I awoke this morning listening to BBC and Radio Deutsche Welle commentary on the fortieth anniversary of the fall of the Berlin Wall.

Angela Merkel and Wolfgang Schaeuble place roses into a portion of the wall at Bernauer Strasse on Nov. 9. 
Angela Merkel and Wolfgang Schaeuble place roses into a portion of the wall at Bernauer Strasse on Nov. 9.  Photographer: Krisztian Bocsi/Bloomberg

The accounts left me despairing over our current world.

The wall fell after I was already accepted into graduate school, but a year before I took up residency in modern European history. Even at the time, New German Critique and Telos (my go-to journals back then) were describing a “new class” of entrepreneurs fanning out across Eastern Europe and Russia, privatizing public entities and occupying the skeletons of remaining public ones. Their authors had little hope that Eastern Europe would follow the examples of Sweden or Norway or the Netherlands. No, this “new class” would strike a more sinister pose: the pose pounded into them by half a century of free market, anti-communist propaganda. They genuinely believed, as President Reagan genuinely believed, that “government is not the solution to the problem; government is the problem.” Markets work best when publics are reduced to a cipher. And so the “new class” set to work dismantling the very institutions that might have arrested, tried, and convicted them for seizing the wealth their citizens so desperately needed and deserved. Absent functioning public institutions, they got off Scot-Free.

Capitalism is grounded on MPL = ΔQ/ΔL, where the marginal product of labor (or capital) is held to be equal to the change in a quantity (of anything, or no thing) over the change in the labor (or capital) required to generate that change. It was this product that proved exceedingly problematic for soviet planners. How do we get more with less?

Some goods should never be subject to marginal analysis: health, education, and welfare, for example. If not constitutionally memorialized (as rights), these goods quickly succumb to the bottom line. What is the value of health? If subject to marginal analysis, the value of health is its value relative to all other value generating goods. In a free market, the value of health is whatever consumers of this good will pay and whatever producers of this good can charge. What is the value of education? Again, if subject to marginal analysis, the value of education is its value relative to all other value generating goods. The same holds true for welfare, which actually is memorialized in the US Constitution; or, in any case, in its Preamble.

Nor do we escape marginal analysis when we account for the marginal benefit society derives from good health, education, and welfare. At some point well short of perfect health, superior education, and sound public welfare, the costs exceed the benefits. One could argue of course that cost should not be the gate-keeper for an education good, or for health, or for welfare; one could argue that their is a category mis-match when health, which is measured in other ways, comes to be measured by cost, or when a citizen’s grasp of what citizenship even is depends upon whether they are sufficiently wealthy. In a world that universally valued superior education, the value of education in monetary terms would drop precipitously; just as in a world where pure water and air were universally available, their cost would drop to zero. But, in a world, such as our own, where health, education, and welfare are subject to marginal analysis, their benefits will be distributed differentially based on the wealth of the individuals who desire them.

Soviet planners wanted to deliver the goods, and they wanted to bypass MPL=ΔQ/ΔL. But they couldn’t. The goods require labor. There is simply no way around it. But that means that people must work, in order to generate the marginal product. Why will they work? In traditional societies, people work because they need to eat. Anyone familiar with farming knows that sustainable farming does not actually take much time. What takes time is farming enough to purchase the equipment, the seed, the materials, and finding the markets willing to pay sufficiently for your goods to pay for the equipment, seed, etc. Traditional societies don’t have this problem because they are producing solely for themselves (and for their lord). But, the soviet planners rejected serfdom and they rejected free markets.

So, the question is: how do you produce any good efficiently? The answer is MPL=ΔQ/ΔL. And this is the definition of capitalism.

Soviet planners could not not be capitalists. They thought their problem was a political one. Achieve power, eliminate the bourgeoisie, and enforce socialist laws and regulations. But their problem was actually a social problem. They needed to find out why, if not for MPL, social actors might want and work for the things we haver reason to value: such as, health, education, and welfare. They never figured this out.

But, evidently, we have not figured it out either. Why, if not for the marginal product, would we want superior education, good health, and secure welfare?

When the wall fell, Eastern Europe and the Soviet Union did not become better. They did not even become better capitalists. They became oligarchs, plutocrats, and tyrants — because they believed in the propaganda dished out to them by defenders of free market capitalism who still have no idea why we might value health, education, and welfare apart from their marginal product.

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