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Modern-Day Socialism and the 30-year Anniversary of Tiananmen Square

This recent tweet captures the half-assed distinction Marx tried to make between so-called bourgeois property and personal property:

On the thirtieth anniversary of the Tiananmen Square massacre — when the totalitarian socialist government of China quashed, with extreme force, a political uprising by the people of China who rebelled at last against the obliteration of their freedom — I sincerely hope that the dire error of the illustration above is both obvious and horrifying.

If, however, it’s not obvious or horrifying, this is perhaps a testament to the steady erosion and the subsequent non-understanding of the concept of rights — which, in turn, is the result of the ideology and the ideas which have for decades reigned supreme in academia and across western culture.

The fatal error in the illustration above is this:

A complete non-understanding of — or, worse, deliberately ignoring — the supreme importance of the amount of money (i.e. capital) that it takes to start and run a large business, including but not limited to all the equipment required; and even more important than that: the role of ideas and the knowledge and learning that goes into starting and maintaining a business.

James Jerome Hill, Thomas Edison, John Rockefeller, Steve Jobs, Bill Gates, Jeff Bezos, Sam Walton, Ray Crock, and thousands upon thousands upon thousands of others could be appropriately cited here — and they should be: because they represent the principle precisely: they and all others like them, who have brought the entire world incalculable amounts in incalculable ways, are the total argument to the illustration above. Moreover, any employee of any business is free to raise her or his own capital and invest her or his own time and learning into a business of her or his own, and the division of labor and the specialization which creates the machines that the business-owner buys with the capital she’s raised is perfectly legitimate, and it is good.

But I suggest we make it more personal:

Let us say your mother, who was born into poverty, the second oldest in a family of ten, and who then worked very hard all her life, beginning as a young teenager, in restaurants and kitchens around southwestern Colorado — let us say that one day this mother of yours, after 53 years of working and learning her trade, of perfecting her pie-crusts and cinnamon rolls and donuts and biscuits and all the other recipes she learned and developed and invented, finally went for it: She mortgaged the home she did not yet fully own, and she raised other money, and she at last, at age 54, opened her own restaurant.

She thereafter worked tirelessly to make this restaurant succeed — and it did: People voluntarily and happily came into her establishment and paid their money to eat her pies and cinnamon rolls and donuts and biscuits and soups and everything else she’d learn to make and create, and which she daily worked so hard in producing anew. In turn, your mother, because her business was earning money, could afford to hire people — people who voluntarily agreed to work for her in exchange for a wage, and whom she taught the things she’d learned over the course of her life. And more than that: these employees liked your mother — they liked working for her, because she was fair, and they learned from her as she learned from them, and the money was good for everyone. The contractual relationship was mutually beneficial: because she hired them and they voluntarily agreed upon the wage she offered, and because the restaurant, which (let us never forget) was her idea and upon which she took all the financial risk and started up, and, armed with knowledge she’d accumulated and developed over four decades of her life, she worked tirelessly to build — knowledge and skill people willingly paid for — she succeeded.

Now imagine someone suddenly comes along and tells your mother that the employees who voluntarily agreed to work for her, and who do so by contractual arrangement, and who invested no capital in starting up this restaurant or buying any of the expensive equipment, and who can leave at any time — they by right have equal ownership in your mother’s business, merely by virtue of the fact that she hired them.

That is the horrifying error in the illustration above.

The exact same principle applies to any business, no matter the specific industry.

If you think that I’m in any way being hyperbolic, you’re perhaps forgetting your history lessons.

It’s called expropriation. It is a horrible injustice — and it’s flatly, unequivocally wrong.

It’s what everyone from Lenin, to Mao, to Castro, to Pol Pot, to Che, to Occupy Wall-Street, to many others, believe:

Egalitarianism by force.

Note the phrase “by force.” Under a system of freedom, anyone is allowed to create a business which is non-hierarchical and entirely employee-owned. Under the opposite system, however, the opposite thing is not true.

It is a very great irony indeed that socialism — which through the media-mob and especially the social-media-mob — has, in the last two decades especially, developed a reputation as being hip and trendy and young and even new and cool: a glittering new idea, this 21st century socialism. The irony is that it’s just the opposite, and the grim joke is on all the true-believers: because the ideas which underpin all socialist theory are embarrassingly outdated, antiquated, and old as hell. They’re also proven failures, mathematically doomed.

Not only are these ideas out-of-date, in fact: they’re out-of-touch — out-of-touch with even the most rudimentary economic laws — and it is a frightening thing when the leaders of the free world, behind whom the people have lined up in lockstep, do not have any inkling of these rudimentary laws (such as knowing that America absorbs and subsidizes much of the world’s socialized pharmaceuticals).

