosperity

In this interview, Kristian Niemietz, PhD, economist, and book author, explains why intellectuals have often advocated socialism and why socialism is incompatible with freedom. His exciting book on this topic Socialism: The Failed Idea That Never Dies, was recently published also in German. The interview, originally published in German by the online Medium eXXpress, was conducted by Stefan Beig.

Dr. Kristian Niemietz is Head of Political Economy at the Institute of Economic Affairs (IEA) in London. He studied economics at Humboldt University Berlin and the University of Salamanca, graduating in 2007. In 2013, he earned a PhD in political economy from King’s College London. He writes regularly for various journals in the UK, Germany, and Switzerland. (Image: ©Kristian Niemietz)

Why does socialism find so many adherents among intellectuals?

Intellectuals are better at finding justifications for what they want to believe. If you look at historical examples—West Germany versus East Germany, Taiwan versus Mao Zedong’s China, North Korea versus South Korea—the model with economic freedoms is persistently superior to the socialist model. It is precisely this simplicity that puts off some intellectuals. They think that with more perspicacity they can see what not everyone sees at first glance. It is unsettling to intellectuals whenever some random person could reach the same conclusion about something. Moreover, they like to use political opinions as a status symbol. It’s not about understanding the world, but about using opinions to say something about themselves.

Many intellectuals…evaluate socialism not based on its results, but on its original intentions. The self-appraisal that stands behind it: “We are smarter.”

Where does this fear of simplicity come from?

As soon as you look at the facts, it doesn’t take much skill to realize that socialism has failed. It takes sophistication and rhetorical skill to justify an idea that fails over and over again. “It only seems that socialism has failed; in truth, it is superior.” It also requires a capacity for abstraction in order to separate an idea from its execution. Many intellectuals probably see attitudes toward socialism as a test of intelligence. They evaluate socialism not based on its results, but on its original intentions. The self-appraisal that stands behind it: “We are smarter.” This too reveals status-thinking.

My answer: If someone tells me that 2 and 2 is 4, then I don’t argue against that, just because someone with basic compulsory education could also say that.

Socialism is back in fashion (see “Millennial Socialism”). Why?

Trends come in waves. It was incredibly popular in the English-speaking world and in France in the 1930s, less so from the beginning of the Cold War until 1968, when many again became enthusiastic about socialism and idealized Maoist China and Cuba. In the 1990s came the next lull, because socialism had failed everywhere. Today, it is enjoying a new heyday. The image of socialism has changed. People no longer think of socialists as cranky, weird splinter groups. Socialism seems cool. It has become a lifestyle, especially in neighborhoods with lots of hipster bars.

Economic liberals…were completely overwhelmed because for a long time they saw no reason to argue against socialism.

Did that inspire you to write your book?

Yes, it was a reaction to the socialism revival, to which Bernie Sanders, Jeremy Corbyn and Alexandria Ocasio-Cortez, for example, have contributed. Polls show that socialist ideas haven’t disappeared, especially among young people. What bothered me: Economic liberals didn’t respond properly. They were completely overwhelmed because for a long time they saw no reason to argue against socialism. So, I started writing articles for various online media and suddenly received a lot more responses than before.

In your book, you present this pattern in dealing with socialist experiments: first enthusiasm, then defensive justification, and finally denial.

With Venezuela, the euphoria hadn’t quite faded when I started writing the book. From 2005 to 2013, there was a honeymoon, then the diversionary tactics began with “Look at Saudi Arabia” or “Even before Chavez, there were problems.” If this continues, I thought at the time, in a few weeks they will say: “Venezuela was never socialist.” That’s exactly what happened. In my first draft of the book, I predicted this, and then it happened.

Why did even prominent economists fall for socialism, or at least consider it just as efficient as the free market economy?

Neoclassical economics is very mathematical, it is about maximization. You can derive a planned economy on that basis. Most economists were not enthusiastic about the planned economy, but they, like Paul Samuelson, for example, overestimated socialism, especially in the 1950s when it concerned the growth rates of the Soviet Union at that time.

All planned economies failed in the supply of consumer goods and services, even in their best times.

