Socialism. Has it ever worked economically?

[ringledman]

Anyone watched 'Tropic of Cancer' on BBC 2 tonight?

Cuba - Rations for all foods except the very basics. Consumer goods prohibatively expensive.

Tourist waiters earning $100/day, being the average yearly salary for everyone else.

The more educated, the less you earn.

Socialism at its best...

 

[csirl]

Anyone watched 'Tropic of Cancer' on BBC 2 tonight?

Cuba - Rations for all foods except the very basics. Consumer goods prohibatively expensive.

Tourist waiters earning $100/day, being the average yearly salary for everyone else.

The more educated, the less you earn.

Socialism at its best...

Saw it and agree with the above.

The movement promoting turning parks and gardens into allotments to feed the populace sounds like what they were doing in the UK during the WWII food shortages.

Cuba does not have a good health service - it is underfunded like most third world countries. I think those who keep on saying this have been taken in by the propoganda. According to the World Health Organisation, the life expectancy for a male in Cuba is only 67. Other indicators like infant mortality are also low. - these stats say it all - not the characteristics of a country with good health care.

http://www.who.int/countries/cub/en/.

 

[Chris]

When economic models become political philosophies they fail. Economics should be about a scientific and pragmatic search for the best way to manage an economy. Therefore socialism and capitalism are not comparable; socialism is closer to a religion than an economic philosophy as it seeks to control many aspects of society.

Very good point, capitalism is an economic system, while socialism is a political system. You also point out something that proponents of socialism never mention: in order for the socialist agenda of one group of society to succeed it has to be enforced upon everyone. This is one of the biggest gripes I have with it.

It should also be remembered that the free market is an artificial construct and open competition can only exist with intervention and active regulation from governments. I don’t see how pure capitalism or pure socialism could ever work.

The debate is really about what type of state intervention/interference should take place in the market and what it’s objectives should be.

Any form of intervention in a free market is based on a subjective view of a few people. Therefore, every intervention distorts competition. Pure free market capitalism does not allow intervention.
I also disagree that the free market is an artificial construct. Quite the opposite, it is the most natural form of economic exchange, i.e. people exchange products free from any coercion or enforcement as they wish to. As soon as you add regulations or other interventions the system becomes man made or artificial.

Do you have examples of where capitalism (without state intervention, subsidies and protection of capitalists) has worked economically?

Germany after WWII is as close as the world has seen to true free market capitalism in the last 150 years, even if it wasn't a conscious choice. The new government was way to busy with what a government is actually meant to do: national defense, policing, road infrastructure, etc, and therefore didn't intervene in the free market. This resulted in the most successful economic period Germany has ever seen, until a few years later state intervention was reintroduced, immediately causing negative economic results.
http://mises.org/daily/3635
For about 200 years after independence in 1776 the USA had miniscule state intervention. There were almost no taxes on individuals or corporations and the size of government was kept to a minimum. Over those 200 years the biggest economic boom took place because the state didn't intervene.

Corruption will always destroy capitalism or communism.
As soon as you introduce politicians, it's the kiss of death.

Exactly! However, in true free-market capitalism, where the state is prohibited from intervening in the economy, there would be no bribing of politicians for economic benefits.

Nowhere near as long as the queues in the depression of the 30s in America.

The great depression was not the result of a failure of free market capitalism. It was the result of state intervention in the 20s through a massive increase in the money supply, and further intervention in the 30s through state spending, price/wage fixing, etc.

Generally the communist/socialist countries of eastern europe did a very good job in providing basic food to everyone. It was luxury goods that were in short suppy.

No, they did not do even remotely a good job at providing basic food. Have you ever talked to East Germans, Hungarians or Bulgarians that "lived" under communism/socialism? I have met many and I saw it first hand in East Germany after the Berlin wall came down. The diets of these people were far from adequate.

As regards Cuba, their main problem was the United States embargo and trade sanctions. Cuba has a fine record in health and education.If Ireland had similiar sanctions imposed we would be in a very sorry state....only cars from the 50s and no inward investment or indeed export markets for most of our produce.

