The View From 1776
Thursday, July 22, 2004
The Economics of Liberal Values
Belief in the possibility and effectiveness of a planned economy is the central economic doctrine of liberal-socialism. Apart from the fact that history demonstrates this to be nonsense, it puts liberals into a theoretical contradiction.
The claimed theoretical foundation of a planned economy is that socialist intellectuals have discovered unchanging and inevitable laws of history that govern evolution in political and economic affairs. Because socialistic intellectuals have this knowledge, they regard themselves as legitimately empowered and entitled to control all of society?s economic affairs in order to assure proper social and economic evolution. This is what liberals call Progress.
The starting point is Jean-Jacques Rousseau?s theory that mankind?s original sin was invention of private property. This is coupled with his fellow Revolutionary philosophers? materialism. If humans have no nature other than their reactions to external, material working and living conditions, then it is theoretically possible for intellectual planners to structure a political society in which private property is eliminated and humans can be conditioned into perfect behavior.
At the same time, however, worshippers at the altar of socialism stoutly maintain that Christian morality is ignorant superstition, because Darwinian evolutionary doctrine proves all life forms to be the result of evolution by random chance, without pattern or design. There is no right or wrong, just the struggle for survival of the fittest. This obviously is the opposite of maintaining that there are unchanging laws governing political and social evolution.
At the beginning of the 20th century, the doctrine called Social Darwinism held that welfare state programs were thwarting the random processes of nature that were intended to assure survival of the fittest. It was said that welfare programs, by preventing nature from weeding out the less fit, reduced the quality of the human race. This view came from the eugenics movement, started by Charles Darwin?s cousin and fellow liberal-socialist, Sir Francis Galton, and used by fervent socialist Adolph Hitler in his German Master Race theories.
The more typical liberal-socialist position advocates an ever-expanding concept of the welfare state, motivated in some quarters by genuine concern for the well being of the less fortunate, and among politicians, by the desire to purchase more votes.
This view, in any case, puts liberals into the position of playing God. So far they haven?t played the role very well.
Massive evidence to the contrary is evident in the experiences of France, Germany, Sweden, Soviet Russia, China, Cuba, and all other countries that have adopted socialism as their national religion. Our own disastrous results in the 1960s and 1970s from President Johnson?s Great Society have to be swept under the rug to preserve the fiction.
A Short Explanation: Capitalism vs Socialism
Since the 1930s Depression, when the New Deal of President Franklin Roosevelt imposed the religion of socialism on the United States, liberal educators have labored to obscure the real nature of socialism. They have misinformed students that the United States doesn?t have a socialistic government. Socialism, they say, is an economic structure under which the government owns all means of production and distribution, which obviously is not the case in our economy.
First, government ownership of all means of production and distribution is not necessary; it?s simply one way to regulate economic activity. Government assumption of the right to regulate and plan is the critical element. Second, socialism is far more than an economic theory.
In support of the second point, take look at a quote from the late Bertrand Russell, one of the world?s most prominent spokesmen for socialism. He said of the World War I German socialist party:
?For Social Democracy is not a mere political party, nor even a mere economic theory; it is a complete self-contained philosophy of the world and of human development; it is, in a word, a religion and an ethic. To judge the work of Marx, or the aims and beliefs of his followers, from a narrow economic standpoint, is to overlook the whole body and spirit of their greatness.? (from Lecture One, “German Social Democracy”).
Socialism is a systematic religion with all the trappings of prophets (the French Revolutionary philosophers, Saint-Simon, Comte, Marx, and Darwin) sacred books (from Rousseau’s “Social Contract” to “The Communist Manifesto” and “On the Origin of Species”), saints (such as Franklin Roosevelt, Lyndon Johnson, and Teddy Kennedy), and a credo (social justice is equal distribution of wealth).
Capitalism is merely the economic aspect of government based on individualism, spiritual religion, and personal morality. It is one product of maximizing individual freedom and individual choice. To speak only of capitalism is to focus exclusively on the materialistic side-effects and to ignore the broader concept, which is the spiritually-oriented essence of individualism.
