Zohran Mamdani Seizing the Means of Production

Videos have surfaced of New York City mayoral candidate Zohran Mamdani claiming that the end goal for socialists like him is to have the government seize and control the means of production. It is easy to believe that our basic needs could more easily be met if we lived in a socialist society where the government controlled all the factories and natural resources, and there would be no more greedy businesspeople exploiting workers and consumers. The government could then create a scientific plan to equitably distribute resources to meet everyone’s needs. This fantasy fails both in theory and in practice. The economist Ludwig von Mises suggests that such a socialist system is bound to fail because without prices, profits, and losses, there is no rational means of allocating scarce resources to meet the most urgent needs. There are millions of ways that workers, factories, and natural resources can be utilized to make consumer goods. In a market economy, all these factors of production are privately-owned, and they are bought and sold at prices that fluctuate according to supply and demand. Entrepreneurs, hoping to earn a profit by fulfilling the needs of consumers, use these prices to calculate the most efficient production methods and shutter enterprises that do not serve consumers at the cheapest cost.

Mises writes that if the government owns all these factors of production and they are simply distributed according to a government plan, then “there would be neither discernible profits nor discernible losses. Where there is no calculation, there is no means of getting an answer to the question whether the projects planned or carried out were those best fitted to satisfy the most urgent needs” (p. 25). The result is economic chaos.

This is not just a theoretical argument. Socialist economists Nikolai Shmelev and Vladimir Popov witnessed the economic calculation problem with their own eyes in the Soviet Union, where the government-planned economy created constant shortages, surpluses, production inefficiencies, and a much poorer quality of life compared to other developed nations. Shmelev and Popov write that for the Soviet Union, shortages and surpluses were “an everyday reality, a governing law. The absolute majority of goods is either in short supply or in surplus… the needed product is almost never present in the needed region in the needed amount” (p. 89). The government planners were unable to predict all the complexity of allocating resources and setting prices, and the people paid dearly for it.

Program evaluators who call for abolishing free markets and replacing them with a system of governance in which the state controls the means of production should be wary of how their ideology put into practice would exacerbate the suffering they desire to alleviate.

References

Ludwig von Mises (1944). Bureaucracy. Liberty Fund, Inc.

Nikolai Shmelev & Vladimir Popov (1989). The Turning Point: Revitalizing the Soviet Economy. Doubleday.