America debated three strategies during the Cold War. The Right wanted “roll back” — dreams of Patton driving his tank into Red Square. The Left wanted détente — which is French for “surrender.” The country loosely followed containment, a program outlined by George Kennan in 1946, which argued that the political contradictions of the Soviet state would eventually cause its own demise. America had but to be patient.
Kennan may have been the first to realize that a society based on Communism would not survive politically, but it was Ludwig von Mises, in his 1922 work Socialism, who demonstrated that any such society could not survive economically.
When a collection of free individuals — the market — is willing to pay a price for a product that creates “excess” profits, it signals producers to provide more of that product. If the market does not support a given price, producers are forced to redeploy their assets for more pressing social needs. Similarly, if a factor of production, such as labor or capital, changes in price, producers instantly react, sending signals — through the prices of intermediate goods — down to the consumer. Prices effortlessly allocate society’s assets to reflect consumer preference and adjust to accommodate the ever-changing availability of scarce resources.
Mises argued that governmental interference in prices, through taxation, subsidies, and regulation, complicates this process — affecting not only the consumption of final goods, but also the economic calculations that are necessary to provide intermediate goods and services. Higher-order division of labor fails. Poverty results. For example, while Chinese and Russian central planners were busy setting quotas for steel mills, there was no method for consumers to signal that they preferred food — and millions starved to death.
Dan Oliver Jr., “Socialism in Stages: Even soft, incremental expansions of government produce poverty”, National Review, 2009-12-15
December 16, 2009
QotD: The importance of markets
December 10, 2009
Russia does it again, to NATO’s benefit
Sometimes, the Russian approach to diplomacy results in exactly the opposite to the intended outcome:
In the 1990s, when enlarging NATO to take in the ex-communist countries still seemed perilous and impractical, help came from an unexpected source. Yevgeny Primakov, a steely old Soviet spook who became first head of Russia’s Foreign Intelligence Service, then foreign minister and even, briefly, prime minister, liked to say that it would be “impermissible” for the alliance to admit ex-communist states.
His remarks, and others in similar vein by leading Russian politicians, proved counterproductive. The more the Kremlin huffed and puffed about ex-captive nations deciding their own future, the harder it became to dismiss those countries’ fears: if your neighbour terms it “impermissible” for you to install a burglar alarm, people will start taking your security worries seriously. Some wags even suggested that a “Primakov prize” be established to mark the boost he had given to the cause.
But the lesson apparently was not learned:
Instead, Russia is adopting the opposite course. It habitually violates Baltic airspace. It maintains a vocal propaganda offensive (such as a report being launched in Brussels this week by a Russian-backed think-tank, which criticises Baltic language and citizenship laws). This autumn, it scandalised NATO opinion by running two big military exercises, without foreign observers, based on highly threatening scenarios (culminating in a Strategic Rocket Forces drill in which Russia “nuked” Poland). The exercises demonstrated weakness and incompetence, as well as force of numbers and nasty thinking. But they made life hard for peacemongers and strengthened the arguments of NATO hawks and the twitchy eastern Europeans.
