Mises doesn’t say that they can’t produce things of value or innovate technologically. Mises says that what they produce is not going to be what consumers want as much as things they would have chosen themselves, and more importantly that price controls prevent the signaling that allows them to correctly allocate capital. The eventual collapse of the USSR is the evidence for this.
The eventual collapse of the soviet union is attributable to dozens of causes, including an oppressive government which lost the support and confidence of it's people, a military budget in excess of 30% of GDP, an expensive and pointless foreign war, widespread censorship, and a crippling bureaucracy.
I'd be skeptical that price controls had a larger affect on the distribution of information than censorship and the threat of imprisonment in the gulag.
> oppressive government which lost the support and confidence of it's people
The oppression was in order to control the economy and the support and confidence was lost because in part because of their inability to provide basic goods and services in a command economy.
> I'd be skeptical that price controls had a larger affect on the distribution of information than censorship and the threat of imprisonment in the gulag.
Its not about the size of the effect but about the effect on specific information that is needed for capital allocation.
USSR was outcompeted by market-driven economies and collapsed due to the unsustainability of the system.
Uhm, no. No single factor, but the USA going into an arms race with the USSR combined with the USA in association with Saudia Arabia tanking world oil prices played significant roles in the demise of the USSR and the Eastern Bloc.
Ok, why was the mixed economy of the US able to produce all those weapons and all those consumer goods and feed and clothe their people while the command economy of the USSR couldn't compete on any one of those fronts?
Oil prices is a distraction from the issue because if the USSR had been able to sell petroleum at a premium then they would have been able to purchase raw materials and finished products from market economies elsewhere and perhaps sustained the system for longer but it doesn't explain why they were reliant on an extraction industry and market-produced goods.
I think you're looking at this from a consumerism point of view.
The US started a huge build up of arms. eg missiles and destroyers specifically, but also the US had significant advances with tank and aircraft weaponry.
The US consumerist system had a positive feedback into the US industrial military complex where advances in manufacturing and information technology lead to huge efficiency gains for arms production even though Western arms production supply chains almost completely isolated.
So, the US had a massive technology and manufacturing advantage, then the US tanked world oil prices and other commodities that the USSR required from world markets. Significantly the USSR was buying more grain and food from the world market, so while the USSR was able to keep up with technology, it was not able to keep up with efficiency gains that the US was realising.
Corruption was also a huge problem for the USSR, and it still is to this day in Russia.
The Americans bankrupted the USSR on multiple fronts. Capital allocation is a capitalist system notion, but, more generally, the US was able to allocate deploy its available resources in a way that out-competed the USSR. The USA was able to organise its society and economy in a more efficient and productive way than the USSR, and that is a Macro Economic argument.
Until the 80's the USA had second most equitable distribution of wealth next to the USSR. The USA imposed significant taxes on everybody up to a marginal rate of 80%. If you want to "Make America Great Again", you need to restore taxation to the levels seen between 1945 and 1981; maybe even to the end of the 80's. American government funding through the DARPA project lead to numerous technological advances that most people, worldwide, now depend upon.
> I think you're looking at this from a consumerism point of view.
Not really, more like a “capitalist” p.o.v. but not in the pejorative context or the crony corporatist context that it holds today; my view is that prices are the mechanism by which information is shared by all participants in a market and that profit (from uncoerced transactions) is the wage for correctly allocating capital. This process occurs regardless of state intervention but it is distorted by state intervention, which is why authoritarians seek to mandate that profit be taken from people in order to fund their failing projects. Left unchecked this process strangles the productive machinery of society because the unproductive coercively funded portion captures more and more of the value in society and continues to squander it on their own values that are not viable in a free and open society. If this process is restrained then the market can drive growth and the parasitic aspect grows with it because of the continued increase in surplus value generated by the market and the fact that the parasitic coercive aspect can simply claim more of the surplus value.
You mention advantages that the US had but that doesn’t explain why the USSR collapsed. Lots of places besides the US didn’t have all of those same advantages but they didn’t descend into the same type of failures that command economies did. And its not as though the USSR didn’t innovate technologically. They were just had less surplus value available to their parasitic endeavors because they had a command economy and that system is not able to coordinate the actions of millions of people to the degree that a market is.
> Corruption was also a huge problem for the USSR, and it still is to this day in Russia.
There may or may not be a cultural element to this but surely you agree that corruption is more of a problem when the corrupt entity has more power and control?
> The Americans bankrupted the USSR on multiple fronts. Capital allocation is a capitalist system notion, but, more generally, the US was able to allocate deploy its available resources in a way that out-competed the USSR. The USA was able to organise its society and economy in a more efficient and productive way than the USSR, and that is a Macro Economic argument.
