Real Capitalism versus Socialism   Leave a comment

Have you ever thought about what happened with the fall of communist socialism in Eastern Europe? I mean, it sure seemed like capitalism had won a decisive victory. But now capitalism appears to be one the ropes and less than a genreation later we have people calling for increased socialism despite the overwhelming evidence that it didn’t work.

I’m basing this on an essay by Hans Hermann Hoppe. I like Hoppe’s thinking, but he’s German and kind of long-winded. I’m not sure if its English-as-a-second language thing or just his personal style, but I figure if it takes me two days to read one of his essays, I can’t really use it on the blog. I can, however, write my own essay based upon his.

When the Berlin Wall fell in 1989, socialism supposedly took a beating. For more than 40 years, there had been a socio-economic experiment underway whereby the post-war Europe was divided into the US-dominated “West” and the USSR-dominated “East”. Immigration from East to West was virtually impossible. The population of Eastern Europe was effectively imprisoned and the Berlin Wall was the most dramatic and visible symbol that state of affairs.

This really was an experiment on a grand scale. Theorists like Marx and Lenin had insisted that socialism was the natural state of industrialized nations, but the only country that had successfully implemented it was the Soviet Union, which had been a agrarian state before the Communist Revolution. Now, the Soviet Union expanded the “socialist experiment” across all of Eastern Europe, which had been industrialized before World War 2. Just as scientists would use a test group and a control group, central planners essentially outlawed private ownership of the means of production, confiscating it from the former “capitalist” owners. All ownership control was transferred to the State government. The Western intelligentsia saw this experiment as great and noble. Keynesian and Nobel-prize economist Paul Samuelson, whose book Economics was the most successful and widely used economics textbook in Western academia at the time, predicted that the “centrally planned” socialist economies of the East would experience a period of economic lag, but would soon surpass Western living standards. When the Berlin Wall came down in 1989, it became clear to all but the most delusional observer that the “Socialist Experiment” had been an unmitigated failure. Russian-style socialism had left behind economic wastelands, ravaged countries, and impoverished and demoralized populations.

As Westerners had suspected all along, the sole purpose of the “iron curtain” had been to prevent Eastern Europe’s most productive and entrepreneurial individuals from leaving the East for the West and thus, hopefully delay the oncoming socialist bankruptcy.

Of course, the Western intelligentsia, not wanting to admit they’d been wrong, asked the question – If socialism lost, who won? Most people answered that the West won – the United States and its Western European allies had, in world public opinion, won the “war” and since the world public opinion saw the US as a prime example of capitalism, it proclaimed that capitalism had won.


Image result for image of free market capitalism

If only capitalism had actually existed in the West. The US has not represented capitalism for a long time. For at least a century, The US has operated under something the neoconservative elites call “democratic capitalism”

Under democratic capitalism, private property remained nominally untouched and intact. The government claims it cannot confiscate private property or the means of production. However, a democratically elected state government could interfere with private property rights if they decided such interference was in the public interest and for the common good. In the service of these interests, the government could confiscate, tax and redistribute private property, and it could legislate or regulate the uses that private owners were allowed to make of their property. That is, all property, and in particular all property used in the means of production (capital), is in reality only provisional private property. The property remained in private hands and under private control as a state government grant, to be kept as long as the government deemed this in the “public interest.” Violate the public interest de jure and you will discover you don’t actually own anything.

Image result for image of free market capitalismUsing the general welfare clause of the Constitution, the US government has become the country’s largest land- and real estate owner and owner of all “public” streets and schools. Ostensibly for the common good, it has grown to consume almost half of the US national product (GDP) annually. In 1989, the public debt had steadily increased to reach 60% of GDP by 1989. Today it stands at more than 100% today. The government monopolizes the production of money, has established a government-controlled central bank, abolished the gold standard and replaced gold with a paper money that it can, with the help of its central bank, create at will at practically zero cost. Through a steadily growing flood of legislation and regulation, the property rights of private owners are constantly redistributed and reshuffled. Some people and businesses are made worse off and others better by the stroke of a pen. “Friends” of government, the promoters of the “common good,” are rewarded and its “enemies” punished. With the next election, that deck might be resuffled, creating new “winners” and “losers”.By 1989, the common good had been intepreted to mean the whole world and, to make the world safe for democracy and quasi-capitalism, the US government maintained the world’s largest, most costly and heavily armed military forces, occupying hundreds of military bases around the globe. Today, it remains engaged in a seemingly endless series of wars to enlarge its empire and sphere of influence.

