"…to a greater or lesser extent, the prevention of the exercise of the entrepreneurial function makes it impossible for entrepreneurs to discover the disallocations that take place in society. By coercively impeding actors from taking advantage of the opportunities for profit that every disallocation generates, such opportunities are not even appreciated by the actor, who, therefore, is not aware of its existence and thus these opportunities go unnoticed or unperceived. And even if by chance a coerced actor were to notice or to appreciate the opportunity for profit, this would be irrelevant, since the institutional coercion would hinder the actions necessary to profit from it.”
~ Jesús Huerta de Soto, Socialism, Economic Calculation and the Entrepreneurial Function
There are numerous pro-market think tanks, institutes, organizations, and bloggers that specialize in being pro-capitalism, pro-freedom and thus oppose the nefarious economic and political outcomes of socialism. But one particularly interesting area that is left behind is a more vocal and visible analysis of the consequences of socialism on society itself, its institutions, dynamics and the relationships between them. The purpose of this essay, thus, is to briefly highlight some of the most devastating effects of socialism that often get lost under the traditional (but no less important) economic analysis.
In his Socialism, Economic Calculation and the Entrepreneurial Function, Jesus Huerta de Soto defines socialism as the “institutionalization of aggression against the free exercise of entrepreneurial action.” This is also quite appropriately the definition of the state itself. Indeed, there is nothing that the state does or can potentially do that does not aggress against the right of free enterprise, and thus property rights. Even the minimal state (“minarchy”) would have a forceful monopoly as the only organization capable of engaging in dispute-resolution. Regardless of what one might think as the better arrangement of society, it is nonetheless correct to refer to the state as ultimately being nothing but socialist. Whatever its ends, its means are aggressive, collectivistic and its very nature is monopolistic.
Seen under this light, this “dis-education” or learned stupidity, for lack of a better term, is the inevitable result as the state grows. Richard Hammer speaks to this process in “Gateway to an Altered Landscape” when he describes this process of the state becoming a state of mind. He uses four stages to illustrate:
- Before the state takes over a function, most people in a society will be comfortable with the existing institutions in which the function is performed privately. For example, most Americans are now comfortable with the ideas that parents can decide for themselves how many children to bear, and that people can decide for themselves what qualities are necessary in a spouse.
- Shortly after the state takes over a function, most people in the society will probably agree with state control of that function, but almost all of them will remember that there had been a debate, and some will acknowledge that there had been plausible arguments against state takeover. For example, the regulation of what tobacco companies say in their advertisements.
- A few generations after state takeover of a function, probably 80% or more of the population will assume that the state must perform that function, and only libertarians will be aware that there had ever been a debate. For examples, compulsory schooling and zoning of land in cities.
- Hundreds of years after state takeover of a function, virtually everyone in the society will assume without question that the state must perform that function. Even the history of private performance of the function will be forgotten by all but a few academics. Examples of functions in this category are: streets, criminal law, and defense from external attack.
As a means of illustration, one can examine one practice across history and see it migrate through the four stages. The obvious question then, is what would it take for society to remember, if you will, what used to happen? For example, let’s look at something as basic as supplying fresh, potable water to a home. Originally, this was something that everyone who built a home needed to understand and plan for. At some point, it became standard for the municipality where one lived to handle this. Now, for most people, but particularly those who live in cities, if the state stopped handling this service they would likely die of thirst — after mass pandemonium and fights over bottled water at the local grocery stores! Clearly then, the state has become a state of mind regarding a need as basic at that of potable water.
State intervention in the economy inevitably results in symptoms of acute dependence. As organizations, companies, and other institutions are crowded out by government agencies, dependence grows. Now, instead of having ordinary people or entrepreneurs in charge of the production of a good or service, there is only one monopolistic “option.” Generally this option is presented as the best choice when in fact, it is often the only choice! And this situation becomes a breeding ground for targeted attack by various lobbying groups, each one trying to extract from the state, like a piñata, some tax-funded handout. In the market, however, where there are no barriers to entry, a multitude of providers can exist simultaneously, each one trying to offer the best service at the best price. Competition and decentralization tends to increase availability and improve quality. If you don’t like the way company X is handling things, there’s a chance that Y or Z would welcome your patronage. Nothing like this exists under a socialist organization. You are forced, at gunpoint if necessary, to fund whatever the state declares necessary.
After the state takes over functions, it becomes less and less of a priority for the market to provide services and people start to see things as a “right," as something that they are entitled to no matter what. Whether it is health care, education, defense, transportation or housing: given that the state has been providing such things for so long it is not surprising that society assumes that there is no other way. Free market health care, education, defense, transportation — all these things are anathema to the modern citizen who bathes in a puddle of putrid social democracy rhetoric. Now, one could argue that certain functions — such as the potable water case — lead to state intervention simply due to economies of scale. Simply put, everyone needs the service, therefore it is better to have one central provider. And given that the state can be “depended upon” to provide for everyone anyway, the single-source nature of water supply represents evolution, not intervention.
One might be inclined to accept this logic, except for the fact that the state is ready, willing, and able to artificially preclude entry into markets where competition would otherwise exist, and thereby make certain that they and only they supply the needs of the public. One of the best examples of this practice is the delivery of mail. Certainly few in the U.S. are not exposed to the Postal Service routinely. As such, everyone accepts that the government — and only the government — delivers personal mail, i.e., letters and such. (Let us for a moment ignore the package delivery services, such as Federal Express and United Parcel Service.) Commensurate with this acceptance, everyone is willing to allow a receptacle that is normally bought, paid for, and maintained by the homeowner, to be “owned” in a sense, by the Postal Service. No one else can lawfully put any mail in that slot! But how many people know that there was once a competing service to the USPS? How many people know that it is because of this competition that the cost of a stamp was driven down? And how many know that in response to this competition, the state passed a law forbidding anyone from competing with them in the area of mail delivery? So we see that the state not only imposes itself on the market via the “evolution” of learned dependence, but also via legislation. Nice racket!
What can be expected, then, when the advocates of freedom and civilization challenge the established views? Not a whole lot, unfortunately. The statist mentality clouds clear thought. Common excuses such as “there’s no other way of doing things” or “it would not work” or even “what’s wrong with the way things work today?” reflect not only the economic illiteracy of most people but also a contempt for their fellow man because they are, often quite explicitly, against voluntary cooperation. Let’s imagine that the government has monopolized the means of production of shoes; it is the only one who has for a long time been producing them. This means that no person alive has ever been a shoe entrepreneur. Granted, the state is employing a few people who do know how to make shoes but those are not entrepreneurs, much less capitalists. The state is using central planning and taxes to provide shoes. It does not have to risk anything or respond to market desires because there simply isn’t a shoe market. Take it or leave it! In that context, the average person would be appalled to consider a non-state shoe. How would they be done? In what amounts? How much would they cost? Who would deliver them, or sell them, and where? What about quality? Colors? Sizes? Madness!
Regulations, taxation, and prohibition bring us closer to a socialist state where a select few are given the power to enter the market. These conditions foster ignorance and mental laziness. With every piece of interventionist legislation, the incentive to offer a product or service is lessened. The inexorable result is decadence and poverty and a world with fewer experts, fewer entrepreneurs and less capital.
Socialism is a guaranteed step towards barbarism and against civilization and progress. And the agent of socialism, the state, is stupefying. Reject its advances and withhold your consent.