Wow. This is a long, FANTASTIC essay by Austrian Economist Yuri Maltsev. Full version available here.
Lenin’s slogan, “Marxism is Almighty Because It Is True,” was displayed practically everywhere in the former Soviet Union.
I once met an Indian translator hired by the Political Publishing House to translate 50 volumes of the Collected Works of Marx and Engels into Malayalam. He complained the project was stalled because the Soviet propaganda officers could not find another Malayalam translator to cross check his work. . . .
In the Soviet Union, Marxism was not thought to be just an economic theory. It pretended to be the universal explanation of nature, life, and society. . . . In the name of Marxism, the death toll reached 100 million; the rivers of blood flowed from Russia to Kampuchea, from China to Czechoslovakia.
Hatred was the chief motivator of the socialist revolutionaries and their followers. Lenin regarded politics as a branch of pest control; the aim of his operations was the extermination of cockroaches and bloodsucking spiders, the myriad persons who stood in the way of his political ambitions. Yet Western hagiographers have glossed over this atrocious ruthlessness of Marxists, as historian Richard Pipes has documented. . . .
One of the common denominators between Leninists and government interventionists in the West is the belief that the problems of monopoly are the problems of ownership: only private monopolies acting out of greed are harmful. These institutions are suppressing scientific and technical progress, polluting the environment, and engaging in other conspiracies against public well-being. Government monopolies, however, were believed to be ethical and upright; they substituted the “greed” of the profit motive with a “societal interest.” Yet group bureaucrats who manage and operate the public sector are no less self-interested than those who manage and operate private business. One important difference exists, though: unlike private entrepreneurs, they are not financially responsible for their actions and they operate without institutional constraints of cost control that private property and competition induces. The enlightened minds of planners and technocrats cannot overcome the problem of economic calculation without market signals. . . . [emphasis added]
The failure of socialism in Russia, and the enormous suffering and hardship of people in all socialist countries, is a powerful warning against socialism, statism, and interventionism in the West. . . .
It is beyond the capacity of economic analysis to calculate the opportunity costs of the socialist experiment in Russia. But the human death toll from Stalin’s collectivization, purges, and Gulags is estimated by Russian historian Roy Medvedev at forty-one million people. . . .
“Despite the recent collapse of socialism and communism in Soviet Russia and Eastern Europe, socialism is alive and growing,” Gary Becker has said.
The Austrian school is also the historical bete noire of the Marxian school. Long before any other school came around to understanding the deep flaws in the Marxian approach, the Austrians had devoted an enormous amount of intellectual power to exposing its fallacies and dangers. Carl Menger refuted the labor theory of value, his student Eugen von Böhm-Bawerk demolished Marx’s views of capital, F.A. Hayek showed the incompatibility between socialism and political freedom, and Ludwig von Mises attacked the core of socialist economic theory.
It was Mises’s criticism that has proven to be the most prescient. In his 1920 essay “Economic Calculation in the Socialist Commonwealth,” he argued that the socialist economy couldn’t properly be called an “economy” at all, since the system provides no means for rationally allocating resources. It abolishes private property in capital goods, thereby eliminating the markets that produce prices with which to calculate profit and loss. The absence of rational economic calculation, and the institutional structures that undergird it, prevents any realistic assessment of the proper uses and opportunity costs and resource allocation options. “As soon as one gives up the conception of a freely established monetary price for goods of a higher order,” Mises wrote, “rational production becomes completely impossible.” The central planners of an industrial economy will find themselves in a perpetual state of confusion and ignorance, “groping in the dark.”
“One may anticipate the nature of the future socialist society,” he said seventy years before the rest of the world was to become convinced. “There will be hundreds and thousands of factories in operation. Very few of these will be producing wares ready for use; in the majority of cases what will be manufactured will be unfinished goods and production goods. . . Every good will go through a whole series of stages before it is ready for use. In the ceaseless toil and moil of this process, however, the administration will be without any means of testing their bearings.” . . .
Gorbachev’s original theory was that the socialist system was in good working order, but the people, the cogs in the communist machine, had taken to laziness, drunkenness, and were accumulating “dishonest income” in violation of socialist ethics. His first reform was to call for “a restructuring of people’s thinking.”
The anti-alcohol campaign began right away. Party bosses sternly announced that they didn’t want any “drunks” in their country. Their enforcers began a concerted effort to discover anyone with the smell of alcohol on their breath and haul them into the police station. When the police stations became overcrowded, it became routine practice to drive thousands of people about fifteen miles out of town and drop them in the cold and dark. Nearly every night, you could see armies of so-called drunks walking miles back to town in the middle of winter.
