Even If a Socialist System Were Not Controlled by Dictators But Instead by Human “Angels,” the Institutional Structure of a Socialist Regime Made It Impossible for It to Produce a “Heaven on Earth”

The primary goal of practically all socialists in the nineteenth century and most of the twentieth century was the abolition of private property, market competition, and money prices. In their place, the State would nationalize the means of production, and as the “trustee” of the interests of the “working class” would centrally plan all of society’s economic activities. The central planning agency would determine what got produced, how and where it was produced, and then distribute the resulting output to the members of the new “workers’ paradise.”

Mises showed that the end of private property would mean the end to economic rationality. Without private ownership of the means of production—and no competitive market upon which rival entrepreneurs could bid for those resources based on their profit-motivated estimates of their respective values in producing goods desired by the consuming public—there would be no way to know real and actual opportunity costs among the potential alternative uses for which they might be applied. How, therefore, would the central planners know whether or not they were misusing and wasting the resources of society in their production decisions? As Mises summarized the dilemma,“It is not an advantage to be ignorant of whether or not what one is doing is a suitable means of attaining the ends sought. A socialist management would be like a man forced to spend his life blindfolded.”

Even if a socialist system were not controlled by brutal dictators but instead by human “angels” who only wanted to do “good” for humanity, and even if the incentives for work and industry were not reduced or eliminated through the abolition of private property, Mises was able to demonstrate that the very institutional structure of a socialist regime made it impossible for it to produce a material “heaven on earth” for mankind superior to the productive and innovative efficiency of a functioning free-market economy. It is what enabled Mises to declare in the early 1930s, when the appeal of socialist planning around the world was reaching its zenith, that,“From the standpoint of both politics and history, this proof is certainly the most important discovery made by economic theory. . . . It alone will enable future historians to understand how it came about that the victory of the socialist movement did not lead to the creation of the socialist order of society.”

--Richard M. Ebeling, introduction to Marxism Unmasked: From Delusion to Destruction, by Ludwig von Mises (Irvington-on-Hudson, NY: Foundation for Economic Education, 2006).