Archive for the ‘socialism’ Tag

Socialism = Many-Headed Hydra   Leave a comment

I got into a kerfuffle with some socialists (Bernie supporters) on Twitter recently because I know what Bernie is advocating and they are so enamored of all the free stuff he’s offering that they are blind to the economic, social and political realities of socialism.

As the New Republic’s John Judis explains:

In the early 1970s, I was a founding member of the New American Movement, a socialist group… Five years later, I was finished with…socialist organizing. …nobody seemed to know how socialism—which meant, to me, democratic ownership and control of the “means of production”—would actually work… Would it mean total nationalization of the economy? …wouldn’t that put too much political power in the state? The realization that a nationalized economy might also be profoundly inefficient, and disastrously slow to keep up with global markets, only surfaced later with the Soviet Union’s collapse. But even then, by the mid-1970s, I was wondering what being a socialist really meant in the United States.

He then noted that socialism is making a comeback and he’s pleased that socialism seems to have a future in American politics once again.  He hopes Sanders can make socialism relevant to Americans in the 21st century.

The old nostrums about ownership and control of the means of production simply don’t resonate in 2017. …In the 2016 campaign, however, Sanders began to define a socialism that could grow… I think there is an important place for the kind of democratic socialism that Sanders espoused.

In analyzing the many flavors of socialism, Judis ultimately distilled them into two camps – Marxist Socialism with its apocalyptic abolition of capitalism and Keynes’s Liberal Socialism, which works more gradually toward the incorporation of public power and economic equality within something that pretends to be capitalism. Most of the leftists I know believe in “liberal democracy” and “liberal socialism”, which are both good when you compare them to Marxist socialism which requires totalitarianism to work, but what Obama and Clinton want is still bad compared to small-government capitalism.

American leftists are content to allow capitalism so long as they can impose high taxes on “economic surplus” to finance lots of redistribution. They are certain such policies will have no significant negative economic impacts. Punishing success and subsiding dependence doesn’t encourage long-term prosperity and demographic trends make their policies increasingly unsustainable, but at least these folks don’t want to enforce their ideals through totalitarianism … yet. They’ll leave that to a later generation, I suppose.

Judis suggested that there is no definitive definition of “socialism”, but throughout the 19th century and much of the 20th century, all socialists condemned and called for the abolition of private ownership of the means of production and imagined it replaced with some form of socialist central planning directed by the government in the name of “the people.” The only great debate among socialists and communists in the 19th & 20th centuries was over how the socialist utopia would be brought about … whether by violent revolution or the democratic ballot box. The Russian Marxists insisted only revolution and the “dictatorship of the proliteriat” would bring “the workers” to power and assure their permanent triumph over the “exploitive” capitalist class, while the German democratic socialists opted for democratic means to power and rejected dictatorship. Well into the post-World War II period, the dispute was over political means and not ideological ends. The goal was, for both ends of the spectrum, the abolition of capitalism and the imposition of socialist central planning. How they got there differed, but both ended up with centralized government direction of economic affairs and social change.

By mid-century, “democratic” socialists in Western Europe grudging accepted the failure of socialist central planning in the Soviet bloc, Asia, Africa and Latin America. The brutal tyranny of Soviet-style socialism made it ethically indefensible. They changed their message to a “social justice” message without mentioning the nationalization of the means of production or centrally planning all economic activity.

With the opening of Cuba to tourism, leftist social justice warriors are planning to go and study what worked there. Of course, they won’t tour La Cabana prison where Che Guevara acted as unrestrained judge, jury and executioner.  They probably won’t tour the forced labor camps or talk to anyone who spent 20 years in one of them for holding ideas that weren’t allowed. No, they prefer to bask in the moral satisfaction that the few remaining communist regimes are still trying to make the “better world” they promised. Censorship of ideas, music, political views and imprisonment of “the people” who don’t have the “right” ideology will mostly not be spoken of. And, note, the social justice warriors who so admire the murderer Che prefer to live in Western countries where the rule of law has thus far protected them from their “liberal socialist” dream.

So, what do my not-so-friendly leftist friends on Twitter want from this “Liberal Socialism” they fervently advocate for? It’s the same “utopia” that Western countries have been pursuing since the end of World War II, though it has different degrees in different places.

Mr. Judis wants the government to intensively regulate, command, restrict and direct various aspects of private enterprise in society while ensuring that American society can still take advantage of the self-interested incentives and innovations that work to improve the material conditions of life. He just wants the direction, form and extent to which private businesspeople are allowed to innovate and produce to be confined and constrained by “non-market” values to conform to the purposes of “society.”

Matching the regulatory and interventionist state will, of course, be the redistributive welfare state. Excessive and unnecessary income held by businesses and investors must be heavily taxed to assure greater material egalitarianism, to fund all manners of social safety nets, and bring benefit to ordinary Americans. They use that word “economic security” a lot.

