Did We Forget the Cost of Socialism? – with expert Matthew D. Mitchell

Duration: 15:49 2818 transcript words EN summary

Video summary

The video explores the fundamental definition of socialism as anything that deviates from the current status quo, often rooted in public ownership or the abolition of private property. The speaker argues that while many people feel frustrated by injustice and desire a better world—making them sympathetic to socialist ideals—they may not fully grasp the practical implications of scaling up these ideas beyond their immediate households. While central planning might seem intuitive on a small scale where parents manage resources, applying this logic to an entire nation requires coercive state power because it cannot rely on voluntary market incentives. This shift from organic cooperation to enforced compliance introduces significant problems, as the state must use its monopoly on force to direct economic activity, which often leads to miserable living conditions for those who do not comply with central directives. A critical examination of socialist systems reveals that their two main promises—abundance and equality—are frequently undermined by structural flaws rather than just ideological failures. To maintain stability when production falls short of expectations, these systems inevitably rely on corruption, black markets, and state-sanctioned theft known as "blot." The speaker highlights the insurmountable knowledge problem: without prices emerging from free individual decisions, central planners cannot accurately gauge supply and demand. This leads to chronic shortages where goods are artificially kept at low prices for public relations purposes while being sold privately on black markets by managers who have a personal incentive to create scarcity. Consequently, even with well-intentioned people, the system becomes outdated before plans can be executed, forcing planners to look abroad or rely on slave labor and mass deportations to meet impossible targets, resulting in catastrophic human costs such as famines that claim tens of millions of lives. In contemporary discourse, particularly within the United States, there is a resurgence of "21st-century socialism" which often conflates large government redistribution with actual socialist economics. The speaker notes that while countries like Denmark and Sweden are frequently cited as examples of this model, they remain highly free-market societies with flat tax rates rather than the progressive systems some Americans believe exist in Europe or the US. This misunderstanding leads to naive policy proposals such as price controls and rent regulations, which historically have resulted in massive shortages and long lines for basic necessities like gas and meat. The speaker expresses concern that both political parties are increasingly willing to dabble in these measures due to a collective amnesia regarding the historical failures of central planning, ignoring data on economic freedom and the devastating human toll associated with past attempts at socialism. Ultimately, the video distinguishes between 20th-century violence-based socialism and the more insidious "creeping" version seen today, where leaders are democratically elected before gradually shifting policies toward state control. While the speaker acknowledges that this modern approach is less violent than revolutions or civil wars, it remains dangerous because its dangers are not immediately obvious to the public. This subtle erosion of free markets allows socialist ideas to take root piece by piece without triggering immediate alarm bells, potentially leading a society back to the conditions of the 1970s where economic freedom declined and shortages became common. The speaker warns that despite having ample evidence demonstrating the power of liberty and capitalism, there is a prevailing narrative in Western discourse suggesting decline, which blinds people to historical realities and makes them susceptible to policies that ultimately defeat their own stated purposes through inefficiency and coercion.

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So, if you are frustrated with injustice, if you want a better world, then you are a socialist because socialism is not the status quo. If you look at the definition that socialists themselves use, uh it is essentially uh public ownership of the means of production. One of my favorite definitions comes straight from Marx himself. Um he said that the definition of socialism can be defined in one sentence. It is the abolition of private property. So, if individuals don't own the property, but instead uh groups, the public owns the property, um that's essentially socialism. That's what they use. I think it might be helpful to think of uh a non-technical definition that I think is probably in [music] the back of a lot of people's minds, especially young people for whom socialism appeals to them. And that is it is whatever is not now. So, if you are frustrated with injustice, [music] if you want a better world, then you are a socialist because socialism is not the status quo. Um and that's important because that doesn't necessarily mean that they are ready to go full-on public ownership of the means of production. They just see injustice in the world, and to me, [music] that maybe opens a dialogue because I see injustice in the world. I'm sure you do as well. If you're a human, you see injustice in the world, and you want to see things change. Uh and you know, you grow up in a in a household that is essentially centrally essentially planned, you know, economy where a mom and dad uh or a parent are um in charge. They distribute resources. Uh they want something done, they plan it. They don't just, you know, sit back and wait for the market [music] to take care of it, right? And so, in that sort of um setting, I think that it is intuitive. Uh the first your first guess about if you want to improve the world is, well, of course you need [music] to centrally plan it. But, if you try to scale that up, you know, I don't love my president. Nobody should love their president unless they're married [music] to them, right? You know, you that's you it doesn't work at a at a grand scale. At that level, the you have to start using coercion. >> [music] >> Um you have to use the state's monopoly on the um legitimate use of force. >> [music] >> And that presents a whole lot of