In their new book, “The Myth of the Entrepreneurial State,” Deirdre McCloskey and Alberto Mingardi recount the following story:
When the workers’ paradise that was the USSR still existed, economist Gerald Nordquist of the University of Iowa was invited to visit the Soviet Union and meet with its economists. They asked him how the corn crop was transported out of Iowa. “Agriculture in the USSR, planned top-down, wasted a huge share of the crop. Nordquist told his hosts about Iowan trucks and grain elevators and rail cars and river barges. Then one of the Soviet economists asked, ‘But who is the commissar? Who’s in charge, top-down?’ Nordquist was startled, and replied, ‘Uh, well, no one is in charge. The price system does it. Farmers and companies enter and exit, making individual decisions. Supply and demand does it.’ … The Russians stopped believing Nordquist, supposing cynically that he must have been ordered to conceal a State secret. How could the grain crop move efficiently, they thought, without a commissar? How could innovation happen efficiently…without policymakers who have learned how to efficiently use the tools and means to shape and create markets?”
In other words, there must be “A Plan.” But the results of state economic planning all over the world and throughout human history have been uniformly abysmal.
“Thus an old cartoon in the Soviet humor magazine Krokodil: in a nail factory directed to make six tons of nails a month, there hangs one enormous nail...of six tons. The caption: ‘The month’s plan fulfilled.’ ”
“Top-down is an old error in social thinking — and a persistent one,” McCloskey and Mingardi wrote. “It is what connects witch-doctors in Neolithic tribes to contemporary socialist professors.”
Funny thing about socialism. Most people who actually experienced socialism — governmental ownership and administration of the means of production and distribution of goods — abhor it while people who live in supposedly socialist Scandinavia are quick to point out that their system is not socialist.
British writer Stephen Daisley may be right. Socialism today has become less an ideology than “an identity, a cultural marker of ethical virtue.” It is now “defined by an angry inertia”: socialists are furious about so many things, says Daisley, but they never get round to doing something about any of them. Socialists, in other words, are “people with the right values, attitudes and rhetoric; outcomes hardly mattered anymore.”
But back to McCloskey and Mingardi’s enlightening new book.
Top-down, they say, “makes sense in a family or a firm, though anyone who has experienced a family or a firm knows that ‘The best-laid schemes o’ mice an’ men / [oft go astray].’ Your own life, we suppose, has not been perfectly planned, though we pray it’s been pretty good. All the less can an economy of millions of people making daily many trillions of decisions be planned. The top-down schemes of the intelligentsia/clerisy have regularly worked poorly, as would a rigid plan by church or father of even your own life. Contrast the results in East and West Germany, North and South Korea.”
And yet “politicians and policy makers insistently raise the alarm. They say that they are fixing those grievous imperfections caused by natural liberty, fixing the ‘problems’ that every generation of politicians discerns anew. [W]e wonder how the politicians and policy makers discern the problems, and opportunities, and how they know in the longer view better than stock markets specialized in making such judgments, and risking personal wealth in making them? Why would someone with no skin in the game do better than people who have plenty of such skin, being holders of stock in a market in which hour by hour the future is forecasted? We wonder.”
The State — government — is not like a business establishment. The State “does not start a software company in a garage, like Bill Gates. It does not go out of business if its investors quit or if its customers do not turn up at the shop. The State’s shops in Cuba are mostly empty of product, but they remain open. The State can always tax, or inflate, or nudge, or imprison, so that the whole of the population is, like it or not, its investors and its customers. The Concorde [the failed British-French government airline] was not financed by the CEOs who traveled on it.”
Or as economics writer Richard Fulmer would put it, “Someone who believes he can steer the economy is like a flea who believes he can steer a dog. While the flea can make the dog miserable, the dog is unlikely to end up where the flea intends.”
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