Showing posts with label socialism. Show all posts
Showing posts with label socialism. Show all posts
Thursday, 7 June 2018
Monday, 3 July 2017
Three Psychological Stages of Political History
I have a wacky theory about the history of ideas (or history proper as Mises would consider it.) When a child is born as far as s/he is concerned the parents are God. They are the authority on what is correct and what is false, they are also morally absolute. Their defining attitude towards their parents is a big "yes." Even if the parents are cruel or abusive, it must be me at fault not them - since they are the authority. At some point between 2 and 7, then later again in the teens, the youngster begins to assert their individuality by rebelling against the parent, the more the parent tries to apply authority and demand certain behaviours, the more the child will rebel against this authority with a resounding "no!" The child feels empowered by making the parents feel out of control emotionally, s/he asserts their dominance over them because the parents want compliance, and the child has the power to mete it out or not - causing the parents an easy time or grief. If the response to this "no!" is overly authoritarian or permissive and lacks engaging with reason and appropriate boundaries bad patterns can be set for life. The child can become compliant and later susceptible to peer pressure as he gets stuck in "Yes" or overly rebellious (even to his/her own detriment) and stuck in "No." From this point on any instructions or even mere advice from others - sometimes even from oneself - result in the involuntary impulse to rebel, stick heels in, and refuse to comply even if the request is in the child-now-adult's interests. This can create tremendous problems including a lack of self-discipline and relationship tumults. A wise parent manages to avoids unwittingly molding this kind of character by creating opportunities for his children to say no and rebel to safe and relatively trivial things. For example s/he does might not tell them not to smoke, know that if s/he does they will smoke. Perhaps they will be told not to climb that tree or to play in the muck instead, something relatively innocuous.
A mature person is able to say "yes" or "no". Without the ability to say "no" a "yes" is utterly meaningless because it does not come from the person's individuality. A "no" without consideration is also a counterfeit individuality, it makes one feel like they are having a say but actually they are purely governed by involuntary impulses as sure as those of the "yes man" or people-pleaser. The new man says "yes" to life; and in that he in many ways seems similar to the primordial man, but there is a critical difference - his yes to life is out of fully integrating all previous stages of development rather than an arrested development.
It's my assertion that maybe we have seen a similar evolution in the political sphere. Classic Liberalism arose as a response to a form of conservatism that was very much a "yes" to authority; the authority of the state, aristocracy, church, powers that be. The authorities of the time were very puritanical and their morals and social norms severely restricted the freedoms of people in terms of whom they could marry (usually whom their parents decided) what they could do for a living (what their parents did) what they could own (most of it belonged to their lord, many could not own land) what they could put in their body (moralizations about alcohol) what they should learn and read (mostly the bible) how they could pray (no pagan gods, no Judaism, etc.) and so forth. Now the arrival of liberalism was a resounding "No!" to authority. In a Hegelian fashion it formed an antithesis to the prevailing mores of the time. It continued to develop into other rebellious schools of thought that claimed to rebel against the prevailing authorities: socialism, marxism, communist, progressivism, &c. and reached its hedonistic peak in the 60s with the free love movement and all the big government and welfare programs - but it went to far too fast for a first attempt and soon there was a reaction against it which turned the tide back for a while. After the 80s it came back swinging though and has reached its second crescendo today with the social justice warrior movement. This has become the new thesis and it required an antithesis to counteract it. Clearly I believe that is libertarianism. It is the new man who integrates all previous stages of development in his evolution. In many ways it seems to harken back to certain "conservative" concepts which liberalism reacted against, but in reality the context of the acceptance of certain aspects of authority and tradition is now based on reason ("they have been shown empirically to work better than all that libertinism") rather than authority alone.
What do you think of my thesis? Are you the new wo/man?
A mature person is able to say "yes" or "no". Without the ability to say "no" a "yes" is utterly meaningless because it does not come from the person's individuality. A "no" without consideration is also a counterfeit individuality, it makes one feel like they are having a say but actually they are purely governed by involuntary impulses as sure as those of the "yes man" or people-pleaser. The new man says "yes" to life; and in that he in many ways seems similar to the primordial man, but there is a critical difference - his yes to life is out of fully integrating all previous stages of development rather than an arrested development.
