“If socialists understood economics, they wouldn’t be socialists.” -Friedrich von Hayek answering “Do Socialists Understand Economics?”
My Take on “Do Socialists Understand Economics?”
Do socialists understand economics? Or, more specifically, do they understand what leads to economic growth and prosperity? No. Absolutely not. They haven’t a clue in the world what economic policies work and which end in disaster, nor are they able to look at basic historical facts, such as the one that socialism destroyed Venezuela.
Case in point is the Soviet Union. That nation, or conglomeration of socialist states, was once a mighty behemoth. At times, even Americans feared its military might, as described in Bridge of Spies.
Now, the Russian Federation is a joke soon to be no longer a great power. The truth about Russian military spending is that on an absolute level it’s equal compared even to Europe, which has basically disarmed. Why is that? Because the socialists that ruled the USSR had no idea how economics work, so they have no money to spend on armaments.
The confluence of factors that lead to economic success isn’t hard to determine. Adam Smith described them hundreds of years ago in The Wealth of Nations. More recently, authors like Milton Friedman, Hayek, and Ayn Rand defined them in books like Capitalism and Freedom, The Road to Serfdom, and Atlas Shrugged, respectively.
Those factors, termed the “magic formula of economic success” by author Nathan Lewis, are easy to see. Deregulation (or, preferably, no regulation to begin with), low taxes or tax cuts, low barriers to starting a business, limited government involvement in the economy, and a stable monetary and banking system lead to prosperity.
Look no farther back than Gilded Age America, where regulation was low and the gold standard was in effect to see how effective that confluence of factors is in increasing prosperity and how, because of that, the answer to “do socialists understand economics?” is undoubtedly “no!”
Unfortunately, just as socialists don’t understand even basic economics or history, they don’t understand that there is nothing good about collectivism. They think it will lead to some sort of egalitarian utopia. In reality, it leads to starvation, misery, and the imprisonment or murder of political prisoners.
But, socialists are seemingly immune to that logical argument. Perhaps they’re blinded by envy and don’t see that capitalism is the solution to poverty. Maybe they just disregard the facts. It’s possible they don’t care.
I think they’re just blind to the truth and don’t understand the true nature of socialism. If socialists understood basic economics and what their system leads to, they’d see that their “golden child” of a system is at its core unworkable. No man, woman, or bureaucrat can understand how every factor of a market works, which means that a centralized economy can’t work. No “center” can understand everything.
Conversely, free markets are the national epitome of Adam Smith’s division of labor. In the free market, everyone does only what he or she is specialized to do. Rather than trying to gain an understanding of everything, they instead seek to understand only one thing very well. That drives innovation, excellence, and efficiency, making capitalism and free markets a workable system.
So, do socialists understand economics? Obviously not. Socialism fails every time. And if they did, then they wouldn’t be socialists, as Hayek stated in the above quotation. Socialism is unworkable and stands in defiance of basic economics. Don’t forget that!
If you understand that the answer to “do socialists understand economics?” is “no,” then naturally you would want to understand why capitalism, its converse, works so well. To do so, order and read The Wealth of Nations by Adam Smith and Free Market Revolution by Yaron Brook, the best defenses of capitalism that exist!