Archive for the ‘socialism’ Tag

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

Social Planners or Tyrants   1 comment

Frédéric Bastiat was a contemporary with Alexis de Toqueville and they both came from France. Both were admirers of the United States who noted risks to that wonderful experiment in constitutional republicanism with democratic features. While Toqueville focused on the United States in the most familiar of his writing, Bastiat focused on France while touching on the United States system.  I find Bastiat’s writing to be prescient. He spoke to his own time and society, but he could have been addressing his comments to American circa 2017.

To read the entire series, here is the Table of Contents.

The socialists were in ascendancy in France in Bastiat’s day, which was the primary purpose he wrote this essay The Law. Bastiat hoped to convince his fellow citizens that socialism was a bad, bad mistake. He actually managed that for a while, until people stopped reading his essay and started listening to socialists again. Lela

 

According to Bastiat, government social planner-types are convinced that ordinary human beings are incapable of making wise decisions for themselves, but there are some people — namely politicians:

[U]pon whom Heaven has bestowed opposite tendencies, not for their own sake only, but for the sake of the rest of the world. Whilst mankind tends to evil, they incline to good; whilst mankind is advancing towards darkness, they are aspiring to enlightenment; whilst mankind is drawn towards vice, they are attracted by virtue. And, this granted, they demand the assistance of force, by means of which they are to substitute their own tendencies for those of the human race.

To make his case, Bastiat provided a survey of literature, because it “is only needful to open, almost at random, a book on philosophy, politics, or history, to see how strongly this idea—the child of classical studies and the mother of socialism—is rooted in our country; that mankind is merely inert matter, receiving life, organization, morality, and wealth from power; or, rather, and still worse—that mankind itself tends towards degradation, and is only arrested in its tendency by the mysterious hand of the legislator.”

Bastiat started with a quotation by Jacques-Benigne Bousset – a French theologian of the previous generation who was court preacher of Louix XIV. He was a strong advocate for political absolutism and the divine right of kings and a vocal opponent of Protestantism.

One of the things which was the most strongly impressed (by whom?) upon the mind of the Egyptians, was the love of their country. . . . Nobody was allowed to be useless to the State; the law assigned to every one his employment, which descended from father to son. No one was permitted to have two professions, nor to adopt another. . . . But there was one occupation which was obliged to be common to all, this was the study of the laws and of wisdom; ignorance of religion and the political regulations of the country was excused in no condition of life. Moreover, every profession had a district assigned to it (by whom?). . . . Amongst good laws, one of the best things was, that everybody was taught to observe them (by whom?). Egypt abounded with wonderful inventions, and nothing was neglected which could render life comfortable and tranquil.

Bastiat objected to Bossuet’s assertion that men derive nothing from themselves, that all patriotism, wealth, innovation, husbandry, science, etc., flows from the king and the system of laws these people live under. Bossuet saw the same pattern among the Persians, by the way:

One of the first cares of the prince was to encourage agriculture. . . . As there were posts established for the regulation of the armies, so there were offices for the superintending of rural works. . . . The respect with which the Persians were inspired for royal authority was excessive. The Greeks, although full of mind, were no less strangers to their own responsibilities; so much so, that of themselves, like dogs and horses, they would not have  ventured upon the most simple games. In a classical sense, it is an undisputed thing that everything comes to the people from without. 

The Greeks, naturally full of spirit and courage, had been early cultivated by kings and colonies who had come from Egypt. From them they had learned the exercises of the body, foot races, and horse and chariot races. . . . The best thing that the Egyptians had taught them was to become docile, and to allow themselves to be formed by the laws for the public good. 