It's my assertion that maybe we have seen a similar evolution in the political sphere. Classic Liberalism arose as a response to a form of conservatism that was very much a "yes" to authority; the authority of the state, aristocracy, church, powers that be. The authorities of the time were very puritanical and their morals and social norms severely restricted the freedoms of people in terms of whom they could marry (usually whom their parents decided) what they could do for a living (what their parents did) what they could own (most of it belonged to their lord, many could not own land) what they could put in their body (moralizations about alcohol) what they should learn and read (mostly the bible) how they could pray (no pagan gods, no Judaism, etc.) and so forth. Now the arrival of liberalism was a resounding "No!" to authority. In a Hegelian fashion it formed an antithesis to the prevailing mores of the time. It continued to develop into other rebellious schools of thought that claimed to rebel against the prevailing authorities: socialism, marxism, communist, progressivism, &c. and reached its hedonistic peak in the 60s with the free love movement and all the big government and welfare programs - but it went to far too fast for a first attempt and soon there was a reaction against it which turned the tide back for a while. After the 80s it came back swinging though and has reached its second crescendo today with the social justice warrior movement. This has become the new thesis and it required an antithesis to counteract it. Clearly I believe that is libertarianism. It is the new man who integrates all previous stages of development in his evolution. In many ways it seems to harken back to certain "conservative" concepts which liberalism reacted against, but in reality the context of the acceptance of certain aspects of authority and tradition is now based on reason ("they have been shown empirically to work better than all that libertinism") rather than authority alone.
What do you think of my thesis? Are you the new wo/man?
Saturday, 18 March 2017
10 Ways The Profit Motive Drives Sustainability.
Time for some heresy today.
Most people are given to thinking that the profit motive in a capitalist economy can only drive environmental destruction, but I am here to say that the profit motive has been acting as a massive bulwark against the kind of environmental destruction which was seen in the communist nations during the 20th century which far outstripped the damage done to the environment here in the west.
The idea that the desire for profit is ripping apart the environment seems so intuitive that you'd think it were beyond dispute. People take resources from the earth to make products and draw a profit, right? And because corporations are only motivated by profit they will destroy the environment in pursuit of profit, won't they? Obviously.
Well, this is not the full story, lets investigate what is unseen.
1) A forest, fishery or grazing land is a renewable resource if properly managed. Keeping it in pristine condition will not only preserve (or even increases) the value of the land but will allow the owner to profit from it indefinitely. Laying waste to it for a quick buck would be like slaying a goose which laid golden eggs for a single dinner. This is why loggeries that are privately owned are handled sustainable whereas when land is leased out to firms by the government they usually mistreat the land for short term profit and leave the taxpayer to pick up the tab. Renters don't take as good care of their stuff as owners do.
2) Companies are always trying to decrease the cost of their inputs because the lower their costs of production the higher their margin of profit. This gives firms and active incentive to constantly find innovative ways of stretching the same amount of resources further. An example of this, often cited, is that Coca Cola have made their cans thinner than they used to be. There must be dozens of others. There is no comparable incentive to save resources by decreasing inputs in a centrally planned economy.
3) Those with the knowledge of how to stretch limited resources the furthest are the most likely to acquire them on a free market because they are able to pay more to acquire them owing to their larger projected profit. This will broadly lead to copper mines and oil wells ending up in the hands of the most competent custodians; so long as the state is not in charge of who gets what, a more competent owner will be able to buy-out a less competent owner.
4) On a free market the price system values resource inputs in proportion to how scarce they are and how many people want to use them. Therefore the most environmentally friendly way to produce something also becomes the cheapest. As resources become more scare the laws of supply and demand push the price of those resources up driving innovation to find alternatives and use those which are still left better - the best alternative being a renewable alternative. There is no comparable defense against the overuse of resources under socialism where the central planners can continue to dish out the goods to cronies long after they have become scarce. (In fact the only defense against this is the potential killing the central planners can make by selling those scarce resources to capitalist economies that actually have a price system.)
6) On a free market the mechanism of profit and loss minimises the production of goods and services that no one wants limiting waste. In a planned economy central planners have to best-guess what people will want. They will often guess wrong and lots of production will simply go to waste.
7) Because consumers have to choose what products to buy with their limited resources on the free market they have to be discerning. Products that are more intensive in resource use are more expensive, meaning someone who buys them has less to spend on something else. Because resources are held privately rather than in common there is no "tragedy of the commons" where everyone has the incentive to take as much as they can in the short term to stop other people from taking it first.
