Free Market

The Socialist Fantasy

The Free Market

The Free Market 21, no. 1 (January 2003)


When the Berlin Wall fell in 1989 and the Soviet Union ceased to exist two years later, many western commentators optimistically declared that socialism had fallen with those two entities. However, as we limp from one economic morass into another, it has become clear that the dream of socialism is far from dead. What’s more, today’s political classes are trying to convince us that although they cannot even run decent and safe school systems, they have the wherewithal to lead us into the socialist brave new world.

In the aftermath of publishing articles in Mises Institute forums, invariably I receive correspondence from socialists who insist that (1) true socialism discredits Ludwig von Mises’s attacks on the socialist calculation problems, and (2) true socialism actually has never been tried, but would create paradise—if only we could keep those capitalists at bay long enough to set up the socialist commonwealth.

The following letter is fairly typical of the socialist responses I receive:

“I read your article with interest. The Misesian calculation argument I am afraid has long been discredited. It is predicated on the false assumption that socialism entails a centrally planned economy. It does not. The Soviet Union was a system of capitalism run by the state. Nothing more nothing less. Ditto Amtrak. The alternative to a centrally planned capitalist economy or a laissez faire capitalist economy is a decentralised moneyless marketless economy in which the old communist adage from each according to ability (voluntaristic labour) to each according to need (free access to wealth) will come into play. . . . The recognition that socialism/communism in its traditional sense would be a self regulating system of production applying the ‘law of the minimum’ (von Liebig), calculation in kind (von Neurath) and a system of communally agreed social priorities. These features operating in conjunction totally demolish von Mises arguments about socialism.”

When I wrote this person a reply pointing out that all of the socialist publications I had read were highly defensive of the communist/socialistic regimes of the USSR, China, and Cuba, the writer said the following:

“You are evidently getting us confused with someone else. The world socialist movement from the very start was highly critical of the Bolshevik regime. It opposed its dictatorial vanguardist methods and pointed out that it could never hope to achieve socialism/communism without majority support and understanding of what socialism entailed and that the system in Russia under Lenin and his successors was state capitalism (which even Lenin once conceded). When Churchill was courting good old Uncle Joe Stalin, socialists were pointing out the obvious inconsistency in the claim that World War II was a war of political ideals—of democratic ideals against totalitarian ideals—when the Soviet dictatorship was supposedly on the side of the so-called democratic nations.”

The case is triumphantly presented in a nutshell, yet it tells us nothing about socialism other than it is a fantasy world. While the arguments seem logical at first glance and even might be convincing to some, they are specious at best and destructive at worst. Let us begin.

The writer claims that socialism is not based upon central planning by the state, but rather is a decentralized, moneyless system in which things are laid out as part of “a system of communally agreed social priorities” in which the “socialist community” bases its actions upon “the old communist adage from each according to ability (voluntaristic labour) to each according to need (free access to wealth).”

There we have it. The community in a fell swoop abolishes the law of scarcity, since no longer will there be the need to engage in economic calculation. The community will decide who will work and who will consume, and all of the labor will be “œvoluntary.” What could be simpler?

Unfortunately, at least where the socialists are concerned, there are many problems with the idealistic scenario that my correspondent has given us. The first involves the ubiquitous presence of scarcity, something we cannot just talk out of existence. Although I realize that many socialists claim that socialism in and of itself cannot abolish scarcity, they come pretty close.

Karl Marx himself claimed that once in place, socialism would create utopian conditions of plenty in which people would be so satisfied that the state itself would “wither away.”Since the modern “socialist” states involved overwhelming force of government used against citizens themselves, socialists could claim that the Marxian utopian state of socialism obviously was not in existence and would have to be created elsewhere.

Beyond that, there is a quaint notion among socialists that scarcity as we know it is actually created by the institutions of private property and money. In their view, capitalists take things that are free, slap prices on them, and immediately render them scarce. For example, the socialist writer Cornel West writes of “commodification” of goods, claiming that capitalists somehow manage to turn those things that are free into commodities complete with prices, thus making them inaccessible to the poor and needy.

The institution of private property, with its rights of exclusion, is the main tool for “commodification,” according to socialists. Private property, they claim, is created by the rich seizing land and other possessions from the poor, excluding their entry, then forcing the poor to “buy back” that which was theirs in the first place.

