Dear Mr. Mayor, I guess you haven’t noticed but the beauty of capitalism is that it has created societies where, unlike in pre-capitalist and collectivist economies, the individual no longer needs to be rugged. But then again, you may define rugged as living in a 1-, 2-, or 3-thousand square foot, climate-controlled home, with two or even three cars in the driveway, carrying around a super computer in your pocket, having easy access to food at supermarkets with thousands of items ready for purchase, being able to obtain almost all your desired purchases from a lounge chair in your home while having them delivered to your door, etc. If that’s the case, then you are right, we are living in a world of rugged individualism.
—January 4 Facebook post by economist Roy Cordato (posted by permission)
Introduction
In his widely reported inaugural speech, New York’s new mayor, Zohran Mamdani, proudly stated that he would replace “the frigidity of rugged individualism with the warmth of collectivism.” But basic economic reasoning and a knowledge of twentieth-century history show that Mamdani has it exactly backwards. A society based on individualism, by which he (I think) and I mean economic freedom and individual responsibility, makes people’s lives relatively easy. A society based on collectivism, by contrast, is not warm, but makes life extremely rugged.
We need look only at the track records of countries based on collectivism and of countries with a fair amount of economic freedom to see the difference.
United States versus USSR
Start with the extremes: the United States on the one hand and the Soviet Union on the other.
In the 1989 edition of his bestselling introductory textbook, Economics, the late MIT economist Paul Samuelson wrote, “[T]he Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” This was just two years before the USSR collapsed. Of course, we now know that that’s false, but Samuelson should have known it then. Indeed, if he had read and taken seriously the work of the late University of Virginia economist G. Warren Nutter, he would have known it as early as the 1960s.
Why was Samuelson so wrong and Nutter so right? The basic reason is that Samuelson took the Soviet Union’s reports on economic growth at face value whereas Nutter looked beneath the numbers to actually understand them. In “Growth of Industrial Production in the Soviet Union,” a chapter in a 1962 book published by the National Bureau of Economic Research, Nutter and co-authors Israel Borenstein and Adam Kaufman wrote, “Soviet industrial development, as we pointed out much earlier, has concentrated on economic growth of a limited list of products; US development, on proliferation of products and qualitative improvements.” And that makes all the difference. It’s relatively easy to increase annual production of, say, steel, if the steel produced doesn’t need to fit the preferences of actual consumers.
Nutter’s view in the 1960s was a minority viewpoint. But as early as 1976, the truth was in clear view. Hedrick Smith was the Moscow bureau chief for the New York Times in the 1970s. His 1976 book, The Russians, tells of the daily life of hardship of Russian consumers, who lined up for hours every day to get the bare necessities. No one could read that book and think the Soviet economy was doing well.
Scott Shane was the Baltimore Sun’s Moscow correspondent from 1988 to 1991. In his 1994 book, Dismantling Utopia: How Information Ended the Soviet Union, Shane vividly told the story of how socialism was failing Soviet citizens. One particularly telling passage was about shoes. Shane wrote:
My informal survey suggested that some of the longest lines in Moscow were for shoes. At first I assumed that the inefficient Soviet economy did not produce enough shoes, and for that reason, even in the capital, people were forced to line up for hours to buy them. . . . Then I looked up the statistics.
I was wrong. The Soviet Union was the largest producer of shoes in the world. It was turning out 800 million pairs of shoes a year—twice as many as Italy, three times as many as the United States, four times as many as China. Production amounted to more than three pairs of shoes per year for every Soviet man, woman, and child.
The problem with shoes, it turned out, was not an absolute shortage. It was a far more subtle malfunction. The comfort, the fit, the design, and the size mix of Soviet shoes were so out of sync with what people needed and wanted that they were willing to stand in line for hours to buy the occasional pair, usually imported, that they liked.
At the root of the dysfunction was the state’s control of information. Prices are information—the information producers need in order to know what and how much to produce. In a market for a product as varied in material and design as footwear, shifting prices are like sensors taped to the skin of a patient in a medical experiment; they provide a constant flow of information about consumer needs and preferences. When the state controlled information, it deprived producers of information about demand.
Shane added that many of the Soviet-produced shoes ended up in a landfill. He wrote this in 1994, but it was about what he observed in the late 1980s. In understanding the problems with the Soviet economy, and in showing how socialist economies actually worked, Shane showed that he was a better economist than Nobel Prize–winner Paul Samuelson.
East and West Germany
We had evidence on the difference between relatively free economies and socialist economies even as early as the 1950s. I wrote about West Germany’s sparkling recovery from World War II in “German Economic Miracle,” in David R. Henderson, ed., The Concise Encyclopedia of Economics. In that piece, I showed how simply reforming the currency from the reichsmark to the deutschmark, ending economy-stifling price controls, dramatically cutting marginal tax rates, and leaving private firms and individuals to trade in the free market contributed to high economic growth. I noted that annual industrial production per capita was more than three times as high in 1958 as the annual rate of production per capita in the first six months of 1948, just prior to the reforms.