8) On a free market, much of what we consider waste could be considered a free resource to one entrepreneur or another. Food waste could be slop for livestock; aluminium and tin cans, glass bottles, and many electronics can be reused. Were there a market in trash disposal, rather than central planning, people would be charged for waste in proportion to how expensive that waste was to dispose of. Perhaps they would even be remunerated for waste to the extent that that waste could be reused. The companies who were most effective at recycling and reprocessing waste in an environmentally friendly way would be able to pay the most to acquire that waste. This would change the whole face of the economy by presenting a massive incentive for companies to make their goods easy to recycle, reuse or repair as consumers faced real financial incentives for choosing sustainable purchases, Non-biodegradable forms of excess packaging and would probably be eliminated as consumers would favour items that they would not be charged for the disposal of. Planned obsolescence would also be heavily discouraged by a system where people had to pay not only the cost of buying goods but disposing of them as well.
9) The profit motive provides an incentive for companies to devise ways to turn their waste into useful biproducts that people can actually use. For example, Standard Oil invented thousands of biproducts such as paraffin wax, lubricating oils, chewing gum, and fertilizer out of resources that other companies were simply wasting. This incentive would also be far more pronounced of a true free market where companies had to pay for waste, not in the abstract, but directly in proportion to how difficult it was to dispose of - and potentially get paid for waste in proportion to how valuable it was to people who could recycle it.
10) The profit motive is constantly driving capitalists to creating innovations which are better for the environment and more sustainable than previous technologies. Memory sticks invented by capitalists have saved billions of trees. A 15 watt fluorescent LED light provides the same luminosity as a 60-watt incandescent bulb. Burgers grown in a lab from cloned meat will be solving our factory farming crises by reducing the massive ecological impact of meat production. The average smart phone has a camera, radio, television, sound recorder, music player, gps, flashlight, board and card games, computer games, video player, maps, encyclopedia, dictionary, thesaurus, access to textbooks, compass, photo album, thermometer, scientific calculator, dematerialising the need for the production of many goods and saving the environment.
A recent innovation in progress designed with the third world in mind is high-tech toilets that burn feces for energy and flash evaporate urine rendering everything sterile. No pipes are required under the floor, no leach field under the lawn, no sewer systems required to run down the block. These may have been invented decades and decades ago had the state not been responsible for getting rid of our sewage; removing the necessity to innovate. Rather than waste anything, these toilets give back packets of urea to be used as fertilizer, table salt, volumes of freshwater, and enough power to charge a mobile phone. If users can sell the energy back into the grid they will literally be being paid to poop!
So, on that note, allow me to end by saying: I’m not shitting you when I say the free market is good for the environment.
There is reams more to say on this topic and I intend to expand upon it in my book The Free Market Hippy. If you would like to be notified when it is finished download my previous book free and you will automatically be informed when it is available.
Most people are given to thinking that the profit motive in a capitalist economy can only drive environmental destruction, but I am here to say that the profit motive has been acting as a massive bulwark against the kind of environmental destruction which was seen in the communist nations during the 20th century which far outstripped the damage done to the environment here in the west.
The idea that the desire for profit is ripping apart the environment seems so intuitive that you'd think it were beyond dispute. People take resources from the earth to make products and draw a profit, right? And because corporations are only motivated by profit they will destroy the environment in pursuit of profit, won't they? Obviously.
Well, this is not the full story, lets investigate what is unseen.
1) A forest, fishery or grazing land is a renewable resource if properly managed. Keeping it in pristine condition will not only preserve (or even increases) the value of the land but will allow the owner to profit from it indefinitely. Laying waste to it for a quick buck would be like slaying a goose which laid golden eggs for a single dinner. This is why loggeries that are privately owned are handled sustainable whereas when land is leased out to firms by the government they usually mistreat the land for short term profit and leave the taxpayer to pick up the tab. Renters don't take as good care of their stuff as owners do.
2) Companies are always trying to decrease the cost of their inputs because the lower their costs of production the higher their margin of profit. This gives firms and active incentive to constantly find innovative ways of stretching the same amount of resources further. An example of this, often cited, is that Coca Cola have made their cans thinner than they used to be. There must be dozens of others. There is no comparable incentive to save resources by decreasing inputs in a centrally planned economy.
3) Those with the knowledge of how to stretch limited resources the furthest are the most likely to acquire them on a free market because they are able to pay more to acquire them owing to their larger projected profit. This will broadly lead to copper mines and oil wells ending up in the hands of the most competent custodians; so long as the state is not in charge of who gets what, a more competent owner will be able to buy-out a less competent owner.
