3See Ludwig von Mises, Economic Calculation in the Socialist Commonwealth (Auburn, Ala.: Ludwig von Mises Institute, 1980); idem, Socialism: An Economic and Sociological Analysis (Indianapolis, Ind.: Liberty Fund, 1981); idem, Human Action: A Treatise on Economics, Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998); Murray N. Rothbard, Man, Economy, and State, 2 vols. (Auburn Ala.: Ludwig von Mises Institute, 1993), esp. pp. 544-50, 585-86; idem, "Ludwig von Mises and Economic Calculation under Socialism," and "The End of Socialism and the Calculation Debate Revisited," in idem, The Logic of Action One; Joseph Salerno, "Ludwig von Mises as Social Rationalist," Review of Austrian Economics 4 (1990).
4See further on this Hans-Hermann Hoppe, "Desocialization in a United Germany," Review of Austrian Economics 5, no. 2 (1991); Murray N. Rothbard, Power and Market (Kansas City: Sheed Andrews and McMeel, 1977) esp. pp. 172-89; Ludwig von Mises, Bureaucracy (New Rochelle, N.Y.: Arlington House, 1969), esp. chap. 3.
II
The manifest bankruptcy of socialism all across Eastern Europe since the late 1980s, after some seventy years of "social experimentation," provides a sad illustration of the validity of economic theory. What does the theory that long ago predicted this result as inevitable6 now imply regarding how Eastern Europe can rise most quickly from the ruins of socialism? Since the ultimate cause of its economic misery is the collective ownership of factors of production, the solution and key to a prosperous future is privatization. Yet how should socialized property be privatized?7
5See further on this Friedrich A. Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944), esp. chap. 10; also The Politicization of Society, Kenneth S. Templeton, ed. (Indianapolis, Ind.: Liberty Fund, 1979). It should be emphasized here in particular that, contrary to widespread belief, the lack of democracy has essentially nothing to do with socialism's inefficiency. It is not the rules according to which politicians are selected for their office that constitutes the problem. It is politics and political decisionmaking as such. Instead of each producer deciding independently what to do with particular resources, as under a regime of private property and contractualism, with socialized factors of production each decision requires a collective's permission. It is irrelevant to the producer how those giving permission are chosen. What matters to him is that permission must be sought at all. As long as this is the case, the incentive for producers to produce is reduced and impoverishment will continue. Private property is as incompatible with democracy, then, as with any other form of political rule. Rather, with the institution of private property an "anarchy of production" is established, in which no one rules anyone, and all producers' relations are voluntary and thus mutually beneficial.
6See in particular Mises, Socialism; also Collectivist Economic Planning, Friedrich A. Hayek, ed. (London: Routledge and Sons, 1935); Trygve J.B. Hoff, Economic Calculation in a Socialist Society (Indianapolis, Ind.: Liberty Fund, 1981).
7While a vast body of literature dealing with the socialization of private property exists, little has been written on how to desocialize. The reason for this neglect, one would suspect, is to be found in most Western intellectuals' persistent explicit or implicit socialist predilections. Given these, any treatment of the problem of deserialization must appear simply irrelevant; for why should anyone ever want to go back from an allegedly "higher stage of social evolution," i.e., socialism, to a lower one, i.e., capitalism? Even within the Mises School at best only implicit advice on this most pressing problem confronting the people of Eastern Europe can be found. For one of the few exceptions see Murray N. Rothbard, "How To Desocialize?" and "A Radical Prescription for the Socialist Bloc," in The Economics of Liberty, Llewellyn H. Rockwell, Jr., ed. (Auburn, Ala.: Ludwig von Mises Institute, 1990); idem, "How and How Not To Desocialize," Review of Austrian Economics 6, no.l (1992); Jeffrey Herbener, "The Role of Entrepreneurship in Deserialization," Review of Austrian Economics 6, no .1 (1992).
An elementary yet fundamental moral observation must precede the answer to this question.8 Since socialism cannot arise without the expropriation of assets originally "created" and owned by individual homesteaders, producers, and /or contractors, all socialist property, illbegotten from the very start, should be forfeited. No government, even if freely elected, can be considered the owner of any socialist property, for a criminal's heir, even if himself innocent, does not become the legitimate owner of illegitimately acquired assets. Because of his personal innocence he remains exempt from prosecution, but all of his "inherited" gains must immediately revert to the original victims, and their repossession of socialist property must take place without their being required to pay anything. In fact, to charge a victimized population a price for the reacquisition of what was originally its own would itself be a crime and would forever take away any innocence that a government previously might have had.9
More specifically, all original property titles should be recognized immediately, regardless of who presently owns them. Insofar as the claims of original private owners or their heirs clash with those of the current assets' users, the former should override the latter. Only if a current user can prove that an original owner-heir's claim is illegitimate—that the title to the property in question had initially been acquired by coercive or fraudulent means—should a user's claim prevail and should he be recognized as the legitimate owner.10
8On the ethical theory underlying the following considerations see in particular Murray N. Rothbard, The Ethics of Liberty (New York: New York University Press, 1998); Hans-Hermann Hoppe, The Economics and Ethics of Private Property (Boston: Kluwer,1993).
