The Persistence of Bad Ideas
The one goal that united socialists at the dawn of the 20th century was the eventual end game they had in mind: the abolition of private property in the means of production and the resulting 'dictatorship of the proletariat'. Even though Marxists insisted that once this 'inevitable' blissful utopia was achieved the 'State would wither away', the exact opposite is of course the case: the State must become all-powerful and all-encompassing in the socialist reality.
Many people are no longer consciously aware of it, but a great many of the ideas and demands of the communists remain deeply ingrained in today's society and politics. There is for one thing the alleged antagonism between capitalists and workers – the so-called 'class struggle', which paints the free market system as one akin to a caste system.
In their efforts to abolish this alleged caste system, Western politicians have done everything in their power to actually create and entrench one. Every regulatory obstacle thrown in the way of business has in the main one effect: it entrenches existing businesses to the detriment of upstarts. In times long past, an upstart 'working on a shoestring' had a chance to unseat the most powerful vested business interests by serving consumers better than they did. The upward mobility of these upstarts, the possibility for everyone with the required talents to one day create a big business himself, is the essential difference between a caste system and the capitalist order.
However, today it has become nigh impossible for such upstarts to accumulate the capital necessary to challenge vested interests – this is especially true in Europe, but it is becoming increasingly true in the US as well.
Mish recently showed this picture of president Obama, who wants to 'streamline the bureaucracy' dealing with US business interests by folding 38 smaller scale existing bureaucratic entities into one giant, even more faceless one. He hopes to 'save' $3 billion over ten years that way (since $3 billion over ten years is less than a rounding error in the federal budget, there will never be an objective way of ascertaining whether these savings were achieved).
The president and his picture of business-related government bureaucracies, of which there apparently exist 38 different ones in the US. Note the text: 'a business looking for government resources'.
As Mish correctly pointed out, the decisive point here is not whether the equivalent of a drop in the ocean can be saved by the government by folding this bewildering multitude of bureaucratic entities into a single giant bureaucratic nightmare, but why on earth should businesses be 'looking for government resources' at all?
How are government resources defined? What are they? Is it a reference to the financial resources government has previously looted from – well, inter alia, business? Or is it a reference to the privileges and favors that business can obtain by lobbying the government? No-one said, but what else can it be but one these two?
Another socialist idea that survives intact to this day and informs government policy and political platforms at every level is the notion that the production and distribution of wealth are somehow two distinct affairs. This is not in reference to the physical distribution of goods produced so that they may reach consumers. It is about the idea that one the one hand, wealth is produced, and that then, after this process has been completed, comes another step of distributing it. However, all wealth that is produced is already distributed in the process of production. Capitalists and entrepreneurs advance present goods to the factors employed in production, i.e. labor, the owners of land and the owners of capital of the preceding production stage, and then reap their share of the product when the production process has been finalized. The idea that the production and distribution of wealth are two distinct events is erroneous and leads to policies that hamper production. Every entrepreneur is taking risks, and the more uncertain the potential rewards become due to interference by the government, the greater will be the tendency to consume capital rather than accumulate it. After all, why should anyone accumulate capital for the benefit of looters?
Another idea that remains deeply ingrained is the notion that trade is a one-way street: that it brings advantage to only one party to it, while harming the other. The result is widespread disdain for free trade and the free mobility of labor and capital. While this is an – apparently ineradicable - remnant of mercantilism, it brings about the same effects as every intervention by the State: it restricts production and thereby impoverishes us all. It is also an essentially collectivist idea, as it ascribes volition to nation states. However, it is never 'nation states' or other collectives that act in exchanges in the market place – it is always individuals that do so and it is in the nature of voluntary trade that it always benefits both parties to it. This is true ipso facto, as otherwise it simply would not take place.
Interventions Spawning More Interventions
Interventionism is widely regarded as necessary to 'correct' the alleged faults of the market economy. It is held that unless the government steered the economy, we would risk a perpetual economic slump, as there would be no-one to 'rescue' us in the event of recession. It is also held that unless government intervenes in the economy, the poor will be worse off.
However, every intervention takes us a step closer to full-blown socialism, for the simple reason that the 'unintended consequences' of such interventions are that they produce as a rule the exact opposite effect of that intended. Once these unintended consequences become obvious, the cry for even more intervention goes up. At some point the free market economy then must turn into the equivalent of a socialist or fascist dictatorship, because every aspect of production will be regulated and planned by the government (note that fascism is merely a special form of socialism – the means of production remain formally privately owned, but the government directs every aspect of their employment).
Ludwig von Mises cites the example of price controls for a staple food in 'Planned Chaos' (ch. 2):
“If the government wants to make it possible for poor parents to give more milk to their children, it must buy milk at the market price and sell it to those poor people with a loss at a cheaper rate; the loss may be covered from the means collected by taxation.
But if the government simply fixes the price of milk at a lower rate than the market, the results obtained will be contrary to the aims of the government. The marginal producers will, in order to avoid losses, go out of the business of producing and selling milk. There will be less milk available for the consumers, not more. This outcome is contrary to the government's intentions. The government interfered because it considered milk as a vital necessity. It did not want to restrict its supply.”
The 'good intentions' behind the price control edict are not what is questioned: the problem is that the edict has the opposite effect of that the government intended. So it goes with nearly every new edict and regulation – and the current method is that their failures spawn not a rescission of the failed interventions, but ever greater volumes of additional interventions and regulations that are supposed to 'fix' the ones that have so damnably failed.
As Percy L. Greaves warned prophetically in an essay in 1956:
“By a process of gradualism, a politically privileged few have fastened on our economy this Marxian policy of ever-increasing "despotic inroads on the rights of property."
