The Siren Song of Central Planning

No one who was awake in 1989 can advocate socialism with a clear conscience. When the Soviet Union fell, the dream that was Marxism died. Fortunately, the Cosmos left us some examples to remember the failure by.

Enter Hugo Chavez. Chavez is the President of Venezuela and an unrepentant socialist. His solution for Venezuela is “socialism, socialism, socialism.” You see, Chavez believes that bettering oneself through productivity is evil and he aims to rid his country of it.

How, exactly, does one eliminate the dreadful desire on the part of some to earn a profit? Well, first you have to find them, so he is sending about 4000 goons out into the countryside to uncover things like “price gouging.” We take that to mean violating his price controls.

Next, you finance the government with paper, a strategy not unknown in the rest of the world, though other countries seem to disguise it better. Never mind that inflation generally tops 20% a year in Venezuela. When you are a socialist, what’s money anyway?

Third, you give it a few more decades. Correcting an entire country’s “vices” and breeding the complete socialist citizen doesn’t happen overnight. Calculating the price that products “should” have is a tedious and time-consuming business. Convincing every citizen that he/she belongs to the collective may take a little longer.

You have to love a guy who stands so firmly against the prevailing winds of sanity. No sane person would advocate a planned economy these days, but there’s ol’ Hugo, chin outstretched, hands on hips…

Oops. This just in. Andy Stern apparently does. Yes, we have it confirmed now that the former president of the Service Employees International Union (SEIU) advocates central economic planning. You know, like China. Ignore for a moment that China is the place where you can still get prison for criticizing the government online and peacefully. This is econ, man! PoliSci is down the hall.

Stern thinks government does not plan enough. Capitalism is old school, apparently. We know better than to accept free market thinking wholesale. We should let government figure stuff out, presumably which industries to support and which companies to subsidize. If that sounds rational to you, imagine what phones would look like if the government were in charge. Or if they were to take over health care. Wait, they already did that.

Stern is intoxicated by China’s “goals” for the next several years, which include:

…the emerging outline of China’s 12th five-year plan. The aims: a 7% annual economic growth rate; a $640 billion investment in renewable energy; construction of six million homes; and expanding next-generation IT, clean-energy vehicles, biotechnology, high-end manufacturing and environmental protection—all while promoting social equity and rural development.

Wow. All that and a bag of chips. Of course, Stern fails to explain where all the money for that stuff came from or whether anyone actually wants it. (Short answer: They borrowed it and no, at least in the case of houses.) We also are left wondering how neat all that stuff will look when China tanks along with the rest of the world.

It is no surprise the Stern, a union man, loves planning and hates the free market. He and his ilk make a handsome living forcing other people to make economic decisions they would never have made on their own. I imagine he figures on being able to “negotiate” some nifty wages and benefits for whatever pack of thugs he happens to be leading come Five-Year-Plan implementation time.

One more time for the economics-impaired. Central planning does not and cannot work. Prices in free markets are the only mechanisms that convey good information about what people really want and are willing to pay for.

Further, any and all planning schemes implicitly assume that it is moral to hijack an obscene percentage of an individual’s earnings for the purposes of others. It is not, at least if one has any semblance of respect for individual rights.

Last, there is no separating political from economic rights. The right to speak freely depends upon owning the property necessary to make one’s views known. If one has the “right” to do something but his/her property rights are so limited as to preclude doing it, the right is meaningless.

Welcome to China, where thugs of a different stripe still rule. All their planning will come to naught when the global economic system punishes man for his dim-witted hubris. No man, no union, and no political party can even begin to “run” an economy; they can only screw it up by trying.

Venezuela and China are little different. China just has the luxury of enough people to create a mirage for a little while. Pirating privately-developed software did not hurt, either. Let’s see them plan something as wonderful as that through central planning.

Stern and others are a nuisance, not only because they advocate a horrible idea, but because it is precisely the kind of idea that crony capitalists love. Embracing it will only prolong the agony of crony capitalism’s death and enrich the tiny sliver of better-dressed thugs at the top in the interim.

In the end, any attempt to commandeer the economy further will result in the same home-remedies as in the old Soviet Union. We will see black markets thrive (because they work) and a barter system emerge (because transactions can’t be traced). Markets will win–they always do. Gold will again become the accepted standard of value–without the government’s approval. How much people suffer before we return to pure markets is dependent on how many fools like Stern are out there. I expect there are legions.

No matter. Each of us who understands can prepare at least somewhat for the day of reckoning. We are smart enough to barter and secure enough in our self-asserted rights that using an underground economy will not keep us awake at night. We will survive, maybe even prosper, as the world plans its way to hell.

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About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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