After weeks of lockdown, several states have begun to outline plans for returning to business as usual. The economies in these states don’t need political schemes. They simply need to be released from government chains.
Governments don’t create economies. It’s not only beyond their legitimate functions, it’s beyond their abilities. They need to stay out of the way and let the wisdom of markets steer us back to normal. But some officials see an opening through which they can drive their big government dreams.
For instance elected officials in California, which is likely to be the last state to fully open though it hasn’t seen the most suffering from the COVID-19 outbreak, view the crisis as a means to push the state harder and faster down the Blue State path. When asked by a reporter earlier this month if he saw “the potential, as many others in the party do, for a new progressive era and opportunity for additional progressive steps,” Gov. Gavin Newsom said yes, of course “there is opportunity for reimagining a progressive era as it pertains to capitalism.”
“Absolutely we see this as an opportunity to reshape the way we do business and how we govern,” Newsom added.
A little more than two weeks later, Newsom announced the formation of his Task Force on Business and Jobs Recovery. Behind the official-sounding name, and a few non-Democrat token members, hides a plan to use the pandemic as a means for advancing Blue State economic interventions that include: greater redistribution of wealth, higher taxes, bankrupting the oil and gas industry, an “unhinged” green energy program, minimum wage that breaks the backs of small businesses, and more of California’s hostility toward business in general.
Expect Newsom’s task force to draw the blueprint for other progressive states to follow.
The task forces, committees, and other councils across the country that will be charged with reopening economies “didn’t build that,” if we might borrow a particularly repugnant phrase. In fact, there is a certainty the most active of these will take what others built and wring the life out of it.
“It didn’t take a global health crisis to empty the shelves in Cuban or Venezuelan grocery stores. Mistakes made by central planners, who hold monopoly power over economic decisions, did that all on their own.”
Art Carden, researcher and Samford University economics professor, puts it another way:
“States are very good at identifying a well-defined problem and rendering a system legible to its functionaries,” he wrote last week. “This is not the same thing as identifying the right problem (or set of problems) and providing anything approximating the ‘right’ solutions. It is just finding something for powerful people to measure and control.”
Business owners and managers, not elected officials, not bureaucrats, not task forces, will know how to reopen their companies, and how best to protect their employees and customers. It’s in their self-interest to succeed.
They don’t need assistance and direction from a government that cannot possibly take in and then disseminate information necessary to set market pricing, manage supply chains, appropriately acquire and invest capital, and efficiently use employees. Nor are businesses aided by politics that eventually produce cronyism, oppressive regulation, and stifling laws.
Maybe the best way to illustrate how a government-led reopening is not advisable is the biting response to a Twitter user who said “I’m moving to an island and starting a new country. I’m taking Bernie Sanders and Jeremy Corbin with me! Who’s coming?”
The reply of the year:
“Cuba already exists, buddy.”
The easily understandable point is that neither Sanders nor Corbyn nor any of those who believe in heavy-handed, top-down policies has any idea how to build an economy. They and their followers would starve on that island in a short time. Using the implied and sometimes applied force of government will never create or foster a thriving economy.
Two years ago, historian Sean Wilentz made clear the thinking of those who wear the label “progressive.”
“Deep down,” he wrote, progressives “harbor the hope that one day, perhaps through some catastrophic event, American capitalism will indeed be replaced by socialism – a system of public property and social ownership that, this liberal notes, has been discredited through all of modern history.”
For many, if not all, progressives, that “catastrophic event” is happening right now.
This article first appeared at Issues and Insights, written by the I&I Editorial Board.
Few statements are more revealing of ignorance than the standard conservative indictment of socialism for “equally spreading poverty.” According to this critique, poverty happens when socialism’s insistence on equality of conditions deprives people of the incentive to work. Such statements so offend reality as to lead one to ask whether those who make them have ever opened their eyes in a socialist country.
No. Socialism makes for the most radical of inequalities among human beings, and enforces them through the state’s absolute power.
Note: Places like Denmark and Sweden, and even Germany, France, Italy, or Argentina, though their governments spend about half the national income, or more, are not socialist. Instead, they have a greater or lesser degree of corporate capitalism, a system first introduced by Benito Mussolini in Italy in the 1920s, in the United States in the 1930s, and that thereafter was copied throughout much of the world.
