Tag Archives: Socialism

Socialism and Authoritarianism: Perfectly Complementary

19 Wednesday Sep 2018

Posted by in Socialism, Tyranny

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The socialist left and the Marxist hard left both deny their authoritarian progenitors. Leftists are collectivists, many of whom subscribe to an explicit form of corporatism with the state having supreme power, whether as a permanent or transitional arrangement on the path to full state ownership of the means of production. Collectivism necessarily requires force and the abrogation of individual rights. At this link, corporatism, with its powerful and interventionist state, is aptly described as “de facto nationalization without being de jure nationalization” of industry. To the extent that private ownership is maintained (for the right people), it is separated from private control and is thus a taking. But the word corporatism itself is confusing to some: it is not capitalism by any means. It essentially means “to group”, and it is a form of social control by the state. (And by the way, it has nothing to do with the legal business definition of a corporation.)

Of course, leftists distance themselves from the brutality of many statist regimes by asserting that authoritarianism is exclusively a right-wing phenomenon, conveniently ignoring Stalin, Castro, Mao, Pol Pot, and other hard lefties too numerous to mention. In fact, leftists assert that fascism must be right-wing because it is corporatist and relies on the force of authority. But again, both corporatism and fascism are collectivist philosophies and historically have been promoted as such by their practitioners. Furthermore, these leftist denials fly in the face of the systemic tendency of large governments to stanch dissent. I made several of these points four years ago in “Labels For the Authoritarian Left“.

I find this link from The Federalist fascinating because the author, Paul Jossey, provides quotes of Hitler and others offering pretty conclusive proof that the Nazi high command was collectivist in the same vein as the leftists of today. Here are a few of Jossey’s observations:

“Hitler’s first ‘National Workers’ Party’ meeting while he was still an Army corporal featured the speech ‘How and by What Means is Capitalism to be Eliminated?’

The Nazi charter published a year later and coauthored by Hitler is socialist in almost every aspect. It calls for ‘equality of rights for the German people’; the subjugation of the individual to the state; breaking of ‘rent slavery’; ‘confiscation of war profits’; the nationalization of industry; profit-sharing in heavy industry; large-scale social security; the ‘communalization of the great warehouses and their being leased at low costs to small firms’; the ‘free expropriation of land for the purpose of public utility’; the abolition of ‘materialistic’ Roman Law; nationalizing education; nationalizing the army; state regulation of the press; and strong central power in the Reich.”

Are you feeling the Bern? Does any of this remind you of the “Nasty Woman”, Liz Warren? Here is more from Jossey:

“Hitler repeatedly praised Marx privately, stating he had ‘learned a great deal from Marxism.’ The trouble with the Weimar Republic, he said, was that its politicians ‘had never even read Marx.’ He also stated his differences with communists were that they were intellectual types passing out pamphlets, whereas ‘I have put into practice what these peddlers and pen pushers have timidly begun.’

It wasn’t just privately that Hitler’s fealty for Marx surfaced. In ‘Mein Kampf,’ he states that without his racial insights National Socialism ‘would really do nothing more than compete with Marxism on its own ground.’ Nor did Hitler eschew this sentiment once reaching power. As late as 1941, with the war in bloom, he stated ‘basically National Socialism and Marxism are the same’ in a speech published by the Royal Institute of International Affairs.

Nazi propaganda minister and resident intellectual Joseph Goebbels wrote in his diary that the Nazis would install ‘real socialism’ after Russia’s defeat in the East. And Hitler favorite Albert Speer, the Nazi armaments minister whose memoir became an international bestseller, wrote that Hitler viewed Joseph Stalin as a kindred spirit, ensuring his prisoner of war son received good treatment, and even talked of keeping Stalin in power in a puppet government after Germany’s eventual triumph.”

Some contend that the Nazis used the term “socialist” in a purely cynical way, and that they hoped to undermine support for “real socialists” by promising a particular (and perverse) vision of social justice to those loyal to the Reich and the German nation. After all, the Bolsheviks were political rivals who lacked Hitler’s nationalistic fervor. Hitler must have thought that his brand of “socialism” was better suited to his political aspirations, not to mention his expansionist visions. Those not loyal to the Reich, including Jews and other scapegoats, would become free slave labor to the regime and its loyal corporate cronies. (It’s striking that much of today’s Left, obviously excepting Bernie Sanders, seems to share the Nazis’ antipathy for Jews.)

Socialism, corporatism and fascism are close cousins and are overlapping forms of statism, and they are all authoritarian by their practical nature. It’s incredible to behold leftists as they deny that the National Socialists Workers Party practiced a brand of socialism. Perhaps the identification of the Nazis as a fascist regime has led to confusion regarding their true place along the ideological spectrum, but that too is puzzling. In their case, a supreme corporatist state enabled its most privileged advocates to exploit government power for private gain, and that’s the essence of fascism and the archetypical outcome of socialism.

New Socialists Fail Socialism 101

02 Sunday Sep 2018

Posted by in Big Government, Socialism

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Not many self-styled socialists can actually provide a proper definition of socialism these days. That includes the celebrated Alexandria Ocasio-Cortez, the New York congressional candidate who has proven herself to be an incredible stumble-bum in numerous media appearances since her primary victory over incumbent democrat Joe Crowley. Maine Wire‘s Matthew Gagnon calls her “belligerently ignorant” as she tweets what she believes to be examples of democratic socialism. Gagnon dissects some of her flakey assertions. The sad truth is that Ocasio-Cortez is fairly typical of her generation, despite her dual college majors in economics and political science.

Gagnon notes that socialism is public ownership of the means of production. But socialism is somehow regarded as a “soft” version of communism: less authoritarian, perhaps. That premise deserves closer examination. There is only one way that the public sector can take possession of private property: by force. A new, authoritarian regime might simply commandeer property, nationalize it, and revoke prior ownership claims at the point of a gun or a club. The government would ultimately impose new rules under which management of formerly private enterprises must operate, and it would engage in centralized decision-making and planning to a large extent. This is essentially communism. Some personal freedoms might be preserved, but they are likely to be severely curtailed; dissidence is not likely to be tolerated.