9Empirically, this is what post-communist governments have by and large done, of course. Particularly noteworthy in this regard is the case of Germany. After the reunification of Germany in 1991, the (conservative) German government, backed by its supreme court, refused to return any of the property that had been expropriated from 1946 to 1949, under Soviet-Russian direction, in former East Germany (more than 50 percent of all agriculturally used land!) to its original owners. Instead, the government sold this land to its own favored "clients," which in many cases included the former communist expropriators-turned-capitalists. By contrast, to this day the original owners or their heirs have not received a penny in compensation.
10In those cases in which current users actually bought expropriated assets from the government, they should seek compensation from those responsible for this sale, and the government officials accountable for it should be compelled to repay the purchase price. On the question of criminal possession, restitution, burden of proof, and other related issues see Rothbard, The Ethics of Liberty, esp. chaps. 9-11; Hans-Hermann Hoppe, Eigentum, Anarchie und Staat (Opladen: Westdeutscher Verlag,1987), esp.chap.4.
Regarding socialist property that is not reclaimed in this way, syndicalist ideas should be implemented; that is, the ownership of assets should immediately be transferred to those who use them—the farmland to the farmers, the factories to the workers, the streets to the street workers or the residents, the schools to the teachers, the bureaus to the bureaucrats, and so on.11 To break up the mostly over-sized socialist production conglomerates, the syndicalist principle should be applied to those production units in which a given individual's work is actually performed, i.e., to individual office buildings, schools, streets or blocks of streets, factories and farms. Unlike syndicalism, yet of the utmost importance, the property shares thus acquired should be freely tradeable and a stock market established so as to allow a separation of the functions of owner-capitalists and non-owning employees, and the smooth and continuous transfer of assets from less into more value-productive hands.12
11The reference to "syndicalist ideas" here is not to be interpreted as an endorsement of the program of syndicalism. See also the following note 12. Quite to the contrary, the syndicalist slogan "the railways to the railway men, the mines to the miners, the factories to the factory hands" was originally meant to be a program of the expropriation of the pr
ivate owners of capitalist enterprises. "Syndicalism like Socialism," writes Mises,
aims at the abolition of the separation of workers from the means of production, only it proceeds by another method. Not all workers will become the owners of all the means of production; those in a particular industry or undertaking or the workers engaged in a complete branch of production will obtain the means of production employed in it. (Socialism, p. 240)
The use of syndicalist ideas here is proposed to the very opposite effect, i.e., as a means of privatizing previously socialized factors of production in such cases where no identifiable original (expropriated) private owner of these factors exists. Furthermore, the ethical rationale for the application of the syndicalist slogan in those—and only those-- cases lies in the fact that such a privatization scheme approximates most closely the method described by John Locke of the first (original) just appropriation of previously unowned resources. The railwaymen have in fact "mixed their labor" with the railroads, and the miners with the mines. Hence, their claim to these resources must be deemed better founded than anyone else's.
12According to the original syndicalist program which aims to abolish permanently the separation of the worker from the means of production [see note 11 above], any trade or sale of his "property-share" by the worker must be precluded. "If syndicalist reform is to mean more than the mere redistribution of productive goods," explains Mises,
then it cannot allow the property arrangements of Capitalism to persist in regard to the means of production. It must withdraw productive goods from the market. Individual citizens must not dispose of the shares in the means of production allotted to them; for under Syndicalism these are bound up with the person of the owner in a much closer way than is the case in the liberal society. (Socialism, p. 242)
Two problems are connected with this privatization strategy. First, what is to be done in the case of newly erected structures—which according to the proposed scheme would be owned by their current productive users—built on land that is to revert to a different original owner? While it may appear straightforward enough to award each current producer with an equal property share,13 how many shares should go to the land owner? Structures and land cannot be physically separated. In terms of economic theory, they are absolutely specific complementary production factors whose relative contribution to their joint value product cannot be disentangled. In this case there is no alternative but to bargain." This—contrary to the first impression that it might lead to permanent, unresolvable conflict—should hardly cause many headaches, for invariably there are only two parties and strictly limited resources involved in any such dispute. Moreover, to find a quick, mutually agreeable compromise is in both parties' interest, and if either party possesses a weaker bargaining position it is clearly the landowner (because he cannot sell the land without the structure owners' consent while they could dismantle the structure without needing the landowner's permission).