Under this system, as government power mixes with, counterbalances, and often overrides private enterprise, people often find government favor to be an adjunct to success—or even the main avenue to it. Everywhere in the modern world, having the government on your side makes up for much lack of talent, enterprise, decency, etc. But you can still do all right on your own, so long as you don’t get the corporate state down on you.
But in full-blooded socialist systems—the Soviet Union was prototypical—like Cuba, China, and Venezuela access to government power is the paramount avenue to success. So much so, that all assets pale in importance by comparison.
Talent and enterprise seldom hurt. But if you see someone prosper, you can be sure that he is well connected with the powers that be. Under real socialism, prosperity and power are two sides of the same coin. Always. Invariably.
Food is the most fundamental feature of prosperity or lack thereof.
Having grown up amidst the widespread hunger of immediate postwar Italy, I was all too familiar with the difference that food makes in how people look. The faces of people who are short of any and all calories are gray, sallow, as well as thin and haggard. Eyes are sunk. Those who get enough starchy food but little if any meat or fish, or maybe even fat, tend to be white and a bit puffy. Their skin does not shine. Those who get the fat and protein they want but lack fresh vegetables and fruit tend to be heavy, shiny. Only those who eat well-balanced diets look the way people are supposed to look.
My first visit to the Soviet Union in January 1979 brought back these visceral memories. Along with the senators whom I served as an expert on weaponry, I dined at Brezhnev’s table in the Kremlin. Good food. The high-ranking Soviets with whom we were surrounded would not have looked out of place in California.
But theirs was a thin social stratum. As we left, some of them pocketed some of the oranges from the table’s centerpiece. The people who attended them and who drove us around looked like they had little if any access to such things as oranges. The attendants at the elite hotel where we were staying were fat but pasty. As we walked the streets, I was struck by how many looked haggard.
When we conferred with the generals, I noticed that food-dependent physiognomy matched rank. The generals looked like us. The colonels obviously did not eat as well.
We managed to get to see the great Andrei Sakharov, in his humble two-room flat in a fifth-floor walk-up at the Academy of Sciences. His wife brought out a tiny apple cake that must have been a rare treasure for these out-of-favor folks.
In 1989, after the Berlin Wall fell, there was a brief and quickly forgotten spate of stories in the media about the lavish lifestyle that East Germany’s Communist elite lived within a compound walled off from the surrounding poverty. How could such things happen in a country dedicated to equality?
The answer is not just that the people who run socialist systems are as selfish as anybody else on the planet. It is that the power of redistribution that is inherent in socialism further corrupts those who dispense favors, and much incentivizes the ordinary people over whom that power is wielded to corrupt themselves into becoming favor seekers.
Yet another human reality contributes to making socialism the degrading horror that it is. The power to control who gets what, especially who gets to eat what and who does not get to eat at all, is the most powerful lever of control over the general population. Because of that, Lenin figured out right away that poverty, especially hunger, are to be sought for their own sake. Keeping the people worried where their next meal is coming from, and reminding them that their bread is literally buttered only on the regime side is socialism’s indispensable element.
Fidel Castro in Cuba, Hugo Chavez in Venezuela, and Daniel Ortega in Nicaragua made redistribution of poverty into their regimes’ very foundation.
In 1985, just after I got to Stanford, I was asked to meet with a group of undergraduates who were on their way to “learn” about Nicaragua’s Sandinista regime, and to “help out” the Campesinos in the fields.
The most expressively progressive attitude belonged to a very fashionable girl, who sat cross-legged on the floor, her perfectly groomed blond hair washing over decidedly un-muscular thighs. Looking at her, I asked how many hours of field labor they planned to contribute, what they thought the Campesinos were paid for that many hours, and what they thought might be the relationship between the worth of the labor they provided and the price of the food they would eat.
They had not thought of that. Since they would be eating with their Sandinista guides, I asked whether they would be eating like the guides eat or like the Campesinos eat. They had not imagined there would be a difference. I assured them that the Campesinos knew the difference too well. What would they be thinking of you, who worked less than they and ate better than they?
I suggested that, if they paid attention to the difference between what the party eats and what the people eat, as well as to the difference between what their un-muscular pseudo-labor was worth and the value of their food, they might be able to figure out why the Sandinista regime wanted their presence. And if they figured that out, they might want to ask themselves how honest of an enterprise socialism is, especially its claim to be equality’s champion.
