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Two Weaknesses of Socialism

Summary:
Two weekend stories in the Wall Street Journal remind us of two weaknesses of socialism or, for that matter, of any collectivist control of the economy. The first story reports on how the federal and state governments have blundered in distributing a trove of money to landlords and tenants in order to prevent evictions due to the Covid and lockdown recession (Andrew Ackerman, “End of Eviction Moratorium Puts Many Tenants at Risk of Losing Their Homes,” Wall Street Journal, July 23, 2021): “The capacity to process applications does not match the volume of need,” said Jim MacDonald, chief community investment officer at the United Way of Greater Kansas City, which is helping distribute about million in the area. In other words, the capacity to process

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Two weekend stories in the Wall Street Journal remind us of two weaknesses of socialism or, for that matter, of any collectivist control of the economy.

The first story reports on how the federal and state governments have blundered in distributing a trove of money to landlords and tenants in order to prevent evictions due to the Covid and lockdown recession (Andrew Ackerman, “End of Eviction Moratorium Puts Many Tenants at Risk of Losing Their Homes,” Wall Street Journal, July 23, 2021):

“The capacity to process applications does not match the volume of need,” said Jim MacDonald, chief community investment officer at the United Way of Greater Kansas City, which is helping distribute about $30 million in the area.

In other words, the capacity to process applications does not match the volume of free goodies that people want. One could argue that the problem is due to partnerships with private organizations (United Way in this case) that are typical of American governments—an objection related to the lack of government “capacity” criticized in Daron Acemoglu and James Robinson’s latest book, The Narrow Corridor (Penguin Book, 2019).

But even a more monopolistic and bureaucratized delivery system has its limits. Governments cannot have all the information about individual preferences and circumstances of time and place that are necessary for efficient central control; nor do they have good incentives to respond to whatever information they have. This problem is illuminated in The State and Revolution (1918) where Lenin defends the ideal of the whole economy organized like the state postal service. Speaking of the “first phase of communism” (that is, the socialism of the proletarian state), he wrote:

A witty German Social-Democrat of the seventies of the last century called the postal service an example of the socialist economic system. This is very true. …

To organize the whole economy on the lines of the postal service so that the technicians, foremen and accountants, as well as all officials, shall receive salaries no higher than “a workman’s wage”, all under the control and leadership of the armed proletariat—that is our immediate aim.

The second story is about Leonard Erdman, a New Mexico mechanic and body shop expert, who spent several months restoring a 1952 Ford pickup and inventing a new purple color for it. Speaking of his restored pickup, he said (see A.J. Baine, “He Invented a New Shade of Purple for His Souped-Up Ford,Wall Street Journal, July 24, 2021):

I tinkered with it for eight months until I came up with a vision of what I wanted to do. I wanted it to be in your face, almost like something you would see in a comic book. My vision included purple paint. Everyone told me I was crazy—even my wife. I kept saying, “It’s going to be OK. Trust me.”

(The color invented by Mr. Erdman is roughly reproduced on the featured image of this post. Look up the Wall Street Journal if you have access to it.)

A Marxist may reply that this sort of esthetic venture is exactly what Marx had in mind when he described the ultimate stage of communism (The German Ideology, 1845):

In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.

The economic problem here is quite basic. Resources are scarce in relation to human desires. Once all factors of production are deemed to be “our national resources” or “our collective resources,” why would the collectivity permit a little mechanic to divert his labor to a time-consuming hobby, not to mention the material inputs (all the parts) that went into “his” old Ford pickup, while, as our democrat socialists in DC would say, American children are hungry and people lack medical care? Any Supreme Soviet would find this unacceptable and contrary to the collective priorities. Any woke government would force the crazy mechanic to devote to feeding children or building medical equipment the time that he selfishly spends restoring old cars,  hunting, fishing, or literary critique.

The two lessons are that (1) government management of the economy is at best bureaucratic and inefficient and that (2), at worst, it requires the arbitrary control of “our” national or collective resources, that is, of us individuals.

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