I just posted this over at a comments thread at Reddit. It is part of a discussion on why socialism was abandoned so quickly by Western nations after the collapse of communism:
Socialism in Western nations began dying off at least ten years before the Soviet Union collapsed. Socialist policies in the US, Britain and Australia (to name just three) were progressively reversed via market-friendly governments.
Part of the reason was ideological. In Britain and the US especially, dogmatic socialism had promised much but failed to deliver. At the same time, economic ideas favouring the market began to prosper.
Meanwhile, In China, the Communists under Deng Xiopeng began Socialism with Chinese Characteristics, which was pretty much a code word for abandoning communism by allowing private businesses.
The problem with what I call "old socialism" is that it made the assumption that the government is better at producing the goods and services people need than the free market is. This got proved wrong when government supported industries - such as coal mines in Britain - ran at a loss for many years and acted to drag the economy down with it.
In its place came economic neoliberalism, which sought to reform "old socialist" policies. This was done by privatizing government industries, corporatizing certain government departments, removing subsidies, tariffs, quotas and other trade barriers, lowering taxation and deregulating certain industries such as finance. Reaganomics, Thatchernomics, Rogernomics - all these variant national economic policies were essentially different forms of economic neoliberalism.
What we're seeing now, though, is the failure of many neoliberal policies. Ironically this has come at a time when market dogmatism has reached its peak. In other words, the exact same conditions that killed off "old socialism" are now present killing off pro-market ideas.
And just as old socialism was dogmatic about the government being the only way to solve everything, so currently are market advocates arguing that the market is the only way to solve everything.
Yet the evidence against this is profound. A deregulated financial market has resulted in the "Great Financial Crisis", while market-based health care in the US has been shown empirically to be less efficient - both in terms of money and outcomes - than the government run universal health care systems of America's allies.
The lesson we must learn is this:
* The government can be very efficient in some areas, and not very efficient in others.
* The market can be very efficient in some areas, and not very efficient in others.
* So let's work out which ones are more efficient. This may mean both the privatization of government industries AND the nationalisation of private industries.
Check out Ordoliberalism.