Speaking only about capitalism moves the battlefield onto terrain of the liberals’ choosing. Liberals then talk about socialism?s high moral purpose of ?caring? for the poor and denounce capitalism as a cold and heartless doctrine concerned only with greed and power. In the real world, this amounts to condemning a society based on individualism because it is more productive and provides a higher standard of living for all members of society than socialism can muster for even its highest ranks.
In any case, the easiest way to understand the economic theory of capitalism is to say that, under a constitutional government of laws (not regulations by bureaucrats) individuals are permitted to keep as much as they can save from the fruits of their labors and to invest their savings in any way they choose. Karl Marx called those savings Kapital, thus the term capitalism. Most people, having worked hard to save some money, are careful about where they invest it. The intermediaries in which they invest their savings ? banks, mutual funds, life insurance companies, and pension funds ? have a fiduciary duty to invest their depositors? funds in prudent business ventures that can be reasonably expected to grow and prosper.
The critical point is that the capital necessary to start and to run a business is separated from the business people. Businesses want money to expand. Lenders and investors want to lend money to businesses only when they can be reasonably sure of getting it repaid, plus a profit reflecting the risk incurred in lending and investing. Capitalism thus has a built-in regulator, a system of internal checks and balances.
To get money, businesses must first convince hard-eyed lenders and investors that a market exists for their products and that they can satisfy that market?s demands. Lenders and investors have strong incentives to avoid bad loans and investments: they lose their jobs and their own money if they don?t.
This is a central point of constitutional individualism that liberals apparently are unable to grasp. In liberal mythology, as expounded by Michael Moore and Al Franken, capital and business are lumped into one evil mass that is dominated by a single-minded lust to plunder society. They picture a massive power bloc called Big Business and The Rich who can do anything they want and can force you to buy their products, most of which liberals think are bad for you.
In reality, you as a consumer are the final boss of every business. If you and enough of your fellow consumers don?t like the company and don?t buy its products, the financial intermediaries stop funding it, and it goes out of business. Even under our partially socialized welfare state, this system has vastly out-performed more fully socialized economies. France and Germany, for example, are steadily falling behind the United States in productivity and standard of living.
Contrast this with full-fledged socialism. Businesses approved by the state-planners don?t have to compete with rival businesses to get funds. They get funding directly from the National State, in accordance with a master plan for the economy. Individuals play no role at all in the process, since their product preferences have no effect. Planners make all the decision about what is produced, how much of it, and where it is to be delivered. Grossly inefficient and outmoded business enterprises, for that reason, survive decade after decade in a socialist economy.
Remember that, at the outset of the Clinton administration, the announced intention of the Federal government was to establish national regulatory controls similar to those in Japan and Germany in order to channel corporate investments into areas that Federal planners believed to be appropriate for the future. Clinton’s advisors stated that American businessmen could not be relied upon to make socially desirable investments, because they were focused only on short term profits. The Japanese were lauded for having close coordination by government ministry regulators, the giant Japanese banks, and the huge Japanese trading and manufacturing corporations.
Shortly into the Clinton administration, the Japanese economy fell off the cliff and is only now, a decade later, slowly climbing back up. What became apparent was that “long-term social” planning was just a cover for disastrous investment policies dictated by government ministries and the colossally bad investment made by Japanese banks and businesses in response to ministry regulation.
From 1917 until 1987, liberals praised the Soviet Union as a society in which every aspect of life was better for all citizens than in capitalist countries. When the Soviet Union collapsed, all the world finally were compelled to swallow the plain facts: apart from military armaments, Soviet businesses were operating at below third-world levels of productivity and their depredations of the environment had been wrought on a colossal scale. The average Soviet citizen had a lower standard of living than the poorest of American welfare dependants in the inner cities. France and Germany, the other two large socialist states in Europe, today are sliding ever farther behind, as their welfare-state, union-controlled economies wither under the crushing burden of costs and regulations. Sweden, always held up as the perfect model of a non-despotic socialistic state, has fallen far behind the United States. According to its own government statistical studies, the average Swedish citizen in 1999 had a comparative income 40 percent lower than his American counterpart. Worse, productivity is so much lower in Sweden that the gap is increasing each year.
