The Politically Incorrect Guide to Capitalism

FrontPage Magazine.com has an interesting interview with Robert Murphy about his new book The Politically Incorrrect Guide to Capitalism.

sample:

FP: In terms of your specialty on capitalism, could you shed some light on how the lack-of-free-enterprise factor played a role in the collapse of the Soviet Empire?

Murphy: Certainly. There are (at least) two major problems with socialism.

The first -- and this is the one that classical liberal thinkers knew about since the beginning -- is that people have no incentive to produce if all of their output will be divided equally among every member of society. When you add to that the temptations to abuse power, it's evident that a socialist system can't work with real human beings and all of their shortcomings.

However, in the early 20th century economists like Mises and Hayek raised a second, more fundamental objection: Even if we concede for the sake of argument that the central planners are angels, and that the comrades would work just as hard for the stranger 1000 km away as for his own wife and children, socialism still can't work. The reason is that a modern economy is far too complex for any mind or group of minds to "rationally" plan.

Without market prices to guide production decisions--in particular, without profit and loss signals to determine which businesses are using resources efficiently and which should stop altogether -- the central planners have no idea how to use the scarce resources at their disposal. In Mises' words, they are "groping in the dark." They can't even figure out after the fact if their five-year plan were good or bad, because there is more to economic efficiency than simple engineering.

So to finally answer your question, I think both factors played a major role in the collapse of the Soviet Union. There was rampant corruption and horrible abuse of power, but even beyond that there was a systematic inability to harness the vast natural resources of the Soviet Union in order to better the lives of its people. Once the Soviet people gained a more accurate picture of how people lived under the "brutal" oppression of the capitalists -- through shows such as Dallas, for example -- the Soviet Union's days were numbered. Even the ruling class eventually stopped believing in the official propaganda.