In 1982, I had the privilege of touring East Berlin with Murray Rothbard and other delegates from the Mont Pelerin Society. At the time, the Western press heaped praise on East Germany for what progressives believed to be the many accomplishments of communism’s most celebrated regime.
Unlike the more capitalistic West Berlin, East Berlin had an administered socialist economy complete with free healthcare. East Germany was proof that socialism could not only build things like an allegedly functioning economy, but also rebuild the Alexanderplatz. This was proof, according to National Geographic, that the communists “had arrived.”
We saw the Alexanderplatz on our city tour, which was a pretty typical Eastern Bloc exercise in sterile architecture. We also saw apartment buildings whose exteriors still showed damage from World War II nearly forty years later, along with a host of rundown buildings and empty sidewalks. This was not an attractive place to live. On the other wide of the wall, the only war-damaged building we could see had been left in that condition on purpose.
There was, however, one structure that was built with exquisite precision and modern technology: the wall that surrounded West Berlin and had been constructed by East German authorities to keep East Germans from escaping into that capitalist hell. This was not just another wall topped with barbed wire—although barbed wire did crown the wall. It had cameras; guard towers from which armed men could see every inch of the wall; and a wide, carefully raked “death strip” that hid land mines under sand and gravel, a veritable construction wonder. East Berlin’s socialist regime could not construct decent housing for its residents, but it could create a state-of-the-art internal security system that efficiently murdered citizens who wanted to leave the country.
Despite their totalitarian nature and absolute power over the lives of their citizens, Communist governments such as that in East Germany were powerless to build anything of quality that could serve East German consumers. There were no groups like the Sierra Club or the American Civil Liberties Union to get in the way of their plans for the economy, but despite the lack of opposition to their projects, these governments had little to show for the resources they consumed.
Yet one of the leading progressive journalists in the United States, Ezra Klein, laments that progressive regimes in this country from California to DC cannot “build” anything because they don’t have enough centralizing power. He writes in the New York Times:
(Brian) Deese, in his speech to the Economic Club of New York, declared the debate over: “The question should move from ‘Why should we pursue an industrial strategy?’ to ‘How do we pursue one successfully?’”
I am unabashedly sympathetic to this vision. In a series of columns over the past year, I’ve argued that we need a liberalism that builds. Scratch the failures of modern Democratic governance, particularly in blue states, and you’ll typically find that the market didn’t provide what we needed and government either didn’t step in or made the problem worse through neglect or overregulation.
We need to build more homes, trains, clean energy, research centers, disease surveillance. And we need to do it faster and cheaper. At the national level, much can be blamed on Republican obstruction and the filibuster. But that’s not always true in New York or California or Oregon. It is too slow and too costly to build even where Republicans are weak—perhaps especially where they are weak.
This is where the liberal vision too often averts its gaze. If anything, the critiques made of public action a generation ago have more force today. Do we have a government capable of building? The answer, too often, is no. What we have is a government that is extremely good at making building difficult.
Klein is not writing about the building of a privately financed housing development produced outside state directives, or a new production facility, or at least not one financed by tax dollars. He is not interested in building per se, but rather in conspicuous projects that are directed by the political system and can benefit politicians.
For example, in another article, Klein writes of the California state’s struggle to produce 100 percent of electricity in the state via “renewable” sources such as solar and wind. Writes Klein:
The environmental movement (in California) is dealing with a bit of dog-that-caught-the-car confusion these days. Hundreds of billions of dollars are pouring into infrastructure for clean energy, and decarbonization targets that were once out of the question are being etched into law. That’s particularly true in California, which has committed to being carbon neutral and to running its electricity grid on 100 percent clean energy by 2045.
Hitting these goals requires California to almost quadruple the amount of electricity it can generate—and shift what it now gets from polluting fuels to clean sources. That means turning huge areas of land over to solar farms, wind turbines and geothermal systems. It means building the transmission lines to move that energy from where it’s made to where it’s needed. It means dotting the landscape with enough electric vehicle charging stations to make the state’s proposed ban on cars with internal combustion engines possible. Taken as a whole, it’s a construction task bigger than anything the state has ever attempted, and it needs to be completed at a speed that nothing in the state’s recent history suggests is possible.
One does not need to read Ludwig von Mises’s Socialism or Bureaucracy to know that Klein is writing near gibberish. While Klein would never admit to having an East German view of political economy, we are seeing just that, a view that a government can administer an entire economy by fiat. Although Klein has a moment of clarity when he explains exactly what would have to happen for California’s so-called clean energy goals to come to fruition, he still assumes that government can order such a state of affairs into being.
To Klein, the kind of massive production needed really is not an economic question at all. Instead, it is a matter of having the political will to embrace new rules of efficiency. Addressing a paper by Brink Lindsey of the Niskanen Center, Klein writes:
But a weak government is often an end, not an accident. Lindsey’s argument is that to fix state capacity in America, we need to see that the hobbled state we have is a choice and there are reasons it was chosen. Government isn’t intrinsically inefficient. It has been made inefficient. And not just by the right [quoting Lindsey]:
What is needed most is a change in ideas: namely, a reversal of those intellectual trends of the past 50 years or so that have brought us to the current pass. On the right, this means abandoning the knee-jerk anti-statism of recent decades; embracing the legitimacy of a large, complex welfare and regulatory state; and recognizing the vital role played by the nation’s public servants (not just the police and military). On the left, it means reconsidering the decentralized, legalistic model of governance that has guided progressive-led state expansion since the 1960s; reducing the veto power that activist groups exercise in the courts; and shifting the focus of policy design from ensuring that power is subject to progressive checks to ensuring that power can actually be exercised effectively.
In other words, just unleash the unlimited power of the state, and as long as someone sets policy goals, everything should be fine. According to Klein, if progressives simply would change their outlooks and encourage progressive state and national governments to act as though there were no barriers, then we would see vast solar and wind farms, brand new electrical grids, and high-speed rail because the power of government finally could be unleashed. How do we know this? We accept it on faith.
Progressives clearly do not understand the importance of economic calculation, and even when confronted with that reality, they simply dismiss it as something that can be subjugated to political will. Austrian economists recognize that California’s so-called energy targets really are political goals, not economic ones. Deciding whether these targets are possible and economically desirable requires planners to examine the opportunity costs of these projects, what resources must be employed, where they should be directed, and what others must give up during the process.
In Klein’s world, costs don’t matter and neither does entrepreneurship. One should simply unleash government power, set a few goals, and watch the magic happen. But in the end, it is not environmental advocates or other litigious interest groups—or even limited-government conservatives—that keep the state from performing the production miracles Klein believes it can achieve.
Instead, it is what Ludwig von Mises so aptly pointed out more than a century ago in Socialism: economic calculation matters. Understanding the relationship between factors of production and final goods matters. Allowing market prices to establish those factor relationships matters.
Even if one could unleash California’s government in a way that would meet with his approval, the energy goals Klein presented could never be met, even if it were theoretically possible to build all the renewable-energy infrastructure needed to produce enough electricity. Costs are real things; they are not abstractions, nor are they irrelevant to stated political goals. The government failures of which Klein writes are not due to limits that outsiders impose, but rather to the reality of scarcity that costs matter, and matter greatly.
