Public Choice and Socialism

The socialist experiment proved to be a failure. It proved not only an isolated failure, but also a global one - every political and economic system influenced by socialism suffered from a severe crisis in the last decades of the 20th century. The soft socialism of the democratic welfare states suffered from fiscal crises in the 1970s and 1980s and led to dramatic policy transformations in the UK (Thatcher), and US (Reagan). Other highly regulated and egalitarian societies followed the Thatcher/Reagan path in the 1980s and 1990s - New Zealand, Ireland, and even the Scandinavian welfare states had to adjust their fiscal houses. Of course, perhaps the most dramatic political-economic event of the 20th century was the collapse of real-existing socialist states throughout East and Central Europe in 1989 and the dissolution of the former Soviet Union in 1991 (the only other contender for most dramatic event this century is the Great Depression of the 1930s). A century that began with increasing demands for the regulation of business and economic planning by government to achieve more efficient production and a more egalitarian distribution of income, ended with a worldwide privatization revolution and a generalized recognition of the innovative benefits that accrue from entrepreneurship. The intellectual demand for state control of economic life was replaced by a ‘gains from trade’ understanding of how the world works. Public choice theory played no small role in this dramatic shift in the intellectual climate of opinion. More pertinent for our purposes here, public choice theory provided the intellectual apparatus needed to pierce the Romantic veil of socialist ideology and lay bear the ugly reality of the political economy of socialism