Francois Fenelon was a student of Bussuet’s who disagreed strongly with him over the love of God, but Bastiat found that they agreed on this subject of the wise ruling class needing to guide the poor dumb brutes that composed the majority of society. Reared in the study and admiration of antiquity and a witness of the power of Louis XIV, Fenelon adopted the idea that mankind should be passive, recognizing that its misfortunes and prosperities, virtues and vices, are caused by the external influence that is exercised upon it by the law or the law’s makers. In Utopia of Salentum, he brings ordinary people, with their interests, their faculties, their desires, and their possessions, under the absolute direction of the legislator:

Whatever the subject may be, they themselves have no voice in it—the prince judges for them. The nation is just a shapeless mass, of which the prince is the soul. In him resides the thought, the foresight, the principle of all organization, of all progress; on him, therefore, rests all the responsibility.

Bastiat referred his readers to Fenelon’s The Adventures of Telemachus, particularly the 10th book of the series. He quoted from it at random to show Fenelon’s all-consuming belief that human beings cannot manage their own lives without the ruling class telling them how to do it:

We could not turn our eyes to the two shores, without perceiving rich towns and country seats, agreeably situated; fields that were covered every year, without intermission, with golden crops; meadows full of flocks; laborers bending under the weight of fruits that the earth lavished on its cultivators; and shepherds who made the echoes around repeat the  soft sounds of their pipes and flutes. “Happy,” said Mentor, “is that people who is governed by a wise king.”. . . Mentor afterwards desired me to remark the happiness and abundance that was spread over all the country of Egypt, where twenty-two thousand
cities might be counted. He admired the excellent police regulations of the cities; the justice administered in favor of the poor against the rich; the good education of the children, who were accustomed to obedience, labor, and the love of arts and letters; the exactness with which all the ceremonies of religion were performed; the disinterestedness, the desire of honor, the fidelity to men, and the fear of the gods, with which every father inspired his children. He could not sufficiently admire the prosperous state of the country. “Happy” said he, “is the people whom a wise king rules in such a manner.

Fénelon’s idyll on Crete is still more fascinating. Mentor is made to say:

All that you will see in this wonderful island is the result of the laws of Minos. The education that the children receive renders the body healthy and robust. They are accustomed, from the first, to a frugal and laborious life; it is supposed that all the
pleasures of sense enervate the body and the mind; no other pleasure is presented to them but that of being invincible by virtue, that of acquiring much glory . . . there they punish three vices that go unpunished amongst other people—ingratitude, dissimulation, and avarice. As to pomp and dissipation, there is no need to punish these, for they are
unknown in Crete. . . . No costly furniture, no magnificent clothing, no delicious feasts, no gilded palaces are allowed.

Mentor’s purpose is to prepare his scholar to mold and manipulate the people of Ithaca, for their own good, no doubt, even if it is against their will.

So we receive our first political notions. We are taught to treat men very much as farmers treat soil or potters clay.

Charles-Louis de Montesquieu was a French lawyer, scholar and political philosopher who lived in the Age of Englightment. We get separation of powers from him. We also get our modern notion of class from him as he divided French society into three — the monarchy, the aristocracy and the commons. Bastiat may have met him as they both lived in Paris at the same time. Despite his strong influence on our Founders, Montesquieu also believed in the ruling class telling the commons what to do in pretty much every instance.

To sustain the spirit of commerce, it is necessary that all the laws should favor it; that these same laws, by their regulations in dividing the fortunes in proportion as commerce enlarges them, should place every poor citizen in sufficiently easy circumstances to enable him to work like the others, and every rich citizen in such mediocrity that he must work, in order to retain or to acquire. 

Bastiat rightly recognized that this would eliminate all fortunes. Yes, in a democracy, the State should support “real equality”, but that is very difficult to measure. Montesquieu would see massive redistribution of wealth … equalization by force of the law.

There were, in Greece, two kinds of republics. One was military, as Sparta; the other commercial, as Athens. In the one it was wished (by whom?) that the citizens should be idle: in the other, the love of labor was encouraged. It is worth our while to pay a little attention to the extent of genius required by these legislators, that we may see how, by confounding all the virtues, they showed their wisdom to the world.