Think of the game of chess as a war between two medieval armies. They are equally matched, identical sets of 16 pieces each, and the field of battle is finite with 64 squares. The only differences are the field generals. More specifically their experience, creative abilities, and fortitude. The object of the game is to defeat the opposing king with the fewest casualties, meaning the fewest moves possible. In The Art of War, Sun Tzu teaches “The supreme art of war is to subdue the enemy without fighting.”
This is where it gets tricky, the best move against a weak opponent is different than the best move against a strong one, and neither work against a grandmaster. Sun Tzu continues, “If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.” In chess, to know the enemy is to know their mastery of the possible combination of moves on the chess board. Its estimated the number of possible moves in a game of chess is greater than the number of atoms in the universe, but chess mastery is only concerned with the ones that expedite victory. Cognitive skills and fortitude are the essentials that matter.
In a modern economy, the division of labor and specialization are paramount. In our postmodern economy, if freedom is preserved, technological innovation is limitless. Former world champion and chess grandmaster Garry Kasparov is the Poetic Justice Warrior on the cutting edge of all of it.
Considered the greatest chess player of all time, Kasparov became world champion at age 22, and held the title for fifteen years. He remained the highest rated player in the world until he retired twenty years later, in 2005. However, Kasparov is best known for the match he lost in 1997 to IBM’s Deep Blue computer. At the time, he insisted that computing power could not overcome the creative genius of the world’s best grandmasters. Kasparov didn’t quite know his enemy.
Man Versus Machine, Not!
Like any rational human being, Kasparov was able to process new evidence, test it against his existing propositions, discard false premises, and maintain his principles for living that are inviolable. Active minds do this. As he reflects in a TED Talks presentation,
It was a blessing and curse to be the proverbial man in the man vs. machine competition. No one remembers who failed to summit Mt. Everest before Sir Edmund Hillary. I was Everest. Human creators reached the summit. Deep Blue was the tourist. Nobody remembers that I won the first match.
Capable of 200 million calculations per second, Deep Blue’s hardware had limitless stamina. Yet it was artificial intelligence (AI) – the algorithms embedded in its software – that transferred the cognitive ability of its IBM creators into the only chess move that would eventually stymie the world’s greatest chess player. On the 20th anniversary of standing alone at the precipice of unprecedented Creative Destruction, Kasparov published Deep Thinking: Where Machine Intelligence Ends and Human Creativity Begins,
I make it clear that my loss to Deep Blue was a victory for humans. It’s hard to look at the big picture during times of disruption and rapid change. But the transfer of human labor to technology is the story of human civilization. Our standard of living gets better, we live longer and healthier lives.
Free market economists like Poetic Justice Warrior Jesus Huerta de Soto understand that computer algorithms are best suited for the physical sciences, and a game of chess has many of those characteristics. The pieces are inanimate objects, not innovative actors. The field of play is not dynamic, and the game ends in checkmate, stalemate, concession or draw. No one dies, and the game starts anew. As Kasparov teaches, chess is “a closed system,” and in contrast, “People say, oh, we need to make ethical AI. What nonsense. Humans still have the monopoly on evil. The problem is not AI.”
Setting Man Free From Men
Garry Kasparov, like Poetic Justice Warrior Ayn Rand, was born in what became Soviet Russia. They share that unique and essential perspective, and know their enemy all too well. As Kasparov explains, “In chess the rules are fixed and the outcome is unpredictable, whereas in Putin’s Russia the rules are unpredictable and the outcome is fixed.” For Rand, the outcome is guilt. If the bureaucrat thinks your prices are too high, you are guilty of price gouging, and if your prices are too low, you are guilty of predatory pricing. If they think your prices are competitive, you are guilty of collusion.
The outcome was also explained by Poetic Justice Warrior Frederic Bastiat, “The relationship between persons and legislators appears the same as the relationship between the clay and the potter.” You are to be molded, or else. Rand avers in her 1943 novel, The Fountainhead, “Our country was based on a man’s right to the pursuit of happiness. His own happiness. Not anyone else’s.” Certainly not the potter’s; yet Kasparov, like Rand, has found Putin’s objective of defeating the individual to be alive in America,
I’m enjoying the irony of American Sanders supporters lecturing me, a former Soviet citizen, on the glories of socialism. It corrodes not only the economy but the human spirit itself, and the ambition and achievement that made capitalism possible and brought billions of people out of poverty.