4) On a free market the price system values resource inputs in proportion to how scarce they are and how many people want to use them. Therefore the most environmentally friendly way to produce something also becomes the cheapest. As resources become more scare the laws of supply and demand push the price of those resources up driving innovation to find alternatives and use those which are still left better - the best alternative being a renewable alternative. There is no comparable defense against the overuse of resources under socialism where the central planners can continue to dish out the goods to cronies long after they have become scarce. (In fact the only defense against this is the potential killing the central planners can make by selling those scarce resources to capitalist economies that actually have a price system.)
6) On a free market the mechanism of profit and loss minimises the production of goods and services that no one wants limiting waste. In a planned economy central planners have to best-guess what people will want. They will often guess wrong and lots of production will simply go to waste.
7) Because consumers have to choose what products to buy with their limited resources on the free market they have to be discerning. Products that are more intensive in resource use are more expensive, meaning someone who buys them has less to spend on something else. Because resources are held privately rather than in common there is no "tragedy of the commons" where everyone has the incentive to take as much as they can in the short term to stop other people from taking it first.
8) On a free market, much of what we consider waste could be considered a free resource to one entrepreneur or another. Food waste could be slop for livestock; aluminium and tin cans, glass bottles, and many electronics can be reused. Were there a market in trash disposal, rather than central planning, people would be charged for waste in proportion to how expensive that waste was to dispose of. Perhaps they would even be remunerated for waste to the extent that that waste could be reused. The companies who were most effective at recycling and reprocessing waste in an environmentally friendly way would be able to pay the most to acquire that waste. This would change the whole face of the economy by presenting a massive incentive for companies to make their goods easy to recycle, reuse or repair as consumers faced real financial incentives for choosing sustainable purchases, Non-biodegradable forms of excess packaging and would probably be eliminated as consumers would favour items that they would not be charged for the disposal of. Planned obsolescence would also be heavily discouraged by a system where people had to pay not only the cost of buying goods but disposing of them as well.
9) The profit motive provides an incentive for companies to devise ways to turn their waste into useful biproducts that people can actually use. For example, Standard Oil invented thousands of biproducts such as paraffin wax, lubricating oils, chewing gum, and fertilizer out of resources that other companies were simply wasting. This incentive would also be far more pronounced of a true free market where companies had to pay for waste, not in the abstract, but directly in proportion to how difficult it was to dispose of - and potentially get paid for waste in proportion to how valuable it was to people who could recycle it.
10) The profit motive is constantly driving capitalists to creating innovations which are better for the environment and more sustainable than previous technologies. Memory sticks invented by capitalists have saved billions of trees. A 15 watt fluorescent LED light provides the same luminosity as a 60-watt incandescent bulb. Burgers grown in a lab from cloned meat will be solving our factory farming crises by reducing the massive ecological impact of meat production. The average smart phone has a camera, radio, television, sound recorder, music player, gps, flashlight, board and card games, computer games, video player, maps, encyclopedia, dictionary, thesaurus, access to textbooks, compass, photo album, thermometer, scientific calculator, dematerialising the need for the production of many goods and saving the environment.
A recent innovation in progress designed with the third world in mind is high-tech toilets that burn feces for energy and flash evaporate urine rendering everything sterile. No pipes are required under the floor, no leach field under the lawn, no sewer systems required to run down the block. These may have been invented decades and decades ago had the state not been responsible for getting rid of our sewage; removing the necessity to innovate. Rather than waste anything, these toilets give back packets of urea to be used as fertilizer, table salt, volumes of freshwater, and enough power to charge a mobile phone. If users can sell the energy back into the grid they will literally be being paid to poop!
So, on that note, allow me to end by saying: I’m not shitting you when I say the free market is good for the environment.
Monday, 6 March 2017
What we can Learn about Economics from Scandinavia
Lately there has been a lot of talk online about how successful the Scandinavian countries are, and their success has been put down to Democratic Socialist policies like a large welfare state, high taxes, and high public spending. We are encouraged to view the example set by Denmark and Sweden as a model for our nation, and indeed there is a lot to learn about economics from the examples they have set. The nature of those lessons, however, may come to many as a surprise.
The Scandinavian countries are successful, but not for the reasons most people think they are. Each of them were already wealthy, egalitarian, equitable and successful nations long before they adopted any socialist policies whatsoever. For most of the 20th century they had more free market economies than the other countries in Europe; and because they largely stayed out the two World Wars they didn't have to waste huge sums of money on weapons, paying forces, and then replacing destroyed infrastructure in the aftermath.