Lycurgus, blending theft with the spirit of justice, the hardest slavery with extreme liberty, the most atrocious sentiments with the greatest moderation, gave stability to his city. He seemed to deprive it of all its resources, arts, commerce, money, and walls; there was ambition without the hope of rising; there were natural sentiments where the individual was neither child, nor husband, nor father. Chastity even was deprived of modesty. By this road Sparta was led on to grandeur and to glory.

The phenomenon that we observe in the institutions of Greece has been seen in the midst of the degeneracy and corruption of our modern times. An honest legislator has formed a people where probity has appeared as natural as bravery among the Spartans. Mr. Penn is a true Lycurgus, and although the former had peace for his object, and the latter war, they resemble each other in the singular path along which they have led their people, in their influence over free men, in the prejudices which they have overcome, the passions they have subdued.

America’s founders admired Rouseau, but it’s important to remember that that his philosophies ignited the French Revolution. Although Rousseau’s philosophy held strong authority with the democrats, Bastiat thought him a strong advocate for “the entire passiveness of human nature: in the presence of the lawgiver:

If it is true that a great prince is a rare thing, how much more so must a great lawgiver be? The former has only to follow the pattern proposed to him by the latter. This latter is the engineer who invents the machine; the former is merely the workman who sets it in motion.

And what part have men to act in all this? That of the machine, which is set in motion; or rather, are they not the brute matter of which the machine is made? Thus, between the legislator and the prince, between the prince and his subjects, there are the same relations as those that exist between the agricultural writer and the agriculturist, the agriculturist and the clod. At what a vast height, then, is the politician placed, who rules over legislators themselves and teaches them their trade in such imperative terms as the following:

Would you give consistency to the State? Bring the extremes together as much as possible. Suffer neither wealthy persons nor beggars.

If the soil is poor and barren, or the country too much confined for the inhabitants, turn to industry and the arts, whose productions you will exchange for the provisions which you require. . . . On a good soil, if you are short of inhabitants, give all your attention to agriculture, which multiplies men, and banish the arts, which only serve to depopulate the country. . . . Pay attention to extensive and convenient coasts. Cover the sea with vessels, and you will have a brilliant and short existence. If your seas wash only inaccessible rocks, let the people be barbarous, and eat fish; they will live more quietly, perhaps better, and most certainly more happily. In short, besides those maxims which are common to all, every people has its own particular circumstances, which demand a legislation peculiar to itself. 

 

Bastiat found it interesting that Rousseau though the government should reflect the needs of the nation, but didn’t reaction that the nation could reflect its own needs without help from the government.

Why does he not allow that by obeying their own impulse, men would of themselves apply agriculture to a fertile district, and commerce to extensive and commodious coasts without the interference of a Lycurgus, a Solon, or a Rousseau, who would undertake it at the risk of deceiving themselves?

Be that as it may, we see with what a terrible responsibility Rousseau invests inventors, institutors, conductors, and manipulators of societies. He is, therefore, very exacting with regard to them.

Bastiat might well have said to Barack Obama that daring to undertake the fundamental transformation of the American nation requires manipulating every individual, denying him his right to live his life as he chooses. “He must feel that he can change the constitution of man, to fortify it, and substitute a social and moral existence for the physical and independent one that we have all received from nature. In a word, he must
deprive man of his own powers, to give him others that are foreign to him.”

Where is the dignity in that?

Bastiat continued his survey with a quote by Guillaume Thomas Raynal, a French writer and scholar during the Enlightment;

The climate, that is, the air and the soil, is the first element for the legislator. His resources prescribe to him his duties. First, he must consult his local position. A population dwelling upon maritime shores must have laws fitted for navigation. . . . If the colony is located in an inland region, a legislator must provide for the nature of the soil, and for its degree of fertility. . . . It is more especially in the distribution of property that the wisdom of legislation will appear. As a general rule, and in every country, when a new
colony is founded, land should be given to each man, sufficient for the support of his family. . . . In an uncultivated island, which you are colonizing with children, it will only be needful to let the germs of truth expand in the developments of reason!

