Time to Overcome Karl Marx

Socialism is still popular in its native Germany – despite the disastrous results of its Nazi and Soviet variants – by Frank Schäffler

Der Spiegel 01/2023

Probably nothing says more about the low confidence in the free-market economy in Germany than its bestseller list of economic books. Das Ende des Kapitalismus (“The End of Capitalism“) by Ulrike Herrmann has been leading that list for months. Hermann pleads for a “green shrinkage” and a “survival economy” that does not rely on economic growth but on an economic order modelled on the war economy of the UK in the 1940s – a socialist command economy that is centrally controlled by the government. It is hard to believe that people haven’t learned anything from the experiments of socialism which have failed over and over again.

The Covid “pandemic” and the energy crisis caused by the Russian-Ukrainian war have already taken us some steps towards such a command economy. Individual liberties have been banned or massively restricted in favour of collective health protection. Maximum prices and state stockpiling of energy ensure interventions in the price mechanism that are not far from a war economy.

Many people don’t like the free market economy based on private property, also known as Capitalism. Yet it is a global success story. In 1800, the world population was 1 billion. Today it is 8 billion and in 2050 it will probably be 10 billion. In 1800, 90 percent of the population was hungry. In 1980, it was 20 percent and today it is around 10 percent. But these 10 percent could easily be fed if new farming methods, new seeds and a consolidated property system were introduced in the developing countries. Only the command economy with its corruption and nepotism prevents it. Do those who strive for a shrinking economy really want to go back to the poverty of the early 19th century?

The market economy puts a price on scarcity. In doing so, it sends an important signal to market participants. In a free market economy there is no shortage. Goods and services are made available everywhere and at all times in the right quantity and at the right price. This has resulted in a sufficient supply of goods and services being made available to all. In fact, capitalism has been so successful that goods and services that years before were luxuries for the wealthy have become available to all. Flying was a luxury in the 1950s; today a flight from Munich to Berlin is cheaper than travelling by car or train.

This social progress is often criticised because the plane has a worse ecological footprint than the train. Critics point out that externalities such as air pollution or CO2 emissions are ignored. But too often apples and oranges are being compared. The mere operation of a commercial aircraft does indeed cause higher CO2 emissions per passenger compared to a high-speed Intercity Express train.

However, a study commissioned by the Friedrich Naumann Foundation broadens the perspective. If we really want to compare the ecological impact of different means of transport, we cannot only look at the pure operation, but also have to consider the scope and maintenance of the infrastructure. Aeroplanes and their airports require less space and less infrastructure that railways, which need stations, tracks, tunnels, bridges and much more. The maintenance costs of a railway system increases enormously the faster the trains travel. Taking this into account, the railway no longer performs so well in ecological terms.

Fewer flights may therefore not be the solution, but rather more efficient technology with lower fuel consumption or even alternative fuels. It is also not necessary to condemn individual transport. We should make better use of the car instead, with more people driving a car on average. It also helps to use alternative fuels and to develop more efficient engines.

And here we come back to Hermann’s command economy. No central command agency would be able to have the necessary information about the best way to transport people. No authority, government or parliament has this comprehensive knowledge. It requires entrepreneurs who take risks and find out by trial and error which offer is the right one.

Friedrich August von Hayek

To paraphrase the famous free market economist Friedrich August von Hayek: “The fact that much more knowledge of facts enters into the order of the market economy than any individual or even any organisation can know is the decisive reason why the market economy achieves more than any other form of economy.”

Frank Schäffler is a member of the German Federal Parliament and one of the few libertarian politicians in Germany.