Capitalists may have studied the way that markets allocate capital in more detail but the entire concept of communism is that the workers “should” control the capital assets they use at their profession. If it is true that they haven’t even considered how workers would choose what capital assets to build and maintain, which capital assets to leave idle for the time being, and which capital assets to abandon, disassemble, and reallocate, then that is an argument in my favor.
> Until the 80's the USA had second most equitable distribution of wealth next to the USSR. The USA imposed significant taxes on everybody up to a marginal rate of 80%. If you want to "Make America Great Again", you need to restore taxation to the levels seen between 1945 and 1981; maybe even to the end of the 80's. American government funding through the DARPA project lead to numerous technological advances that most people, worldwide, now depend upon.
This is an ideological issue and beyond the scope of our discussion about prices, command economies, and capital assets.
> I'd be skeptical that price controls had a larger affect on the distribution of information
I don’t think you’re understanding what information is being talked about here. If you don’t let a market of buyers and sellers determine the price of something you can’t discover the supply and demand curves nor the price floor, etc.
If the government comes out and just dictates that the price for gas is capped at $2/gal, you just end up with a bunch of shortages, rations, and lost potential oil industries because a ton of market information has bene destroyed. That is entirely independent of censorship.
How are you able to draw this distinction? If price controls are ineffective allocation of capital then surely GDP was depressed? How can you isolate and ignore price controls in such a complex system as the Soviet economy?
I wouldn't ignore them, but I'd suggest that there were other more potent mechanisms for information control which resulted in ineffective capital allocation.
Consider that talking about a superior suspension system present in Western cars would have been problematic to the censors. Engineers who pushed such systems could find themselves in trouble, and ultimately cozy insiders could get competitors blackballed for pushing competing programs e.g. Censorship and Corruption did the most damage to the efficient allocation of capital.
The corruption of nominating a supplier or a design as the only approved design is equivalent to not using price as information - or rather, not being allowed to use price as information.
For example, if a supplier is inefficient in a free market, then the prices they charge are significantly higher than the inputs - i.e. profit is high. High profits attract competition; competitors look at the price of the output and the prices of the input and see that they can do better by building something cheaper. This competition drives efficiency and reduces prices.
Whether competition is banned, or improvements are banned, or prices are exogenously set, it's all approximately equivalent to mucking with price as information.
Certainly the USSR made other mistakes besides price controls, the point is that without market-generated prices, they had no way of knowing which goods were in higher demand relative to their supply in order to invest capital resources in producing those. Many Soviet goods were of high quality but the planners still sought pricing information from their western rivals in order to allocate capital.
the most important immediate causes were a) that it could not feed itself and had to buy food imports with hard currency, and b) that it acquired its hard currency by selling oil, which became unsustainable during the 1980s
Often omitted part of the reason for that was that it had to build itself up, in rather hostile conditions, from much worse state than "the west". Even former Russian partition of Poland, to this day considered (for a reason) a backwards place, was one of the most modern areas of the Russian Empire.
Then when post-WW2 the expected disarmament didn't come... well
There were many problems with the Soviet system but the collapse was not really related to it not being a market economy. In fact the enormous economic collapse that happened was due to privatization shock doctrine promoted by free market fundamentalists. Ironically free market reforms killed Russia not their command economy.
Thats an interesting perspective. Why don’t you agree that the privatization was a reaction to a failing system? Surely if command economics had been successful they wouldn’t have felt the need to privatize?
The people who pushed privatization were the ones who personally benefited the most from it. It went from semi-incompetent central command to completely incompetent private cronies with baked in government support in the form of contracts, outright thuggery, and geopolitical might. Sure they got cleaner pricing signals, but they lost everything that made them competitive. At this point, most of the privatized industry that remains is largely rent seeking (telecom et all), resource extraction, and the military industrial complex.
The argument is that what the USSR experienced is an accelerated version of what we're seeing in the US, since it didn't have the other social institutions to make the transition. The free market didn't win, it just paused its ambitions to cannibalize the only competition before continuing on the same destructive path that the USSR economy speed ran in the 80s.
> semi-incompetent central command to completely incompetent private cronies with baked in government support in the form of contracts, outright thuggery, and geopolitical might.
this doesn't exactly make sense when the people you call semi-incompetent were unable to meet basic standards of the modern world with their dictatorial powers and the crony economy that replaced them was able to rebuild the capital assets and replace them.
> they lost everything that made them competitive.
they were not competitive at the time according to practically everyone.
> most of the privatized industry that remains is largely rent seeking (telecom et all), resource extraction, and the military industrial complex.
why was a command economy unable to make extractive and rent-seeking enterprises work? why was a market economy able to sustain a military industrial complex (which is wholly parasitical) when a command economy was not?
