Even Angels Couldn’t Make Socialism Work

 

Source: AP Photo/Charles Krupa

Before the collapse of the USSR, Russian workers would say, “We pretend to work and the government pretends to pay us.” Today, people who favor free markets often say that socialism would work if humans were angels, pointing to the incentive problem.

Hayek argued that socialism is necessary for small groups, such as families. In fact, applying capitalist principles to families would destroy them. Hayek believed socialism could work in small groups, like communes and churches, where everyone knows everyone else. Many theologians think the early church in Jerusalem practiced communism, although the context and Greek indicate they didn’t.

However, all communes from the Pilgrims to the kibbutzim have failed because of the incentive problem. Kibbutzim have continued to exist in Israel but have changed radically from the original design. It’s human nature to quit working when the diligent see the lazy getting the same rewards.

All socialist intellectuals understood the incentive problem but insisted that the widespread adoption of socialist principles would transform human nature, returning it to a state of innocence and eliminating the incentive problem. When that didn’t happen in the U.S.S.R. and China under Mao, socialist leaders turned to punishment, then execution for those who refused to emerge from their capitalist cocoons as redeemed socialist butterflies. North Korea, Cuba, and Venezuela carry on that venerable tradition.

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Christian laissez-faire built this country

I have been looking for an economics text book for non-majors for years and finally found it in Francis Wayland’s Elements of Political Economy – published in 1837. It’s shocking how little good economics has changed in almost 200 years. But first, readers need a little background in order to appreciate the book.

Puritan economics in the US followed Calvin’s ideas closely and gave absolute control over commerce to the government. However by the turn of the eighteenth century, Puritan ministers no longer equated commerce with greed, but with “industriousness and prudence, moral reform and Protestantism’s interest in the world. They maintained that providence used overseas traders to protect English liberty and spread civilization,” according to Mark Valeri in Heavenly Merchandize: How Religion Shaped Commerce in Puritan America. And Isaac Newton, having been a great theologian as well as history’s greatest scientist, influenced Puritan pastors. Instead of viewing the hand of God directly causing events in the physical world, Newton described “nature as a system integrated into a regular pattern by universal physical laws” that God had created. God worked indirectly through natural laws.

Soon theologians began to find similar natural laws working in society to promote prosperity and order as well as to restrain vice. Prosperity no longer resulted from God’s favor at a Christian’s devotion but from following the natural laws of the market, and financial hardship was not a sign of God’s wrath as much as failure to understand and abide by God’s natural laws according to Valeri.

Writers on both sides of the Atlantic probed the meaning of the economy as a subset of this cosmic order. They described commerce as a series of natural exchanges that, by the law of nature, coalesced into a balanced system. This reading prompted pastors and merchants to imagine the natural dynamics of exchange as a divinely sanctioned, moral good. Innate desires brought people together into networks of trade that depended on mutuality, confirming the natural integration of variety into a whole; as Foxcroft put it, nature “impresses men with a deep sense of the bonds and benefits of society; and so excites them to feel the good of others” as they pursued their own economic good, “rendering their work daily more and more natural.” God designed the market system that ran by moral laws.