If you focus only on coal, steel, and iron production, and are interested in military production and maximizing output, then that can work under socialism to some extent, especially if you copy capitalist production techniques, as the Soviet Union did. Initially, after all, the Soviet Union financed the import of Western industrial equipment with state expropriations of grain. In certain sectors, the Soviet Union was an important factor in World War II. But this did not help the people in the Soviet Union. All planned economies failed in the supply of consumer goods and services, even in their best times. But that is what interests me as a consumer in everyday life. The entrepreneurship factor has also been undervalued by some economists.

Are the internal problems of socialism still too little understood today?

Yes, that was also the case with the Kohl government, for example. In the reunification process, it sent West German managers to eastern companies. But that did not solve the problems. The managers in East Germany were just as capable, they just had the wrong system. There was no market-based process to determine which entrepreneur was best. A state authority cannot decide that.

Even today, many believe that the public sector works better with better managers. But the private sector is much more dynamic. This has to do with the knowledge process: In the public sector there is no competition and therefore no competitors to learn from. The main problem, in my opinion, is the knowledge system of socialism.

Some intellectuals like George Orwell criticized real socialism but dreamed of a democratic socialism.

In Orwell, a noble revolution is betrayed because the rulers are corrupted by power. There is a lack of economic books showing why socialism degenerates into totalitarianism. Socialism is not compatible with freedom. The German jurist Franz Böhm said that competition is the most ingenious check on power ever invented. No one has absolute power if I can go elsewhere as a consumer, worker, or borrower. That prevents the concentration of power.

As the dominant actor in economic life, the state has no competitors. This leads to concentration of power.

As the dominant actor in economic life, the state has no competitors. This leads to concentration of power, and that does not change even if its excessive concentration of power is structured democratically. In a similar way, planned economies also mesh poorly with individual freedom, even if the plan is set by the majority. To implement an economic plan, one would have to force people to adhere to it. One can then no longer say to them: “You can do something else if you want.” There is no room for dissenters.

You don’t think socialism with a human face is possible?

A planned economy does not necessarily lead to mass murder like it did under Stalin. After Stalin’s death, the situation did improve. But the Soviet Union still remained miles away from what romantic socialists envisioned. This is due to the factors inherent in the system of socialism. Khrushchev was able to liberalize a bit, but freedom of travel, let alone freedom to emigrate, did not exist even under him. In order to plan, he had to be able to control the factors of production, including labor. A worker could not simply leave the country. Even in the mildest forms of socialism, there were almost always bans on leaving the country.

When you no longer have market signals, only command and obedience remain, unless you want to slip into chaos.

In the GDR, there were attempts to mitigate central control, but when you no longer have market signals, only command and obedience remain, unless you want to slip into chaos. Decentralization attempts weakened central control, but it was not replaced by market mechanisms. Everything became chaotic, so the state re-centralised power again.

Must socialism always mean state expropriation?

Stalin’s collectivization of agriculture made sense according to Marxist logic. Stalin could not allow private enterprise. He had to fear that the kulaks—the wealthy peasants—would become too powerful politically. Joseph Stalin did not kill people just because he was in a bad mood.

At its core, socialism has always meant collectivizing the means of production—and that can only be done by the state. Some socialists say: Workers could also do this cooperatively, and it could be administered via direct democracy. But a mechanism for this has not yet been developed. How is that supposed to work in a country like Germany with 83 million inhabitants? How can you manage all that together?

I have no problem with socialism in small groups, like in kibbutzim. But that is something else entirely.

For `{`Marx`}`, capitalism and socialism were not alternative models. For him, capitalism was the steppingstone to socialism.

Marx was still hardly concerned with the representation of socialist society. He believed that dialectical development necessarily leads to socialism.

Marx never saw fit to describe the institutions of a socialist society. He did not extol a model of society. For him, capitalism and socialism were not alternative models. For him, capitalism was the steppingstone to socialism.

That has changed.

Modern socialists argue very abstractly. Democratization of the economy, the people will decide—but what should that look like in concrete terms? With 83 million people, how do you democratically determine how much beer to brew and how much steel to produce? If you want to overturn everything to see how it could work differently, you should at least have a rough idea of what replaces it. It is interesting that socialists today get away with saying little more than abstract phrases and platitudes.

 

Translated from German by Thomas and Kira Howes.

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