There is another mechanism by which society can declare public ownership of productive resources that is nominally less authoritarian: democracy. Citizens or their elected representatives simply vote for the state to acquire particular resources and enterprises, in whole or in part. Enabling legislation might authorize administrative agencies to determine how the former private owners of these enterprises are to be compensated. To one extent or another, this involves takings of private property and rights, and it boils down to a very real tyranny of the majority: we will vote to take possession of your business; we will vote to create a bureau that will determine its worth and your compensation; we will vote that henceforth you may not operate this business on your own behalf, but only in the service of the people; and we will vote on what rights you possess. This is the ugly tyranny of democratic socialism, and it still requires force.

Self-proclaimed socialists are fond of proclaiming that we already have socialism in many sectors of the economy. They cite public parks, roads, bridges, K-12 education, and other goods and services sometimes provided by the public sector. There is a key distinction, however, that separates many of these examples from actual socialism: whether a good is actually a “public good”, meaning that its benefits are non-exclusive, as opposed to a private good that yields exclusive benefits. A more precise definition of socialism, in my view, is public ownership of the means of producing private goods.

The typical example of a public good is national defense: the benefits I receive do not reduce the benefits you receive, so those benefits are non-exclusive. I have little personal incentive to pay for national defense if anyone else is willing to pay for it, as I’ll receive the benefits anyway. But who will pay if everyone tries to free-ride on others? That’s why the provision of public goods is an appropriate function of government, and it is not generally what is meant by socialism. Gagnon is correct that government involvement in an activity is not the same as socialism, and he correctly ridicules some examples of governmental activities (and non-governmental activities like cooperatives) that Ocasio-Cortez believes to be socialism.

In contrast to public goods, private goods are exclusive in their benefits. The development of a private market can be counted upon to fulfill demands for such goods because private individuals are willing to pay. However, when government grants itself an advantaged position as a provider in such a market, such as a monopoly franchise, we can safely describe it as socialism. Many goods are not purely private, having some degree of non-exclusivity in their benefits. This is commonly asserted to be the case for K-12 education, but the matter is not as clear-cut as the public education establishment would have you believe. The bulk of the benefits to education accrue privately. Therefore, it is fair to describe public K-12 education in the U.S. as socialism. And it is largely a disaster.

Is a social safety net rightly described as socialism? Gagnon thinks not and, strictly speaking, the welfare state does not require public ownership of the means of production, only a means of redistribution. It requires funding, so private resources will be extracted via taxes, and the same is true of public goods. Taxes do not make it “socialism”. Let’s stipulate for the moment that there is a true safety net supporting only those unable to support themselves, either on a temporary or a permanent basis. This may yield non-exclusive benefits to the extent that such a “lifeline” reduces crime, begging, and our personal discomfort with the possibility that other individuals might starve. However, on an ex ante basis, some of these benefits represent a form of risk reduction that, in principle, could be arranged privately. To the extent that we vote to provide these potentially private benefits, those parts of the safety net can be construed as democratic socialism. In practice, our “safety net” covers a large number of able-bodied individuals. Unfortunately, it does a poor job of encouraging self-sufficiency. Like most public benefit programs, it is expansive, poorly designed, and has pernicious effects on the private economy that act to the long-term detriment of its intended beneficiaries.

Leftists fancy that socialism is “compassionate” and righteous, despite its predictably harsh outcomes. The misleading conceit that universal alms-giving by the state is always empowering to individual recipients, and potential voters, is an extremely corrosive element of democratic socialism. William Voegeli, Senior Editor of The Claremont Review of Books, writing in Imprimis makes “The Case Against Liberal Compassion“. (I dislike his misuse of the word “liberal” — too many conservatives are willing to cede that label to the Left.) Voegeli notes the “never enough” mentality of welfare statists, who refuse to acknowledge that the expansive growth of the welfare state over the past five decades has failed to reduce rates of poverty. The programs are rife with fraud, waste and bad incentives. If leftists are truly compassionate, Voegeli insists, they ought to take more interest in fixing problems that leave less for the truly needy and create dependencies rather than simply increasing the flow of funding.

Many well-meaning individuals are careless about affiliating with socialist causes because they do not understand what it actually means, and they often lack any historical and theoretical perspective on the implications of socialism. The flirtation is dangerous, and we can only attempt to educate and reason with them. Some will grow into greater wisdom. Some, like Bernie Sanders, will never come around. While we educate, let’s keep their hands away from the reins of power.

Suspending the Economic Problem With Free Stuff

27 Saturday Aug 2016

Posted by in Central Planning, Socialism, Subsidies

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denial

When things are scarce, they can’t be free. That’s an iron law of economics. It’s true of everything we ever wish for and almost everything we take for granted. Things are naturally scarce, but when we are told that things can be free, it always comes from likes of whom Jeffrey Tucker calls “scarcity deniers”. Bernie Sanders and Hillary Clinton have told America that a college education should be free, and a large number of people take that seriously. They are scarcity deniers. On one level, the Sanders/Clinton claim is like any other promise that simply cannot be met at the stated cost — a rather garden-variety phenomenon among politicians. These promises are not harmless, as such initiatives usually involve budget overruns, compromised markets, underproduction and wasted resources.

The Sanders/Clinton claim, however, is a form of scarcity-denial that comes almost exclusively from the political left. That is really the point of Tucker’s article:

“This claim seems to confirm everything I’ve ever suspected about socialism. It’s rooted in a very simple error, one so fundamental that it denies a fundamental feature of the world. It denies the existence and the persistence of scarcity itself. That is to say, it denies that producing and allocating is even a problem. If you deny that, it’s hardly surprising that you have no regard for economics as a discipline of the social sciences.“

Our socialist friends (who otherwise claim to be defenders of science) contend that free things can be offered to a broad swath of the population with little consequence. The least cynical among them (perhaps including Sanders) believe that the costs can be shouldered by the wealthy and/or big corporations and banks. Others (including Clinton) know that the cost of “free things” must be met by higher taxes on a broader share of the population. Doesn’t that mean they recognize scarcity? Only superficially, because they fail to grasp the dynamics of resource allocation, the subtle forms in which costs are imposed, and the true magnitude of those costs.