The US embargo is only partially to blame, and incidentally the embargo is a form of state intervention, not free market capitalism. The world is a big place, but yet Cuba has failed to create any meaningful productive sector, despite its low wages.
Also, to set the record straight, Cuba does not have a good modern health service. What it has is universal access to a poor service. It is a perfect example of what Churchill was referring to in this quote: "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."


To the original question, socialism has never succeeded. Socialism is also regularly being reinvented. At first it was the confiscation of all means of economic production, but this miserably failed. It seems that socialists realised this, so they then moved onto confiscating the profit of economic production. Worryingly, they are now calling for confiscation/nationalization again. Let's hope this doesn't happen.
What socialists are also misrepresenting is that the current economic crisis is proof that free market capitalism has failed. The economic system we live with, does not even remotely resemble free market capitalism, but rather is more adequately called interventionism. State intervention is the main cause of all economic crises, and the last thing we now need is more of the interventions.

 

[Complainer]

You also point out something that proponents of socialism never mention: in order for the socialist agenda of one group of society to succeed it has to be enforced upon everyone.

And this is different to capitalism how?

Any form of intervention in a free market is based on a subjective view of a few people. Therefore, every intervention distorts competition. Pure free market capitalism does not allow intervention.
I also disagree that the free market is an artificial construct. Quite the opposite, it is the most natural form of economic exchange, i.e. people exchange products free from any coercion or enforcement as they wish to. As soon as you add regulations or other interventions the system becomes man made or artificial.

This is nonsense. It is perfectly natural for many people to prioritise buying of Irish goods over imports in order to improve our economic woes, but those nice guys in WTO/GAAT have their own bibles of regulations to prevent such interventions. Regulations work both ways, not just the way that suits you.

 

[Chris]

And this is different to capitalism how?

If by capitalism you mean our current system then there is no difference. As I mention in my previous post, the current economic system does not remortely resemble free-market capitalism, it is more adequately called interventionism. In true free-market capitalism all participants in economic transactions are free to exchange products for money (and vice versa) as they see fit to do. The only thing that is enforced is property rights and and protection from coercion or manipulation. Apart from that everyone is free to transact in whatever way the see fit.
Herein lies the difference, nobody is restricted or encouraged to do anything specific that is decided by a higher authority.

This is nonsense. It is perfectly natural for many people to prioritise buying of Irish goods over imports in order to improve our economic woes, but those nice guys in WTO/GAAT have their own bibles of regulations to prevent such interventions. Regulations work both ways, not just the way that suits you.

Yes it is natuaral for people to prioritise, but prioritisation should not be enforced by a group of politicians. It should be up to individuals to choose whether they want to buy Irish or not. Forcing people through regulation to buy Irish will have absolutely no positive effect on the economy, as consumers will face higher prices than they would if they were completely free to choose where they spend their money. If you are happy paying a higher price for an Irish made product, good for you; if you want to buy a cheap Chinese product, good for you. This is what competition is all about, and distorting it through intervention will always result in higher prices or lower quality (directly or indirectly) for the consumer.
If creating economic growth were so simple to achieve as prioritising the buying of local goods over imports, then banning imports would be the ultimate solution. Worked great for the GDR.

 

[Complainer]

In true free-market capitalism all participants in economic transactions are free to exchange products for money (and vice versa) as they see fit to do. The only thing that is enforced is property rights and and protection from coercion or manipulation. Apart from that everyone is free to transact in whatever way the see fit.
Herein lies the difference, nobody is restricted or encouraged to do anything specific that is decided by a higher authority.

But the capitalist system itself would be enforced by a higher authority. And the rules of that system (e.g. GAAT/WTO rules) are imposed by a higher authority. And those who want a system whereby public services are provided to all based need, rather than based on ability to pay are left swinging in the wind.

Yes it is natuaral for people to prioritise, but prioritisation should not be enforced by a group of politicians. It should be up to individuals to choose whether they want to buy Irish or not. Forcing people through regulation to buy Irish will have absolutely no positive effect on the economy, as consumers will face higher prices than they would if they were completely free to choose where they spend their money. If you are happy paying a higher price for an Irish made product, good for you; if you want to buy a cheap Chinese product, good for you. This is what competition is all about, and distorting it through intervention will always result in higher prices or lower quality (directly or indirectly) for the consumer.
If creating economic growth were so simple to achieve as prioritising the buying of local goods over imports, then banning imports would be the ultimate solution. Worked great for the GDR.

