Why Does Socialism Sometimes Seem to Sort of Work, At First?

Sometimes industries get nationalized, and they seem to do OK, at least for a while.  Sometimes when countries go socialist, and they appear to function well, at least at first (Sweden, for example, was held up as a model for a while).  I had a couple of thoughts on this topic as we seem to be at the precipice of nationalizing the health care industry in this country:

  • Among some, the work ethic dies hard.  Medicine is a great example.  Because of how difficult it is to become a doctor in this country, the medical profession attracts very few people with poor work ethics.  One can see these folks continuing to work hard, even under socialized medicine where many of the incentives to do so have been taken away.  It can take a whole generation for socialism to kill the work ethic in an industry, but when it finally does so, the effect is dramatic.  For example, doctors in the US see 60% more patients in a day than doctors in countries with socialized medicine (ie everywhere else).  Eventually, though, the highest talent, most motivated people move on to other industries or occupations where their hard work is rewarded, and are replaced by a new generation of workers who are attracted to a job where only attendance (and sometimes not even that) is required.
  • Incentives can work quickly, or they can take a while to operate.  Some incentives can work quickly -- for example, if on any given day, the government were to decide to cap gasoline prices twenty percent below the market level, we would see gasoline lines in less than a week.  On the other hand, the welfare program of the late 1960's provided incentives for out-of-wedlock births that took 20+ years to reach its peak.  Beyond the moral failures of socialism, one** of its practical failures revolves around incentives.  Customers get subsidized products or services, forgetting that that this will cause people to use more than is available.  Employees don't get rewarded for merit or hard work, but the system is constructed such that it won't work without these.
  • Assets and capital equipment act like a storage battery.  Businesses that are purely human, like a restaurant, you can screw up in a week.  I think everyone has had the experience of going to a service business under new management and being really disappointed.  Capital-intensive businesses, particularly extractive ones, can be looted for decades by kleptocratic governments.   Even so, the game can't go on forever.

What drives me most crazy is when socialism's advocates answer criticisms about socialism's consistently dismal long-term results by saying "but it will work if only we can get the right people in charge" (usually this means the speaker and his/her cronies).  If you are a Star Trek fan, you will understand why I call this the "John Gill Fallacy."  As I wrote before:

Technocratic idealists ALWAYS lose control of the game.  It may feel
good at first when the trains start running on time, but the
technocrats are soon swept away by the thugs, and the patina of
idealism is swept away, and only fascism is left.  Interestingly, the
technocrats always cry "our only mistake was letting those other guys
take control".  No, the mistake was accepting the right to use force on
another man.  Everything after that was inevitable.

** Other failures of socialism include this.  And this:

You can't make better decisions for other people, even if you are
smarter, because every person has different wants, needs, values, etc.,
and thus make trade-offs differently.  Tedy Bruschi of the Patriots is willing to take post-stroke risks by playing pro football again I would never take, but that doesn't mean its a incorrect decision for him.


  1. dearieme:

    I understand that Swedish socialism nationalised very little industry - much less than British socialism, for instance, did. That would have left them with a decent source of tax revenue to fund their welfare state.

  2. Sameer:

    I think one of the key reasons fails is the lack of creative destruction.

    Socialism is ok at doing the same thing that you've been doing, but there's no way for a socialist system to generate innovation. Either within a firm so that it continues to be efficient and can deal with a changing environment, or within a broader economy so that new firms can emerge to address changes in the world. Thus you get stagnation and, eventually, decline.

    So thus it looks like its working, because in the short term you don't really need to innovate. But long term, innovation is key.

  3. James R Ament:

    Where socialism "seems" to have worked over a period of time are in countries that have small homogeneous populations - meaning that there is a good deal of cultural history unaffected by "diverse" outside views. Where has this been? I always hear about the Scandanavian countries or New Zealand as the "shining" examples. If that has been valid, it's hard to imagine it working anywhere else - And history indicates that it hasn't! Right?

  4. M. Hodak:

    Socialism is basically code for cashing in on the wealth created by capitalism. Cashing in always "works" in the sense of satisfying desires for consumption, until the cash and credit run out.

  5. Pozorvlak:

    You may be relieved to learn that private-only health care appears to deliver substantially lower levels of public health at around twice the cost than, say, a single-payer system like Canada's.

    And before you start, I live in the UK, and I'm well aware of the problems of socialized medicine. There's still no way I'd rather switch to a system where my doctors are ultimately beholden to my insurance company's shareholders.