If a thing is scarce, available supplies must be balanced against demand. The reward to suppliers at the margin must match the willingness of buyers to pay. That means there is no surplus and waste, nor any loss attendant to shortage and non-price rationing. The price creates an incentive for consumers to conserve and an incentive for producers to bring additional supplies to market when they are demanded.

A crucial prerequisite for this to work is the establishment of secure property rights. Then, absent coercion, one can’t overuse what isn’t theirs. One can’t simply take a thing from those who create it without a mutually agreeable payment. Creators cannot be forced to respond on demand without compensation. No one can be required to husband resources for others to simply take. No one can be asked to pay for a thing that will be commandeered by others. The establishment of property rights serves these purposes. Incentives become meaningful because they can be internalized by all actors — those consuming and those producing. And the incentives solve the problem of scarcity by balancing the availability of things with needs and desires, and balance them against all other competing uses of resources. Then, the market-clearing price of a thing reflects its degree of scarcity relative to other goods.

The socialist bluster holds that all this is nonsense. Would-be central planners propose that more of a thing be produced because they deem it to be of high value. Furthermore, it must be made available to buyers at a price the planners deem acceptable, or quite possibly for free to their intended constituency! Property rights are violated here in several ways: first, the owner/producer’s authority over their own resources is declared void; second, the owner has no incentive to care for their resources in a responsible and sustainable way; third, a confiscation of resources from others is required to pay at least some of the costs; fourth, the beneficiaries overuse and degrade the resource.

We know a scarce thing cannot be provided for free. Here are some consequences of trying:

  • Overuse of resources. When the buffet is free, the food disappears.
  • The “free thing” will be over-allocated to those who benefit and value it the least. (Example: the education of students for whom there are better alternatives.)
  • Supplies will evaporate unless producers are fully compensated. Otherwise, quality and quantity will deteriorate. This is a form of “contrived scarcity” (HT: Don Boudreaux).
  • If supplies dwindle, new forms of rationing will be necessary. This might involve time-consuming queues, arbitrary allocations, bribes, side payments and favoritism.
  • If suppliers are compensated, someone must pay. That means taxes, public borrowing or money printing.
  • Taxes weaken productive incentives and chase resources away. The consequent deterioration in productive capacity undermines the original goal of providing  something “for free” and inflicts costs on the outcomes of all other markets. This creates more contrived scarcity.
  • So-called progressive taxes tend to hit the most productive classes with the greatest negative force.
  • Government borrowing to fund “free stuff” today inflicts costs on future taxpayers. More fundamentally, it misallocates resources toward the present and away from the future.
  • Printing money to pay for a “free thing” might well cause a general rise in prices. This is a classic, hidden inflation tax, and it may involve the distortion of interest rates, leading to an inter-temporal misallocation of resources.

Scarcity denial is a carrot, but it inevitably becomes a stick. To voters, and to naive shoppers in the marketplace of ideas, the indignant assertion that things can and should be free is powerful rhetoric. Producers, too, might happily accept “free-stuff” policies if they expect to be fully compensated by the government, and they might be pleased to have the opportunity to serve more customers if they think they can do so profitably. However, serving all takers of “free stuff” will escalate costs and is likely to compromise quality. It is also likely to create unpleasant circumstances for customers, such as long waiting times and unfulfilled orders. The stick, on the other hand, will be brandished by the state, blaming and penalizing suppliers for their failure to meet expectations that were unrealistic from the start. The fault for contrived conditions of scarcity lies with the policy itself, not with producers, except to the extent that they allowed themselves to be duped by scarcity deniers. Tucker notes the following:

“Things can be allocated by arbitrary decision backed by force, or they can be allocated through agreement, trading, and gifting. The forceful way is what socialism has always become.“

Politicians and would-be planners with the arrogance to claim that naturally scarce things should be free are dangerous to your welfare. These scarcity deniers cannot provide for human needs more effectively than the free market, and ultimately their efforts will make you subservient and poor.

The Fascist Roader

04 Thursday Aug 2016

Posted by in Central Planning, fascism

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Obamas - fascist world government

 

 

 

 

 

 

 

 

President Obama is a believer in centralized social and economic management, despite the repeated disasters that have befallen societies whose leaders have applied that philosophy in the real world. Those efforts have often taken the form of socialism, with varying degrees of government ownership of resources and productive capital. However, it is not necessary for government to own the means of production in order to attempt central planning. You can keep your capital as long as you take direction from the central authority and pay your “fair share” of the public sector burden.

A large government bureaucracy can coexist with heavily regulated, privately-owned businesses, who are rewarded by their administrative overlords for expending resources on compliance and participating in favored activities. The rewards can take the form of rich subsidies, status-enhancing revolving doors between industry and powerful government appointments, and steady profits afforded by monopoly power, as less monied and politically-adept competitors drop out of the competition for customers. We often call this “corporatism”, or “crony capitalism”, but it is classic fascism, as pioneered by Benito Mussolini’s government in Italy in the 1920s. Here is Sheldon Richman on the term’s derivation:

“As an economic system, fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax.“

With that in mind, here’s an extra image:

Mussolini Quote

The meaning of fascism was perverted in the 1930s, as noted by Thomas Sowell:

“Back in the 1920s, however, when fascism was a new political development, it was widely — and correctly — regarded as being on the political left. Jonah Goldberg’s great book ‘Liberal Fascism’ cites overwhelming evidence of the fascists’ consistent pursuit of the goals of the left, and of the left’s embrace of the fascists as one of their own during the 1920s. … 

It was in the 1930s, when ugly internal and international actions by Hitler and Mussolini repelled the world, that the left distanced themselves from fascism and its Nazi offshoot — and verbally transferred these totalitarian dictatorships to the right, saddling their opponents with these pariahs.“

The Obama Administration has essentially followed the fascist playbook by implementing policies that both regulate and reward large corporations, who are only too happy to submit. Those powerful players participate in crafting those policies, which usually end up strengthening their market position at the expense of smaller competitors. So we have transformational legislation under Obama such as Obamacare and Dodd-Frank that undermine competition and encourage concentration in the insurance, health care, pharmaceutical  and banking industries. We see novel regulatory interpretations of environmental laws that destroy out-of-favor industries, while subsidies are lavished on favored players pushing economically questionable initiatives. Again, the business assets are owned by private cronies, but market forces are subjugated to a sketchy and politically-driven central plan designed jointly by cronies inside and outside of government. That is fascism, and that’s the Obama approach. He might be a socialist, and that might even be the end-game he hopes for, but he’s a fascist in practice.