Forcing people NOT to prioritise through WTO/GAAT rules is regulation in itself. Or is it just one set of regulations that you seek to demonise?

 

[Purple]

I think when Chris talks about forcing people he is talking about government intervention, tariffs or embargoes etc.

I am of the opinion that people should be free to buy whatever goods they want as long as they are safe to consume. Protectionism impacts on the weak and the vulnerable and protects the haves from the have-not’s.

I think that the free market is an artificial construct in as much as governmental oversight is required to stop businesses from abusing their market dominance in order to become monopolies; we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.

 

[ringledman]

we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.

Why should successful companies be penalised for having a high market share?

The aim of the free market should be limited regulation.

If rival companies are any good they will naturally rise to the top and become a real competitor. We don't need government intervention to prop up unproductive companies or sectors. Resources (capital, land and workers) would be better to work at other more productive industries.

As another example, the US bailouts of GM and Chrysler will prove to be a complete disaster. Japan created zombie firms that returned 100 times less than they cost the taxpayer to prop up.

The sign of successful economies are where good companies are allowed to rise to the top and bad companies dissapear. Creative destruction is good for the health of economies.

 

[Chris]

I think when Chris talks about forcing people he is talking about government intervention, tariffs or embargoes etc.

I am of the opinion that people should be free to buy whatever goods they want as long as they are safe to consume. Protectionism impacts on the weak and the vulnerable and protects the haves from the have-not’s.

I think that the free market is an artificial construct in as much as governmental oversight is required to stop businesses from abusing their market dominance in order to become monopolies; we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.

Large corporations have become so large and dominant, precisely due to regulations. The more regulations a government introduces, the more difficult it is for new companies to be created and then compete with the large established companies. With all the talk of regulting the financial industry more, not one financial corporation is publicly rejecting such an idea, because it makes sure that competition is kept at bay.
Ontop of that, the largest corporations in the world do not have to fear losses like small companies do; look at all the financial institutions that have been bailed out by tax payers! It's like flipping a coin and saying heads I win, tails you lose.
Could you provide some more detail in how government interference increased competition in the computer market? The fine imposed by the EU did absolutely nothing, it wasn't even punishment when the amount is compared to Microsofts revenue. People were switching to Macs and Linux long before the anti-trust cases.

 

[Purple]

Large corporations have become so large and dominant, precisely due to regulations.

Can you back that up please?
For an example of how large companies can abuse their market position just loom at Standard Oil. If a company has lots of cash it can keep competition out of the market by below cost selling, targeted at their budding competitions market.

There has to be a legal framework that business is conducted within, unless you’d like to see a return to charter companies like the British East India Company? Therefore there will be some form of government regulation, be it overt of more subtle.
As for all crashes being caused by government interference, as far as I recall the Tulip Mania of the 1630’s was not caused by any government but a simple speculative bubble.

There's a big drive in the rightwing media in America at the moment to sell the virtues of completely free market capitalism. I’m not a big fan of the clowns on Fox News and their fanatical attempts to re-write economic history (I'm not saying you're like that!). Life is complex and one size fits all dogmas that purport to offer a simple answer to everything really don’t stand up to scrutiny.

 

[Chris]

Can you back that up please?
For an example of how large companies can abuse their market position just loom at Standard Oil. If a company has lots of cash it can keep competition out of the market by below cost selling, targeted at their budding competitions market.

Let me try and explain differently. Take as an example horse drawn carriage rides in a park. Initially, there are no regulations; if you have a horse and a cart you can try and attract customers that want to take a trip around the park. Business takes off and more people start offering the same service. The best thing you can do to protect your business from new competitors, is appeal to the local council or government that there should be regulation and strict rules of this service "for the benefit of the customers". As you are already established in the business new regulations are not much of a problem for you. But if you have to add the cost of complying with regulations to all other start up costs then setting up the business quickly becomes less appealing.
European financial regulations are so strict and costly to businesses that there are no new banks being formed, even though it should be quite easy to compete with essentially insolvent banks.
As for Standard Oil, below cost selling is the ultimate benefit to the consumer. If they can somehow remain profitable while selling below cost, then from a consumers point of view there doesn't need to be much competition. Even a large cash stockpile will ultimately dwindle by continued below cost selling, resulting in higher prices and more room for competition.