In many ways the Scandinavian nations are still far more free market than the USA, Britain or France are. Their economies are far less regulated, they do not demand occupational licenses to practice in hundreds of professions that require them in some states of The US (in Finland you don't even need a license to practice law, yet people manage to hire competent lawyers and the cost is far lower), it's easier to start a business, to hire people - and fire them, and there is a lot less red tape and forms to fill in. We have certainly not been asked to heed the example of the Nordic countries in these respects, in fact these policies have been fervently opposed by the champions of The Scandinavian Model in Europe and America.
What's more, the Scandinavian countries were all far more successful before they adopted any socialist policies at all. Sweden enjoyed the highest per-capita income growth in the entire world from 1870 to 1950. It was from the 1970s onward that the Scandinavian nations began their experiments in Democratic Socialism and they remained somewhat successful during this period but less so than previously. These nations built their welfare states on the wealth created by free markets; and in so doing began to reverse their success.
All the Scandinavian countries are market economies. Danish Prime Minister Lars Løkke Rasmussen finally got so tired of media claims to the contrary that he exclaimed: "I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy." Sweden, however, did attempt the experiment of centrally planning their economy like The Soviet Union - and with disastrous consequences.
The Case of Sweden
Socialism nearly destroyed Sweden. Swedish government spending rose from a relatively modest 20% of GDP to 50% between 1950 and 1975. Taxes, public debt, and the number of government employees all expanded massively. By the 1980s the destructive effects of the Swedish experiment with socialism was completely apparent to everyone and the government had to attempt to jump-start the economy with a massive expansion of credit which resulted in economic chaos: stock market and real estate bubbles burst, and interest rates were pushed up to 500 percent by the Swedish central bank. By 1990 Sweden had fallen from the fourth place in international income comparisons to twentieth. The decline led to a revolt against the socialist regime. More economically liberal politicians sharply reduced income tax rates, abolished currency controls, deregulated bank lending, privatized several government enterprises, deregulated the retail, telecommunications and airline industries; and implemented deep government spending cuts. Sweden began to recover and is doing a lot better now (as I am sure you have all heard.) But Sweden's recovery was all thanks to free markets - and no thanks to socialism.
Despite Sweden's economic recovery after the mid-1990s it is still poorer than Mississippi, the lowest income state in the USA. A 2009 study by the Swedish Economic Association discovered that the Swedish economy had failed to create any new jobs in the private sector on net between 1950 and 2005. The actual unemployment rate in Sweden is still probably at least three times higher than the official government figures because many Swedes live off government sick benefit and early retirement and are not counted. Thousands of Swedes are paid by the government to participate in "labor market political activities" whose only purpose is to reduce the official unemployment rate. To speed along their recovery, Sweden has been privitising portions of it's healthcare, social security, and education sectors in an effort to heal them up from the incentives entailed in public ownership which always destroys the quality of services while ratcheting up the cost of provision. Private health insurance is booming in Sweden because of the inevitable rationing, shortages and long wait times which their highly socialised healthcare system has lead to. It may seem shocking but in Sweden the government instructed doctors to "prioritize" patients according to their status as future taxpayers. The elderly are at the bottom of that list since they are mostly retired and paying relatively little in taxes while receiving large shares of government services. It's a distressingly callous approach that can only make cool sense from the perspective of planners seeking to minimize expenses out of the public purse which different interests are all angling for. (So much for socialism doing away with competition.)
Sweden's experiment with socialism also destroyed its history of innovation. The great companies that came out of Sweden such Lidl, H&M, Volvo, Saab, AstraZeneca, Electrolux and Ericsson were all founded in Sweden's free market period. After 1970, the establishment of new firms dropped significantly and many enterprises now survive purely on government contracts out of the public pocket rather than by indication that they are producing what consumers actually want. It was during the free market period when Sweden produced Alfred Nobel, inventor of dynamite, Sven Wingquist inventor of the self-aligning ball bearing, Gustaf Dalen who founded the gas company AGA, and Baltazar von Platen, who invented the gas-absorption refrigerator.
The Case of Denmark
Denmark, like the other Scandinavian nations, may have a large welfare state and public sector, but it also has a far freer economy than the US and many other western nations as I have mentioned. Denmark is only one place below America on the Economic Freedom Index and was previously one rank above it. It is the most free market of all the Scandinavian countries.
This does not mean Denmark has found the right balance, having "the best of both worlds" though.