As Sowell points out, Obama gains some crucial advantages from this approach. For starters, he gets a free pass on any claim that he’s a socialist. And however one might judge his success as a policymaker, the approach has allowed him to pursue many of his objectives with the benefit of handy fall-guys for failures along the way:

“… politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector.  Politically, it is heads-I-win when things go right, and tails-you-lose when things go wrong. This is far preferable, from Obama’s point of view, since it gives him a variety of scapegoats for all his failed policies, without having to use President Bush as a scapegoat all the time.

Thus the Obama administration can arbitrarily force insurance companies to cover the children of their customers until the children are 26 years old. Obviously, this creates favorable publicity for President Obama. But if this and other government edicts cause insurance premiums to rise, then that is something that can be blamed on the “greed” of the insurance companies.The same principle, or lack of principle, applies to many other privately owned businesses. It is a very successful political ploy that can be adapted to all sorts of situations.“

Obama’s most ardent sycophants are always cooing that he’s the best president EVAH, or the coolest, or something. But the economy has limped along for much of his presidency; labor force participation is now at its lowest point since the late 1970s; and median income has fallen on his watch. He has Federal Reserve policy to thank for stock market gains that are precarious, at least for those companies not on the fascist gravy train. Obama’s budgetary accomplishments are due to a combination of Republican sequestration (though he has taken credit) and backloading program shortfalls for his successors to deal with later. Obamacare is a disaster on a number fronts, as is Dodd-Frank, as is the damage inflicted by questionable environmental and industrial policy, often invoked via executive order.  (His failures in race relations and foreign policy are another subject altogether.)

Fascism is not a prescription for rapid economic growth. It is a policy of regression, and it is fundamentally anti-innovation to the extent that government policymakers create compliance burdens and are poor judges of technological evolution. Fascism is a policy of privilege and is regressive, with rewards concentrated within the political class. That’s what Obama has wrought.

 

Bernie, Donald and Ignatius?

29 Friday Jan 2016

Posted by in Immigration, Socialism, Uncategorized

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BernieTrump

We have candidates vying for the nominations of both major U.S. political parties with tendencies toward nationalism: Bernie Sanders and Donald Trump. They both oppose liberalized immigration and they are both anti-trade, playing on economic fears in articulating their views. Sanders has attempted to soften his rhetoric on immigration since last summer, when he alleged that it harms U.S. workers.

There are differences between Sanders and Trump on the treatment of existing illegal immigrants. Despite Trump’s protests to the contrary, his nationalism has had ethnic overtones.

Trump’s positions on immigration and trade protectionism are not necessarily at odds with Republican tradition, which is a mixed bag, but they are consistent with a faith in big government and central planning. An anti-immigration and anti-trade platform is certainly no contradiction for Sanders, because central planning is integral to his avowed socialism.

Sanders has been called a “socialist with nationalistic tendencies”. He favors government provision of free health care and higher education, heavy redistribution, and severe restrictions on property rights via high taxation. Trump, on the other hand, has been called a “nationalist with socialist tendencies.” He too has called for nationalized health care, increasing certain transfer payments, as well as compromises to state rights. It would probably be more accurate to describe Trump as a corporatist, a system under which large business entities both serve and control government for their own benefit. For example, Trump has used and favors eminent domain to secure land for private projects, generous bankruptcy laws to eliminate business risks, and “deal-making” between government and private enterprise in order to “get things done.” Corporatism is a flavor of fascism, and it is perfectly consistent with a statist agenda.

Thus, each party has candidates who are by degrees both nationalist and socialist. In using these labels, however, I plead innocent to a violation of Godwin’s Law. Of course they are not Nazis, but they are nationalistic socialists. The distinction is explained nicely by B.K Marcus in The Freeman. Both candidates take positions that are consistent with the platform of the National Socialist German Workers Party, circa 1920.

As an aside, Marcus provides some fascinating etymology of the word “Nazi”, quoting Steve Horwitz:

“The standard butt of German jokes at the beginning of the twentieth century were stupid Bavarian peasants. And just as Irish jokes always involve a man called Paddy, so Bavarian jokes always involved a peasant called Nazi. That’s because Nazi was a shortening of the very common Bavarian name Ignatius. This meant that Hitler’s opponents had an open goal. He had a party filled with Bavarian hicks and the name of that party could be shortened to the standard joke name for hicks.“

Marcus also quotes Mark Forsyth on this topic:

“To this day, most of us happily go about believing that the Nazis called themselves Nazis, when, in fact, they would probably have beaten you up for saying the word.“

Back on point, I’ve written about both of these candidates before: Trump here and here; Sanders here. To keep things even, here is one more interesting take on Bernie.

“His family managed to send him to the University of Chicago. Despite a prestigious degree, however, Sanders failed to earn a living, even as an adult. It took him 40 years to collect his first steady paycheck — and it was a government check.”

Read the whole thing!

It’s difficult for me to take these two candidates seriously because they do not take individual liberty seriously, nor do they understand the power of private markets to promote human welfare. I also have strong reservations about their understanding of constitutional principles, and I suspect that either would have few qualms about taking Mr. Obama’s cue in stretching executive authority.

Instead of the headline above, it would have been more accurate to say “Bernie, Donald and Ignoramus!” Unfortunately, one of these guys could be our next president. Well, it won’t be Sanders.

Bernie Sanders Wants To Deal… Your Property

18 Sunday Oct 2015

Posted by in Socialism, The Road To Serfdom

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Fall In Hole giphy

Bernie Sanders is very sincere in his beliefs, and yet he is profoundly ignorant regarding economic growth in the U.S. and the futility of socialism as form of economic organization. Chelsea German, at the HumanProgress blog, presents some simple facts that contradict a few of the Senator’s favorite assertions. In “Senator Sanders and the Fixed Pie Fallacy“, German quotes a line that Sanders has been using for at least 41 years: “The rich are getting richer and the poor are getting poorer.” Granted, his first utterance of that expression might have been in a recession, but aside from those relatively brief episodes, he’s been wrong for the duration. Apparently, Sanders cannot fathom the widespread gains made possible by capitalism and economic growth. Only a “fixed pie” (or worse) would necessarily imply that gains must come at the expense of others, as he seems to believe. (H.T. to Ken DeVaughn on the brilliant gif above.)