Moreover, we can compare two economies that started off in bad shape after the war and had very similar cultures: East and West Germany. But while West Germany’s government chose relatively free markets, East Germany’s government chose (warm?) communism. The results? In 1991, just after East Germany dropped communism, East Germany’s GDP (in 1990 dollars) was $86 billion, up from $51.4 billion in 1950 (also in 1990 dollars). This implies an average annual growth rate of 1.3 percent. I wrote, “In 1991, West Germany’s GDP (in 1990 dollars) was $1.24 trillion, making it the third-largest economy in the world, up from $214 billion in 1950 (also in 1990 dollars). This implies an average annual growth rate of 4.4 percent, more than three times that of East Germany.”
And since the comparison is between individualism and collectivism, we shouldn’t minimize how the two governments treated their people. West Germany’s government didn’t engage in heavy surveillance or censorship and, more important, allowed people to leave. East Germany’s government, by contrast, surveilled people intrusively to ferret out those whom it regarded as traitors, heavily censored the printed word, and, most important, shot to kill people who tried to escape. That sounds pretty rugged to me, and not at all warm.
North and South Korea
Consider also North and South Korea. By the time of the 1953 armistice that ended fighting in the Korean War, both countries’ economies were in tatters. When my mother wanted me, as a four-year old in 1954, to finish my dinner, she said, “People are starving in Korea.” She didn’t distinguish between North and South Korea. She didn’t have to.
But then the two countries’ governments chose very different strategies. South Korea’s government, while not choosing laissez-faire, did allow a large role for private property and private enterprise, and was relatively open to international trade. North Korea’s, by contrast, chose communism.
Here’s what I wrote about the closest thing we have in economics to a controlled experiment:
In 2004, North Korea’s GDP was about $40 billion, up from $11 billion in 1953 (also in 2004 dollars). This implies an average annual growth rate of 2.6 percent, which is almost certainly an overstatement of the true North Korean growth rate because there is no good way to measure the value of output in a socialist economy. If shoes are produced but no one buys them, this counts in GDP. If one government plant produces steel that other government plants are required to take, even if it is useless, this also counts in GDP. Such surpluses of useless goods are endemic in socialist economies (see socialism). Also, the socialist planners had an incentive to overstate growth. In 2004, South Korea’s GDP was about $925 billion, up from about $13.8 billion in 1953 (also in 2004 dollars). This implies an average annual growth rate of 8.6 percent, more than three times as much as North Korea’s official rate.
Moreover, there is a huge difference between the two governments’ treatment of their citizens. South Korea’s government generally respects people’s civil liberties. As Human Rights Watch reported in 2023, North Korea’s government is “one of the most repressive countries in the world.” Here’s one paragraph from that report:
The government does not tolerate pluralism, bans independent media, civil society organizations, and trade unions, and systematically denies all basic liberties, including freedom of expression, peaceful assembly, association, and freedom of religion and belief. North Korean authorities routinely send perceived opponents of the government to secretive political prison camps (kwanliso) in remote regions where they face torture and other ill-treatment, starvation rations, and forced labor. Collective punishment is also used to silence dissent.
Life under North Korea’s collectivist government is rugged indeed. It’s also probably not very warm at night, as evidence by this satellite picture of the two Koreas at night.
Note also that if anything, I’m biasing the results against my theme. I haven’t even mentioned the tens of millions of deaths that communism in Stalin’s Russia and in Mao’s China led to.
Yeltsin’s supermarket sweep
In 1989, Boris Yeltsin, two years before he became head of the Soviet Union, paid an impromptu visit to a supermarket in Houston. He was stunned by the amount and variety of goods that everyday American consumers could buy. He said to his aides that if his people were to see this, “there would be a revolution.” To his credit, after becoming president of the Soviet Union in 1991, he helped dissolve the Soviet Union and helped move Russia closer to a market economy. He understood how un-rugged individualism was.
Am I cherry-picking?
Perhaps you think I’m cherry-picking by looking only at extreme cases. I’m not, but that criticism is easily handled if we look at data from 165 countries. Every year, the Fraser Institute in Canada publishes a report on economic freedom around the world. The whole report is well worth reading. It shows, among other things, the high correlation between economic freedom and economic well-being.
One particular correlation is worth noting, especially for people who genuinely care about the poor. As Figure 1.8 of the report shows, the average income of the bottom 10 percent of people in the countries with the least economic freedom was $1,255. For the bottom 10 percent in the countries with the most economic freedom, it was $9,771. The data are in 2021 dollars, adjusted for purchasing power parity. If you have to be poor, it’s much better to be poor in a country with a lot of economic freedom.
Conclusion
I have never talked to Mayor Mamdani and so I don’t know what he knows or doesn’t know. He may know of the millions of deaths that collectivism has caused. If he doesn’t care, that would be horrible. But it’s also possible that he knows little about collectivism’s grisly results.
A look at his history shows that his growth has been like that of a fragile orchid. Orchids, to grow, require just the right amount of light, fertilizer, and water. Mamdani grew up in a highly sheltered environment. His mother and father are prominent leftists. He earned his undergraduate degree at Bowdoin College, where he majored in Africana studies. A 2020 study by David Horowitz and Eli Lehrer found that the ratio of registered Democrats to registered Republicans on Bowdoin’s faculty was 23 to 1. One can be fairly confident that none of the registered Republicans taught Africana studies. After a few years as a rap artist, he entered politics, first as an aide to other politicians and then as a member of the New York State Assembly. Where would Mamdani have learned about any of the horrors caused by collectivism?
Hopefully, the residents of New York City won’t have to learn.
