Marxist Economic Theory (Centrally Planned Economy) Does Not Work

A lot of Marxists would tend to argue that socialism is more responsive to the needs of the people, to the little man. Under socialism, they argue, there are far more individual freedoms that are actually guaranteed by the state. Sure, socialism sounds great in theory. But there are certainly some issues with this theory. Number one: a big idea that socialists follow is universal healthcare, and the idea that healthcare should be guaranteed as a right to all human beings. Once again, sounds great in theory, but it's bad in practice. You can't guarantee healthcare as a right in the same way that you can guarantee other rights, such as freedom of speech. Because while freedom of speech doesn't cost anyone anything, healthcare definitely does. Universal healthcare would put a tremendous strain on the state and the people, because where would the funding come from? Sure, we definitely need to rethink the American healthcare system. But socialism is not the answer.

The fact that socialism attempts to guarantee prosperity should, in a way, already be a red flag. Capitalism guarantees nothing. Instead, it offers an opportunity to move up the socioeconomic ladder. When you guarantee things, you are merely playing to what the people want. That's how dictators come to power; unrealistic promises. Not that the socialist system itself is specifically designed as a tool of dictators, but it can easily be misused. Why has every communist country ended up a dictatorship? Because socialism is a weak system.

Now, let's get into the actual economic stuff. A lot of Marxists seem to believe that executives in companies are useless, only there for personal gain. They say that CEOs and executive boards should be replaced, and the workers or state should collectively own the companies. Now, here's the issue: companies need executives. Workers are definitely an important part of the business. After all, in a factory, for example, they are the ones who work long hours on the assembly line and put the products together. But what do they need to make those products? The machinery. And who's going to invest in the machinery? The executives. When a legal issue arises, what if the company loses the case? What if it puts the workers out of a job? Who can prevent that from happening, and at least try to win the lawsuit for the company? Lawyers. And who hires the lawyers? Executives. I mean, no matter what you call it, executives or workers, whoever is in charge of the company will have to do these things. So you put a worker in charge of the company, and soon enough, he'll just turn into another executive.

Calling for a business without executive is like calling for a nation without a government. The laborers are not everything. It is the job of the workforce to unionize and petition their bosses for more benefits and higher pay, and it is the job of the executives to generally resist union demands to keep prices low. And it is the job of both to find common ground and recognize that compromise is necessary to maintain the happiness of the workers, keep prices low, and generate overall stability. If the executives get too powerful, that's bad, I can recognize that. But if the workers get too powerful, it's also bad, because then the prices get too high, and then the customers stop buying, and the company goes bankrupt, and the workers all are left without a job.

If you know anything about economics, you know about supply and demand. Prices are driven by supply and demand: if supply is too low, prices will go up and people won't pay, so the company increases supply. And if supply is too high, prices go down. Demand also has a significant effect on this, as you can imagine. And competition, such as that in a free market economy, has a tremendously important impact on price, too. Socialism instead offers the idea of a planned central economy. Typically, a state with a centrally-planned economy would assemble planning committees to determine manufacturing quotas and other economic policies. Think about it: competition, the intricate web of competing companies and industries within a capitalist economy provides information on what the people want. A new company can simply examine past failures and successes, along with current market information collected by thousands of other companies, to assess which products are in style and most profitable, and what the appropriate price is.

Now, a centrally-planned economy doesn't have competition. So all the information necessary to properly assess how to manufacture and sell things must either be entirely collected by, or simply made up, by the state-run central planning committee. The state could either spend billions upon billions of dollars just to gather accurate market information, or simply take wild guesses from sloppily collected polls to figure out what the people want. Usually, it's the latter option. And competition also, as we previously saw, sets prices. If you're building a car for a company, naturally, you would want the cheapest materials. So how do you find the best price? By utilizing the good old capitalist system of competition. You can sift through the market to find the best, most stable, most reasonable price which, by the way, has been generated by competition. Competition creates stable prices, because if a company's price is too low, it won't profit and will need to raise prices, and if a company's price is too high, no one will buy and the company will be beat out of the market if a price adjustment is not made. In this way, competition sets a sort of equilibrium and enables fair prices for consumers.

Now here's the kicker: in a centrally-planned economy, there is no competition. So since there are no competing companies to generate fair prices, the only way for prices to be determined is for the state planning committee to set prices. That's right, they come up with prices out of thin air, using, at best, uninformed guesses. So the estimates of public demand are off, and prices are created by an uninformed state. So no one's happy. And just think of how serious these flaws can become. They affect everything in a centrally-planned economy, including food supply and infrastructure. Societies can collapse very quickly with this system. That's why Marx's "utopian" economic system floundered and needed to be replaced with Lenin's New Economic Policy barely four years into the RSFSR's founding.