One chart in German’s post shows that after-tax income grew in every quintile of the U.S. income distribution from 1979 (pre-recession) to 2010 (post-recession). The chart is taken from CBO data used by Gary Burtless in a piece published by Brookings. Sanders should have a look. However, it’s also important to note that people generally don’t remain in the same strata of the distribution over time. A second chart, from Angus Deaton’s “The Great Escape“, shows that U.S. poverty rates have generally declined over time. Finally, German shows that with a few interruption, GDP has grown over time. All of these facts might be something of a surprise to Sanders. German quotes the great Deirdre McCloskey:

“The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travel, rights for women, lower child mortality, adequate nutrition, taller bodies, doubled life expectancy, schooling for their kids, newspapers, a vote, a shot at university, and respect.“

Sanders showcases his lack of familiarity with economic principles almost every time he opens his mouth, or his Twitter account. He recently opined that rates of interest on student loans should be lower than rates on loans for autos and mortgages. Of course, both auto loans and mortgages are secured by valuable collateral and have much lower default rates. It’s a good thing for Sanders that he didn’t pursue a career in lending.

Recently, Hillary Clinton has been unable to restrain herself from chasing Sanders off the rhetorical cliff. Clinton is offering the public lots of “free stuff“, like Sanders, in a transparent attempt to buy votes with promises of future largess. Neither candidate has offered a credible plan for funding their promises. Higher taxes on “Wall Street” and other top earners are the supposed answer, but those measures would be woefully inadequate. Look out, middle class!

By the way, another recent Brookings study shows that increasing the top marginal income tax rate, a policy of which Sanders would approve, would do little to reduce the degree of income inequality.

Of course, Sanders seems just as unfamiliar with the great failures of socialism over the past century as he is with the successes of capitalism in eliminating poverty. He thinks the U.S. should adopt the socialist policies in Scandanavia, but the truth is that socialism has served to inhibit the continued success of capitalism in those countries (also see here). Perhaps that’s why Denmark is scaling back its redistributionist policies.

The Left, including Bernie Sanders, are burdened by a naive utopianism so powerful that they can rationalize the confiscation of private property to support their personal preferences and those of the political class. The aristocratic Left, like Hillary, differ only in the power they hold to influence policy. Perhaps a few suffer from a strong sense of guilt regarding their own circumstances. No, not Hillary. But both Bernie and Hillary are guilty of gross social and economic misdiagnosis. Politicians, heal thyselves!

Bernie Sanders: Just a Regular Looter

17 Thursday Sep 2015

Posted by in Free markets, Poverty, Socialism

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Bernie

Economic illiteracy is getting to be a central theme in the early stages of the 2016 presidential race. The two candidates with whom the public and media are most fascinated at the moment are Bernie Sanders and Donald Trump. Both are veritable case studies in delusional economic reasoning. I have already devoted two posts to Trump, the current frontrunner for the Republican nomination (both posts appear at the link in reverse order). At the time of the second of those posts, I recall hoping desperately that someone or something would rescue my blog from him. I have managed, since then, to resist devoting more attention to his campaign. In this post, I’ll focus on Senator Bernie Sanders of Vermont, currently the top rival to Hillary Clinton for the Democrat nomination.

It’s ironic that Sanders, a self-proclaimed socialist, shares several areas of acute economic illiteracy with Donald Trump. There is a strong similarity between Sanders and Trump on foreign trade (and both candidates are pro-Second Amendment). Like Trump, Sanders demonstrates no understanding of the reasons for trade, as Kevin Williamson notes:

“The incessant reliance on xenophobic (and largely untrue) tropes holding that the current economic woes of the United States are the result of scheming foreigners, especially the wicked Chinese, “stealing our jobs” and victimizing his class allies…. He describes the normalization of trade relations with China as “catastrophic” — Sanders and Jesse Helms both voted against the Clinton-backed China-trade legislation — and heaps scorn on every other trade-liberalization pact. That economic interactions with foreigners are inherently hurtful and exploitative is central to his view of how the world works.“

Sanders lacks an understanding of trade’s real function: allowing consumers and businesses to freely engage in mutually beneficial exchanges with partners abroad, and vice versa. Trade thereby allows our total consumption and standard of living to expand. It is not based on “beating” your partners, as Sanders imagines. It is cooperative behavior.

Opposition to free trade nearly always boils down to one thing: avoiding competition. That goes for businesses seeking to protect or gain some degree of monopoly power and for unions wishing to keep wages, benefits and work rules elevated above levels that can otherwise be justified by productivity. The result is that consumers pay higher prices, have access to fewer goods and less variety, and have a lower standard of living. It is no accident that trade wars deepened the severity of the Great Depression domestically and globally. But Sanders, like Trump, has failed to learn from the historical record.

Another area of Sanders’ deep economic ignorance is his position on wage controls. He advocates a mandatory $15 federal minimum wage with no recognition of the potential damage of such a change. Kevin Williamson has this to say:

“Prices [and wages] in markets are not arbitrary — they are reflections of how real people actually value certain goods and services in the real world. Arbitrarily changing the dollar numbers attached to those preferences does not change the underlying reality any more than trimming Cleveland off a map of the United States actually makes Cleveland disappear.“

The minimum wage was the subject of a recent post on Sacred Cow Chips. A higher minimum is a favorite policy of well-meaning leftists and social justice warriors, but they fail to address the realities that the least-skilled suffer adverse employment effects, that a higher minimum wage hastens the substitution of capital for unskilled labor, and that the policy often benefits non-primary workers from middle and upper-income households. It’s a lousy way to help the impoverished. Moreover, minimum wages were originally conceived as a tool of racial exclusion and in all likelihood still act that way. Most of the research supporting minimum wage increases focuses on short-run effects or on sectors that are less capital-intensive. Findings about long-run effects are much more negative (see here, too). It’s a given that Sanders understands none of this.