In Denmark more than a quarter of the working-age population (aged 18-66) is on the government dole; for every one hundred persons employed full time, there are about sixty working age on welfare. In many regions less than half of people are employed. More than 1.5 million people live full-time on taxpayer-funded handouts; the other 4 million people in the country have to pay a marginal income tax rate of 55.6% (on incomes of 55,000$ and above), a 25% national sales tax, and a wide variety of other taxes. Danish economist Per Henrik Hansen estimated taxes in Denmark approach 70% of income when all is considered. It has been claimed that Denmark has a more regressive tax system than the US where a far higher percentage of the taxes fall on the rich.
It might come to a surprise to many on the left who are championing the Danish model (such as Bernie Sanders and his supporters) to discover out that many Danish voters are turning out to vote for more free market politicians, and even the Democratic Socialist Party and those further to the left are in agreement that this is a problem. The classic liberal (free market) Venstre Party was in power in a coalition with the Conservative People's Party from 2001 to 2011 and was elected on its own in 2015. They have gained massive support in making free market reforms to the welfare state and are carrying them out right now! The platform has cross-party support.
Denmark is following the example that Sweden has been laying out since the 1990s. They are undergoing massive welfare reforms because they acknowledge their huge welfare state has created massive dependency and started to shift their culture away from personal responsibility and the ancient hard work ethic they had inherited. This calls the final death knell of empiricism for Socialism as an ideology - but how long before the left will heed the sound?
The Real Economic Lesson to be taken from Scandinavia
The real lesson to be taken from Scandinavia is that socialism wrecks economies and culture. It erodes the work ethic of a nation over generations and it takes a long time for free markets to restore them to prosperity afterwards. In Scandinavia, these policies have been a disaster only mitigated by having economies that are relatively unregulated compared to Europe and America.
New Zealand also flirted with all the policies that Bernie Sanders and supporters want to copy from Scandinavia up until the 1990s as well. It didn't do much for them at all. Since the 1990s New Zealand liberalised their economy and have been far more prosperous; Australia are following suit. Hong Kong was poorer than most countries in Africa and has become one of the richest countries in the world per head in a generation thanks to free market policies. Singapore has also proven itself to be a modern economic miracle. None of the countries which adopted socialism, nor any of the highly statist economies in the developing world, have had results that compare to those of Hong Kong or Singapore in the same period - and many of them remain devastated.
Free markets have helped the poor more than anyone else as they take people out of the most abject poverty and dependency at once, giving them control over their own destiny rather than having to rely on unreliable government to hand them alms. Markets also create the wealth necessary to look after those who remain poor, which is why most of the world's poor would rather be poor in a market economy than a highly socialised one with big government.
We can learn from Sweden and Denmark, yes. We can learn that we don't need miles of regulations or occupational licensing in up to 800 professions which drive up the price of services and stop young people from getting jobs. We can learn that when it's easier to start a business, hire and fire people, and to cut through red tape that brings prosperity. We can learn that high taxes and high spending stunt rather than grow an economy. We can learn that well-intentioned welfarist policies do more to foster dependency than to help the poor in the long term. That is the hardest pill to swallow.
What we can learn from Scandinavia is what Sweden and Denmark have already learned from their experiments with socialism. Hopefully we will learn from them without repeating their mistakes.
The Scandinavian countries are successful, but not for the reasons most people think they are. Each of them were already wealthy, egalitarian, equitable and successful nations long before they adopted any socialist policies whatsoever. For most of the 20th century they had more free market economies than the other countries in Europe; and because they largely stayed out the two World Wars they didn't have to waste huge sums of money on weapons, paying forces, and then replacing destroyed infrastructure in the aftermath.
In many ways the Scandinavian nations are still far more free market than the USA, Britain or France are. Their economies are far less regulated, they do not demand occupational licenses to practice in hundreds of professions that require them in some states of The US (in Finland you don't even need a license to practice law, yet people manage to hire competent lawyers and the cost is far lower), it's easier to start a business, to hire people - and fire them, and there is a lot less red tape and forms to fill in. We have certainly not been asked to heed the example of the Nordic countries in these respects, in fact these policies have been fervently opposed by the champions of The Scandinavian Model in Europe and America.
What's more, the Scandinavian countries were all far more successful before they adopted any socialist policies at all. Sweden enjoyed the highest per-capita income growth in the entire world from 1870 to 1950. It was from the 1970s onward that the Scandinavian nations began their experiments in Democratic Socialism and they remained somewhat successful during this period but less so than previously. These nations built their welfare states on the wealth created by free markets; and in so doing began to reverse their success.
All the Scandinavian countries are market economies. Danish Prime Minister Lars Løkke Rasmussen finally got so tired of media claims to the contrary that he exclaimed: "I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy." Sweden, however, did attempt the experiment of centrally planning their economy like The Soviet Union - and with disastrous consequences.
