THE DEFECTS OF SOCIALISM


	Capitalism as practiced in the United States, Western
Europe and Japan works better than socialism as practiced
in the Soviet Union, Eastern Europe, China and Cuba.  The best
evidence for this is that all the socialist countries
control emigration and none of the capitalist countries do.
Nevertheless, socialism has strong intellectual attraction,
because it seems plausible that a planned economy should
work better than an unplanned one, it sems more just that
rewards should not be based on inherited position, and it
seems better to many people to be working for the good of
all rather than for the good of an employer.

	My thesis is that socialism potentially works better
than capitalism, but in order to do so it must overcome
certain defects that are dear to the ideology of most
socialists.  In fact, after I get through improving socialism
the free enterprisers might like it better than the socialists
do.

	The main fault of socialism is the politicization of
decisions that should be administrative or contractual.  We
can see this best in the institutions in the U.S. that have
a socialist character - the regulatory agencies and the
social welfare system.  These agencies make decisions that
effect the interests of many groups - take, for example,
the Federal Power Commission and its regulation of the price
of natural gas.  Leaving the result aside, consider the procedure
whereby the result is reached.  Hearings are held in which
various interests are represented.  A representative of a city
says that the people are poor and can't afford to pay more
for gas.  A representative of the gas producers says that a
higher price is needed to stimulate production.  The decision
is often the resultant of the political strengths of the various
groups.  Moreover, the lawyers representing the groups argue
for the most obvious and immediate interests of the groups.
You will not persuade a lawyer for a New England town that if
he keeps the low rates he is arguing for, it may happen that
demand will be stimulated and production discouraged to the
point where a shortage will occur that will cause the main
industry of his town to be cut off and the citizens of the
town to become unemployed.  I don't wish to argue that the
lawyers for the other side in this case are necessarily better
although they can often get their clients, being fewer, to see
farther ahead.

	Socialist sentiment wants to extend this kind of
procedure to all institutions.  Should not the students
have a say in running the university.  Should not the workers
run the factory.  Should not the faculty of a university
control appointments?  Why should there be administrators?
Should
not decisions be made by those who will be directly affected
by them?

	The answer to all these questions is NO, especially
to the last.  The worst group to make decisions is often those
directly affected if their immediate interests are in conflict
with those of the social institution that they are part of.
If the faculty ran Stanford University according to its
immediate interests, it might decide to liquidate it and
walk off with $500,000 apiece.