You have the natural-born right to grow wealthy, so long as you do not infringe upon the rights of others: your rights, my rights, everyone’s rights stop where another’s begin.

If you need any more convincing, please watch the following debate — it’s genuinely fascinating — in which the young, hip socialist (founder of Jacobin Magazine) is soundly defeated by a so-so defender of private-property and free-exchange. I urge you to take particular note of the young socialist’s absolute refusal to answer the question: if people voluntarily want to work for someone who starts up a business, and if these same people voluntarily agree to that business-owner’s offered wage, should they be free to do so? Should such business transactions be legal and allowed?

And the reason the hip socialist does not answer this question is that he doesn’t believe this business structure and this sort of voluntary transaction should be allowed — because he, like so many others, has bought into the dismally old and failed ideology of egalitarianism-by-force.

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James Buchanan: RIP

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James M. Buchanan, economist and Nobel Prize winner, died Wednesday, January 9th, 2013. He was 93. He was also among the most important economists of the 20th century:

“A founder and profound contributor to the discipline of public choice, the branch of economics that examines how governments actually make policies. Prior to his work, many economists focused on market failures, assuming that government actions would bring efficiency. Buchanan argued that self-interested individuals decided both private and public matters. Government failure was a likely outcome in response to market problems. After Buchanan, economists could not blithely assume that government had a solution for every problem on the public agenda.”

(Source)

James Buchanan, a brilliant polemicist, was the perfect antidote to the overwhelming trend of Keynesian economics that pervade world culture, but which are destined to fail. The following is a brief but irrefutable critique of central planning — a critique Buchanan wrote in 1982 and which Don Boudreaux described as “Word for word, the most insightful thing I’ve ever read”:

James M. Buchanan, “Order Defined in the Process of its Emergence”*

*A note stimulated by reading Norman Barry, “The Tradition of Spontaneous Order,” Literature of Liberty, V (Summer 1982), 7-58.

Norman Barry states, at one point in his essay, that the patterns of spontaneous order “appear to be a product of some omniscient designing mind” (p. 8). Almost everyone who has tried to explain the central principle of elementary economics has, at one time or another, made some similar statement. In making such statements, however, even the proponents-advocates of spontaneous order may have, inadvertently, “given the game away,” and, at the same time, made their didactic task more difficult.

I want to argue that the “order” of the market emerges only from the process of voluntary exchange among the participating individuals. The “order” is, itself, defined as the outcome of the process that generates it. The “it,” the allocation-distribution result, does not, and cannot, exist independently of the trading process. Absent this process, there is and can be no “order.”

What, then, does Barry mean (and others who make similar statements), when the order generated by market interaction is made comparable to that order which might emerge from an omniscient, designing single mind? If pushed on this question, economists would say that if the designer could somehow know the utility functions of all participants, along with the constraints, such a mind could, by fiat, duplicate precisely the results that would emerge from the process of market adjustment. By implication, individuals are presumed to carry around with them fully determined utility functions, and, in the market, they act always to maximize utilities subject to the constraints they confront. As I have noted elsewhere, however, in this presumed setting, there is no genuine choice behavior on the part of anyone. In this model of market process, the relative efficiency of institutional arrangements allowing for spontaneous adjustment stems solely from the informational aspects.

This emphasis is misleading. Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post (after the choices), in terms of “as if” functions that are maximized. But these “as if” functions are, themselves, generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange. The potential participants do not know until they enter the process what their own choices will be. From this it follows that it is logically impossible for an omniscient designer to know, unless, of course, we are to preclude individual freedom of will.

The point I seek to make in this note is at the same time simple and subtle. It reduces to the distinction between end-state and process criteria, between consequentialist and nonconsequentialist, teleological and deontological principles. Although they may not agree with my argument, philosophers should recognize and understand the distinction more readily than economists. In economics, even among many of those who remain strong advocates of market and market-like organization, the “efficiency” that such market arrangements produce is independently conceptualized. Market arrangements then become “means,” which may or may not be relatively best. Until and unless this teleological element is fully exorcised from basic economic theory, economists are likely to remain confused and their discourse confusing.

James M. Buchanan — 1919 – 2013 — RIP.





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Depression Before the Great Depression

Martin van Buren
The following is Chapter 21 of Leave Us Alone:

Before the Great Depression of the 1930’s and 1940’s, there were a number of depressions and recessions in this country, two of the most notable being the Panic of 1819 and the depression of 1837. In every instance prior to the Great Depression, the government policy was essentially a policy of hands-off.