I’m not really certain what differentiates Mr. Judis’ “liberal socialism” from what already exists in the United States. It appears it’s a fine line involving intentions and the recipients of the goodies. Modern liberals like Bill and Hillary Clinton lost their way and started sleeping with the enemy (Wall Street et al). What is needed, according to Mr. Judis, is for modern American liberals to take a giant step to the left and use the Democratic Party to propagandize and persuade more in society to believe that socialism is best for them.

Just move the existing welfare state to the ‘right’ elected hands and watching things change.

Of course, what we really have in the United States is not a free market “neo-liberal” capitalism. It’s more of a “bourgeois socialism” where a system of government regulation, redistribution, favors and privileges benefit many in the private enterprise sectors of society … what we now call “crony capitalism.” What Judis is calling for is “proletarian socialism” where government more directly takes from the “rich” to give to “the workers” and “the poor.”

How likely is this to come about? Well, the call for “participatory democracy” is telling. Politics in an unrestrained democracy always becomes a tug-of-war among special interest groups capable of gaining concentrated benefits from State intervention and redistributation at the diffused expense of the rest of society. Think about special interest groups who succeed in offering campaign donations and votes to politicians who then fulfill their campaign promises to those groups once in power. The “classless” Soviets used a hierarchial system of privilege that beguiled one of the most intricate social webs of power, privilege favoritism and plunder ever seen in human society. Turned out that the notion of “the people” owning, controlling, regulating and overseeing the collective direction of an economy was pure illusion.

What far too many peole who share Mr. Judis’ views about capitalism and socialism fail to comprehend is that ANY and ALL forms of planning, regulation and political redistribution takes power and decision-making away from “the people” and gives it to government administrators who then use it for their own benefit.

What do you want to be when you grow up, little boy? You can be an engineer or an engineer. Soviet Era Joke

Only in the open, competitive market economy does each and every individual exercise liberty over his own personal affairs. The market enables us to make our own choices concern the professional, occupation and productive calling we wish to pursue. It leaves us free to make our own choices on how to earn income and spend that income on what we value or desire or believe will bring meaning and happiness to our own lives. In a free society where individual liberty and voluntary association are protected, we have true opportunities to form groups of almost any type to make our lives outside of the market materially, socially, culturally and spiritually better in our estimation.

 

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Posted September 19, 2017 by aurorawatcherak in economics, Uncategorized

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Relying on “Experts”   Leave a comment

I have emerged from the writer’s cave once more. I hope you’ve enjoyed the various reblogged articles. Thank you for your patience and I should probably even be back on Twitter when this runs. Lela

 

For April Fools Day of 1957, the British Broadcasting Corporation broadcasted a short segment about a bumper spaghetti harvest in southern Switzerland. The “documentary” explained that the bumper crop was due to “an unusually mild winter and to the virtual disappearance of the spaghetti weevil.” The television audience “watched video footage of a Swiss family pulling pasta off spaghetti trees and placing it into baskets. The segment concluded with an enthusiastic “for those who love this dish, there’s nothing like real, home-grown spaghetti.”

Related imageThe BBC reports that “hundreds of people phoned the network wanting to know how they could grow their own spaghetti tree.”

Okay, did you know that the word “gullible” is not in the dictionary?

Apparently, 7% of the American public believe chocolate milk comes from brown cows. Yeah, some of us are really that ignorant.

But, wait ….

I know a little bit about a lot of things. Writers research and we’re curious. But I really wouldn’t know how to build a car or manufacture a toaster. So while ignorance can be alarming, is it really so surprising? Few Americans live on farms anymore and most urbanites have never gardened. Many of us use appliances and gadgets with no idea how they are constructed and work. Without the skills, knowledge, and efforts of others, most of us would quickly perish. None of us would enjoy our current standard of living.

Conversely, one of the advantages of living in a modern society is that we don’t need to know how to construct the things we take for granted. We don’t even need to understand how they work. This frees us up to be “experts” in other fields while enjoying the benefits of what others know.

In 2008, British artist Thomas Thwaites set out to make a toaster from scratch. After nine months of mining, smelting, and assembling raw materials, he succeeded in making a rudimentary but extremely expensive and single-use toaster. When he used it for the first time, it melted.

Matt Ridley (The Rational Optimist) summarized the lesson of Thwaites’s toaster:  

To Thwaites this illustrated his helplessness as a consumer so divorced from self-sufficiency. It also illustrates the magic of specialization and exchange: thousands of people, none of them motivated by the desire to do Thwaites a favor, have come together to make it possible for him to acquire a toaster for a trivial sum of money.

Our state of boundless ignorance leads directly to “the case for individual freedom,” Hayek argues in The Constitution of Liberty. Achieving “our ends” depends upon us recognizing that we are ignorant of much of what we need to flourish. Hayek writes:

It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.

We live comfortably in a state of ignorance because, in a modern economy, others are free to cooperate and provide for our needs without necessarily even knowing we exist.