. . . But when you establish old people in a new country, the skill consists in only allowing it those injurious opinions and customs which it is impossible to cure and correct. If you wish to prevent them from being perpetuated, you will act upon the rising generation by a general and public education of the children. A prince or legislator ought never to found a colony without previously sending wise men there to instruct the youth…. In a new colony, every facility is open to the precautions of the legislator who desires to purify the tone and the manners of the people. If he has genius and virtue, the lands and the men that are at his disposal will inspire his soul with a plan of society that a writer can only vaguely trace, and in a way that would be subject to the instability of all hypotheses, which are varied and complicated by an infinity of circumstances too difficult to foresee and to combine.

Bastiat noted that Raynal wrote as if he were a professor of agriculture telling his pupils how best to amend the soil. But the soil that he is discussing happen to be people, “your equals, intelligent and free beings like yourselves, who have received from God, as you have, the faculty of seeing, of foreseeing, of thinking, and of judging for themselves!”

Bastiat continued by quoting Gabriel Bonnot de Mably, a French philosopher and historian of the 18th century.

Mably was writing that the laws can become obsolete and sometimes neglect security, so:

Under these circumstances, we must be convinced that the bonds of Government are slack. Give them a new tension (it is the reader who is addressed), and the evil will be remedied. . . . Think less of punishing the faults than of encouraging the virtues that you want. By this method you will bestow upon your republic the vigor of youth.

Through ignorance of this, a free people has lost its liberty! But if the evil has made so much way that the ordinary magistrates are unable to remedy it effectually, have recourse to an extraordinary magistracy, whose time should be short, and its power considerable. The imagination of the citizens requires to be impressed.

In other words, treat your subjects like children until they rebel and then come down on them hard. “There was a time when, under the influence of teaching like this, which is the foundation of classical education, everyone was for placing himself beyond and above
mankind, for the sake of arranging, organizing, and instituting it in his own way.”

Bastiat wasn’t done yet with showing his readers what their leaders had been learning. He quoted Etienne Bonnot de Condillac, a French epistemologist who studies psychology:

Take upon yourself, my lord, the character of Lycurgus or of Solon. Before you finish reading this essay, amuse yourself with giving laws to some wild people in America or in Africa. Establish these roving men in fixed dwellings; teach them to keep flocks. . . . Endeavor to develop the social qualities that nature has implanted in them. . . . Make them begin to practice the duties of humanity. . . . Cause the pleasures of the passions to become distasteful to them by punishments, and you will see these barbarians, with every plan of your legislation, lose a vice and gain a virtue.

All these people have had laws. But few among them have been happy. Why is this? Because legislators have almost always been ignorant of the object of society, which is to unite families by a common interest. Impartiality in law consists in two things, in establishing equality in the fortunes and in the dignity of the citizens. . . . In proportion to the degree of equality established by the laws, the dearer will they become to every citizen. How can avarice, ambition, dissipation, idleness, sloth, envy, hatred, or jealousy agitate men who are equal in fortune and dignity, and to whom the laws leave no hope of disturbing their equality? What has been told you of the republic of Sparta ought to enlighten you on this question. No other State has had laws more in accordance with the order of nature or of equality.

Bastiat thought we shouldn’t be surprised that 17th and 18th century thinkers thought of people as inert matter, ready to receive everything down to the thoughts we think from a great prince, or legislator, or genius. They had been educated bo believe that few men in history had molded mankind according to their fancy, enslaved by the force of the law.

