Why does socialism always end up in oppression and poverty?

Last week, I reviewed the excellent new book new book Socialism: The failed idea that never dies by Kristian Niemietz of the Institute of Economic Affairs. He looks at why socialism remains popular despite its long, unbroken track record of failure. He concludes that socialists have been successful at arguing, time and again, that these various failures were not ‘real socialism’.

But there is more to Niemietz’s book than this. As well explaining how socialism remains popular, he also explains how it remains economically unsuccessful and politically oppressive.

Good intentions…

Socialists do not generally set out to create impoverished, oppressive disasters. When the Bolsheviks seized power in Russia in 1917, the gulags were not their endgame. Socialists often have the best of intentions. They don’t intend for socialism to be oppressive and economically inefficient, it just works out that way every single time.

One major reason is the failure to take human nature into account. Niemietz explains how, in Venezuela, Chavez made “genuine attempts to create alternative models of collective ownership and democratic participation in economic life. In particular, the formation of worker cooperatives and various forms of social enterprises was heavily promoted.” “The social sector”, it was hoped, would become

“…a training ground where workers could develop a socialist mindset, and thus an incubator for a more advanced stage of socialism. The government believed that working in an economic environment characterised by cooperation, sharing and joint democratic decision-making would instil socialist values and habits in them. This was part of their programme of building socialism from below, rather than imposing it from on high.”

It did not work out that way. An academic sympathetic to Chavez reported

It soon became clear to Venezuelan policy makers that many cooperatives were behaving like capitalist enterprises, seeking to maximize their net revenue […] For example, rather than supplying their products to local markets […] some have chosen to export them to other countries where they can sell them at higher prices […] Also, many cooperatives have refrained from accepting new members. […] [T]hey fear that including new members is going to affect their income. […]

[M]any members I interviewed were against having to start paying taxes […] They asserted that […] they are already contributing enough to their local communities.

All this has occurred despite President Chávez’s frequent calls for solidaristic behaviour.

[T]he most common argument used to oppose contributing to neighboring communities was the claim that their cooperatives’ economic success was the result of their own efforts alone. Ignoring the inadequate capabilities that some have […] some workers claimed that community members ‘were not trying hard enough’ and had to ‘help themselves like we are doing in the cooperatives’ […] Others stated that their revenue was not large enough to be redistributed, as if only they were entitled to it.

Eventually, Chavez was forced to admit that

‘The model of cooperatives [cooperativismo] does not guarantee socialism because a cooperative is collective private property; that is, if we are 20 in a cooperative, we are going to work for the benefit of us 20, and that is merely capitalism. Cooperatives need to be impelled towards socialism’. […]

Chávez suggested that an enterprise is only ‘socialist’ or of ‘social property’ if it is controlled by society, thus satisfying social needs. An enterprise of social property, he elucidated, ‘belongs to the entire community and […] operates under a direction, a plan; it produces in accordance with the interests not only of the cooperative members but of the entire community’.

So, the state took control of these cooperatives in the name of ‘society’. Despite his promise that “we cannot resort to state capitalism, which would be the same perversion of the Soviet Union”, that is exactly where Venezuelan socialism ended up.

Much the same happened in the Soviet Union, Cuba, and China. The success of Cuban communism was based on the planned creation of a ‘New Man’ who would work selflessly for others and not for himself. When these ‘New Men’ failed to materialize, regular men were sent off to labor camps. They would emerge either ‘New’ men or dead men. The same went for the Soviet Union. The attempt to nationalize agriculture in the wake of the revolution lead to famine. As early as 1921, Lenin effectively gave up on the program and instituted the New Economic Policy. This saw a substantial return to the market economy in Russia and, through the mid-1920s, the economic situation of the Russian people improved. In China, the failure of collectivized agriculture starved millions to death. China’s economic miracle only began when its farmers were allowed to sell some small share of their produce for profit.

John Phelan is an economist at the Center of the American Experiment.