> The argument is that what the USSR experienced is an accelerated version of what we're seeing in the US,
this is because the US is a mixed economy, not a market economy. the same process of parasitic institutions strangling the productive institutions is at play, it only takes longer because there are more productive institutions and fewer parasitic institutions in a mixed system than a command system.
> The free market didn't win, it just paused its ambitions to cannibalize the only competition before continuing on the same destructive path that the USSR economy speed ran in the 80s.
of course the free market didn't win because there was no free market competing. the mixed economy outcompeted the command economy because the market portion produced more value and the command economy choked on its own inability to effectively allocate capital. It is true that people who had the money came from market institutions and purchased formerly public assets in the former USSR. This suggests the question: Why were they able to purchase these assets and why didn't representatives of the command economy purchase the (private) capital assets in the west?
I'm far from an expert on this, but the reason could be that back then, "democracy" and free market without State intervention were presented as inseparable parts of the same package.
That just moves the question to why people would want a democracy if they had a state controlled economy that provided for their needs and prevented them from capitalist exploitation?
The point here is that soviet economic collapse as a historical event preceded the shock privatization* despite what command economy apologists might claim.
*free market proponents shouldn’t defend the sale of state assets to oligarchs when those assets were formerly expropriated. The title is encumbered by the previous misdeeds.
There is no dispute that the Soviet state-driven economy was totally inadequate in providing for the needs of its people and that led to its collapse.
I think there is also no dispute that the wave of privatizations that followed the end of USSR led to an even economically worse situation for the Russian state. The fact that said privatizations were merely a transfer of State assets to a small group of private individuals for pennies on the dollar is a signifiant factor of that.
What's less clear to me is why privatization was the chosen direction instead of a more dirigist approach, and I posit that the reason is the prevailing dogma back then (as promoted by such institutions as the IMF or the World Bank) was that democracy equals free market economy equals prosperity, so the Soviet people naturally believed democracy would be the solution to their economic problems. Had they been aware of an alternative way to prosperity (aka the Chinese way), I don't know if they would have adopted democracy (or what passed for democracy in Eltsine and Putin's Russia) or free market economy.
> I think there is also no dispute that the wave of privatizations that followed the end of USSR led to an even economically worse situation for the Russian state. The fact that said privatizations were merely a transfer of State assets to a small group of private individuals for pennies on the dollar is a signifiant factor of that.
I'm not sure how to parse this. Certainly I can agree that there is something morally wrong about the process of expropriating assets, mismanaging them, and then transferring them to politically connected people. However the economy now meets the needs of the people better than it did when it was state-owned, and the Russian state is made of people, it has no interests apart from the people who constitute it. If you're presenting a command economy that can't feed its people and a crony economy that does a better job feeding people, I think most people would choose the option where they get fed.
> What's less clear to me is why privatization was the chosen direction instead of a more dirigist approach, and I posit that the reason is the prevailing dogma back then (as promoted by such institutions as the IMF or the World Bank) was that democracy equals free market economy equals prosperity, so the Soviet people naturally believed democracy would be the solution to their economic problems.
I doubt the people had much say in the matter either way.
privatization shock doctrine occurred during the 1990s, after the collapse. the collapse occurred during a period of market and social liberalization, but was directly precipitated by an oil crash pushing over a deeply sclerotic economy that could not feed itself and a regime with severely diminished legitimacy
Free market fundamentalists? You should probably call it klepto privatization. Most of the resources were appropriated and sold by unscrupulous individuals in positions of power for their own profit. This is how oligarchs were born. There's always a shock when transitioning from a state centrally planned economy to a free market economy but special interests made it far worse.
Hah, I beg to differ here. I mean, a lot of people hated it, but, a lot of people did not. It is scary how well people bought the propaganda. Even now, in ex communist countries, we have people pining for the "good old days".
I can't agree with that or let it pass. The fundamental reason it failed was because there was no checks and balances which are inherent in a true free market system (or reasonably close ones like western economies). Autocratic Communism requires actual morals and concerns for the people at large by the "Party" and not just for their own advancement. While some of that may have existed in the early idealistic USSR, it certainly no longer existed by the 1980s, all that remained was an Autocratic government. It was a complete failure and was living on borrowed time. Autocratic Party Capitalist systems like the Chinese system can work because they generally leave the markets alone at the low to mid levels and attempt to weed out the worst corruption in the upper layers while they take the cream off the top of the economy, the market mostly takes care of itself with pricing, supply and demand as well as incentives. Similarly with Western style government economic systems but citizens actually also have personal freedom as well as economic freedom.
