Obama’s Grab-Bag Socialism

Edward Hudgins has a good article called “Obama’s Grab-Bag Socialism” at the Atlas Society website.

Although comparing Fascism and socialism is often like discussing how many angels can dance on the head of a pin, Hudgins does a good job doing so. Here are excerpts from the piece:

We can understand why President Barack Obama and the Democratic Congress do not want to call their attempts to socialize America’s economy “socialism.” Government efforts to control economies in the past have been disasters. Still, this administration is using a grab-bag approach in its attempt to take control. But it will face the same insurmountable problems as did socialisms of the past, and the American people will suffer.

Consider the three brands of socialism from the past century.

First there was the communism or “scientific socialism” of Marx and Lenin in which the government owned all property and controlled all aspects of the economy.

Without private property rights and market incentives, there was little motivation to do one’s best and no place for true entrepreneurs. The Russians had a saying: “We pretend to work and they pretend to pay us.”

Planners—the dictators of the proletariat—attempted to allocate all the inputs of production—energy, raw materials, industrial equipment—in order to produce the right mix of food, capital goods, infrastructure, and consumer products to make an economically strong “nation” though not necessarily prosperous subjects. How many tons of coal produced by which mines must be shipped in what quantities in how many train cars to which industrial facilities to produce how many tons of steel or megawatts of electricity? Micromanaging an economy through millions of such decisions was an impossible task.

Without market prices to indicate the real supply, demand, and best uses of the factors of production, the planners literally just made up the numbers.

The system was a disaster. It kept millions impoverished and eventually collapsed.

Under the second type of socialism, corporatism, pioneered by Benito Mussolini in Italy, much property stayed nominally in private hands. But individuals did not have the right to use their property as they saw fit. The system was not democratic; citizens were only important as members of groups—farmers, merchants, industrial workers—not as individuals.

Appointed ministers with various portfolios in a Grand Council of Fascism would dicker about levels of production, wages, prices, and the like. Decisions of how to “harmonize” all these interests were made by the prime minister—Il Duce. The owners of productive property and enterprises were informed of the will of the state and knew they had to obey or face demonization, intimidation, or worse.

This form of central planning did not work either. Planning by political elites simply produced economic hardships and the elites had to use heavy-handed tactics to quell dissent.

A third type of socialism was taken up in many European countries after World War II. Central planners would restrict themselves to owning and controlling the “commanding heights” of the economy—transportation, finance, raw materials, heavy industry—which they saw as fundamental to economic growth, while leaving most other economic matters to the choices of individuals and smaller enterprises. Welfare state benefits such as health care and unemployment insurance would provide a safety net for all.

Democratic socialism didn’t work well either. Interest groups, especially labor unions, could get their way through massive demonstrations or crippling strikes. The parts of the economy owned and controlled by governments became costly and inefficient. Rather than providing platforms for growth, they were drags on the economy. Job creation and productivity stagnated. By the 1980s Margaret Thatcher was undoing Euro-socialism in Britain, and Continental leaders were borrowing policies from Ronald Reagan.

Today, Obama and the Democrats will not call what they’re doing “socialism.” But they are using a grab-bag approach to taking over the economy. […]