Yes, that wasn’t real socialism, and today’s foolishness.

The foolishness of history was that so many people, including many great economists, were misled into believing the Soviet Union was genuinely socialist- a planned economy. Today’s foolishness is that so many people believe either that our interventionist economies are pure market economies or socialist economies.

“The idea of Socialism is at once grandiose and simple“, remarked perhaps the greatest critic of socialism. The enticing greatness and the seductive boldness of a planned economy, that not only offers us unprecedented wealth but also overcomes alienation and creates a formidably just society, attracts those who fight for a better world. The idea of socialism is so great, however, that even its most learned critics have, at times, been deceived by those creating a façade of socialism.

Socialism is not „when the government does stuff“, nor is it when the government does a lot of stuff. Socialism denotes a specific economic system: one in which there is a single decision-making centre that plans the entire economy, from end to beginning. There are no independently acting entrepreneurs. It is a monocentric, and not a polycentric system, as Paul Craig Roberts has stressed. And this is where its purported greatness comes from. There is no longer anarchy. However, this presupposes that it’s all according to one plan.

The „foolishness of history“, to which this blog entry’s title alludes, are words that Michael Polanyi used when describing a curious phenomenon: he described that the Soviet Union, to many the main torchbearer of socialism, was in no sense a planned economy, and therefore, in its truest sense, not a socialist system – but still, many believed it was.

If socialism means there is someone who plans the economy, then the Soviet Union was not a planned economy, except, perhaps, for the one attempt in late 1920. Disregarding this attempt, there were substantial black markets throughout the Soviet Union’s existence. And, more importantly, the economic system was not centrally planned, but relied on countless different decision-makers, creating a heavily interventionist economy, but an interventionist, not a socialist, economy. As Don Lavoie summarised in the 1980s, “planning is, strictly speaking, not inefficient; it is impossible. What really occurs in the Soviet economy, as elsewhere, is blind intervention by a government into a polycentric order it does not understand and which is not under the control of any one person or group.”

I take the foolishness of today to mainly refer to gross misunderstandings of our economies – misunderstandings that are shared by people with very different political affiliations. On the one hand, there are people who deplore the poor state of the American health care system, the 2007–2008 financial crisis, or the dire housing market. These people – think of movements such as Occupy Wall Street – then go on to chastise the „market“, or “capitalism,” for failing to live up to its promises and demand, as a remedy, nationalisations or similar government interventions. However, it is usually the government’s various interventions that are responsible for the bad outcomes.

On the other hand, there are those people who today see socialism everywhere. This culminates in such preposterous denunciations of so many people as socialists. Joe Biden, by some, is then labeled a socialist. On the verge of irony, there are also many government policies that are explicitly called socialist. However, if socialism means that the government plans everything, then there can be no such thing as an intervention in a planned economy. You cannot intervene because you have already planned everything! Thus, to call an intervention socialist makes little sense.

Now, of course, it is true terms can take on a different meaning over time. This may be the case with “socialism”. However, even if the meaning of socialism has changed, it still holds that many people who are critical of both comprehensive and non-comprehensive planning overlook the fact that our economy is, to a large degree, a market economy. No matter how much governments today intervene, there is still relatively free entrepreneurship, private property, and (genuine) prices. And just this is why, especially the American economy, continues to see substantial growth.

The foolishness of today is not only that so many people mistake interventionist economies for pure market economies but also that so many people mistake interventionist economies for socialist economies. But the world we live in is an interventionist mess; governments intervene too much. Despite the distortions they cause, fundamentally there still is a market process at work that keeps Paris fed – and this is the reason for the massive economic growth the world has seen in recent decades.