other problems. If people don't want to do it, they can't be incentivized to [music] do it through normal market incentives. The state has to use extraordinary extraordinary coercion that um makes life miserable. Do socialist countries or the ones who have tried to implement socialism have an ideological motivation or is it about power? It's a mix. I mean, I think if you look at the beginning of the Soviet Union, um it was a whole lot of people who were genuine true believers. Uh they >> [music] >> then had to impose it by uh you know, a bloody civil war. So, they imposed it at at the point of a gun. Uh and there's, you know, even some kind of uh tricks of the language there. [music] So, you know, Bolshevik uh uh they were fighting the Mensheviks, and Bolshevik means majority, but they were actually a minority. [music] So, they were they were, you know, really imposing their their will on on their their fellow countrymen. There are some examples where socialism kind of crept on. [music] That's the other way to get it. Um so, you know, Venezuela, um >> [music] >> Hugo Chávez was democratically elected, and he he didn't When he initially ran, he did not run as a socialist. Uh the socialism of the 21st century [music] came on later, a few years into his into his term. Um so, I In my view, you essentially need to either do it by the point of a gun by true believers or uh slow creeping socialism over time. >> [music] >> There's two central promises of socialism, which is um abundance, prosperity, um you know, that they are literally going to outproduce capitalism. We kind of miss that today. A lot of people think, "Oh, it's all about equality." But no, >> [music] >> you know, in order to take from those who have and give to those who need, [music] you have to have something. Okay, so that's the number one claim is that they're they're going to outproduce. And then their number two claim is that they will do it in an equal >> [music] >> way and a fair way. And very quickly, I think in socialist systems, those two claims [music] start to fall apart. And in order to patch things up, socialist systems ironically have to rely on what they what the Russians [music] called blot. They have to rely on corruption. They have to rely on black markets. One of the things we haven't talked about is this knowledge problem, too, is which is that um it's just extraordinarily difficult to plan a essentially plan a society when you don't have prices that emerge from free decisions of individuals. One of our pieces, we quote a Croatian journalist who points out, you know, she's she's writing in like 1990, in no communist society do you can you find tampons >> [music] >> anywhere? And she says this, I think, is proof um that the system doesn't work because it ignores 50% of the population. And then you [music] have strong incentives for people to cheat the system. So, without the not with the knowledge problem, they are not going to get prices right. They could have prices too high, they could have prices too low. But then you need to bring in the incentive problem to see why systematically they tended to actually have prices too low. If prices are too high, you're going to have a surplus. If prices are too low, you're going to have a shortage. And they typically the the managers had an incentive [music] to keep the prices too low. I think one reason is sort of PR. Like, "Oh, we have lower prices than [music] in the capitalist societies." And somehow psychologically people will not get as upset with a low price even if there's no product on the shelf. It's like, "Oh, well, it's a good price even though I can't actually access the product." Um so, there's a little bit of PR, but then there's also the corruption incentive. So, managers actually [music] had an incentive to force prices too low, create a a shortage, and then they have some of the goods in the back that they can privately [music] sell to on the black market. So, they have a the the whole system sort of runs on this logic of defeating its purpose. Even if if you have the best people on the job, by the time you gather the information, make the plan, send the plan, um it's already outdated data. Um exactly. And part of what they were doing was looking at uh countries' weak markets to make those decisions because they couldn't get the data to make those decisions, right? >> That's right. And you see this in a uh you know, famous joke that uh emerged, I think, in the '70s and '80s uh where, you know, they ask the uh head of communications, you know, are is your plan to make uh the Soviet Union is your plan to make all of the world communist? And he said, "Yes, everyone but New Zealand." He said, "Well, why not New Zealand?" "Well, we have to get our prices from somewhere." So, and and it is true like if you if you interview, as I did, you know, a former um central planner, they literally looked at the West to see uh how how should we [music] price this product or service? Do you think there's a lack of memory of what happens when you implement these kinds of systems? I think so, uh and I think the amnesia is just really strong in the West. Uh so, especially among young people. I worry I don't think our generation has educated the next one about 100 million deaths caused by communism. 30 million dead in the uh >> [music] >> great Chinese famine, tens of millions dead in Stalin's famines, and there's still I think some scholarly debate on how much of that is [music] the failure of central planning versus a a war tool to suppress uh you know, essentially [music] force people into collectivization or to suppress particular group unwelcome groups. We haven't talked about the mass deportations, the forced exile [music] within your own country, the internal passports that if you wanted to move within your country you had to have a passport, [music] um the fact that um much of the Soviet Union ran on slave labor. Slave labor. Um I think it's something [music] like 20 25% of the entire labor force was slave labor. Um maybe we talk a little bit about the shortages and the low standard of living, [music] but probably not enough. Um and you know, have to put a underline under it. We definitely don't talk enough about 100 million dead. It's just [music] for some reason that's gone down in the in the memory hole, unfortunately. What do you think in the US uh which versions of socialism are being put forward by names that are very