Which was exactly as it should have been, since depressions are not caused by the private sector but by government interference in the marketplace, and only that.

What were the results of these hands-off policies prior to the Great Depression?

Answer: a drastic reduction in the amount of time the depression lasted.

Let us reiterate and emphasize that the only way to create wealth and jobs is through production.

That is why capitalism, true laissez-faire capitalism, is the only possible way to end an economic depression or recession.

Government spending will always compound problems. Why? Because government can only obtain money by taxing or borrowing or printing.

Always remember: government by definition is not an agency of production: it is a mechanism of force. That is its defining characteristic.

Thus the money that government takes away from the private sector depletes money that would otherwise have by choice (as opposed to by coercion) been saved or spent upon other things.

Private money, in other words, is diverted from the capital sector into the hands of bureaucrats. Which is exactly the thing that exacerbates and prolongs the preexisting economic problem.

It is so very easy to spend money that is not yours, money that you’re not fully accountable for, money that you obtain through force or the threat of force. Whereas, on the other hand, cutting governmental borrowing and spending and taxation and printing, it frees private money and private resources, which in the end is the one and only thing that can produce genuine wealth.

Printing more and more money to cover the cost of government spending will only ever bring inflation. It can happen in no other way.

Economic law cannot be abolished, just as mathematical law cannot be abolished, and for the exact same reasons. It doesn’t even matter how many politicians wish to abolish these economic laws, or how charismatic the masses find these bureaucrats: economic laws will not be subverted. One might just as well try turning back the tide with one’s own two hands.

Here, then, is how to end a recession or depression as swiftly as possible:

Slash government spending.

Slash taxes.

Stop the inflationary process that fiat money (i.e. money printing) inevitably brings.

Deregulate private enterprises so that the private sector can function – which is to say, free the market so that businesspeople can start up businesses, produce products, and create more and more jobs.

That’s all there is to it. And yet it’s a pill that bureaucrats simply cannot swallow.

The depression of 1837 was the biggest depression this country had seen prior to the Great Depression. The good President Martin Van Buren and his administration did exactly the right thing: they stepped back and let the market correct itself, which indeed it did, so that the depression lasted less than a year.

Martin Van Buren stated in his inaugural address that he advocated a policy of laissez faire.

Two months later, the United States experienced a banking crisis. President Van Buren stuck to his guns.

“All but six of the nation’s eight hundred or so banks had ceased redeeming their bank notes in gold or silver, but in his first message to Congress the President proclaimed that his policy would be one of governmental retrenchment” (Dr. Thomas Dilorenzo, How Capitalism Saved America, p. 158).

In President Van Buren’s own words:

“All communities are apt to look to government for too much, especially at periods of sudden embarrassment and distress…. All former attempts on the part of Government to assume management of domestic or foreign exchange have proved injurious.”

President Van Buren added that the solution is “a system founded on private interest, enterprise and competition, without the aid of legislative grants or regulations by law” (James D. Richardson, A Compilation of the Messages and Papers of the Presidents, New York: Bureau of National Literature, 1922).

It should be noted that Van Buren had to fight every step of the way against governmental intervention by such notable statists as Daniel Webster, Henry Clay, and the young Abraham Lincoln, all of whom remained statists until the day they died.

President Van Buren waged a tireless war for deregulation of finance, and he thereby created the Independent Treasury System in which all bank notes were redeemable in gold and silver.
In so doing, he brought this country the strongest and most stable monetary system it’s perhaps ever had.

President Van Buren also, in the words of historian Jeffrey Hummel, “thwarted all attempts to use economic depression as an excuse for expanding governments role.”

Conversely, interventionists like Henry Clay and his young protégé Abe Lincoln saw this economic downturn as a political opportunity to create pork-barrels for so-called internal improvements. Sound familiar?

These same statists also attempted to get the federal government to bail out the states, but President Van Buren fought them tooth-and-nail and eventually won; so that government spending actually fell during his term, and the debt remained steady, the free-market price system allowed to operate without intervention.

That is why the depression of 1837 lasted only one year.

That is why it never spun out of control, as today’s crisis has.

By refusing to pile up debt, President Van Buren thereby refused to drag out the economic downturn, which by necessity steals money from the private sector.

Compare that to, in the next chapter, the brief but by-no-means exhaustive list of extraordinarily destructive policies followed first by Herbert Hoover, who was an admirer of Soviet Russia and “believed that human manipulation could triumph over any alleged ‘laws’ of economics,” and then the even more brutal Franklin Delano Roosevelt, a discussion of whom will come in the chapter after the next.