In effect, under syndicalism the worker is not "owner" in the normal sense of the word; for ownership, as Mises notes, "is always where the power to dispose resides. . . . Private property exists only where the individual can deal with his private ownership in the means of production in the way he considers most advantageous." (pp. 244-45) In fact, if workers were permitted to dispose of their shares, conditions would quickly return to the capitalist status quo ante with a clear separation of owner-capitalists (property) on the one hand and workers (labor) on the other. However, if this is not permitted, explains Mises, then insurmountable difficulties arise, unless it is unrealistically assumed
that no changes occur in the methods of production, in the relations of supply and demand, in technique, or in population. ... If changes in the direction and extent of demand or in the technique of production cause changes in the organization of the industry, which require the transfer of workers from one concern to another or from one branch of production to another, the question immediately arises what is to be done with the shares of these workers in the means of production. Should the workers and their heirs keep the shares in those industries to which they happened to belong at the actual time of syndicalization and enter the new industries as simple workers earning wages, without being allowed to draw any part of the property income? Or should they lose their share on leaving an industry and in return receive a share per head equal to that possessed by the workers already occupied in the new industry? Either solution would quickly violate the principle of Syndicalism.... if the worker on his departure from an industry loses his share and on entering another industry acquires a share in that, those workers who stood to lose by the change would, naturally, oppose energetically every change in production. The introduction of a process making for greater productivity of labor would be resisted if it displaced workers or might displace them. On the other hand the workers in an undertaking or branch of industry would oppose any development by the introduction of new workers if it threatened to reduce their income from property. In short, Syndicalism would make every change in production practically impossible. Where it existed there could be no question of economic progress, (pp. 242-44)
See further on syndicalism Mises, Human Action, chap. 23; idem, Money, Method, and the Market Process (Boston: Kluwer, 1990), chap. 18.
13Instead of awarding equal property shares to all current producers, for justice to prevail it would actually be preferable to award unequal shares in accordance with the time that a worker has served within a given production unit. This would also permit the inclusion of currently retired workers in the proposed privatization scheme and thus solve the so-called pension problem.
Second, the syndicalist privatization strategy implies that producers in capital intensive industries would have a relative advantage as compared to those in labor intensive industries. The value of the property shares received by the former would exceed the wealth awarded to the latter, and this unequal distribution of wealth would require justification, or so it seems. In fact, such justification is readily available. Contrary to widespread "liberal" (i.e., social democratic) beliefs, there is nothing ethically wrong with inequality.15 Indeed, the problem of privatizing formerly socialized property is almost perfectly analogous to that of establishing private property in a "state of nature," i.e., when resources are previously unowned. In this situation, according to the central Lockean idea of natural rights which coincides with most people's natural sense of justice, private property is established through acts of homesteading: by mixing one's labor with nature-given resources before anyone else has done so.16 Insofar as any differences between the quality of nature-given resources exist, as will surely be the case, the outcome generated by the homesteading ethic will be inequality rather than equality. The syndicalist privatization approach is merely the application of this homesteading principle to slightly changed circumstances. The socialized factors of production are already homesteaded by particular individuals. Only their property right regarding particular production factors has been ignored so far, and all that would occur under the proposed scheme is that this unjustifiable situation would finally be rectified. If such rectification results in inequalities, this is no more unfair than the inequalities that would emerge under a regime of original, unadulterated homesteading.17
14On the economic theory of bargaining see Rothbard, Man, Economy, and State, pp. 308-12; also Mises, Human Action, p. 336.
15See Murray N. Rothbard, Egalitarianism As a Revolt Against Nature and Other Essays (Washington, D.C.: Libertarian Review Press, 1974); also: Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974), chap. 8; Helmut Schoeck, Envy: A Theory of Social Behavior (New York: Harcourt, Brace and World, 1970); idem, Das Recht auf Ungleichheit (Munich: Herbig, 1979); idem, 1st Leistung Unanstandig? (Osnabrueck: Fromm, 1978); Erik von Kuehnelt-Leddihn, Liberty or Equality (Front Royal, Va.: Christendom Press, 1993).
16See John Locke, Two Treatises of Government, book 2, sect. 27, where he writes:
Though the earth and
all inferior creatures be common to all men, yet every man has a "property" in his own "person." This nobody has any right to but himself. The "labor" of his body and the "work" of his hands, we may say, are properly his. Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labour with it, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state Nature placed it in, it hath by this labor something annexed to it that excludes the common right of other men. For this "labor" being the unquestionable property of the laborer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good left in common for others.
See also note 11 above. In order to forestall any misunderstanding, the endorsement of Locke here refers exclusively to his central "homesteading" idea. It does not include an endorsement of the first statement of the just quoted passage or of the infamous "proviso" which concludes the passage. To the contrary, the first statement regarding the "common" ownership of nature requires unnecessary as well as unsubstantiable theological presuppositions. Prior to an act of original appropriation, nature is and must be regarded as simply unowned. Thus, the proviso is plainly inconsistent with Locke's main idea and must be abandoned. See on this also Richard A. Epstein, Takings (Cambridge, Mass.: Harvard University Press, 1985), pp. 10-12. From the rejection of Locke's initial premise it follows that criticisms of Locke's theory of original appropriation such as Herbert Spencer's in Social Statics, chaps. 9-10, must be rejected as invalid, too. Spencer shares Locke's initial premise, but based on this he concludes that this prohibits any private ownership in ground land whatsoever. Land, according to Spencer, can only be leased from "society" by paying a "ground rent" for its use. For a criticism of this proposal and similar ones made by Henry George and his followers see Rothbard, Power and Market, pp. 122-35.
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