recognizable and openly socialist now, and why are they being so well received by people in certain parts of the US? Yeah. So, I mean, I think some of what they are promising is a little bit closer to the European use of the word, which is um just larger government. You know, more redistribution. Uh often you'll see people point to the Scandinavian example. Um well, Denmark, Sweden, these are actually very free market societies. They have minimal regulations. It's relatively easy to start a business. They have superb protection of property and uh contracts, uh they have very few barriers to uh entry, very few um you know, barriers to international trade, um excellent monetary policy. [music] So, you know, if you look at our Economic Freedom of the World Index, they score quite high. Where they don't score as well is they have a relatively large redistribution state. It still is not exactly the type of redistribution state that I think some Americans think it is. Um they are not [music] it's not a tax the rich and redistribute necessarily to the poor. They have very high tax rates, but the tax rates are quite flat. So, uh you know, the one of the biggest sources of revenue is the VAT tax, which is sort of like a a sales tax. So, everybody pays that. It's actually a little bit regressive because um lower income people tend to uh uh bear a larger burden of it in terms of their income. Um the other source of revenue is uh income tax, which the top marginal tax rate kicks in about 10 percent above uh median income. [music] So, almost So, a large portion of society actually pays those top rates. So, I think Western perceptions of what socialism is >> [music] >> are greatly influenced, I think, by the Scandinavian examples. Well, and they're in a bind because um the United States has one of the more progressive uh tax systems in the world. But, one of their main talking points is that the United States doesn't have a progressive tax system and that it's, you know, a system in which um the wealthy escape, you know, their fair share. Um so, if you want a more progressive tax system, but you don't realize we are already very progressive, it become it creates a bit of a problem because you can't the only the only way you can move is to take this already very progressive tax system and move it even even more in that direction. And then uh you know, to your point, they I think have uh often some naive solutions about around price controls and rent control and uh you know, here it's just sort of a lack of creativity and a lack of I think knowledge about the history of the way these things work and have played out over the past. Um you know, there was a time in the '70s where it was just or at least in the early '70s where it was kind of understood that [music] the state's going to control prices. Um it's going to Richard Nixon it was one of his more popular decisions for a little while uh to impose wage and price controls across the entire economy, and you got [music] the same sort of problems that socialistic societies where you had long um you had >> [music] >> massive shortages and long lines waiting for gas. Uh you had shortages of meat in grocery stores. >> [music] >> Um so, we've had sort of experiments at different times [music] and places with different types of socialism uh in the United States. Um and if you look at the economic freedom of the world, we sort of hit a high point around the year 2000, and now we're been moving back down. [music] Uh and we're getting back closer to those types of systems uh the type of system we had you know, in the '70s and in late '60s. [music] So, we don't have a system right now in my view where you have one party that is consistently saying we need to move in a socialist direction. That kind of sounds good, right? Um but I think we're getting we might get there by accident because you have both parties willing to dabble in socialism [music] on this or that issue, and then you have a near collapse of [music] a free market uh political movement. And so, I think that opens >> [music] >> unfortunately opens a door to those who are want to uh you know, piece by piece make us a little bit more socialist in one way or another. People, especially outside the US, I find overestimate the degree to which uh the US is a you know, extraordinarily economically [music] free place. Uh it is, you know, try to start a business in some in uh or build an an apartment complex in an [music] area that's not a that doesn't allow that Uh and you'll find that you quickly run into [music] some problems, right? It's it is quite difficult. One of the things that worries me though is um you mentioned this idea that, you know, capitalism delivers the goods that, you know, it it it it works. I'm not sure if people that just seems to be an empirical fact that people are quite blind to are increasingly just unaware of. So, we're sort of sitting on um >> [music] >> you know, a wealth of data you know, to demonstrate the power of freedom at the same time [music] that this bizarre narrative of Western decline and capitalism doesn't work and >> [music] >> you know, capitalism is impoverishing has somehow gained purchase in both parties and I it's [music] bizarre world for me. What differences do you see in the 20th century socialism and 21st century socialism? And what has been the the shift, let's say, on how these ideas are presented and discussed in the mainstream public discourse? That's a great question. I think 21st century socialism is less violent. [music] So, this is a this is a good thing, right? It's it's less of imposed socialism at the point of a gun um [music] and you know, have a revolution in our country [music] and then try to get a revolution in the next country over. It's less of that, so that's uh wonderful. But it is a it's a more [music] insidious form of socialism. It's the the creeping type of socialism, sort of [music] the Venezuela model, get elected democratically and then later um you know, move in that direction. Um [music] and I would say I would much prefer the creeping socialism to the violent type of socialism. However, it obviously poses [music] some dangers when it can creep on and, you know, gets you it's less the dangers are less obvious and so I think it can sort of >> [music] >> certain manifest itself and more easily and sort of grab a hold of people's attention in their hearts and their minds, unfortunately.