Other elements of Sanders’ platform are essentially freebies for all: universal health care (see the first link from this Bing search), free college tuition for all, and expanded social security benefits. And of course there is a promise to rebuild our crumbling infrastructure, taking full advantage of the myth that our infrastructure is so decrepit that it must be replaced now. All of these ideas are costly, to say the least, and there is nothing adequate in Sanders’ platform to pay for them. He’ll raise taxes on the 1%, he says. Just watch the capital fly away. Ed Krayewski of Reason discusses Sander’s rich promises and the lack of resources to pay for them in “Bernie Sanders, the 18 Trillion Dollar Man“:

“The Wall Street Journal spoke with an economist at the liberal Center on Budget and Policy Priorities, who acknowledged taxes would have to go up for the middle class too to pay for Sanders programs.“

Middle class tax hikes would undoubtedly be accompanied by a lot more public debt, and ultimately inflation. Freebies for whom? As Krayewski says, Sanders “wants taxpayers to ‘feel the Bern’“.

In fairness, Sanders suggests that some of the needed revenue can be diverted from military spending. Possibly, but the military budget has already been reduced significantly, and it is not clear that much fat remains for Sanders to cut. There will certainly be demands for greater military spending given the significant threats we are likely to face from rogue states.

Sanders’ promise to transform our energy system is another one that will come with high costs. What Sanders imagines is a widespread fallacy that green energy can be produced at little cost. However, we know that renewables carry relatively high distributed costs and their contributions to load are intermittent, requiring base load backup from more traditional sources like fossil fuels or nuclear energy. Like President Obama, Sanders would impose new costs on fossil fuels, but the poor will suffer the most without offsetting assistance. And subsidies are also required to incent greater adoption of expensive alternatives like home solar and electric vehicles. Sanders would authorize this massive diversion of resources for the purpose of mitigating a risk based on carbon-forcing climate models with consistent track records of poor accuracy.

If free speech is your hot button, then Sanders’ promise to “overturn” Citizen’s United won’t make you happy. Why should an association of individuals, like a union or a corporation, be denied the right to use pooled resources for the purpose of expressing views that are important to their mission? Sanders is proposing an outright abridgment of liberty. From the first Kevin Williamson link above:

“… criminalizing things is very much on Bernie’s agenda, beginning with the criminalization of political dissent. At every event he swears to introduce a constitutional amendment reversing Supreme Court decisions that affirmed the free-speech protections of people and organizations filming documentaries, organizing Web campaigns, and airing television commercials in the hopes of influencing elections or public attitudes toward public issues.“

It is hard to take issue with Sanders’ call for an end to police brutality without a clear sense of his attitude toward law enforcement. I believe all fair-minded people wish for zero police brutality, but critics often minimize the difficulty of police work. No doubt there are gray areas in the practice of law enforcement; some police officers take their powers too far, which cannot be condoned. If institutional reforms can help, so much the better. But the police must be given the latitude to do a difficult job without fear of unreasonable legal reprisal.

On a related note, Sanders advocates an end to the war on drugs, a reform that I wholeheartedly support. Go you Bernie!

Finally, here is a more general illustration of Bernie Sanders’ backward views on economics. It is a Sanders quote I repeat from the second Kevin Willamson link above:

“You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country. I don’t think the media appreciates the kind of stress that ordinary Americans are working on.“

Sanders’ complaint about the plethora of choices in consumer goods fails to recognize that they reflect real differences in consumer preferences, as well as an economy dynamic enough to provide for those preferences. Far from causing hunger and poverty, that dynamism has lifted standards of living over the years across the entire income distribution, even among the lowest income groups, to levels that would astonish our forebears. And it created the wealth that enables our society to make substantial transfers of resources to low income groups. Unfortunately, those very transfer programs are rife with incentives that encourage continued dependency. Other government interventions such as the minimum wage have diminished opportunities for work for individuals with little experience and skills. Meanwhile, regulation and high business and personal taxes undermine the continued growth and dynamism of the economy that could otherwise lift more families out of dependency. Sanders would do better to study the history of socialism in practice, and to look in his own socialist mirror to identify the reasons for persistently high levels of poverty.

Will ET Be a Socialist?

19 Wednesday Aug 2015

Posted by in Capitalism, Socialism, Space Travel

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If we are ever visited or contacted by agents from an extraterrestrial civilization, what kind of society will they come from? The issue is given scant attention, if any, in discussions of extraterrestrial life, at least according to this interesting piece in The Freeman by B.K. Marcus. The popular view, and that of many scientists, seems to be that the alien society will be dominated by an authoritarian central government. Must that be the case? Marcus notes the negative views taken by such scientific authorities as Neil deGrasse Tyson toward laissez faire capitalism, and even Carl Sagan “… could only imagine science funded by government.” Of course, Tyson and Sagan cannot be regarded as authorities on economic affairs. However, I admit that I have fallen into the same trap regarding extraterrestrial visitors: that they will come from a socialist society with strong central command. On reflection, like Marcus, I do not think this view is justified.

One explanation for the default view that extraterrestrial visitors will be socialists is that people uncritically accept the notion that an advanced society is a planned society.  This runs counter to mankind’s experience over the past few centuries: individual freedom, unfettered trade, capitalism and a spontaneous social order have created wealth and advancement beyond the wildest dreams of earlier monarchs. Anyone with a passing familiarity with data on world economic growth, or with F.A. Hayek, should know this, but it Is often overlooked. Central planners cannot know the infinitely detailed and dynamic information on technologies, resource availability, costs and preferences needed to plan a society with anything close to the success of one arranged through the voluntary cooperation of individual actors.

Many of us have a strong memory of government domination of space exploration, so we tend to think of such efforts as the natural province of government. Private contractors were heavily involved in those efforts, but the funding and high-level management of space missions (NASA in the U.S.) was dominated by government. Today, private space exploration is a growth industry, and it is likely that some of the greatest innovations and future space endeavors will originate in the private sector.