The Case of Sweden
Socialism nearly destroyed Sweden. Swedish government spending rose from a relatively modest 20% of GDP to 50% between 1950 and 1975. Taxes, public debt, and the number of government employees all expanded massively. By the 1980s the destructive effects of the Swedish experiment with socialism was completely apparent to everyone and the government had to attempt to jump-start the economy with a massive expansion of credit which resulted in economic chaos: stock market and real estate bubbles burst, and interest rates were pushed up to 500 percent by the Swedish central bank. By 1990 Sweden had fallen from the fourth place in international income comparisons to twentieth. The decline led to a revolt against the socialist regime. More economically liberal politicians sharply reduced income tax rates, abolished currency controls, deregulated bank lending, privatized several government enterprises, deregulated the retail, telecommunications and airline industries; and implemented deep government spending cuts. Sweden began to recover and is doing a lot better now (as I am sure you have all heard.) But Sweden's recovery was all thanks to free markets - and no thanks to socialism.
Despite Sweden's economic recovery after the mid-1990s it is still poorer than Mississippi, the lowest income state in the USA. A 2009 study by the Swedish Economic Association discovered that the Swedish economy had failed to create any new jobs in the private sector on net between 1950 and 2005. The actual unemployment rate in Sweden is still probably at least three times higher than the official government figures because many Swedes live off government sick benefit and early retirement and are not counted. Thousands of Swedes are paid by the government to participate in "labor market political activities" whose only purpose is to reduce the official unemployment rate. To speed along their recovery, Sweden has been privitising portions of it's healthcare, social security, and education sectors in an effort to heal them up from the incentives entailed in public ownership which always destroys the quality of services while ratcheting up the cost of provision. Private health insurance is booming in Sweden because of the inevitable rationing, shortages and long wait times which their highly socialised healthcare system has lead to. It may seem shocking but in Sweden the government instructed doctors to "prioritize" patients according to their status as future taxpayers. The elderly are at the bottom of that list since they are mostly retired and paying relatively little in taxes while receiving large shares of government services. It's a distressingly callous approach that can only make cool sense from the perspective of planners seeking to minimize expenses out of the public purse which different interests are all angling for. (So much for socialism doing away with competition.)
Sweden's experiment with socialism also destroyed its history of innovation. The great companies that came out of Sweden such Lidl, H&M, Volvo, Saab, AstraZeneca, Electrolux and Ericsson were all founded in Sweden's free market period. After 1970, the establishment of new firms dropped significantly and many enterprises now survive purely on government contracts out of the public pocket rather than by indication that they are producing what consumers actually want. It was during the free market period when Sweden produced Alfred Nobel, inventor of dynamite, Sven Wingquist inventor of the self-aligning ball bearing, Gustaf Dalen who founded the gas company AGA, and Baltazar von Platen, who invented the gas-absorption refrigerator.
The Case of Denmark
Denmark, like the other Scandinavian nations, may have a large welfare state and public sector, but it also has a far freer economy than the US and many other western nations as I have mentioned. Denmark is only one place below America on the Economic Freedom Index and was previously one rank above it. It is the most free market of all the Scandinavian countries.
This does not mean Denmark has found the right balance, having "the best of both worlds" though.
The large welfare state and heaving public sector has lead to poor social consequences in Denmark, not good ones. Only the nation's relatively free market economy has compensating for the fact, as evidenced by the fact that similar policies have worked nowhere outside of Scandinavian countries: neither in Greece, nor France, nor Spain nor anywhere else. This is partly down to the culture of a hard work ethic that the Scandinavian countries have inherited from their history which required their people to survive the harsh climate. Unfortunately, as generations wear on these welfarist policies are warping the very culture that allowed them to work in the short term.
It might come to a surprise to many on the left who are championing the Danish model (such as Bernie Sanders and his supporters) to discover out that many Danish voters are turning out to vote for more free market politicians, and even the Democratic Socialist Party and those further to the left are in agreement that this is a problem. The classic liberal (free market) Venstre Party was in power in a coalition with the Conservative People's Party from 2001 to 2011 and was elected on its own in 2015. They have gained massive support in making free market reforms to the welfare state and are carrying them out right now! The platform has cross-party support.
Denmark is following the example that Sweden has been laying out since the 1990s. They are undergoing massive welfare reforms because they acknowledge their huge welfare state has created massive dependency and started to shift their culture away from personal responsibility and the ancient hard work ethic they had inherited. This calls the final death knell of empiricism for Socialism as an ideology - but how long before the left will heed the sound?
