The former Car Czar of Romania, writing in the WSJ, talks about his experience in trying to manufacture cars under socialism. He extends his analysis to the Jaguar in Britain to show how governments in capitalist countries can’t do it either. His analysis centers on two features of car socialism: the technical ignorance of the planners and the inevitable politicization of design and distribution plans.
These factors are enough to doom the attempt but I think Mises himself would go further. Let’s stipulate perfect technical expertise and a complete absence of political bias in planning. Can car socialism work under these conditions? Mises would say no, and for one reason: an absence of truth-telling market prices for inputs and distortion of prices on outputs means that one cannot trust the accounting ledger to reveal the least wasteful, most productive path for production. Without accurate price signals revealing profits and losses, planners end up feeling their way in the dark. Production becomes economically irrational.
In the market, the possibility for any firm to completely vanish from the planet has to be an ever-present prospect. But by intervening to become a 60% owner, government has already ruled out that eventuality, which means that it is going to forever waste resources avoiding what would otherwise have been the market’s judgement on GM’s quality and the impossible burdens that government itself has placed on the enterprise. You can bet that Obama and Co. will not let the new GM fail, and by ruling that possibility out, it guarantees a future of waste and irrationality that will not be entirely unlike the Romanian experience.