Another explanation for the popular view is the daunting social challenges that would be faced by crews in interstellar travel (IST). Given a relatively short life span, a colonizing mission would have to involve families and perhaps take multiple generations to reach its destination. There is a view that the mini-society on such a ship would require a command and control structure. Perhaps, but private property rights and a certain level of democratization would be advantageous. In any case, that carries no implication about the society on the home planet nor the eventual structure of a colony.

A better rationale for the default view of socialist ETs involves a public goods argument. The earth and mankind face infrequent but potentially catastrophic hazards, such as rogue asteroids and regions of strong radiation as the sun orbits the center of the Milky Way galaxy. These risks are shared, which implies that technological efforts to avert such hazards, or to perpetuate mankind by colonizing other worlds, are pure public goods. That means government has a classic role in providing for such efforts, as long as the expected benefits outweigh the costs. The standard production tradeoff discussed in introductory economics classes is “guns versus butter”, or national defense (a pure public good) versus private consumption. IST by an alien civilization could well require such a massive diversion of resources to the public sector that only an economically dominant central government could manage it. Or so it might seem.

As already noted, private entrepreneurs have debunked the presumed necessity that government must dominate space exploration. In fact, Elon Musk and his company SpaceX hope to colonize Mars. His motives sound altruistic, and in some sense the project sounds like the private provision of a public good. Here is an interpretation by Tim Urban quoted at the link (where I have inserted a substitute for the small time-scale analog used by the author):

“Now—if you owned a hard drive with an extraordinarily important Excel doc on it, and you knew that the hard drive pretty reliably tended to crash [from time to time] … what’s the very obvious thing you’d do?
You’d copy the document onto a second hard drive.
That’s why Elon Musk wants to put a million people on Mars.”

Musk has other incentives, however. The technology needed to colonize Mars will also pay handsome dividends in space mining applications. Moreover, if they are successful, there will come a time when Mars is a destination commanding a fare. Granted, this is not IST, but as technology advances through inter-planetary travel and colonization, there is a strong likelihood that future Elon Musks will be involved in the first steps outside of our solar system.

While SpaceX has raised its capital from private sources, it receives significant revenue from government contracts, so there is a level of dependence on public space initiatives. However, the argument made by Marcus at the first link above, that IST by ETs is less likely (or impossible) if they live under a socialist regime, is not based primarily on recent experience with private entrepreneurial efforts like Musk’s. Instead, it has to do with the inability of socialist regimes to generate wealth, especially the massive wealth necessary to accomplish IST.

Discussions of ETs (or the lack thereof) often center around a question known as the  Fermi Paradox, after the physicist Enrico Fermi. He basically asked: if the billions and billions of star systems, even in our own galaxy, are likely to harbor a respectable number of advanced civilizations, where are they? Why haven’t we heard from them? My friend John Crawford objects that this is no paradox at all, given the vastness of space and the difficulty and likely expense of IST. There may be advanced civilizations in the cosmos that simply have not been able to tackle the problem, at least beyond their own stellar neighborhood. No doubt about it, IST is hard!

I have argued to Crawford that there should be civilizations covering a wide range of development at any point in time. In only the past hundred years, humans have increased the speed at which they travel from less than 50 miles per hour (mph) to at least 9,600 mph. The speed of light is approximately 270,000 times faster that that! At our current top speed, it would take almost 50% longer to reach our nearest neighboring star, Alpha Centauri, than the entire span of human existence to-date. With that kind of limitation, there is no paradox at all! But I would not be surprised if, over the next 1,000 years, advances in propulsion technology bring our top speed to within one-tenth of the speed of light, and perhaps much more, making IST a more reasonable proposition, at least in our “neighborhood”. There may be civilizations that have already done so.

Answers to the Fermi Paradox often involve a concept called the Great Filter. This excellent HuffPo article by Tim Urban on the Fermi Paradox provides a good survey of theories on the Great Filter. The idea is that there are significant factors that prevent civilizations from advancing beyond certain points. Some of these are of natural origin, such as asteroids and radiation exposure. Others might be self-inflicted, such as a thermonuclear catastrophe or some other kind of technology gone bad. Some have suggested that the Large Hadron Collider in Switzerland could be a major hazard to our existence, though physicists insist otherwise. Another example is the singularity, when artificial intelligence overtakes human intelligence, creating a possibility that evil machines will do us in. The point of these examples is that some sudden or gradual development could prevent a civilization from surviving indefinitely. These kinds of filters provide an explanation for the Fermi Paradox.

More broadly, there could be less cataclysmic impediments to development that prevent a society from ever reaching an advanced stage. These would also qualify as filters of a sort. Perhaps the smart ETs lack, or failed to evolve, certain physical characteristics that are crucial for advancement or IST. Or their home planet might be light on certain kinds of resources. Or perhaps an inferior form of social organization has limited development, with inadequate wealth creation and technologies to transcend the physical limitations imposed by their world. On a smaller than planetary scale, we have witnessed such an impediment in action many times over: socialism. The inefficiencies of central planning place limits on economic growth, and while high authorities might dictate a massive dedication of resources toward science, technology and capital-intensive space initiatives, the shift away from personal consumption would come at a greater and greater cost. The end game may involve a collapse of production and a primitive existence. So the effort may be unsustainable and could lead to social upheaval; a more enlightened regime would attempt to move the society toward a more benign allocation of resources. Whether they can ever accomplish IST is at least contingent on their ability to create wealth.

Socialism is a filter on the advancement of societies. ETs capable of interstellar travel could not be spawned by a society dominated by socialism and central planning. While government might play a significant role in a successful ET civilization, one capable of IST, only a heavy reliance on free-market capitalism can improve the odds of advancing beyond a certain primitive state. Capitalism is a relatively easy ticket to the wealth required for an advanced and durable civilization, and conceivably to the reaches of the firmament.

Unfortunately, there is absolutely no guarantee that capitalistic ETs will be friendly  toward competing species, or that they will respect our property rights. They might be big, smart cats and find us mouse-like and quite tasty. Their children might make us perform circuses, like fleas. In any case, if ETs get this far, it’s probably because they want our world and our resources. My friend Crawford says that they won’t get here in any case. He believes that the difficulty of IST will force them to focus on their own neighborhood. Maybe, but on long enough time scales, who knows?