The Real Economic Lesson to be taken from Scandinavia
The real lesson to be taken from Scandinavia is that socialism wrecks economies and culture. It erodes the work ethic of a nation over generations and it takes a long time for free markets to restore them to prosperity afterwards. In Scandinavia, these policies have been a disaster only mitigated by having economies that are relatively unregulated compared to Europe and America.
New Zealand also flirted with all the policies that Bernie Sanders and supporters want to copy from Scandinavia up until the 1990s as well. It didn't do much for them at all. Since the 1990s New Zealand liberalised their economy and have been far more prosperous; Australia are following suit. Hong Kong was poorer than most countries in Africa and has become one of the richest countries in the world per head in a generation thanks to free market policies. Singapore has also proven itself to be a modern economic miracle. None of the countries which adopted socialism, nor any of the highly statist economies in the developing world, have had results that compare to those of Hong Kong or Singapore in the same period - and many of them remain devastated.
Free markets have helped the poor more than anyone else as they take people out of the most abject poverty and dependency at once, giving them control over their own destiny rather than having to rely on unreliable government to hand them alms. Markets also create the wealth necessary to look after those who remain poor, which is why most of the world's poor would rather be poor in a market economy than a highly socialised one with big government.
We can learn from Sweden and Denmark, yes. We can learn that we don't need miles of regulations or occupational licensing in up to 800 professions which drive up the price of services and stop young people from getting jobs. We can learn that when it's easier to start a business, hire and fire people, and to cut through red tape that brings prosperity. We can learn that high taxes and high spending stunt rather than grow an economy. We can learn that well-intentioned welfarist policies do more to foster dependency than to help the poor in the long term. That is the hardest pill to swallow.
What we can learn from Scandinavia is what Sweden and Denmark have already learned from their experiments with socialism. Hopefully we will learn from them without repeating their mistakes.
The main sources for this article are Debunking Utopia by Dr. Nima Sanandaji, and The Problem With Socialism by Tom DiLorenzo, you can get these two books if you want to learn more.
Monday, 12 December 2016
That's not real Socialism!
We live in a mixed economy where the state is responsible for almost 50% of the spending in the economy in the UK, and 19% of the population is employed in the public sector. The state controls the money supply, sets the interest rates, and is responsible for regulating each and every facet of the economy from the provision of energy, to the conditions under which someone can employ another person. The state runs the schools, and a great deal of the hospitals. It decides when a road is to be built, and when we are to build a railway. It hands subsidies to tobacco farmers, then taxes the tobacco we smoke. It hands welfare to the wealthy in the form of contracts and preferential legislation, and to the poor in the form of entitlements, free services and food stamps
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There is no part of the society left untouched by the machinations of the state – whether rightly or wrongly – and yet we are told again and again that this is capitalism. The free market at work.
What's more whatever goes right in the economy: the government is responsible for, whatever goes wrong in the economy: capitalism is to blame.
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There is no part of the society left untouched by the machinations of the state – whether rightly or wrongly – and yet we are told again and again that this is capitalism. The free market at work.
What's more whatever goes right in the economy: the government is responsible for, whatever goes wrong in the economy: capitalism is to blame.
This line of reasoning (if we acquiesce to calling it one) is at its most flagrant when people on the far-left attempt, shamelessly, to redefine the nature of regimes which were heretofore ubiquitously considered and described as communist – The Soviet Union, China, Cuba – as not socialistic, but in fact examples of “state-capitalism.” The underlying message is clear: Whatever we don’t want is capitalism, and whatever we want do want is socialism. And so it necessarily follows that no socialistic regime can ever really be bad, because if is woefully inefficient, or it yields tremendous abuses, or the people starve, we simply redefine it as some form of capitalistic one. What is more the philosophical doctrine of socialism narrowly escapes condemnation like a slippery frog.
By this trick the socialistic ideology becomes an unfalsifiable doctrine which is immune to any rational discourse or examination. An idee fixe. Whenever it fails in reality, it is “not real socialism.” Equally is it immune to the puncturing incision of factual evidence such as the inconvenient truth that throughout history the nations that are the most free economically thrive, while the nations that are the least free economically flounder. Socialism is good qua definition and thus consequently can never be abandoned as a doctrinal goal in light of the facts.
"The More of the Economy they Socialise, The More they Complain:
Capitalism Isn't Working!"
- Nathan Fraser
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