The possibility of men living together in peace and to their mutual advantage, without having to agree on common concrete aims and bound only by abstract rules of conduct, was perhaps the greatest discovery mankind ever made. (Hayek in Law, Legislation and Liberty, Volume 2)

 

Of course, nowadays, our ignorance is used as an argument insisting we need to be directed by the self-proclaimed wisest among us. Listen to the “experts” because they aren’t ignorant. Really? I’m willing to bet that any expert you look at is personally ignorant in some field in which you are expert. Expertise is usually in a narrow field and outside of that field, the “expert” is just an ordinary ignorant person. So why do we act as if their expertise in some narrow field makes them expert in all fields? Einstein was a great mathematician, but he once lost his ticket on a train and had no idea where he was going.

A part of the push toward technocracy has to do with our desire to control others through government force.

“Humiliating to human pride as it may be, freedom means the renun­ciation of direct control of in­dividual efforts,” Hayek explained. When we renounce controls, “a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend.”

I may be ignorant in many areas, but when I encounter a field where my ignorance will be a problem, I take it upon myself to become educated on the subject. That’s one reason that I feel free to offer my opinion on so many topics. I may not be “an expert” in that I lack a license and haven’t spent four years studying it in an accredited college, but I know enough on some subjects to know what works and what doesn’t. I can see, for example, that old-fashioned supply-and-demand economics makes more sense in reality than Keynesian voodoo. By and large, I am comfortable with making my own decisions, secure in the knowledge that I can educate myself, weigh the value of the advice derived from “experts” and take the hits if my analysis fails.

There is evidence that a declining percentage of Americans believes that uncoerced cooperation is the best way to satisfy our needs. “According to an April 2016 Harvard University pollsupport for capitalism is at a historic low.” The Harvard poll echoes a 2011 Pew Research Center survey, in which 46% of 18- to 29-year-olds had a positive view of capitalism, and 47% held a negative one. Many of these young people would prefer if the government controlled the economy at the level of individual interactions because they believe people other than themselves are just too ignorant to make their own decisions.

Being ignorant that spaghetti is produced by processing wheat is not inherently a problem, but ignorance of how markets work can become one. The cornucopia of food that predictably appears on supermarket shelves today is the product of a market process in which farmers, manufacturers, trucking companies and supermarkets spontaneously cooperate on our behalf. It’s been feeding us very well for many years. Government would only complicate the functional system. If Americans are ignorant of these invisible market processes, they may support socialism and policies that interfere with the freedom of others to cooperate and create. Just look at how the thriving Venezuela of yesterday became the impoverished, chaotic, socialist Venezuela of today.

Were we directed from Washington when to sow and when to reap, we should all want for bread. (Thomas Jefferson, Autobiography, reprinted in Basic Writings of Thomas Jefferson, 1944)

Not knowing how spaghetti or chocolate milk gets made won’t cause starvation, but socialistic inference in the market is causing it in some countries today and could cause it in the US if we don’t curtail our human arrogance and desire to control what others do.

Mises on Economic Calculation   Leave a comment

I’m concluding my series on Ludwig von Mises’ 1920 essay “Economic Calculation in the Socialist Commonwealth”, appropriately enough, with his conclusion of the essay. I highly recommend you read it for yourself to get a fuller understanding of why socialism was a bad idea in 1920 and a bad idea nearly a century later.. Lela

 

He called for socialists to consider their position on a rational basis and realize that socialism does not  match reality. Their system has no way of determining the natural value of anything. Prices must be arbitrarily derived by bureaucrats in a socialist system, while in a capitalist system, supply and demand operate automatically to provide a “market value” price derived through exchange relations. The purchasers of a product determine the price depending on their personal choices.

Ninety-seven years after Mises wrote this essay, he’s still right and the Soviet Union and China have both proven his critiques. The Soviet Union is no more and Russia and the former Soviet bloc countries are largely market-based economies. Many of them are much more capitalistic than the United Kingdom or the United States. Meanwhile, China has taken a halfway position in state capitalism. Lenin thought of state capitalism as an intermediary step toward the paradise of socialism, but having tried social for several decades, China decided to introduce some capitalism.

Image result for image of american socialismName a socialist society that is doing well. There are a few capitalist societies that have a great admix of socialism — the United States, for example. Alaska too. The United States has suffered under a slowing economy for more than a decade now and is currently $21 trillion in debt. Alaska almost didn’t pass a budget this year. Socialism sounds good from the perspective where it hasn’t been tried yet, but inevitably it can’t operate without some market-economy features and so …. The United States has spent many decades slowly becoming more socialistic and our economy is teetering on the brink of collapse. Some observe that we appear to have been coasting on the dynamism of our past capitalism and that is now running out. Just look at the pace of inventions in the US between the end of the Civil War and now. You can see that we had a huge burst of activity and then we slowly fell away in an inverse ratio to the amount of government interference in the economy. So, what does that mean for us now? Is the solution perhaps reintroducing capitalism to the system?

Responsibility and Initiative in Communal Concerns   Leave a comment

This is a series based on Ludwig von Mises’ essay “Economic Calculation” I’m only hitting what I think are the highlights and suggest you look the essay up to read it in full if you’re curious. Lela

Image result for image of the failure of socialist businessesMost socialists ignore this or they believe they can remedy it by setting up pretend business structures. They still don’t own the means of production, but occasionally enterprises have flourished under their control, so they see this as proof that if society owned the means of production, there would be no issues over the lack of ownership.