I would add a caveat to conclusions about the strength of the filters discussed above. A capitalistic society might reach a point at which it could send artificially intelligent, self-replicating machines into space to harvest resources. Those machines might well survive beyond the end of the civilization that created them. Conceivably, those machines could act autonomously or they could take coordinated action. But we haven’t heard from them either!

For a little more reading, here is SETI‘s description of the Fermi Paradox, and here is a post from io9 on the Great Filter.

Don’t Call Leftists “Liberal”; They’re Not!

29 Wednesday Jul 2015

Posted by in Liberty

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Nor are statists, collectivists and socialists, but I repeat myself. The simple plea above is made by Daniel Klein in an essay appearing in the Intercollegiate Review and in Modern Age. He asserts that libertarians (and conservatives) fall into a semantic trap when they use the term as a pejorative for leftists. I have touched on the mangled, modern usage of “liberalism” several times on Sacred Cow Chips, but Klein brings some interesting empiricism into consideration and makes several points worth emphasizing.

First, Klein traces the historical record of appearances of certain words related to liberalism in published literature using the “n-gram viewer” on Google. He shows that the political use of “liberal” began around 1770. For the next 110 years, liberalism referred to a philosophy and policies associated with small government and individual autonomy. In the U.S., however, the term began to be co-opted by the political left in the late 1800s. Around the turn of the twentieth century, references to “New Liberalism” and “Old Liberalism” became more frequent. So the term was subverted in that time frame, a decade or two before the term “left-wing” came into use.

“The literature of the so-called New Liberals declaimed openly against individual liberty and in favor of state collectivism and socialistic reform.“

Today, the association of “liberalism” with the left is confined mostly to the U.S. and Canada:

“…when we step outside North America, we see that, by and large, liberal still means liberal (in the UK, usage is in-between). …

Where liberal still means liberal, such as in Europe and Latin America, leftists have no reluctance in calling their imaginary bogeyman ‘neoliberalism.’“

By way of suggestion, Klein reviews a few alternative labels for the left. In doing so, he notes that in general, the left supports the “governmentalization of social affairs”. For that reason, one of my favorite labels is “statism”. Oddly, Klein never mentions this as a possibility. (Klein concedes that the left supports liberty on a few issues, which happen to be issues upon which most libertarians are in agreement.) He does refer to the old standby “collectivists” in passing.

Klein likes the label “Progressivism” for the left, despite the positive associations some might make with that term. He argues with some merit that progressivism implies activist, goal-directed policy, as opposed to non-intervention and the spontaneous social order favored by true liberals.

“That collectivists should join together for what they imagine to be progress is perfectly fitting. For them the term progressive is suitable. By contrast, conservatives and libertarians look to, not progress, but improvement. …

Another fitting term for leftism is social democracy, which is standard in Europe. Social democracy is a compromise between democratic socialism and a tepid liberalism. The socialistic penchant is foremost, but a vacillating liberalism gnaws at the social democrat’s conscience.”

I fully agree with Klein that we should never refer to leftists as liberals. They are completely undeserving of the description, and doing so concedes a glaringly false premise. Every leftist I know advocates the increasing governmentalization of social affairs and a naive acceptance of an impossible proposition: that government can ever possess the detailed knowledge necessary to successfully regulate individual actors from above. And leftists are foolishly willing to place faith in the benevolence and wisdom of political agents and central controllers. Klein mentions a recent editorial by Kevin Williamson in National Review:

“Williamson ends the piece by quoting two leftist authors writing in The Nation, one decrying ‘unbridled individualism,’ the other ‘unfettered capitalism.’ Williamson concludes: ‘A ‘liberalism’ that is chiefly concerned with the many clever uses of bridles and fetters does not deserve the name. It never has.’”

Francis’ Statist Vision Not Shared By Venezuelan Clergy

16 Friday Jan 2015

Posted by in The Road To Serfdom

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Some people lament our tolerance in the U.S. for “religious crazies.” Of course, these misgivings might reflect a certain view that religious people are crazy to begin with, as well as an outright hostility to constitutional protections of religious freedom. Do they mean that religious speech should not be protected? That one’s religious beliefs should not inform their political views? That religious freedom should not exempt anyone from rules imposed by government (the dispute in King vs. Burwell)? These possibilities cover a lot of ground, but none of them stands up to scrutiny in a free and liberal society. In fact, the apparent resentment of the Left toward “religious crazies” largely misses the point: the very expansion of government activity, in kind, degree and complexity, often brings the state into conflict with religious imperatives. And regardless of one’s stance on the taxation of religious activity, exemptions necessarily become more controversial in the sort of high-tax environment needed to fund big government.

But it is not just the secular Left that fails to recognize the inherent conflict between big government and religious liberty. Pope Francis himself seems oblivious to the dangerous implications of big government for religious freedom. His apostolic exhortation for greater reliance on the state to care for the poor simultaneously embraces socialism and condemns capitalism. I take no issue in principle with the provision of a social safety net, but the Pope should be more results-oriented in assessing different forms of social organization and their impacts on poverty. Big government typically fails to achieve the kinds of humane objectives usually espoused by the Left. The sad “road to serfdom” has played out many times in the past. In fact, in an apparent rebuff, Pope Francis’ Venezuelan Archbishops just issued a strong condemnation of socialist solutions to poverty. From Investors.com:

“The Venezuelan archbishops make the useful observation that if capitalist economies have problems, socialist alternatives are far worse for the poor and needy. Could it be the pope’s Latin American colleagues on the ground in the cesspool of communism are the ones who can get through to the holy father on economics?”

The Pope would do well to listen to his Venezuelan flock or to this great economic thinker, Thomas Sowell, who emphasizes the inability of government to craft solutions that “do no harm.”

Apart from lousy economic results, basic freedoms are seldom immune to compromise under the grip of big government. These reports from China should give the pontiff pause. The Chinese Communist Party is said to feel “threatened” by the growth of Chinese Christianity, and the government is cracking down, dismantling religious symbols and even destroying some churches. Similar outcomes have followed authoritarian governments many times in the past, and of course this isn’t the first crackdown on “religious crazies” under Chinese communism. No one should be surprised. Capitalism, with its miracle of market self-regulation, is the only economic system that is truly consistent with freedom and diversity of religion.