The Great Experiment of the 20th Century: The Scientific Case Against Socialism


In light of the recent election of a full-fledged socialist to the Seattle City Council, with her advocacy of actual terrorism in response to what she terms “economic terrorism” (corporations making decisions based on an intent to remain financially solvent), I think it may be a good time to express my thoughts on socialism in general. While it is true that I would never call myself a laissez faire capitalist and would never-ever-EVER name my child Rand, I am someone who believes in free-market capitalism – not only because I like the values associated with this economic model, but because I feel that anyone approaching the matter with an objective scientific mind should be able to clearly see which general approach to economics is superior.

While it is probably not safe to say that all left-wingers claim to “believe in” science, as the Left tends to be more secular, one might assume that such views are more common on the Left than on the Right. And yet, even when they study and teach economics, left-wingers sometimes do not look at the study of economics as a science. This tendency is somewhat understandable, as a truly scientific approach to economic policy would be to make decisions based upon verifiable, quantitative observations of how various economic models have worked in the past, and one of the problems with taking a scientific approach to economic theory is the fact that it is so difficult to carry out legitimate controlled experiments of economic principles. There is no great economic laboratory in which all variables can be eliminated, and even when we do observe clear trends, the sheer complexity of economic variables in the real world can result in stark reversals of those trends. Because of this, it is not fair to simply compare a capitalist country with a socialist country and see which has the higher quality of life. We should not use the Norway-United States comparison to advocate socialism any more than we should use the United States-Venezuela comparison to advocate capitalism. Each of these countries has its own circumstances and culture, and a specific economic policy in one country may have completely different results in another country.

A true controlled experiment of capitalism versus socialism on the national level would involve taking a country with a substantially large population and cutting it in half in such a way that both sides start out with exactly the same culture, wealth, demographics, and resource distribution. The economist performing the test would then monitor the conditions of the people in these two countries over the next few decades to see what happens. Of course, such a perfect experiment has never occurred, and even if it did occur, just one experiment would not be enough to satisfy the scientific mind. Sadly – or perhaps fortunately – it is likely that no such experiment will ever be conducted. However, although no one intended for it to happen, the 20th Century did give us the closest thing we will ever have to such an experiment. Actually, it gave us three of them.

1. East and West Germany

With the end of the Second World War, Germany was cut in half. Liberated by the USA and the British Empire, West Germany and the western part of Berlin adopted a free-market economy. East Germany and the eastern part of Berlin, under the thumb of the USSR, became socialist.

In the following years, what happened in West Germany was described as the “Wirtschaftswunder” (“economic miracle”). In brief, the economy simply took off. Some would argue that this occurred as a result of American economic aid, but this is not the case. (Even if this were the case, one must wonder about why the USSR did not send aid that benefited East Germany in the same manner.) In simple terms, West Germany simply got busy rebuilding itself and producing things. As for East Germany, even ignoring the countless injustices and human rights issues that arose (or continued) under socialist rule, the people there did not fare as well as those in the West. An article in The Guardian sums up the economic difference that resulted from these two different economic models quite well:

At the time of reunification the gross domestic product per capita in the east was €9,400 ($11,800), as opposed to €22,000 in the west. Since then per capita revenue in the east has more than doubled to reach €23,700, whereas in the west it has only increased by half to €33,400 (still 30% ahead of the east).

The stark truth of the inadequacy of the East’s economic model became particularly clear when the socialists started building walls to keep people in.

2. North and South Korea

The armistice that ended the conflict between North Korea (backed by the USSR and China) and South Korea (backed by the UN) resulted in the creation of two sovereign states. As with Germany, one side of the line became capitalist, while the other side became socialist. As with Germany, the capitalist side saw years of growth that have often been described as miraculous, while the socialist side descended into abject poverty. Despite one report (published by North Korea) that lists North Korea as the second-happiest nation in the world (after China), the reality is that a severely authoritarian government and centrally planned economy have resulted in a dire human development condition. To this day, large shipments of food are frequently sent to feed the starving people of North Korea – from South Korea. As with East Germany, North Korea tasks much of its law enforcement and military resources with keeping people in the country. In current news, we see that Dennis Rodman loves North Korea’s ruler Kim Jong Un. While he apparently approves of Kim’s oppression of millions, it has not yet been verified whether or not he agrees with the “good-hearted kid” that one should use a firing squad to deal with ex-girlfriends.