Mises acknowledged that there are two different kinds of business. Most small companies are run by proprietors or small boards of directors who all have direct interest in the company. They may be corporations, but they act like small businesses. Think Hobby Lobby or Chik-fil-A.

Then there are the large scale corporations where only a fraction of the shareholders have any direct control of the firm. The firm’s control is in the hands of people who don’t own it and are sometimes at variance to the people who own stock in the company. Sometimes the management follows a course that injures the shareholders. Why? Because their agenda for the company is their own best interest rather than the shareholders.

The same holds true for banks and large financial institutions. It’s best not to trifle with the public’s interests because sooner or later, it will come back on you, the manager, and end up harming you in the long run.

Image result for image of the failure of socialist businessesBut when an industry is nationalized, this motive disappears because private individuals no longer have material interests in the enterprise they are employed by. By Mises’ era there were already decades of evidence on State and socialist endeavors. There were no internal pressure to reform or improve products and socialist enterprises had no incentive to adapt to changing conditions of demand. Companies grow moribund. Managers lose interest in doing great work, because they get paid the same whether they do pedestrian work or excellent work. It doesn’t matter, so they don’t care.

If the managers of these enterprises were interested in the yield, it was thought they would be in a position comparable to that of the manager of large-scale companies. This is a fatal error. The managers of large-scale companies are bound up with the interests of the businesses they administer in an entirely different way from what could be the case in public concerns. They are either already owners of a not inconsiderable fraction of the share capital, or hope to become so in due course. Further, they are in a position to obtain profits by stock exchange speculation in the company’s shares. They have the prospect of bequeathing their positions to, or at least securing part of their influence for, their heirs.

This ignores the obvious fact that most people are diligent, enthusiastic and hard working only when it benefits them. Socialists believe they can construct a socialist commonwealth on the basis of the Categorical Imperative alone. How lightly it is their wont to proceed in this way is best shown by Kautsky when he says, “If socialism is a social necessity, then it would be human nature and not socialism which would have to readjust itself, if ever the two clashed.”

But let’s say we live in Utopia and that people really will exert the same zeal for the collective as they do for themselves and those they love. We’re still faced with the problem that the lack of economic calculation means that individuals can’t ascertain how well they’re actually doing in their jobs.

Bureaucracies typically lack initiative. We know that. Government agencies spend a lot of money trying to remedy this by organizational changes. It almost always fails.

Socialists resist placing their ventures entirely in the hands of a single person, because they suspect he’ll permit errors that damage the community, so instead they rely on committees. But committees rarely introduce bold innovations.

One cannot transfer free disposal of the factors of production to an employee, however high his rank, and this becomes even less possible, the more strongly he is materially interested in the successful performance of his duties; for in practice the property-less manager can only be held morally responsible for losses incurred.

The property owner himself bears responsibility. He must primarily feel the loss arising from unwise business practices. This difference in the sense of ownership is a characteristic difference between market-based and socialist production.

Nature of Economic Calculation   Leave a comment

This is part of an ongoing series evaluating an essay by Ludwig von Mises. Click here to follow the rest of the series.

Every economic choice we make is really based on value. When we judge a item as more or less satisfactory, we are making a statement about its quality and its desirability to us. Most of us are quite capable of making these valuations. We all have opinions about what we like. In simple conditions, this valuation is easy, but as affairs become more complex and their interconnections are not so easily discerned, subtler means of valuation must be employed to determine value

Valuation is complicated by the  subjective nature of valuation. In an exchange economy the objective exchange value of commodities is the unit of economic calculation.

It is possible to base the calculation upon the valuations of all participants in trade. The subjective use value of each is not immediately comparable as a purely individual phenomenon with the subjective use value of other men. The exchange value arises out of the interplay of the subjective valuations of all who take part in exchange, but calculation by exchange value furnishes a control over the appropriate employment of goods. Anyone who wishes to make calculations concerning a complicated process of production will immediately notice whether he has worked more economically than others or not; if he finds, from reference to the exchange relations obtaining in the market, that he will not be able to produce profitably, this shows that others understand how to make better use of the goods in question. Calculation by exchange value makes it possible to refer values back to a unit. For this purpose, since goods can be mutually substituted in accordance with the exchange relations obtaining in the market, any possible good can be chosen. In a monetary economy it is money that is so chosen.

Monetary calculation has its limits. Money is not a yardstick of value or price. Value and price are not measured in money because as an economic good, money is not of stable value as has been naïvely, but wrongly, assumed in using it as a “standard of deferred payments.” The exchange-relationship which obtains between money and goods is subjected to constant, though often minor, fluctuations originating not only from the influence of other economic goods, but also from the side of money, but these fluctuations hardly disturb value calculations.

The inadequacy of the monetary calculation of value does not have its mainspring in the fact that value is then calculated in terms of a universal medium of exchange, namely money, but rather in the fact that in this system it is exchange value and not subjective use value on which the calculation is based.