There has to be a legal framework that business is conducted within, unless you’d like to see a return to charter companies like the British East India Company? Therefore there will be some form of government regulation, be it overt of more subtle.
As for all crashes being caused by government interference, as far as I recall the Tulip Mania of the 1630’s was not caused by any government but a simple speculative bubble.

Yes indeed, the tulip mania was a speculative bubble, but there was plenty of government intervention. Take a look at this article for a different look at the crash: [broken link removed]

There's a big drive in the rightwing media in America at the moment to sell the virtues of completely free market capitalism. I’m not a big fan of the clowns on Fox News and their fanatical attempts to re-write economic history (I'm not saying you're like that!). Life is complex and one size fits all dogmas that purport to offer a simple answer to everything really don’t stand up to scrutiny.

Oh yes, those guys at Fox; you're absolutely right, they are constantly re-writing history, and are also in absolute denial of their "everything is great in the economy" reporting of 2006/7. My economic beliefs are as much aligned with them as they are with Marx and Engels. While on the surface they are calling for free markets, they are also calling for massive government deficits and Federal Reserve money printing, which from the Austrian School's point of view is the ultimate government intervention. The only difference between Republicans and Democrats (economically speaking), is that Democrats admit that they will increase government size, power and spending, while Republicans state the opposite, but still do it.
Yes, life is complex, just as complex as nature. And just like human interference in the balances of nature, interference in economic balances of the free market are equally as devastating.

 

[ringledman]

Yes indeed, the tulip mania was a speculative bubble, but there was plenty of government intervention. Take a look at this article for a different look at the crash: http://www.econ.ucla.edu/thompson/Document97.pdf

Yes government intervention is at the root cause of nearly all bubbles.

The current crises was caused by the Fed, Ecb, BoJ, BoE, etc keeping interest rates too low for too long in relation to inflation this past 15 years. Also far too much monetary expansion, money printing and public sector binges (unsupported by any wealth creating private industry).

Governments caused the current mess we are in.

Peter Schiff has done some interesting historical research and states that small, mild, recessions should occur every 4-5 years. This is a healthy occurance where people pay down debt and speculative bubbles are kept at bay.

The West went from 1991 to 2008, the longest period in history without a recession. We now face the mother of all depressions as a result of government intervention and artificial proping up of an unsustainable system.

We face an even bigger government debt induced total collapse of the system at some point down the line (I give it 10 years for the West to collapse).

All this mess is as a direct result of incompetent governments.

The ROOT CAUSE of the crises lies firmly with the governments and criminal central banks. The private bankers contributed to the crises by latching onto the loose monetary policies created by the central banks. This financial engineering added nothing to the Western economies, having a zero sum net effect on long term wealth creation.

Nonetheless, the governments and central banks created the situation for the fraudulent bankers to play along to.

Once the West totally collapses under a hyperinflationary currency collapse; brought about by socialist public sector run economies, without any real 'wealth creating' private industry then we can start all over on a firm foundation of real libertarian and austrian economics.

This view is slowly coming to light bit unfortunately the general public will continue to be hoodwinked by statist governments who know nothing about real 'long term wealth creating' economic societies.

After all wealth in the West has been totally destroyed and stolen by these incompetent people in power then we will have the opportunity to try a different course. A new economy built on firm foundations of:

minimal taxes
minimal governments
the rule of law
private property rights
minimal regulations
Incentivising saving
Economy built on exporting goods and services
minimal debt and consumption

Until then, I'm holding onto my gold, silver and Asian assets.