Image result for image of free market capitalismIf that is capitalism, capitalism was not a good thing in 1989. Tragically, the European Union (EU) has adopted and followed the US model closely. Everywhere a large and steadily growing underclass of state-dependent “public welfare” clients has emerged side by side with a small oligarchy of the super-rich, government and central bank-connected bankers and financiers. Meanwhile, working and middle-class incomes are stagnant or in decline.

Could capitalism be blamed for this scenario? Only if it actually existed. Capitalism is associated with private property and with free choice and exchange based on and within the constraints of private property (laissez-faire).  That’s can’t be reconciled with the state government extracting and expanding about half of a country’s GDP and monopolized the production of the country’s entire infrastructure of roads, schools, public buildings and lands, and also production of money and credit.

We do not have free market capitalism in America; we have crony capitalism. There is a huge difference between free market capitalism that democratizes a country and makes us more efficient and prosperous and corporate crony capitalism. - Robert F. Kennedy, Jr.

Some argued that democracy (majority rule) is incompatible with private property and laissez-faire. Wasn’t democracy just another form of socialism? They argued that democracy was not to blame for the increasingly blatant shortcomings, failings, and blunders of the US and the Western world/

Of course, in the West, democracy is seen as an indisputable and unquestionable ‘good.’ You have got to have democracy to have self-rule, right? Take a hard look at the current Presidential election and intelligent people begin to wonder if that is actually true.

Image result for image of free market capitalism

Yes, in school we read that the leftist Western intelligentsia laid all all blame for all wrongs at the feet of capitalism and assured that no one was free to think otherwise in our government licenced and financed public schools and universities. Does that mean it’s true or just that we have been disallowed from thinking otherwise?

In the West, private property was not abolished entirely in one stroke and given over to government control as in Russian style socialism, but under the influence of democratic socialism, the encroachment on private property rights by the state proceeded gradually and relentlessly, until today there is virtually no aspect of human life that is left free and unregulated. Go on. Take an inventory. I have. Our every choice and activity is regulated from cradle to grave, whether as a consumer, producer or trader, at home, at work or in “public”. Private property and private property rights have become a farce. Trust me — I own a remote cabin site in Alaska where I would like to build a cabin – I know for certain that private property rights are a joke that is exceedingly not funny.

Image result for image of free market capitalism

The economic decline of the West was less dramatic than that experienced in the East because it occurred more slowly. Democratic socialism has outlasted one-party socialism by some decades, maybe because we drunkenly sway toward capitalism on rare occasion, so slow the disaster train down a bit, but the oncoming economic bankruptcy and social upheavals of Western democratic socialism should be clear to anyone. We’re at $20 trillion dollars in debt. Neither major party candidate is promising to do anything about that elephant in our collective livingroom. Democratic socialism – the Western economic system – has entered its end game and is breaking down. It took it 20 years longer than it took Soviet socialism, but it’s happening just as surely.

The Left will try to label the coming economic breakdown and social disaster as an ultimate crisis of capitalism. The cure they will propose will be another version of socialism. The difficulty is that no variety of socialism can ever produce lasting peace and prosperity. It hasn’t so far, in all of its many attempts. Only capitalism has achieved prosperity and some semblance of peace, but it didn’t last very long because the central planners took aim at it.

Capitalism is entirely different from what its socialist detractors say it is. Capitalism means

  • justly acquired private property
  • free, voluntary association, contract
  • exchange of and between the owners of private property.

Capitalism so conceived cannot be found anywhere in the contemporary world. It’s an unrealized ideal. At certain times and places, societies have made significant advances toward this ideal and accordingly prospered and flourished, but the steadily growing influence and seemingly unstoppable popularity of socialist ideas from the mid-19th century onward put a tragic end to any such attempt and has derailed and reversed any trend in that direction.

Image result for image of free market capitalism

We’ve become so glutted with the false teachings of our public schools and government-financed universities that we don’t even realize that we’ve misidentified our vocabulary, so it is extremely difficult to even have a conversation about how best to avoid economic disaster. It seems almost as though we must destroy ourselves in order to, maybe, learn a better way of doing things.

Posted October 21, 2016 by aurorawatcherak in economics

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