Monday 8 November 2010
A socialist state is defined as one in which the economy and much of one’s personal life is centrally planned, meaning that the rulers and their bureaucracy decide what is to be produced, which lines of production are to receive investment and which are not, how much is to be consumed and invested, etc. (Irrespective of what some socialists assert it is impossible to impose central planning without controlling the people.)
Socialism appears in basically two forms: formal and informal. The first one maintains the appearance of capitalism while all economic decision-making is in the hands of the state. In this form so-called capitalists are in reality agents of the government who are valued for their knowledge, expertise and experience. Nevertheless, their position in society is determined by how well they serve the state. (In Nazi Germany capitalists were renamed betriebsfuhrers.)
This type of socialism is called fascism. If this situation lasts long enough even the facade of capitalism state will disappear as the old capitalists die out — taking their expertise with them — and their places are taken by bureaucrats. The second kind can be called Soviet-style socialism in which state control of the economy is direct and there is no pretence at maintaining a capitalist order. As we can see, there is no fundamental economic difference between the ‘two’ structures. Ultimately, any basic difference will boil down to the degree with which one regime is more or less brutal than its competitor.
From the day he was born Obama has been surrounded by socialists. He admits that when he went to university he chose friends and lecturers on the basis of their leftwing ideology. This is not the mark of an enquiring minds, one that is introspective or questioning. He is the child of socialist thought and it is part of his DNA. Obama’s view of the world consists entirely of leftwing myths and reality be damned. It’s a world where capitalism is the criminal and not the saviour and where bloody Muslim conquests never happened. It is the world of a profoundly ignorant and politically bigoted man.
Although there is no way that a sudden Soviet-style takeover of the US economy could happen a fascist approach is all too possible. This is one where a piecemeal takeover occurs as the state gradually assumes control — using one crisis after another as an excuse — of vital sectors of the economy and appoints “czars” to a administer them.
Obama’s takeover of much of the car industry, his attacks on insurance companies, his plans to basically takeover the energy industry, his legislative effort to nationalise the health industry, etc., a reveal him to be a dogmatic leftist. But none of this would be possible without the support of Democrats.
In 2008 Democrat congressmen Maxine Waters and Maurice Hinchey1 revealed the extent of socialism thinking among congressional Democrats when they called for the nationalization of the oil companies. According to the ideology of this socialist duo nationalization would give the state the power of controlling prices. In other words, they would repeal the economic law of supply and demand. The ‘thinking’ of these ignorant ideologues mirrors the words of S. G. Strumilin, a Stalinist ‘economist’, who declared:
Our task is not to study economics but to change it. We are bound by no laws
Even though socialism has been a social and economic disaster whenever it has been imposed2 the likes of Waters and Hinchey still call for the socialisation of the US economy. And when they made this call not a single Democrat — including Obama — brought them to book on it. And why should they? This is the party that has blocked the building of refineries for more than 30 years. This is the same party that at this very moment is doing everything it can to prevent an increase in the domestic production of oil. It is the same party that has stymied nuclear power. And it is the party that Obama proudly boasted will cause “electricity prices [to] skyrocket”.
What is striking about the Democrats is the number of cultists it now attracts. One of the chief characteristic of a cult is its imperviousness to counterfactual evidence. Those who have joined the cult will simply refuse to believe any evidence that refutes its doctrine. (See L. Festenger, H. W. Riecken & S. Schachter, When Prophecy Fails, Harper Torchbooks, 1966). This behaviour fits Waters, Hinchey, Obama, Pelosi and their media toadies down to a ‘T’.
When forced to defend their nonsense — which doesn’t happen often enough — socialists rationalise the collapse of communism by either denying that the Soviet Union was a socialist state or that their socialist utopia will not repeat the planning mistakes of the Soviet Union. In other words, a socialist must be in a permanent state of denial. Waters and Maurice Hinchey are excellent examples of this observation.