The corrosion of the human spirit negates cognitive skills and fortitude, and is the essential strategy for turning people into chess pawns of potter’s clay – social justice warriors molded by state-run media and education. They march and scream to replace their opportunity for self-creation with their cowardly grievance societies. As an activist for capitalism, Kasparov explains,
A centrally planned economy cannot imitate this engine of creative destruction because you cannot plan for failure. You cannot predestine which two college drop-outs in a garage will produce the next Apple.
As Poetic Justice Warrior Czeslaw Milosz explained, the Russian mechanism (hailed by Sanders and his pawns) is very fragile, yet America’s education and media elites harbor no gratitude that America exists. This passive injustice is that evil described by Kasparov.
Children – Chess – Cognition – Volition – Capitalism
Chess is a game that teaches critical thinking and purposeful action. It enriches the mind of any child with problem-solving skills, long-range planning, and independence. Students learn the capability of each piece and how they work together in a complex system. They learn to identify opportunities, evaluate threats, and take calculated risks. However, its imperative to transfer these skills to open system solutions.
Garry Kasparov has promoted scholastic chess for decades, and upon his retirement from professional chess in 2005, he organized the United Civil Front in Moscow. Its stated goal is an open federal system for free elections, and it stands in direct opposition to the political machine – a closed system, that maintains power for Vladimir Putin, and gets people killed. Kasparov knows his opponent: “To stay in power, Putin does not ask why, he asks why not.” To Kasparov, the difference between Sanders and Putin is communist propaganda. While Sanders is selling its old, failed, deadly concepts to useful idiots,
Putin doesn’t try to sell you anything. Its all about doubts. He’s very good at that. He uses western technology to undermine the free world. It’s all about disruption.
For Kasparov, technology must be harnessed to preserve and promote freedom.
Playing chess well is a marvelous experience, but not an end in itself. As Poetic Justice would have it, Kasparov transcends that, and has some Sun Tzu-quality advice for America, “Removing the moral component from foreign affairs has been a catastrophe. Since 1992, its like a pendulum. It’s very important to recover American prestige in the world.”
Recently, thousands of anti-capitalist protestors took to the streets in capital cities across the world. Wearing V for Vendetta-inspired Guy Fawkes masks (most of which are made in China), these self-styled “anti-establishment” demonstrators, who took part in annual Million Mask March, sought to express their dissatisfaction with the capitalist system and the unfair outcomes it allegedly creates.
More than 70 percent of Millennials would likely vote for a socialist candidate.
Large anti-capitalist protests like those we saw last night are, of course, nothing unusual. In August, French police resorted to using water cannons and tear gas to disperse thousands of anti-capitalist demonstrators who were protesting in the French coastal town of Bayonne, during the G7 summit which was taking place in a nearby resort.
But it is not just during protests that we see disdain for capitalism. All over our newspapers there are headlines such as, “Capitalism is in crisis,” “Capitalism is failing,” or most recently “Capitalism is dead,”—the latter being a recent quote from billionaire Salesforce CEO, Marc Benioff, who amassed his fortune thanks to the capitalist system.
Public View of Socialism
The consistent bombardment of capitalism in our media and on our streets has culminated in a recent YouGov poll showing that nearly half of all Millennials and Gen-Z’ers hold an unfavorable view of capitalism. The same poll also found that more than 70 percent of Millennials would likely vote for a socialist candidate.
It is fundamentally trendy to be socialist, and to decry the alleged ills of capitalism. But does this persistent condemnation of capitalism hold up to scrutiny?
Every year, the Fraser Institute, a Canadian think tank publishes its Economic Freedom of the World (EFW) report in order to find out which countries have the freest (i.e. most capitalist) economies. The EFW ranks the level of freedom of 162 economies, using 43 indices, across major policy areas: size of government, legal systems and property rights, sound money, freedom to trade internationally, and regulation.
More than 27 percent of people in the most socialist economies live in extreme poverty but that number is just 1.8 percent in freest economies.
The idea behind the EFW report is that if you can find out which countries have the most capitalist economies, you can then use this information to see if more capitalist countries have better outcomes for their citizens when compared to their more socialist (or at least: less capitalist) counterparts. To analyze the correlation between economic freedom and human wellbeing, the EFW splits the 162 economies into quartiles, based on their level of economic freedom. And the results are staggering.