Over 90 percent of liquor stores were closed. The Party bosses did not anticipate what happened next: sugar, flour, aftershave, and window cleaner immediately disappeared from the shelves. Using these products, the production of moonshine increased by about 300 percent in one year.
The predictable result was a heavy loss of life. From 13,000 to 25,000 people died from drinking poisonous homemade alcohol. Many more died standing in lines for five hours to get the little bit of official liquor that was left. . . .
Price controls in cooperative markets were strictly enforced, so that all prices had to be the same as in state stores. For example, beef was supposed to be 4 rubles per kilo. As a working economist in Moscow, my first thought was, “all beef will disappear from the market.” But when I went to the market to see what was going on, to my surprise beef was available. It turns out that farmers were shrewdly selling 4 rubles’ worth of beef, but attached would be a huge dinosaur-sized bone that brought the total weight to one kilo. With a complex system of selling meat plus huge bones, supply and demand met and there were no meat shortages.
Things were different in the market for rabbit meat, which was supposed to sell for 3 rubles per kilo. It was impossible to find a bone heavy enough to add to the total weight that could also have plausibly come from a rabbit. Rabbit meat disappeared very quickly. . . .
The most visible results of the campaign against dishonest income were an increase in bribes and a reshuffling of power in favor of the bureaucrat-led mafia. Soviet bureaucrats were always pleased when new laws were passed because it gave them a chance to extract even more bribes. . . .
I once knew a man who was head of a huge, multi-hundred-thousand-ruble furniture manufacturing enterprise. He did his best to stay away from underground activities, and on his salary he could afford to. But he had an enemy in the Party, and one day he got a visit from a policeman accusing him of dishonesty in record keeping. (Police work is a highly valued occupation because of the opportunity for receiving bribes.) Instead of paying the appropriate bribe, the man maintained his innocence. Then a team of six accountants came into his offices and combed through his records over a period of weeks. Finally, they found a 34-ruble mistake, which they said was deliberate dishonesty.
After a hearing, the state attorney threatened the man with eight years in prison. His own attorney, whom he had to bribe, told him the best solution was to pay 15,000 rubles — divided among the prosecutors, the bureaucrats, and the judge — so the affair could end. . . .
After wreaking havoc on the economy through his first two campaigns, Gorbachev initiated a third: in favor of “labor discipline,” that is, forcing people to show up on time and work harder. In this, Gorbachev was following a similar campaign by his mentor Andropov (who had people rounded up in the streets and destroyed their lives for not acting like slaves). Gorbachev initiated harsh measures against “lazy” people, making it easier to find and prosecute anybody the government did not like. If a person was absent for three hours, they would lose their job. Instead of giving two weeks’ notice to change jobs, employees had to give two months’. . . .
Gorbachev’s final effort, before he began speaking about “the market,” was a short-lived campaign for new “quality” standards. The central plan had always emphasized the quantity of output, but never the quality. So 150,000 new bureaucrats were hired to oversee the “quality of output.” . . . resulting in more bribes and more failure. . . .
A young man from a peasant family I knew had heard that market activity was legal, and decided to raise a pig to sell in the market. For six months, this hopeful entrepreneur devoted his time and money to caring for it and feeding it, hoping he would earn twice his money back by selling it. Never was a man so happy as when he took the pig to market one morning. That night I found him drunk and depressed. He was not a drinker, so I asked him what happened. When he arrived at the market, a health inspector immediately chopped off a third of the pig. The inspector said he was looking for worms. Then the police came and picked the best part of it, and left without even saying thank you. He had to pay bribes to the officials in charge of the market to get a space to sell what was left. And he had to sell the meat at state prices. By the end of the day, he earned barely enough to buy one bottle of vodka, which he had just finished drinking. This was Gorbachev’s new market in a nutshell. . . .
Henry Kissinger, the Nobel Prize Committee, and many others have given credit to Gorbachev for the events of 1989 in Eastern Europe, which brought down the communist regimes there. Gorbachev’s real strategy in those countries, however, was to replace the old-guard Stalinists (with poor images) with young men like himself who drank the same brands of brandy. He hoped he could put smoother, smarter men in power in an effort to save socialism. The situation fell out of his control, largely because the KGB had misinformed him about how deep the hatred toward socialism was in those countries. The revolutions of Eastern Europe happened in spite of Gorbachev, not because of him. . . .
Western academics and media pundits found his support for socialism charming, if a little outdated. But the people who lived under the system felt differently. They knew socialism had proven itself the most destructive ideology in human history — responsible for untold millions of deaths. For those populations onto whom socialism was imposed, it impoverished them, wiped out their cultural heritage, and in many cases, resulted in massive bloodshed.
At his first news conference after the Soviet coup attempt, Gorbachev promised: “I will struggle until the very end for the renewal of this party. I am a true believer in socialism.”