3. Mainland China and Taiwan

In the wake of the Second World War, conflict recommenced between the Communists and Nationalists in China. While the Nationalists’ position had been strong prior to the war, Mao Ze-dong had proven very good at using the Japanese to weaken them. As a result, the Nationalists were literally driven into the sea. Fortunately for them, they maintained control of most of China’s navy, which allowed many of them to retreat to Taiwan and set up an exiled government there. China became “communist” (socialist, actually), while Taiwan became capitalist. In the years that followed, the Taiwan Miracle occurred in Taiwan, while China experimented unsuccessfully with a number of centrally planned economic endeavors. The abject failure of socialism in China led directly to the White Scare, which came as a result of the leadership trying to shift the blame of economic malaise from their own heads to those of various Chinese citizens who were randomly rounded up and punished for being capitalist insurgents and economic saboteurs.

Some would argue that, despite its slow start, the Communist Party in China has actually proven itself to be quite effective with economic planning. This is evident, they would say, in the fact that China has been steadily seeing drastic growth. However, the obvious problem with this argument is the fact that China’s growth has come specifically as a result of the implementation of capitalist economic policies.

Another argument that some might make would be that Taiwan, while being capitalist, spent decades under one-party Kuomintang rule in which leaders were guilty of oppression and injustices comparable to those of their counterparts in mainland China. However, it is important to point out that Taiwan’s government transitioned into a truly representative, multi-party system without any need for a bloody revolution. The same has yet to be seen on the mainland.

“But Capitalism Is Terrible!”

The counter-argument to the realities of socialism’s weaknesses is always the same: capitalism has problems. Corporations take advantage of people and pollute the environment. Greed is rewarded. Government officials are corrupted by bribery. Resources are not used effectively. And they are right: there are many problems that tend to arise in capitalist economies, such as the ones named. In many cases, I find myself nodding and agreeing emphatically with socialists – as long as they are criticizing capitalism. As soon as they start suggesting solutions, though, they immediately start sounding less intelligent. Experience has shown us, for instance, that socialist governments take advantage of people and pollute the environment. They also reward greed to some extent, but they mostly reward laziness. Government officials are similarly corrupted by bribery. Resources are used even less effectively. There is no instance in which the socialist governments in the “experiments” mentioned handled any of these major concerns more effectively than their capitalist counterparts did.

Hearing the arguments that capitalists make, socialists frequently respond by saying something like: “Your entire argument is based on the assertion that capitalism is just the best we can do, and not that it is actually good.” It is true: advocating free-market economic policy on the basis of it being the lesser of two evils is a pessimistic thing indeed. However, this does not mean that we should institute economic policies that are decidedly not the best we can do simply because they look prettier on paper.

The issue is not that capitalism is terrible. The issue is that people can often be terrible. This remains true regardless of policy.

A Solution

Capitalism rewards greed. Socialism rewards sloth. In both frameworks, self-interested leaders rise to exact an undue level of control over the lives of others, and human vices result in systemic problems throughout the society. Using law to control the effects of one human vice generally empowers another human vice. The idea that an authoritarian state led by corrupt and greedy demagogues can make people good is almost as ridiculous as the idea that pure anarchy can exist for any substantial amount of time without some tyrant arising to provide the “order” that the people will invariably desire.

The solution, as simplistic as it seems, is for people to be virtuous. We cannot say that we have hope for humanity when we do not trust humans. In a situation of “big government”, a virtuous society will produce virtuous leaders who maintain a sense of altruism as they exact authority over the people. In a situation of “small government”, a virtuous society will produce virtuous people who do not need to be micromanaged. Just as an equitable capitalist society requires people to give money to the poor out of the goodness of their hearts, a successful socialist society requires people to be industrious and innovative out of the goodness of their hearts. Either way, we rely upon the goodness of the hearts of the people. Capitalism has proven to work better for two main reasons. First, rewarding greed is always better than rewarding sloth because one man’s greed can often benefit someone else, while sloth never benefits anyone. Reasonable legislation and regulation can also be very effective in limiting the harmful effects of greed, and the same cannot be said of sloth. Second, when we err on the side of freedom, even though robber-barons and soulless corporations often command an undue level of power, they can never consolidate and forcibly maintain power like an oppressive government can, and there is no precedent of any corporate entity being able to limit the freedom of expression like oppressive governments do. Such enduring freedoms make it much easier to bring about real social change without any need for bloody revolution. In short, while no economic structure can completely eliminate human vice, a liberal (in the true sense) policy structure manages vice much better than an oppressive one does. Government must be strong, efficient, and limited, acting as an incubator for human happiness rather than, as the Chinese say, yanking on the sprouts to help them grow. Those who deny this – insisting on advocating an unyielding Marxist economic philosophy that resists conclusions based upon trial and observation in exactly the same way that many religions do – promote Marxism, ironically, as an opiate for the masses, which they use to rise to power at the expense of those whom they claim to be helping.