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'The interventionists do not approach the study of economic matters with scientific disinterestedness. Most of them are driven by an envious resentment against those whose incomes are larger than their own. This bias makes it impossible for them to see things as they really are. For them the main thing is not to improve the conditions of the masses, but to harm the entrepreneurs and capitalists even if this policy victimizes the immense majority of the people' Ludwig Von Mises

 

[Complainer]

Let me try and explain differently. Take as an example horse drawn carriage rides in a park. Initially, there are no regulations; if you have a horse and a cart you can try and attract customers that want to take a trip around the park. Business takes off and more people start offering the same service. The best thing you can do to protect your business from new competitors, is appeal to the local council or government that there should be regulation and strict rules of this service "for the benefit of the customers". As you are already established in the business new regulations are not much of a problem for you. But if you have to add the cost of complying with regulations to all other start up costs then setting up the business quickly becomes less appealing.

So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?

With all the talk of regulting the financial industry more, not one financial corporation is publicly rejecting such an idea, because it makes sure that competition is kept at bay.

This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.

 

[Purple]

So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?

How about a law that states that you have to clean up after your animal if it defecates in a public place (like there is for dogs)?

This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.

He was being dishonest when he said that. Anyway, that's not the point Chris is making.

 

[Chris]

But the capitalist system itself would be enforced by a higher authority. And the rules of that system (e.g. GAAT/WTO rules) are imposed by a higher authority. And those who want a system whereby public services are provided to all based need, rather than based on ability to pay are left swinging in the wind.

The only thing that needs to be enforced by government is criminal law, property law and contract law. My point is that governements should be precluded from deciding what and how means of economic production are put to use.

Forcing people NOT to prioritise through WTO/GAAT rules is regulation in itself. Or is it just one set of regulations that you seek to demonise?

Yes it is a regulation, but not on the economy, rather on the government. Making it illegal for governments to tinker in the economy (through stimulus, tax incentives, tariffs, etc.) restricts governments, not the means of economic production.

So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?

Tourists in Killarney have nothing to do with my example. To add to Purple's comment, we do not need to regulate through horse nappies. We do not need to spend time on money to come up with a report and pay horse experts for feedback. All that needs to be done is the enforcement of existing littering laws.

This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.

I would strongly suggest that you do not believe a single word that man mutters. How many financial institutions have publicly complained against the talk for new regulations, except for rules on executive pay? Regulation protects those that are being regulated, not their customers.

 

[sunrock]

I do believe if we had minimal government interference in the Irish economy ,we would have a much more productive country.
Reduce the minimum wage and welfare rates to the bare minimum.
Reduce taxes on work and VAT.
Reduce public sector numbers and reduce the remaining workers salaries.
All these measures would mean that people would have a big incentive to work and costs would fall across the board stimulating all buisnesses.
The only problem is the transition pain would be so painful no politician would endorse it.

 

[Complainer]

I do believe if we had minimal government interference in the Irish economy ,we would have a much more productive country.
Reduce the minimum wage and welfare rates to the bare minimum.
Reduce taxes on work and VAT.
Reduce public sector numbers and reduce the remaining workers salaries.
All these measures would mean that people would have a big incentive to work and costs would fall across the board stimulating all buisnesses.
The only problem is the transition pain would be so painful no politician would endorse it.

WHy not just legalise slavery?

But seriously, why this mad rush for 'more productive'? What benefits arise for society from a 'more productive' country?

 

[ringledman]

WHy not just legalise slavery?

But seriously, why this mad rush for 'more productive'? What benefits arise for society from a 'more productive' country?

Slavery is the state stealing individual's wealth through taxation or inflation in order to pay for non-productive statist enterprises or welfare dependents.

Your second question - Turn it on its head what benefits arise from a 'less productive' socialist run country? None.

High productivity leads to greater income for the country, leading to lower taxes and a greater standard of living for all.

 

[Complainer]

High productivity leads to greater income for the country, leading to lower taxes and a greater standard of living for all.

Some interesting leaps of faith there. Has this actually happened anywhere?

The Irish version was;

Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).

 

[Purple]

Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).

We stopped being highly productive when we had a building and public sector boom (massive numbers entering both sectors with pay increases way ahead of inflation). Higher consumption taxes were required to pay for the increase in public sector numbers (and to a lesser extent pay). The income tax base was then narrowed to penalise those on higher incomes (the myth that high earners pay less tax was exposed in this thread).

If anyone really thinks that higher productivity leads to a situation that "penalising those who earn less" then they don't understand very basic economics or the first thing about what’s happened in this country over the last ten years.