Former Democratic U.S. presidential candidate Senator Bernie Sanders thursts his fist as he speaks during the first session at the Democratic National Convention in Philadelphia, Pennsylvania, U.S. July 25, 2016. REUTERS/Mark Kauzlarich

Socialism, despite its current failures in Venezuela, North Korea, Cuba and elsewhere, despite its past rejection by the people of the former Soviet Union and Eastern Europe and its slow fade in Asia, has new adherents among US Democrats who seek nomination as their party’s candidate for the job of president of the United States. So it seems worthwhile to review the reasons for socialism’s failure lest the enthusiasm for the disastrous system spreads.

Socialism is defined as a national policy program in political economy in which the government “owns” the “means of production”: government commands and controls all employment of land, labor and capital, thereby planning the output of final goods and services, is the way an economist would phrase it. A socialist government’s commands, controls and plans have the force of law, and if disobeyed, are punished accordingly, up to and including imprisonment, confiscation of goods and denial of the right to undertake what would be, in the absence of commands to the contrary, market exchanges which benefit both buyer and seller.

This classic definition of socialism still captures, in today’s world, a core reality descriptive of current practice. “Modern” socialism places government’s choices for the employment of factors “ahead” of those of the market. Autos are forced to be smaller, more “efficient,” and more “climate friendly” than they would be in the absence of regulations. Then-vice-president Al Gore caused all US toilets to use less water than would homeowners who prefer a vigorous flush.

‘Modern’ socialism places government’s choices for the employment of factors ‘ahead’ of those of the market. Autos are forced to be smaller, more ‘efficient,’ and more ‘climate friendly’ than they would be in the absence of regulations. Then-vice-president Al Gore caused all US toilets to use less water than would homeowners who prefer a vigorous flush

“Modern” socialists break contracts, or rather rewrite them via regulations in the “name of” climate management, general welfare etc. Socialist governments seize assets via ruinous taxation. Modern socialists diminish property rights with rules for the safety of spotted owls and other endangered species.

This essay will group all this variety of socialistic practices under the general rubric of “planning and control,” just to keep the discussion focused on the key fact of all socialistic behavior: individual choices become secondary, junior, inferior, subservient to government preferences. That’s planning and control by another name.

The definition of socialism must be unfolded to show why is it destroys interpersonal honor, trust, security and social harmony. The problem is to explain why what seems to be a mere technical production strategy inevitably gives rise to moral failure. After all, every big company gathers and controls land, labor and capital, plans how to manage and combine these inputs, and, by way of management, “forces” these means of production to combine in ways that (for example) allows the company to, at one end “swallow” steel, plastic, engineering labor along with other inputs, and then, at the other end of the factory machine, to grind out (for example) cars and trucks. That argument is below. Notice I am discussing socialistic moral decay among “the people,” not just the immorality of “the master planners.”

Nonetheless, it is worth taking a paragraph to note, by way of an empirical, historical discussion, how the “boss planners/commanders” fail to practice the Aristotelian virtues expected of meritorious leaders. Since they spend “other people’s money” they are imprudent and prodigal. Because they are in constant fear of rebellion, or losing their place, they lack courage, and are rash and malicious when punishing underlings who fail to meet planning goals. Because they dare not appear to have been born into nobility or privilege, they and their works are boorish, vulgar, tasteless and their speech and communications are frivolous, boastful, vain and common. If they are, for a time, securely in command, they are shameless, untruthful, self-indulgent and spiteful. All these ethical failings are a result of monopoly power over all social planning and control.

Socialistic dictators’ failings are nearly self-evident, a matter of oft-repeated historical fact, and need only to be listed to be seen and understood. It is the immorality that socialism engenders in ordinary citizens that needs to be explained

The “elevator explanation” is that since almost all socialistic political and economic interactions among plain folk are commanded and controlled “from above,” no one need accept responsibility for actions taken, and no one can be said to put his own honor, truthfulness, probity, honesty or morality at risk when making promises, exchanges, pledges, confirmations or engaging in contractual relations with other ordinary persons. All persons are mere nuts and bolts in a social machine, performing as required by a top-down social blueprint.

In a socialist state, interpersonal relations take place in the absence of justice.

Real social justice consists in each individual getting what is due and giving what is required. Justice is about exchange. Justice is about the terms and security of a contract of exchange. Oliver Wendell Holmes, an American jurist of the early 20th century, committed one of his many errors (for example, he defended compulsory sterilization of the “unfit,” saying, “Three generations of imbeciles are enough”) when he defined contract as a promise that is retractable via efficient breach. That is, he said economic actors may break the terms of a contract/promise as long as they make payment to the aggrieved player large enough to fully compensate for reasonable damages.

But of course, walking out on a deal just because (for example) a better deal has come along is dishonorable. Contracts among virtuous, honorable, trustworthy, responsible players need to be more secure than they would be in a Holmes universe. (Why? If honor is not enough, then the economist says there will be third-party damages, since the loser in a Holmes breach may well set off a domino row of third- and fourth-party contract failures, since all contracts are part of a market-wide, interdependent network of promises, all put at “Holmes risk.”)

But a socialistic world has no voluntary, person-to-person individual contracts that define the pattern of production or the distribution of economic costs, benefits, responsibilities, rights or obligations. Behavior is planned from above, and personal honor does not come into it. If anything, the top-down plan should be resisted and not obeyed, since it is an affront to personal freedom. Justice – at least not as justice is traditionally connected with honor, virtue and trustworthiness – is not definable in the absence of personal freedom, discrete responsibility and rightful individual payoffs.

Socialists like to quote Pierre Joseph-Proudhon: “property is theft.” Socialists talk about property as if they refer to a landed aristocracy “oppressing” a peasantry. When socialists take over a previously free society, they typically seize property, especially from “the rich,” claiming to redistribute it to “the poor,” as if they were cutting up a landed aristocrat’s estate, so as to hand out homesteads to a peasantry. But today at least, property is in the form of contract rights – to a lease, to a job, to a pension, to a splendid variety of rights and obligations that, in aggregate, define each individual’s place in society. Ripping up that economic fabric of tightly interwoven promises is the act of vandalism that brings on quick socialistic failure.

Governments have a useful role in respect of contracts. Governments may provide (but not require) a dispute settlement system for property rights in contracts voluntarily undertaken among and between partners whose enforceable agreements give rise to mutually beneficial and efficient markets. One of the main functions of government in a free society is to make contracts believable and enforceable, in particular to avoid the third-party damage done because of Holmes’ breach strategies. Government may help to record and apply common law traditional remedies when contracts that are deeply inconsistent with “the general welfare” become a nuisance.

Let us hope that no popular wave of misunderstanding about the dangers and failures of socialism threatens the sanctity of property rights in American contracts. The woven cloth of international agreements, promises, pledges and mutually beneficial undertakings among persons and nations, so many of which are enforceable in US courts in accord with the Anglo-American common law tradition, including treaties, understandings and useful habits and practices, not just in trade but in diplomacy, social relations and legal systems would have the central thread pulled loose, allowing a cold wind of broken promises to chill and dampen all the world’s exposed and figurative body politic.

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