The average income in the most capitalist quartile of countries is an astonishing six times higher, in real terms, than the average income in the least capitalist economies ($36,770 and $6,140 respectively). For the poorest in society, this gap widens even more. The bottom 10 percent of income earners in the most capitalist countries make, on average, seven times more than the poorest ten percent in the least free economies.Similarly, more than 27 percent of people in the most socialist economies live in extreme poverty (as defined by the World Bank as an income of less than $1.90 a day), whereas just 1.8 percent of people in freest economies live in extreme poverty—a figure that is still too high (the optimal number is zero), but vastly better than the level that persists in the least free countries.
Comparing Capitalist and Socialist Economies
Economic measures aside, people living in the most capitalist countries also live on average 14 years longer, have an infant mortality rate six times lower, enjoy greater political and civil liberties, gender equality, and to the extent you can measure such things, greater happiness too—when compared to the least capitalist economies.
Take Hong Kong, for example, which is the world’s freest economy according the EFW report. In 1941, journalist and travel writer Martha Gellhorn visited the city-state with her husband, Ernest Hemmingway and noted“the real Hong Kong…was the most cruel poverty, worse than any I had seen before. Worse still because of an air of eternity; life had always been like this, always would be.” But just a few years after Gellhorn’s visit, the surrender of the Japanese in 1945 meant that British rule returned to the island and with it came a largely laissez-faire approach to the city’s economy.
We should remember; the data simply doesn’t support the anti-capitalists.
In 1950, the average citizen in Hong Kong earned just 36 percent of what the average citizen in the United Kingdom earned. But as Hong Kong embraced economic freedom (according the EFW, Hong Kong has had the most capitalist economy every year bar one since 1970), it became substantially richer. Today, Hong Kong’s GDP per capita is a whooping than 68 percent higher than the UK’s. As Marian Tupy, editor of HumanProgress.org, notes, “the poverty that Gellhorn bemoaned is gone – thanks to economic freedom.”We can see far bigger gaps whenever we pair a broadly capitalist country with an otherwise similar socialist country: Chile vs. Venezuela, West Germany vs. East Germany, South Korea vs. North Korea, Taiwan vs. Maoist China, Costa Rica vs Cuba, and so on. (Yes, I know: none of that was “real” socialism. But then, it always is real socialism, until it isn’t.)
Decrying the ills of capitalism on a placard or in a newspaper headline is a trend with little sign of going away any time soon, but when we see such unsubstantiated claims, we should remember; the data simply doesn’t support the anti-capitalists.
The United States has never had a meaningful socialist tradition or even a semi-serious socialist party. Socialism in the United States is a fringe movement at best and always has been. This makes the sudden acceptability of socialism all the more surprising. But with one avowed socialist, Bernie Sanders, campaigning for the presidency for a second time, and another, Alexandra Ocasio-Cortez, rising to national prominence from her post in the House of Representatives, American socialism is more mainstream now than at any point in our history.
Socialism Is a Response to Capitalism
Complicating matters, socialism exists entirely as a response to capitalism, as has been the case from the time Marx first put pen to paper. And as if that weren’t enough, the very usage of the terms “capitalism” and “socialism” has evolved past the point of clear meaning.
These terms were once very clearly defined. Socialism is state control of the means of production. The intent is that these means are to be used for the public good. By contrast, capitalism is simply private ownership of the means of production. The intent is that these means are to be used to advance the interests of those who own them, which will in turn create conditions of general prosperity that can be enjoyed by all.
It appears that what Americans really have in mind when they think about socialism is not an economic system but particular economic outcomes.
When polled, Americans express relatively well-defined views on both. And while nowhere near a majority of the American electorate favors a completely socialist system, a recent Gallup poll indicates that more than four in ten Americans think “some form of socialism” is a good thing. But what is “some form of socialism?” A society is either socialist or it isn’t. The state either owns the means of production or it doesn’t. There is no middle ground. Even our openly socialist politicians rarely advocate anything near as drastic as government control of the means of production.
It appears that what Americans really have in mind when they think about socialism is not an economic system but particular economic outcomes. And their thoughts seem to focus most often on the question of what people should have. The answer they arrive at most often? More than people typically get in a system based on the pursuit of profit. Capitalism, they believe, is immoral because it is a system in which some do without while others have more than they could hope to use in multiple lifetimes.