Value calculations that stand outside of exchange transactions are impossible to calculate. If a man were to calculate the profitability of erecting a building or factor, he couldn’t include the loss of beauty in a view as part of his calculation because that is subjective criteria and yet many buildings have not been built because it would ruin a view.

It is customary to term such elements “extra-economic,” but you really can’t call the considerations irrational.

In any place where men regard as significant the beauty of a neighborhood or of a building, the health, happiness and contentment of mankind, the honor of individuals or nations, they are just as much motive forces of rational conduct as are economic factors in the proper sense of the word, even where they are not substitutable against each other on the market and therefore do not enter into exchange relationships.

Monetary calculation cannot embrace these factors, but this doesn’t negate the significance of monetary calculation in our everyday economic life. Humankind values esoteric things like beauty, health, honor and pride, so we should pay regard to them. Sensitive spirits may object to having to balance spiritual goods against material ones, but that is not the fault of monetary calculation. Even where judgments of value can be established directly without computation in value or in money, the necessity of choosing between material and spiritual satisfaction cannot be evaded.

Robinson Crusoe and the socialist state have an equal obligation to make the choice.

Anyone with a genuine sense of moral values experiences no hardship in deciding between honor and livelihood. We all have to eat and you can’t eat honor, but some people do choose to forego bread for honor’s sake, while others value material comfort over spiritual values.

Monetary calculation fulfills all the requirements of economic calculation. It affords us a guide through a complicated economic system. It enables us to extend to all goods of a higher order the judgment of value, as it touches on consumer goods. It renders their value capable of computation and thereby gives us the primary basis for all economic operations. It takes the guesswork out of capitalism.

We use money to keep track of the exchange of production goods, to reduce all exchange-relationships to a common denominator. There are limited circumstances where we can dispense with monetary calculations. Households often use a false economy. There’s relatively limited use of capital, division of labor is rudimentary, consumption goods are handled from beginning to end. So within the narrow confines of a closed household economy, it is possible to judge production without monetary placeholders, but it is increasingly difficult to do so the larger and more complex the economic system becomes.

This is why socialist societies end up perplexed when they try to take money out of the equation. “The human mind cannot orientate itself properly among the bewildering mass of intermediate products and potentialities of production without such aid. It would simply stand perplexed before the problems of management and location.”

It is an illusion to imagine that in a socialist state calculation in natura can take the place of monetary calculation. Calculation in natura, in an economy without exchange, can embrace consumption goods only; it completely fails when it comes to dealing with goods of a higher order. And as soon as one gives up the conception of a freely established monetary price for goods of a higher order, rational production becomes completely impossible. Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.

It is easy to overlook this fact when we deal with socialistic processes within a larger free market system. The State undertakes technical improvements in industry because their effect in similar private enterprises is evident and because those private industries which produce the materials for these improvements request it, but it’s easy to miss that these activities operate within a society based on private ownership of the means of production and upon the system of monetary exchange, which provides a means of accounting. This wouldn’t be possible in a purely socialistic environment, because economic calculation would be impossible.

There can be–in our sense of the term–no economy whatsoever. In trivial and secondary matters rational conduct might still be possible, but in general it would be impossible to speak of rational production any more. There would be no means of determining what was rational, and hence it is obvious that production could never be directed by economic considerations. What this means is clear enough, apart from its effects on the supply of commodities. Rational conduct would be divorced from the very ground which is its proper domain. Would there, in fact, be any such thing as rational conduct at all, or, indeed, such a thing as rationality and logic in thought itself? Historically, human rationality is a development of economic life. Could it then obtain when divorced therefrom?

Mises wrote this a long time before the Soviet Union toppled because of irrational policies based on a lack of economic calculation. He could evaluation the difference between a competitive economy and a socialist one and foresee the future.

The supply of goods will no longer proceed anarchically of its own accord; that is true. All transactions which serve the purpose of meeting requirements will be subject to the control of a supreme authority. Yet in place of the economy of the “anarchic” method of production, recourse will be had to the senseless output of an absurd apparatus. The wheels will turn, but will run to no effect.

Mises foresaw a society where many thousands of factories would be producing wares that were not ready for use, because the administration is incapable of testing their bearings. Has that good been on the shelf too long. Was work or material wasted in creating it? Was the method of production profitable? Maybe the administration could evaluation the quality of an item, but they would have no way of calculating the cost of production.

Contrast that with the economic system of private ownership of the means of production. Here the system of computation by value is necessarily employed by each independent member of society. Everybody participates in its emergence in two  ways

  • as a consumer
  • as a producer

As a consumer he chooses what he wants to buy based on quality and price. As a producer, he sets out to create high quality goods by whatever method produces the greatest return. Through the interplay of these two processes of valuation, individuals determine the price they want to pay for consumer goods, thus “harmonized their own requirements with their estimation of economic facts.”