And what does this prove? That because men and society are improvable, error, ignorance, despotism, slavery, and superstition must be more prevalent in early times. The mistake of the writers quoted above is not that they have asserted this fact, but that they have proposed it as a rule for the admiration and imitation of future generations. Their mistake has been, with an inconceivable absence of discernment, and upon the faith of a puerile conventionalism, that they have admitted what is inadmissible, viz., the grandeur, dignity, morality, and well-being of the artificial societies of the ancient world; they have not understood that time produces and spreads enlightenment; and that in proportion to the increase of enlightenment, right ceases to be upheld by force, and society regains possession of herself.

Bastiat believed in the instinctive effort of people toward liberty. “[W]hat is liberty, whose name can make every heart beat, and which can agitate the world, but the union of all liberties, the liberty of conscience, of education, of association, of the press, of movement, of labor, and of exchange; in other words, the free exercise, for all, of all the inoffensive faculties; and again, in other words, the destruction of all despotisms, even of legal despotism, and the reduction of law to its only rational sphere, which is to regulate the individual right of legitimate defense, or to repress injustice?”

While liberty is the tendencu of the human race, it can be thwarted by education that insists politicians must place themselves above mankind to arrange, organize and regulate it based on what they think is best.

For whilst society is struggling to realize liberty, the great men who place themselves at its head, imbued with the principles of the seventeenth and eighteenth centuries, think only of subjecting it to the philanthropic despotism of their social inventions, and making it bear with docility, according to the expression of Rousseau, the yoke of public felicity as pictured in their own imaginations.

 

Plunder of Socialism   Leave a comment

Frédéric Bastiat was a contemporary with Alexis de Toqueville and they both came from France. Both were admirers of the United States who noted risks to that wonderful experiment in constitutional republicanism with democratic features. While Toqueville focused on the United States in the most familiar of his writing, Bastiat focused on France while touching on the United States system.  I find Bastiat’s writing to be prescient. He spoke to his own time and society, but he could have been addressing his comments to American circa 2017.

To read the entire series, here is the Table of Contents.

For a modern libertarian-conservative, Bastiat’s own example in France is interesting. The head of state at the time was concerned about socialism because socialism always leads to plunder.

Image result for image of plunder of socialismSocialists are not thieves in the usual sense of the word. The plunder they exercise is typical of what collectivists have exercised since the beginning of time. Plunder is not new to socialists. Yet, in Bastiat’s time, the government wanted to stand against socialism, never noting the irony that the government itself had been plundering for a long time before the socialists arose.

When the law is discovered to be perverted, the best thing we can do is remove the perversion quickly and completely. How do we distinguish when the law has been perverted? Whenever the law allows property to be taken from some and given to others, that allows a citizen to do something that would ordinarily be considered a crime, then the law is perverted.

It’s not legal to steal from random strangers in the park to fund your drug habit. Nor is it legal to steal from your neighbor’s paycheck to fund the creation of that park.

Abolish this law without delay; it is not merely an iniquity—it is a fertile source of iniquities, for it invites reprisals; and if you do not take care, the exceptional case will extend, multiply, and become systematic.

Of course, those who benefit from this law, will complain that they have a “right” to be protected and encouraged. He will insist that it is good for society, so the State should support it. “The delusion of the day is to enrich all classes at the expense of each other; it is to generalize plunder under pretense of organizing it.”

Legal plunder can take many forms, so are seen an infinite multitude of  organization, tariffs, protection, perquisites, gratuities, encouragements, progressive taxation, free public education, right to work, right to profit, right to wages, right to assistance, right to instruments of labor, gratuity of credit. Socialism is a false and absurb doctine that must be refuted, but that will be easier if you root it out of existing legislation where it has crept in unnoticed.

The problem, Bastiat saw, was not just that socialism was on the rise, but that the French government had perverted the law to allow legal plunder. There are only three ways for society to organize itself.

  • When the few plunder the many. (Partial Plunder)
  • When everybody plunders everybody else. (Universal Plunder)
  • When nobody plunders anybody. (Absence of Plunder)

These are the only three choices that the law can produce.

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