Chapter 6 On Socialism and Desocialization

On the meaning of social welfare:  "[I]f this small movement increases the welfare of certain individuals and decreases that of others, we can no longer state positively that it is advantageous to the entire collectivity to carry out this movement." Vilfredo Pareto in Manual of Political Economy

Hoppe begins by noting that there are three, and only three, means of creating wealth: 

1. By perceiving the previously unrecognized value of a thing in nature and taking possession of it;

2. By producing goods with one's labor upon the thing appropriated from nature; and

3. By acquiring a good through trade or purchase.  

When one recognizes that these are the only means of creating wealth, it necessarily follows that socialism can never produce wealth and can only result in impoverishment. By its very nature, socialism favors the non-homesteaders, the non-producers and the non-contractors.

Secondly, since "the means of production cannot be sold under socialism," no market price exist, i.e it is impossible to determine if the thing being used is being used for its highest and best use or if it is being used inefficiently.

Thirdly, every person's output is diminished since the output is collectively allocated equally without regard to personal effort.  We can see this principal in action if we consider that the small plots allowed farmers in Russia vastly outproduced the large collective farms even though they were less mechanized and had less available labor.

Fourthly, in a socialist society, all decisions become political in nature and require imposing one's will on the group.  The producer is not free to assess what a customer is most likely to want and to provide it at a price that satisfies the customer, instead the producer must convince the collective of what is to be produced.  The needs of the customer do not drive production and determine market success; instead one rises through "persuasion, demagoguery, and intrigue."

Part II On the Proper Disposition of Assets Which Were Appropriated by the State

In this section, Hoppe is concerned with the appropriate disposition of the property following the collapse of the Soviet Union. His thesis is that "[n]o government...can be considered the owner of any socialist property, for a criminal's heir, even if himself innocent, does not become the legitimate owner of illegitimately acquired assets." Hoppe notes (in the footnotes to this Chapter) that the property stolen from the citizens of Eastern Europe was not returned to them following the collapse of the Soviet Union. In East Germany the property which had been collectively owned was instead sold to favored, connected clients of State of Germany.

In the event that the previous legitimate owner cannot be identified, Hoppe proposes that "syndicalist ideas should be implemented." By that he means, that the ownership of the assets should be transferred to those who use the assets, e.g. the hospitals to the doctors and nurses, the roads to the local communities, etc.  Hoppe recognizes that producers receiving goods in a capital intensive industry would have the advantage over those receiving goods in a labor intensive industry, but sees nothing inherently wrong in the resulting inequality.  

Finally, Hoppe categorically rejects the possibility of the sale of the seized assets--even if they are the proceeds are distributed equally to the populace.  Since the asset was confiscated by the State, i.e. expropriated from the legitimate owner, the State has no more than right to sell it and distribute the proceeds than a thief.

With respect to assets that are currently owned by states, Hoppe proposes, following privatization, each country should adopted a brief constitution providing: "Every person...has the right to employ his private property in any way he sees fit so long as in so doing he does not uninvitedly change the physical integrity of another person's body or property."

Part III On the Development of Eastern Europe Following a Program of Privatization

Had Hoppe's plan been adopted, he acknowledged it would have been hugely disruptive but ultimately he saw it as hugely beneficial to the people of Eastern Europe. An opportunity for proper cost accounting would have allowed the most efficient, best use of resources. Further, producers would have been highly incentivized to produce goods and services since their property rights would have been assured. He acknowledged that unemployment would have increased dramatically initially and that wage rates would have fallen below those in Western Europe, but those effects would quickly have attracted both entrepreneurs and capital, thereby reversing the initial high unemployment.  

Part IV Postscript On Privatization in Welfare States

Hoppe closes Chapter 6 by clarifying that in no event should the syndicalist strategy he proposes for expropriated assets ever be used to assign assets to public employees.  Civil servants can never be the victims of expropriation since they are participants in the system, i.e. he specifically rejects the idea that the schools should be turned over to the public school teachers, the postal service to the postal workers or public lands to the employees of the bureau of land management.  For those assets whose prior ownership cannot be ascertained, he proposes that they be given to people in proportion to the taxes that they have paid.  Civil servants may have the right to homestead certain previously public assets, but certainly only those for which they had no responsibility as that particular role might provide an unfair and unearned advantage to them.


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