Mises offered a contrasting example. Consider two societies are building railroads. The principle question is, should it be built at all and which route should it follow.  In a competitive and monetary economy, this question would be answered by monetary calculation. The new road will render less expensive the transport of some goods, and it may be possible to calculate whether this reduction of expense transcends that involved in the building and upkeep of the next line.

The socialist society would know how to look after itself. It would issue an edict and decide for or against the projected building and determine the route depending on personal preference. The decision would depend at best upon vague estimates by a central planning authority rather than on an exact calculation of value. The rail would not need to reduce the cost of transport of goods. It needn’t even be used. But it would be built and proclaimed a victory because it no economic appraisal or evaluation is possible. It’s just throwing darts at a board.

“Socialism is the abolition of rational economy.”

Economic Diagnosis of Venezuela   Leave a comment

I firmly believe you can be a smack-awesome journalist without having gone to college. Yes, I have a BA in journalism, but I’ve met reporters who were better than me who never went to college. Journalism is about curiosity and writing skills and, in my estimation, the ability to be balanced with a story and seek out as many facts as can be ascertained … even the facts we don’t like.

I received several benefits from my university education that you don’t actually need to attend college to acquire, but it was helpful. For example, I took an economics course, which gave me an interest in the subject that I pursue even today. I haven’t taken a university-level economics course in 30 years, but I read at least one book a year on the subject.

By the way, books not written as textbooks … WAY more educational because they aren’t so boring.

So, I’m a little puzzled as to why reporters keep scratching their heads about Venezuela’s descent into extreme poverty and chaos?  Anyone who has read widely on economics can diagnosis the cause — socialism. From there, the treatment is obvious. End Venezuelan socialism and you will end the misery.

When the New York Times wrote about Venezuela’s ongoing collapse a year ago, it described how the country was suffering “painful shortages” of basic foods, and how “electricity and water are being rationed, and huge areas of the country have spent months with little of either.”

According to the Times, Venezuela’s dire situation was caused by factors out of its control:

The growing economic crisis (was) fueled by low prices for oil, the country’s main export; a drought that has crippled Venezuela’s ability to generate hydroelectric power; and a long decline in manufacturing and agricultural production.

Times’ reporters failed to mention the fact that Hugo Chávez tried to turn Venezuela into a socialist paradise and his successor Nicolas Maduro has continued those policies. Unfortunately, the Times’ coverage of Venzuela demonstrates that many journalists are economically illiterate.

Venezuela was never a model free market economy. A couple decades ago, the Heritage Foundation gave it a 59.8 ranking on its Index of Freedom. If you’re unfamiliar, this index measures how free or government-controlled an economy is. That put Venezuela at the edge of being “moderately free.”

Then Chavez nationalized the oil industry, agricultural operations, transportation, power generation, telecommunications, steel production, banks and other industries. Today Venezuela is the third least free economy in the world, ahead of only Cuba and North Korea.

As a direct result of those actions, Venezuela went from being one the wealthiest countries in South America to a country where people are literally fighting for scraps of food while surrounded by a wealth of natural resources. Last year, Venezuela’s economy shrank 18%. The unemployment rate is 25% and climbing. Inflation could reach 2,068% next year. Riots have become everyday events.

Alaska (and Norway) is also suffering from the effects of low oil prices. Nobody is starving here (long as the barges keep running). We still have lights and water. There hasn’t been a riot since Black Friday (although there were demonstrations at the Arctic Council meetings). Why isn’t Alaska spinning out of control too? Because, despite being a colony of the United States, we still have a vestige of market economy and so we are not entirely dependent upon the central planners to make sure we get food (as long as the barges keep running).

The cause of Venezuela’s dire conditions is socialism, not oil prices, the weather, greedy businessmen or name that excuse. Venzuela’s economic crisis what socialism produces in every time and every place. The history of socialism has produced as close to an iron law of economics as there can be.

Yet reporters continue to avoid, if not totally ignore, this economic reality when they try to explain to readers what is going on there.

The Los Angeles Times says that it’s only “anti-government protesters” who “blame Venezuela’s economic crisis on the policies of Maduro and his predecessor, Hugo Chávez.” While “supporters of the government say the culprits are a drop in international oil prices as well as ‘corrupt’ business leaders.”

There’s no attempt made by the reporter to say who is right.

The Associated Press blames the “oil boom and bust” for the crisis:

The plunge in world oil prices has left the government owing money across the board, from foreign airlines to oil service companies. Most of the anti-poverty gains made under Chavez have been erased and people are grappling with severe food and medicine shortages.

USA Today said that the reason Venezuelans were resorting to hunting dogs and pigeons for food was because:

although Venezuela has the world’s largest petroleum reserves, the country has suffered from a combination of lower oil prices and tight limits on dollar purchases that have cut off vital food and most other imports. The result has been a plunging economy and the world’s highest inflation rate — above 700%.

Others blamed a drought for the country’s problems. The Wall Street Journal reported last spring that “the newer hardships are water scarcity and increasingly critical power blackouts — a byproduct of the lack of water in a country dependent on hydroelectric dams.”

I think reporters ignore the obvious because most of them are liberals who are infatuated with the idea of socialism.

