Why Isn’t Socialism Dead?

Lee Harris looks at South America and asks, “why isn’t socialism dead?”

The Peruvian economist, Hernando de Soto, has argued in his book, The Mystery of Capital, that the failure of the various socialist experiments of the twentieth century has left mankind with only one rational choice about which economic system to go with, namely, capitalism. Socialism, he maintained, has been so discredited that any further attempt to revive it would be sheer irrationality. But if this is the case, which I personally think it is, then why are we witnessing what certainly appears to be a revival of socialist rhetoric and even socialist pseudo-solutions, such as the nationalization of foreign companies?
It should be stressed that de Soto is not arguing that, after the many socialist failures of the twentieth century, capitalism has became historically inevitable and that its expansion would occur according to some imaginary iron clad laws without any need for active intervention. On the contrary, de Soto is fully aware of the enormous obstacles to the expansion of capitalism, especially in regions like South America, and his book is full of dismal statistics that demonstrate the uphill battle against bureaucratic red-tape that is involved in getting a business license or even buying a house in many third world countries. But, here again, the question arises, If capitalism is mankind’s only rational alternative, why do so many of the governments of third world nations make it so extraordinarily difficult for ordinary people to take the first small steps on the path of free enterprise?
For de Soto, the solution lies in democratizing capital. Minimize state interference. Cut the red-tape. Make it simple to start up a business. Devise ways for the poor to capitalize on their modest assets. If a person in the USA can get a loan based on the value of his $200,000 home, why shouldn’t a much poorer fellow get a loan based on the value of his $2,000 shack?
These are all sensible ideas; they are all based on de Soto’s belief that the only way to help the poor in the third world is to get the bloated bureaucratic state off their backs, and permit them to use their own creative initiative to do what so many poor immigrants to the USA were able to do in our past — to start out as micro-entrepreneurs, and to work their way up to wealth and often fabulous riches. But again, we come back to the same question, only in a different form, Why are the people in Bolivia and Venezuela responding so enthusiastically to the socialist siren-song of Evo Morales and Hugo Chavez, instead of heeding the eminently rational counsel of Hernando de Soto? Why are they clamoring to give even more power and control to the state, instead of seeking to free themselves from the very obstacle that stands in the way of any genuine economic progress?
When Hernando de Soto asserts that capitalism is the only rational alternative left to mankind, he is maintaining that capitalism is the alternative that human beings ought to take because it is the rational thing to do. But what human beings ought to do and what they actually do are often two quite different things. For human beings frequently act quite irrationally, and without the least consideration of what economist called their “enlightened self-interest.” And it is in this light that we must approach the problem, Why isn’t socialism dead?

Posted by on May 6th, 2006 at 4:00 pm


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