From the WSJ Opinion Archives
OUTSIDE THE BOX
On History's Ash Heap
Socialists promised heaven, but their heads were in the clouds.
Most Americans have never celebrated May Day, the working-class holiday, but the superiority of our free-market system has not always been self-evident. For most of the last century, from 1917 through 1981, socialism was in ascendancy, dominating the thinking of intellectuals and the governments of the world. Its failure became undeniably clear only in the final two decades of the 20th century.
Now an excellent book and television show have documented the ascendancy, struggle and failure of socialism and the better-late-than-never triumph of the market: Joshua Muravchik's "Heaven on Earth: The Rise and Fall of Socialism" and Daniel Yergin's three-part PBS documentary "Commanding Heights." Between them they trace socialism from its beginnings in the French Revolution through the Russian Revolution, its expansion around the globe after World War II, and its decline in the 1980s and '90s. They put the 80-year battle for the commanding heights of economic policy in clear perspective.
We know Russian communism failed, for we saw the Berlin Wall come down in 1989 as the Soviet economy collapsed. Actually the socialism that doomed its economy was a failure from the start; Lenin's 1920 War Communism nationalized the means of production, set up a government-controlled distribution system and imposed a single economic plan on the entire Soviet economy. As Russian scholar Richard Pipes noted in "A Concise History of the Russian Revolution," the bureaucracy to manage it grew from 318 employees in 1918 to 30,000 in 1921, while the number of employed industrial workers "declined by one-half, industrial output by three-quarters, and industrial productivity by 70 percent." The failed Soviet economic system would continue until we saw erstwhile Soviet colonial subjects grasping for oranges and bananas in West Berlin supermarkets in 1989.
While the U.S.S.R. may have been socialism's most spectacular failure, it turns out to be but one of many. India became an enthusiastic socialist state after World War II, believing in what was called the "dependency theory": If imports were prohibited and needed goods produced domestically, the economy would prosper. It didn't work--in India, South America, Africa or anywhere else--because it cut off the technological improvement competition engenders, and because local monopolies discouraged work and innovation. "Commanding Heights" relates the Indian government's decision that all automobiles would be produced domestically, shutting out foreign imports and creating Hindustan Motors to produce a car called the Ambassador. Toyota began production in Japan the same year. Fifty years later Toyota was producing five million cars a year while Hindustan's annual production was 18,000 of the same model it originally built in the 1950s.
Mr. Muravchik's description of Tanzania's socialist experiment is even more depressing. Here was a nation that, with enthusiastic help from China, the World Bank and the international community, set out in 1961 to create a model socialist heaven on earth. Julius Nyerere nationalized land, industry and banks; disbanded labor unions and created a one-party political system. The state set prices for 3,000 goods and services, established hundreds of model socialist villages, and imposed collective agricultural policies. But by 1988 the nation was importing corn that it used to export, corruption was universal, and the World Bank reported that the Tanzanian economy had shrunk 0.5% every year for 30 years.
The British Labour Party established the roots of a socialist system in 1918 based on the "common ownership of the means of production, distribution, and exchange." It would come to full flower in Clement Atlee's postwar government with the nationalizing of most of the nation's large industries. By 1973, Ted Heath's conservative government was still attempting to set the prices hairdressers and taxi drivers could charge.
In spite of its failures, socialism dominated the commanding heights of Western intellectual thinking for 60 years. Whenever something went wrong in a nation's economy, intellectuals blamed it on a lack of regulation, and socialism spread around the globe, governing 59 nations at its high-water mark in 1985. Even Richard Nixon proclaimed "we are all Keynesians now" as he imposed wage and price controls in America in the 1970s.
But it turned out to be a mirage. The idea that a centrally planned economy could outproduce and outperform a market-based economy was a fiction. Socialism simply didn't provide enough opportunity to motivate people to excel in producing goods. Worse, central planning usually brought totalitarianism and a loss of liberty. Austrian economist Friedrich von Hayek was correct in his 1944 book, "The Road to Serfdom," that too much government planning leads to too much government power, and too much government power destroys freedom.
Ever so slowly the world's nations began to see that socialist economies were not delivering prosperity or even a minimal quality of life. The return to market economies began with Margaret Thatcher in Britain deregulating and selling off nationalized industries. It spread to Poland through Lech Walesa and Solidarity, to China under Deng Xiaoping, to Russia with Boris Yeltsin. It came to India, and Chile, and finally a Labour prime minister, Tony Blair, had the courage to buck 75 years of party tradition and argue for market capitalism. By the end of the 20th century socialist thinking was being abandoned and market economies were in ascendancy around the world. Bill Clinton, arguably the most liberal president of the 20th century, talks of the primacy of international trade in raising the standard of living of less developed countries.
Of course the battle never ends. The descendants of the Western intellectuals who praised the brave new world of Soviet Russia and the paradise of centrally planned economies now argue that globalism is an antisocial force that must be contained. But a return to socialism would be worse, for as U.S. labor leader Samuel Gompers said about socialists in 1903: "Economically you are unsound; socially you are wrong; industrially you are an impossibility." History has proven him correct on all counts.
Yet as South American economist Hernando de Soto says at the conclusion of the "Commanding Heights" series, we can't be complacent about free markets. In this technological age, when a poor Third World denizen looks at his television and "sees how you live compared to how he lives, he's going to get very angry. So either you show him a capitalist route to [improve things] and integrate him, or he's going to find another ideology." It happened in France in 1793, in Russia in 1917 and around the world after World War II--and it's happening today in the Muslim world. If we value liberty, we must aspire to liberty for all.
Banners used to shout "Workers of the World Unite!" especially on May Day--a day best remembered for massive military parades in Red Square with Stalin or Khrushchev gray and grim above Lenin's tomb celebrating the power and glory of the Union of Soviet Socialist Republics. How fortunate we are to be celebrating the liberty and opportunity of market economies, rather than the military might of totalitarian socialism's failing effort to achieve heaven on earth.
Mr. du Pont, a former governor of Delaware, is policy chairman of the Dallas-based National Center for Policy Analysis. His column appears Wednesdays.