Consider how AP lovingly described Chavez:

a political outsider promising to upset the old order and funnel some of the country’s enormous oil wealth to the poor. Poverty rates fell sharply during his administration, and many people continue to see him as a beloved Robin Hood figure who gave them houses, free health care, better education and a place at the table in government.

That list of “accomplishments” reads eerily like the Democratic Party platform.

Reporters’ unwillingness to admit that socialism can’t work drives so many mainstream journalists to look for something, anything, else to blame when socialist economies invariable fail, but at some point, it behooves us to read an economics book to discover the real reason.

How Communism Became the Disease It Tried to Cure | Richard M. Ebeling   Leave a comment

The great German sociologist, Max Weber (1864-1920) offered an understanding of the evolution of socialist regimes in the twentieth century from revolutionary radicalism to a stagnant system of power, privilege and plunder, manned by self-interested Soviet socialist office holders.

Image result for image of leninMax Weber, in his posthumously published monumental treatise, Economy and Society (1925), defined a charismatic leader as one who stands out from the ordinary mass of men because of an element in his personality viewed as containing exceptional powers and qualities. He is on a mission because he has been endowed with a particular intellectual spark that enables him to see what other men do not, to understand what the mass of his fellow men fail to comprehend.

But his authority, Weber explains, does not come from others acknowledging his powers, per se. His sense of authority and destiny comes from within, knowing that he has a truth that he is to reveal to others and then knowing that truth will result in men being set free; and when others see the rightness of what he knows, it becomes obvious and inevitable that they should follow his leadership.

Certainly Vladimir Lenin (1870-1924) fit that description. While many who met or knew him pointed out his either non-descript or even unattractive physical appearance and presence, most emphasized at the same time Lenin’s single-mindedness of being on a “mission” for which he had absolute confidence and unswerving determination, and due to which others were drawn to him and accepted his leadership authority.

Surrounding Lenin, the charismatic, was an array of disciples and comrades who were called and chosen, and saw themselves as serving the same mission: the advancement of the socialist revolution. As Weber says:

“The . . . group that is subject to charismatic authority is based on an emotional form of communal relationship . . . It is . . . chosen in terms of the charismatic qualities of its members. The prophet has his disciples . . . There is a ‘call’ at the instance of the leader on the basis of the charismatic qualification of those he summons . . .”

The “chosen” group renounces (at least in principle, if not always in practice) the material temptations of the worldly circumstances, which the goal of their “mission” is meant to overthrow and destroy. And, this too, marked the often conspiring, secretive and sometimes Spartan lifestyle of Marxist revolutionaries. Max Weber explained:

“There is no such thing as salary or a benefice. Disciples or followers tend to live primarily in a communistic relationship with their leader . . . Pure charisma . . . disdains and repudiates economic exploitation of the gifts of grace as a source of income, though to be sure, this often remains more an ideal than a fact . . . On the other hand, ‘booty’. . . whether extracted by force or other means, is the other typical form of charismatic provision of needs.”

But once the charismatic and his followers are in power, a transformation soon occurs in their behavior and relationship to the rest of the society. Now it becomes impossible to stand outside of the flow of the mundane affairs of daily life. Indeed, if they do not immerse themselves in those matters, their power over society would be threatened with disintegration. Slowly, the burning fervor of ideological mission and revolutionary comradeship begins to die. Said Max Weber:

“Only the members of the small group of enthusiastic disciples and followers are prepared to devote their lives purely and idealistically to their calling. The great majority of disciples and followers will in the long run ‘make their living’ out of their ‘calling’ in a material sense as well . . . Hence, the routinization of charisma also takes the form of the appropriation of powers of control and of economic advantages by the followers and disciples and the regulation of the recruitment of these groups . . .

Correspondingly, in a developed political body the vassals, the holders of benefices, or officials are differentiated from the ‘taxpayers.’ The former, instead of being ‘followers’ of the leader, become state officials or appointed party officials . . . With the process of routinization the charismatic group tends to develop into one of the forms of everyday authority, particularly . . . the bureaucratic.”

I would suggest that in Max Weber’s analysis we see the outline of the historical process by which a band of Marxist revolutionaries, convinced that they saw the dictates of history in a way that other mere mortals did not, took upon themselves to be the midwives of that history through violent revolution.

But as the embers of socialist victory cooled, such as in Russia after the Revolution of 1917 and the bloody three-year civil war that followed, the revolutionaries had to turn to the mundane affairs of “building socialism.” Building socialism meant the transformation of society, and the transforming of society meant watching, overseeing, controlling and commanding everything.

Self-Interest and the New Socialist “Class Society”

Hence, was born in the new Soviet Union what came to be called the Nomenklatura. Beginning in 1919, the Communist Party established the procedure of forming lists of government or bureaucratic positions requiring official appointment and the accompanying lists of people who might be eligible for promotion to these higher positions of authority. Thus was born the new ruling class under socialism.

In the end, the socialist state did not transform human nature; human nature found ways to use the socialist state for its own ends.