Take a hillside spring where villagers might obtain water supplies, for example. If the spring is located on common land, the villagers can come to the spring and take their fill, since the water is so plentiful that the use by one does not exclude the use by others. However, assume that a capitalist purchases the spring and then fences off the property, allowing only those who pay to have access to the spring. What was once free and plentiful is now “commodified,” and users are restricted to those who pay the property owner.

While compelling on the surface, the argument is nonsense. If it were true, it could not be used as a universal argument against private property, since most goods needed for human survival do not simply pour from the ground like water from a spring but rather are created by the application of scarce human labor and tools.

First, private ownership of the spring in question does not preclude the villagers from finding water from another spring. 

Second, the newly-established property rights cover the spring, not the contents of the spring as the water spills beyond the boundaries of the owner’s property. The owner would have to go to great lengths and expenses in order to continue to exclude people from consuming water that emanates from the spring.

Third, the owner’s private purchase of the spring also protects that spring (and its pure water supply) from other predations known as the “tragedy of the commons.” If the owner seeks to attract villagers to the spring and away from other possible common property sites, then he must make it as attractive as possible for them to purchase his water. As long as villagers find it less costly to them to look elsewhere, the owner may have title to the land, but no customers, so it is in his best interests to make sure people come back.

This, of course, is a highly-stylized example. Most things we consume are scarce in their own right, from our clothing to our food. As noted earlier, from our labor to the tools we use to create these goods, we are dealing with scarce things, items that do not just freely pop from the ground.

Even water, which socialists often use as an example of capitalist “exploitation,” is scarce, at least for safe human consumption purposes. For example, Martin Luther King, Jr., once declared that capitalism was bad because “two-thirds of the earth’s surface is covered with water, but we still must pay for it.”  

The water of which King spoke, of course, is salt water, which is not fit for many human purposes, including drinking and watering our crops. Fresh water, on the other hand, covers only one percent of the earth”s surface, so even in its “natural” form, it is obviously scarce. King was an eloquent speaker, but mere rhetoric cannot create drinkable water from the sea. Instead, clean, fresh water can only be piped into our homes as a scarce commodity, since all of the mechanisms needed to bring the water into the home are scarce.

The writer also holds to the fiction that people voluntarily will give their labor freely “according to their abilities” while others freely take “according to their needs.” While this principle seems to work in very small voluntary communities (often tied to religious groups, which socialists declare are an evil “opiate of the people” in and of themselves), the idea that it can be forced upon a society at large without resistance is ludicrous.

When Josef Stalin “collectivized” the farms of the USSR, it was not done voluntarily. Millions of people were starved, shot, or sent to die in labor camps in order to clear out resistance to his plan. It is silly for socialists to believe that such a plan could be enacted peacefully, as people do not like to give up what they own.

For much of the 20th century, as the socialist regimes murdered and plundered in the name of “community,” True Believers like the writer who emailed me sat back and claimed that these examples were not typical of the real socialist experience, and that they condemned the loss of life.

Yet, as Marx and Friedrich Engels wrote in the Communist Manifesto:

“The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution” (p. 120).

This clearly is a clarion call for blood, yet the socialists still claim to follow Marx, but disdain the violence of Stalin, Lenin, Mao, and Castro, all of whom created totalitarian poverty in their regimes. Moreover, they believe that once this ideal society is reached on a voluntary basis, then somehow scarcity will disappear altogether and people either will not have to work very hard or at all, and that the earth simply will bring forth its fruit on its own.

No, socialists have never discredited Mises’s socialist calculation problem. Instead, they have chosen to ignore it, claiming that under socialism, economic calculation is unnecessary, since there will be no scarcity. Although socialists claim to discard all religious belief, that is only partly true. If they believe that seizing private property, killing the capitalists, and forcing “volunteers” to live in communes will suddenly make the age-old problem of scarcity disappear, then I contend they exhibit more faith than all of the Christians, Jews, Muslims, and adherents of all other religions combined. 


William L. Anderson teaches economics at Frostburg State University (



Anderson, William L. “The Socialist Fantasy.” The Free Market 21, no. 1 (January 2003).

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