Socialists and Crony Capitalists: What They Gain, Humanity Loses

This is a guest blog post, written by Larysa Konstantynova, one of my MBA students. Larysa was born in March, 1986, in the Ukraine just one month before the accident at Chernobyl.

As you read Larysa’s narrative about Chernobyl, please remember that commercial nuclear power is a complete creation of government. Without the protection of the Price-Anderson Act which limits the liability of nuclear power plants in case of an accident, there would be no nuclear power.

Our arrogance in overriding the wisdom of the market has recently had terrible consequences for the people of Japan and the rest of the world, including the west coast of America where radiation levels are spiking. The reactors at Fukushima were designed by General Electric, one of the companies gaining the most by the Price-Anderson Act.

Crony capitalists, such as General Electric, gain by having government subsidize what they produce. Their gain is humanity’s loss. The billions of dollars spent on nuclear power would have been spent on other forms of energy. In the process of misdirecting resources, government subsidies create incentives which block the discovery of vital knowledge about alternative energy sources.

As you read Larysa’s narrative observe the terrible truth—incentives make government bureaucrats and politicians almost incapable of making decisions that benefit anyone but themselves and their favored cronies. The incentives inherent in socialism squash the dispersion of vital knowledge. Squashing vital knowledge opens the door to terrible outcomes. Why do we persist that in believing that American-style socialism will have a different outcome?

And now Larysa Konstantynova’s narrative:

The sunny spring day of April 26, 1986, in Pripyat, a small industrial town in northern Ukraine, would not have been different than any other day. Life was going its usual way: the residents getting ready to go to work, their children rushing to school, they would all come back home and have family dinner. They could not have known how dramatically and irrevocably their lives and the lives of their children and grandchildren would forever change.

A team of junior technicians carried out a routine test on Chernobyl nuclear power reactor number four. But that early April morning at 1:23 AM the situation spun out of control resulting in the most terrifying nuclear accident: the reactor exploded dumping eight tons of radioactive debris into the atmosphere and contaminating tens thousands of square miles in northern Ukraine, southern Belarus, and the western region of Russia. The remains burnt for ten days blasting deadly radioactive particles.

A team of sixty-nine courageous firefighters responded first in an attempt to extinguish the fire; thirty one died from direct exposure of radiation. That was just the beginning of a terrifying death toll to an invisible monster created and nurtured by the government. Researches give different estimates of the number of victims of this devastating catastrophe: one hundred thousand troops and four hundred thousand civilians, the so called “bio robots,” were thrown into the battle. Some of them died shortly after the lethal doses of radiation; many suffered from various forms of cancer, heart disease, and mental and physical disabilities. The losses on every level, economic, social, environmental, are colossal and immeasurable and even yet are a burden for future generations.

Soviet authorities responded with silence. All the information about the risk of nuclear power was classified; besides that, there was a predominant belief that “nothing ever goes wrong, and cannot go wrong.”  The government launched a top secret operation to evacuate the 50,000 population of Pripyat, turning it into a ghost town. The residents got their first information thirty-six hours after the explosion, while the failed reactor continued to burn and emit lethal radiation.

The commissars knew about the imminent and deadly threat to the residents of adjacent areas. Nonetheless, in the dilemma of whether to speak up or stay silent, they chose to be a part the ugly bureaucratic machine of totalitarian government.

Friedrich Hayek wrote in his classic essay “The Use of Knowledge in Society” that the problem that any society faces is “… a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.” Knowledge in society is dispersed; it is not concentrated within one small group of people. But this was not what authorities believed in the former Soviet Union. There was no free flow of information: information has to go from the bottom to the top through layers of useless titles. Right after the explosion, local commissars were not very willing to deliver bad news to the mid-level commissars, and the latter were petrified to pass it to the high level commissars.

Some of them, ironically, were afraid of losing their jobs, and by choosing silence they signed a death sentence to thousands of their own citizens. How could these people live in peace with their conscience after they finally realized the consequences of their wrongdoing? Some of them couldn’t. Valery Legasov, the chief of the committee investigating the Chernobyl disaster, committed suicide on the second anniversary of the accident. Legasov left an audiotape in which he states “political pressure censored the mention of Soviet nuclear secrecy in his report to the IAEA (International Atomic Energy Agency), a secrecy which forbade even plant operators knowledge of previous accidents and known problems with reactor design.”

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