Under socialism, the product of your work effort is considered to be the collective property of society. You have no right as an individual to what you produce; everything goes into the common pot. That is what is meant by ?socialization? and by the slogan, ?From each according to ability, to each according to need.? Individuals are, in effect, no more than soldiers in an industrial army (that, by the way, is exactly the terminology that Franklin Roosevelt used in his first inaugural address announcing the imposition of socialistic state-planning in 1933). The State will decide what sorts of jobs, housing, clothing, food, education, and medical services are appropriate for you.
We in the United States are not yet quite at that point in “progress” toward socialism. But, if you listen to the “values” enunciated by liberal politicians, this is what you hear as their goals for society. This is the meaning of “give our country back to us.” This is what Social Security and Medicare are all about. This is the substance of government subsidies and welfare measures, as well as of Federal funding of education.
All the wealth and income that you produce is “socialized,” that is, it’s the common property of society, presumably for the greater good. As Senator Hillary Clinton recently told a gathering of the socialistic faithful, “We’re going to take things away from you on behalf of the common good.”
Your work product belongs to “the people,” whose voice is state-planners and social-engineers. You, presumably, are happy to work harder than your neighbor and to watch contentedly as he gets more of your work product than you do; that?s how we get equality in a socialist state. Planners? orientation is to restrict available choices of products and services, on the theory that a vast array of new products and choices wastes social resources. The nanny-state of liberalism reserves the prerogative of deciding what is good for you and what you will be permitted to do and to have. Anyway, they say, you would not want to buy any of that multitude of capitalist products if it weren?t for advertising by Big Businesses to manipulate and control your desires. The bureaucrats will protect you from them. No more advertising. No sugar-frosted flakes for you, just granola, whether you like it or not. No SUVs, only electric cars. At the same time, liberal environmentalists will make sure that there won?t be enough electric power production and transmission lines to keep your electric car?s battery charged. Power plants are bad for the environment, but the currently available alternative of cutting down all the trees to burn as fire wood isn’t?
The good part is that whatever the planners and social-engineers decide to make available will be available to anyone who claims that he needs it. Unfortunately, there will be far less of it available than in a capitalist society. The equality of liberal-socialism means that we must all be equally poor. You will always have to stand in line for groceries and wait months for medical care, as Canadians now do under their vaunted National Health Service. The only people not equally deprived are the intellectual planners, who form an elite corps at the top of the power heap.
This according to socialist theory, is the definition of happiness. This what they called freedom from oppression. Power is no longer in the hands of the wealthy, it’s in the hands of Big Brother, who truly loves you.
The socialist vision is of a static world in which it is their right to rearrange income, wealth, and goods and services to make everybody as equal as possible. Because socialistic planning theory relies on centralized regulatory control of everything, it makes no allowance for the dynamism of economic and scientific progress in the real world. Because it ignores the inborn human urge to innovate and to pursue personal goals, impulses that upset efforts to maintain equal distribution of income and wealth, liberal-socialism shuts off society?s source of social and economic progress. Though socialists call themselves progressives, in reality they are regressives, as the third-rate performance of socialist economies everywhere has demonstrated.
You may object that we in the United States are not living in a socialist economy. We have relative freedom of choice. It’s true that, compared to more thoroughly socialist economies, such as France, Germany, China, Russia, and Cuba, we are relatively free. But it’s also true that, compared to the individual freedoms that existed in 1776, and even as late as the 1920s, we have travelled a long way down what Friedrich Hayek called “The Road to Serfdom.”
Liberal proposals, for instance, to force American business to use only employees in the continental United States and to prevent outsourcing jobs is the epitome of socialistic, nationalistic self-sufficiency, the hallmark of Hitler’s Nazi socialism.
If liberal economic values are good, then bobbing for maggots in a cesspool is a medically-recommendable health practice.