Monday, July 12, 2010

Ronald Kitching: Socialism and Economic Calculation

The Essay titled “Economic Calculation in The Socialist Commonwealth” published in 1920 by Ludwig von Mises, showed conclusively that in a socialist state, rational economic activity cannot occur. Mises’s original thesis stands on its own against all counter arguments and without any need for qualification or emendation: without private ownership of the means of production, and the competition of the spontaneous market order for them, there cannot exist economic calculation and rational allocation of resources under conditions of the social division of labor. In short, socialist economy and society are impossible.

Von Mises wrote: “Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics,”

In spite of the efforts of socialist “intellectuals” for 90 years, the Miserian thesis has never ever been refuted. And now, the never-ending growth of the bloated, rapacious, unjust Western-style heavily indebted welfare states simply ignore the wisdom of irrefutable science.

But China and India are no longer indulging in socialist fantasy. After the bubble bursts can no longer be repaired, perhaps they will lead the world back to a rational economic and monetary order.

With a 13 page comment by comment by Joseph T. Salerno, Mises’s essay is available Online at: http://mises.org/pdf/econcalc.pdf

A great case in point is New Zealand. New Zealand is rapidly going backwards with entrepreneurs deserting in droves and capital leaving for friendlier shores by the millions of dollars. Already the N.Z. economy is dominated by the State. As it accounts for 50% of the economic activity of the nation. It is obvious there, that the bureaucrats are well and truly in charge.

The bureaucrats do not have to answer to the Profit and Loss system so there is no natural brake on their inordinate spending habits for which their taxpayers pay either in direct taxes or by way of monetary expansion, which actually is inflation.

Eventually unless some rational government stops the inordinate spending and the inflation, NZ will descend to the economic status of Zimbabwe. It is now an economic cot case that was once the bread basket of Africa as well as a huge mineral exporter.

1 comment:

Jens Meder said...

I would still like to argue, that with the widespread left wing sympathies in New Zealand, the practical "panacea" for our economic problems would be amending the NZ Super Fund into a permanent institution of Personal Accounts, with a basic rate of compulsory savings for investment through the NZSF built ino our taxation system - or taxation rebates from the moment our budgets achieve an adequate margin of surplus(es).
This is a practical (not ideological) proposal based on the elementary economics of wealth creation, and if it is not a good one, it should be shown to be so in economic, not airy/fairy ideological terms. If no prestigious economist is prepared to discuss the pros and cons of it, how can we ever be sure whether it isd a practical, or utopian proposition?

Jens.