He also points out that this process of gradually undermining property rights in democratic societies is in fact a plan the communists hatched in order to hasten the advent of socialism. It's right there, spelled out clearly in the Communist Manifesto published in 1848 by Marx and Engels:
“The immediate aim of the Communists is … a conquest of political power by the proletariat.… In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property.… Property, in its present form, is based on the antagonism of capital and wage-labor.… The proletariat will use its political supremacy, to wrest, by degrees, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the State, i.e., of the proletariat organized as the ruling class.…
Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production.”
Today we find that just about the only countries the populations of which decisively reject socialist ideas are the ones that were once under the communist yoke – the former command economies of Eastern Europe.
There are exceptions to this, as in some of these countries, especially a few of the former provinces of the Soviet Union, the old guard has managed to establish dictatorships. For instance in Belarus, former apparatchik Alexander Lukashenko (a.k.a. 'Europe's last dictator') has ruled without interruption since 1994 and has instituted a so-called 'socialist market economy' – in reality almost full-blown socialism. A recent study has however found that even so, it is easier to start a new business in Belarus than in nominally capitalist Austria, a member of the euro area.
Our centrally planned monetary system is of course one of the worst socialist features of the modern-day hampered market economy. The pretense – accepted by most economists today as though it were completely beyond questioning – that central planning of the height of interest rates and the growth of the money supply by a committee of bureaucrats is somehow superior to a free market outcome is the very height of self-delusion.
In Europe, we see governments battle the market economy at every level. They continually frame the current crisis in such terms: whenever a eurocrat holds forth on the subject, it is not the profligacy of the highly indebted governments that is held to be at fault for the crisis, nor the botched centrally planned monetary system. Instead it is allegedly all the fault of 'speculators', who are said to 'attack' the bond markets of insolvent governments.
In the succession of emergency summits and emergency measures, what seems to be foremost on the agenda are as a rule even more taxes and more regulations. The hampering of trading in CDS contracts, the bans on shorting certain stocks, the proposed 'Tobin tax' and so forth are all typical examples of the conceit that politicians can somehow bend economic laws to their will by interfering in markets.
The fact remains though that with every new intervention that coercively suppresses the voluntary exchanges of economic actors, the goals formulated by the Marxists in their 1848 manifesto are advanced by a further step, employing the very tactics they once proposed. Will Marx have the last laugh?
Addendum: Lukashenko and the Internet
Interestingly, the above mentioned Belarussian dictator Lukashenko has just made waves by tightening the government's control over the internet:
“Under rules introduced by Lukashenko in 2010, Internet users going online in an Internet cafe or using a shared connection have to identify themselves and a record is to be kept of each user's surfing history. Authorities also have drawn up a list of Web sites that employees of state-run companies and organizations, as well as cultural and educational institutions, are forbidden to visit. The list includes Web sites belonging to leading opposition groups.”
“The new legal amendments now bar Belarusian businessmen from using outside Internet resources such as online stores registered in other countries. The amendments formalize earlier restrictions on Internet use introduced by Lukashenko's decree, which required Internet service providers to monitor users and report them to authorities if they visit opposition websites blacklisted by the government. “
This is interesting because the US legislative is about to implement the 'SOPA' and 'PIPA' acts (the 'stop online piracy' and 'protect intellectual property' acts), on the behest of industries that want to see their privileges perpetuated.
As the Daily Bell has often pointed out, the internet is the one channel of communication the elites do not have under their complete control. As long as all information distribution was the sole province of the corporatist mainstream media, it was fairly easy to shape public opinion. The internet is akin to the Gutenberg printing press, in that it has made it possible to share information that was previously suppressed.
A law that is a first step of returning the control over information to the ruling elites, a law that can be introduced under the pretext of battling criminals, is naturally music to the ears of politicians.
Incidentally, wikipedia has blacked itself out today in protest against these sweeping new laws.
More on PIPA and SOPA can be read here. A few snips:
“Both SOPA and PIPA put power in the hands of the entertainment industry to censor sites that allegedly "engage in, enable or facilitate" copyright infringement. This language is vague enough to target sites you use every day, like Facebook and Google, making these bills a serious problem.
SOPA and PIPA were initially designed to do two things. The first was to make it possible for companies to block the domain names of web sites that are simply capable of, or seem to encourage copyright infringement. This would have been bad for everyone because such a measure doesn't actually prevent piracy. The reason that blocking a domain name isn't effective is because any blocked site can still be accessed via its numeric IP address. For example, if lifehacker.com were blocked, you could still find it by visiting a number-based address. In fact, before the bills were even supposed to come to a vote, tools were created to automatically route domain names to their IP addresses to completely render this measure of SOPA and PIPA useless. As a result, the IP-blocking provisions have been removed from both bills.
The other, still-active measure present in the SOPA and PIPA bills would allow rights holders to cut of the source of funding of any potentially infringing web site. This means any other companies doing business with this site would have to stop. Whether that means advertising, links in search engines, or any other listings would have to be removed.
Basically, PIPA can only be used to censor a site if it's more likely to be a source of illegal content than not. This is still problematic because a tool designed to accept user-generated content is, to some extent, at the whims of its users. If infringing content is found, rights holders already have the Digital Millenium Copyright Act (DMCA) to help them request the legal removal of that content. They also have the ability to sue infringers for damages, as we've previously seen with the Recording Industry Association of America (RIAA) when they, for example, . SOPA and PIPA provide a means to censor the tool that provided a means for the infringing content to exist on the internet rather than the content itself. This puts a lot of power in the hands of rights holders and has significant potential for abuse.
Given the existence of the DMCA, one must immediately ask: why is yet another law thought to be needed? It seems that it is precisely the new law's 'potential for abuse' that is behind the push for its implementation.
The dictator of Belarus, Alexander Lukashenko. He tries to stifle political dissent by censoring the internet.
(Photo via AP)
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