Since this is the nearest most of us have ever got to living under the Blitz, I’ve been re-reading George Orwell’s The Lion and the Unicorn. Written in London in 1940, it begins with the famous line: ‘As I write, highly civilised human beings are flying overhead, trying to kill me.’ The first part of the book, titled ‘England Your England’ contains more quotable lines per page than anything not written by Shakespeare. It is here that Orwell explains why he loves Britain, warts and all.
The rest of the book, in which he makes the case for ‘democratic socialism’ is maybe less well known, but is characteristically clear and unambiguous. Socialism, he says, means that ‘the State, representing the whole nation, owns everything, and everyone is a State employee.’ He then offers a classically Marxist explanation for why such a system is superior to capitalism. Capitalist economies over-produce some products, leading to waste, while under-producing others. This problem becomes acute in times of war, says Orwell, when a capitalist country ‘has difficulty in producing all that it needs, because nothing is produced unless someone sees his way of making a profit out of it.’
Under socialism, says Orwell, ‘these problems do not exist. The State simply calculates what goods will be needed and does its best to produce them.’ This sentence, thrown so lightly onto the page, highlights the fallacy of central planning. Orwell uses the word ‘simply’ but there is nothing simple about it. ‘Somehow’ would be a more realistic. As Ludwig von Mises explained way back in 1920, just three years after the Russian Revolution, it is impossible to know how many goods are needed without the price mechanism to act as a guide. You cannot allocate resources efficiently if you do not know what they are worth. And since value is subjective and in constant flux, you cannot hope to avoid over or under-production without prices.