Informed opinion understands that the collapse of communism fully revealed the contradictions, gross errors, tragedy and unimaginable waste that attempts at central planning created. These enormous losses and mistakes were not caused by planning errors, bureaucratic inefficiency, lack of enthusiasm or even ingenuity. They were caused by the sheer impossibility of the task.
In a seminal essay (Economic Calculation in a Socialist Commonwealth, 1920, Augustus M. Kelley Publishers 1975) Professor Ludwig von Misses explained why central economic planning (meaning socialism) would always fail. At the heart of his critique is his insight that without money prices it is impossible to allocate resources efficiently. The Result is economic chaos. His insights were extended by Professor von Hayek’s work3. The historic and economic case against central planning is now conclusive. (Also see David Ramsay Steele’s From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation, Open Court, 1992).
A great many lessons of economics and history are forever being forgotten and then, after much misery, relearned. Regrettably, the tragic lesson that is central planning has evidently been rejected by the socialist likes Waters, Hinchey and Obama. Their absurd belief in the power of the state, i.e., politicians like themselves, to successfully do the work of the market would be comical if it were not tragic.
Driven by a powerful mixture of statist ideology, a staggering ignorance of economics and economic history, and abundant arrogance Obama’s ideological soul mates were probably licking their lips at the thought of being able to use the coercive power of the state to take over the oil companies, irrespective of the social, economic and political consequences.
(One would have to be particularly naïve to think that people like this would be easily satisfied. To them, nationalising the oil companies would be the first step in their inordinate vision of controlling the whole of the United States massive economy).
The arrogance of socialists is such that they believe they can successfully substitute ‘rational economic policies’ for the “anarchy of production” that is capitalism. In their opinion government insights, the needs of vested interests and bureaucratic direction will eliminate the market’s alleged failures and its “exploitation” of labour by capital. The result of their hubris is that the complex phenomenon that the market spontaneously, continuously and successfully deals with would be subordinated to the interests of the state, meaning themselves.
How many people — excluding that proportion of Democrats dumb enough to support Obama’s socialist agenda — really imagine that any bureaucrat, politician or academic could have created Silicon Valley? Entrepreneurs look to what can be. Planners look to what is. Hayek aptly called the belief in state planning the “fatal conceit”. The emphasis should be on fatal. Moreover, such a state would have to suppress criticism of its actions. The last thing socialists want is an informed citizenry. Needless to say, Obama and his allies are deeply hostile to free speech hence their efforts to silence critics by reintroducing the infamous “fairness doctrine”4 and continually demonising their critics.
Of course, when socialists argue about a “plan” they are really arguing about whose “plan”. As von Mises caustically observed, would-be economic planners are always arguing over whose plan is best. That a vital function of the market is to coordinate plans is something that never seems to occur to these one-size-fits-all ignoramuses who would wreck the US economy if given half a chance.
If the Democratic Party is not fully socialist, it doesn’t have far to go.
The following books are essential reading for those who are interest in learning how fascist economies operated.
Günter Reimann, The Vampire Economy: Doing Business Under Fascism, New York: Vanguard Press, 1939.
R. J. Overy, War and Economy in the Third Reich, Clarendon Press, 1995.
Adam Tooze, The Wages of Destruction, Penguin Books, 2006
1Hinchey is a member of the socialist Progressive Caucus. Another power cult that thinks it can abolish economics and successfully impose a socialist state on Americans. Waters is a member of a number of socialist cults, one of which is the <a href=>Campaign for America’s Future</a>. Its co-director is Robert Borosage who was a pro-Soviet activist employed by the Institute of policy Studies during the Cold War. The IPS also hosted KGB officers.
2 Countries like France or Sweden were never actually socialist. They were strongly interventionist states. Unfortunately many conservatives fail to distinguish between outright socialism and interventionism.
3Unfortunately Hayek muddied the waters somewhat by reducing the ‘planning problem’ to one of information. Mises stressed that what mattered is market money prices. These could only emerge when the institution of private property exists. From this it followed that socialist states do not have prices: they have price edicts.
4Naturally, the rules would not apply to the leftwing media.
Gerard Jackson is Brookesnews’ economics editor