Ministries needed to be manned, Party positions needed to be filled, nationalized industries and collective farms needed managers assigned to supervise production and see to it that central planning targets were fulfilled, state distributions networks needed to be established, trade unions needed reliable Party directors, and mass media needed editors and reporters to tell the fabricated propaganda stories about socialism’s breakthrough victories in creating a new Soviet Man in his new glorious collectivist society.

Contrary to the socialist promises of making a new man out of the rubble of the old order, as one new stone after another was put into place and the socialist economy was constructed, into the cracks between the blocks sprouted once again the universals of human nature: the motives and psychology of self-interested behavior, the search for profitable avenues and opportunities to improve one’s own life and that of one’s family and friends, through the attempt to gain control over and forms of personal use of the “socialized” scarce resources and commodities within the networks and interconnections of the Soviet bureaucracy.

Since the state declared its ownership over all the means of production, it was not surprising that as the years and then the decades went by more and more people came to see membership in the Nomenklatura and its ancillary positions as the path to a more prosperous and pleasant life. In the end, the socialist state did not transform human nature; human nature found ways to use the socialist state for its own ends.

The system of privilege and corruption that Soviet socialism created was explained by Boris Yeltsin (1931-2007), the Russian Communist Party member who, more than many others, helped bring about the end of the Soviet Union and an independent Russia in 1991 that at first tried democracy. In his book, Against the Grain (1990), Yeltsin explained:

“The Kremlin ration, a special allocation of normally unobtainable products, is paid for by the top echelon at half its normal price, and it consists of the highest-quality foods. In Moscow, a total of 40,000 people enjoy the privilege of these special rations, in various categories of quantities and quality. There are whole sections of GUM – the huge department store that faces the Kremlin across Red Square – closed to the public and specially reserved for the highest of the elite, while for officials a rung or two lower on the ladder there are other special shops. All are called ‘special’: special workshops, special dry cleaners, special polyclinics, special hospitals, special houses, and special services. What a cynical use of the world!”

The promised “classless society” of material and social equality was, in fact, the most granulated system of hierarchical privilege and power. Bribery, corruption, connections and favoritism permeated the entire fabric of Soviet socialist society. Since the state owned, produced and distributed anything and everything, everyone had to have “friends,” or friends who knew the right people, or who knew the right person to whom you could show just how appreciative you could be through bribery or reciprocal favors to gain access to something impossible to obtain through the normal channels of the central planning distributive network for “the masses.”

And overlaid on this entire socialist system of power, privilege and Communist Party-led plunder was the Soviet secret police, the KGB, spying, surveilling and threatening anyone and everyone who challenged or questioned the propaganda or workings of the “workers’ paradise.”

Communist Contradictions and the End to Soviet Socialism

It all finally came to an end in 1991 when the privilege, plunder and poverty of “real socialism” made the Soviet system unsustainable.

It is not an exaggeration to say that everything that the Marxists said was the nature of the capitalist system – exploitation of the many by a privileged few; a gross inequality of wealth and opportunity simply due to an artificial arrangement of control over the means of production; a manipulation of reality to make slavery seem as if it meant freedom – was, in fact, the nature and essence, of Soviet socialism. What a warped and perverted twisting of reality through an ideologically distorted looking glass!

It all finally came to an end in 1991 when the privilege, plunder and poverty of “real socialism” made the Soviet system unsustainable. Indeed, by that time it was hard to find anyone in any corner of Soviet society who believed, anymore, in the “false consciousness” of communist propaganda. The Soviet Union had reached the dead-end of ideological bankruptcy and social illegitimacy. The “super-structure” of Soviet power collapsed. (See my article, “The 25th Anniversary of the End of the Soviet Union.”)

In 1899, the French social psychologist, Gustave Le Bon (1841-1931), looked at the, then, growing socialist movement at the end of the nineteenth century and the soon to be beginning twentieth century, and sadly said in his book, The Psychology of Socialism:

“One nation, at least, will have to suffer . . . for the instruction of the world. It will be one of those practical lessons which alone can enlighten the nations who are amused with the dreams of happiness displayed before their eyes by the priests of the new [socialist] faith.”

Not only Russia, but also many other countries in Eastern Europe, Asia, Africa, and Latin America have been forced to provide that “practical lesson” in the political tyranny and economic disaster that socialist society, especially in its Marxist permutation, offered to mankind.

It stands as a stark demonstration of the disastrous consequences when a society fully abandons a political philosophy of classical liberal individualism, an economic system of free markets, and an acceptance of self-interested human nature functioning within a social arrangement of voluntary association and peaceful exchange.

Let us hope that with this year marking the one-hundredth anniversary of the communist revolution in Russia mankind will learn from that tragic mistake, and come to realize and accept that only individual liberty and economic freedom can provide the just, good, and prosperous society that humanity can and should have.

Based on a presentation delivered as the John W. Pope Lecture sponsored by the Clemson Institute for the Study of Capitalism at Clemson University on March 1, 2017.

Source: How Communism Became the Disease It Tried to Cure | Richard M. Ebeling

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