Transferism Is a More Accurate Term
These four in ten Americans, and the politicians who speak for them most vocally, are not advocating socialism at all; they are advocating what we should really call “transferism.” Transferism is a system in which one group of people forces a second group to pay for things that the people believe they, or some third group, should have. Transferism isn’t about controlling the means of production. It is about the forced redistribution of what’s produced.
Federal transfers are money the federal government gives directly to people or to state and local governments. These are not purchases. To be a transfer, the money must be given in exchange for nothing. The earned income tax credit, income assistance, and payments from various welfare programs are transfers. So, too, are Social Security benefits. While workers tend to regard Social Security benefits as returns on their Social Security taxes, legally, Social Security taxes are simply part of the government’s tax revenues. Workers are not entitled to Social Security benefits. Who says so? The Supreme Court in Flemming v. Nestor (1960). In reality, Social Security benefits are simply transfers—gifts—from the federal government to retirees.
At least at the federal level, our government has fully embraced transferism.
Federal transfers to persons have risen from 11 percent of federal spending in 1953 to 53 percent today. As with persons, the federal government also sends transfers to state and local governments. Federal transfers to persons and state and local governments have risen from 17 percent of federal spending in 1953 to 69 percent today. As of today, almost 70 percent of what the federal government does involves simply taking money from one group of people and giving it to another. Less than one-third of the money Washington spends is spent in the name of actual governance.
At least at the federal level, our government has fully embraced transferism. And both parties are responsible. Among the four presidents under whom transfers were greatest, two were Democrats (Obama and Clinton) and two Republicans (G.W. Bush and Trump). Transfer payments increase steadily over time. Partisan differences are a matter of rhetoric and public perception, not a reflection of any underlying reality.
Federal transfers as a fraction of total federal spending.
Contrary to type, politicians speak in very clear terms about the benefits they would like to finance by transferring money from one group to another, and they have had predictable success with it. Most Americans cannot imagine a country without Social Security, Medicare, and the Earned Income Tax Credit. And politicians never seem to run out of new ideas regarding what they might be able to achieve with even more transfers of wealth. New ideas are typically well-defined, at least on the benefit side. Student loan forgiveness, universal basic income, Medicare for All, and every other piece of proposed redistributive legislation offers an obvious benefit for an equally obvious group of people.
The lack of clarity comes when the politicians get around to explaining who will pay for all of it. Their answer is inevitably some form of “the rich,” who will finally, we are told, pay “their fair share.” None of this is ever defined, which explains the United States’ present $23 trillion debt. Transfers are tricky political business because politicians need to point to who benefits and by how much while at the same time hiding who will actually be paying.
Cronyism vs. Capitalism
And just as transferism is not actually socialism, the system against which transferists rail isn’t capitalism, either. When they think of “capitalism,” transferists imagine a monied class that defrauds customers, pollutes the environment, and maintains monopoly power, all because the monied class is in bed with government. But capitalism is simply the private ownership of the means of production. What people are actually describing is something more appropriately called “cronyism,” which can manifest in a socialist system as easily as in a capitalist one. Cronyism isn’t a byproduct of the economic system at all; it is a byproduct of politics.
For current examples, one need look no further than North Korea, Cuba, and Venezuela. Socialists say these aren’t examples of “real socialism,” and they’re not. There was a time when these countries were indeed socialist, just as there was a time when the United States was capitalist. But cronyism has overtaken these countries’ economic systems, just as it did in humanity’s grandest socialist experiment: the Soviet Union. Life was simply different for inner-party members than it was for workers. This is the real danger that all countries face, regardless of the animating principles of their economic and political structures.
The obvious question that never gets asked is how much transferism we actually want.
And this is where the dangers of transferism should become manifestly clear, because transferism is simply another form of cronyism. In the United States’ current iteration, the cronies are not a monied elite who buy off powerful politicians for their own benefit (although that still happens, too). They are voters who reward the politicians who promise them a growing list of benefits year after year.
The obvious question that never gets asked, almost entirely because of our increasingly confused understanding of the words socialism and capitalism, is how much transferism we actually want. The intellectual shorthand that socialism and capitalism allow turns out to be broadly inapplicable to our present circumstances, but our insistence on the categories virtually guarantees that we will get nowhere with the present discourse.
How Much Transferism Do We Want?
We need to answer the core question: how much transferism do we want?
In order to figure this out, we need to come to terms with the fact that any transfer is a confiscation of wealth from the people who created it. That confiscation will decrease wealth creation in the long term by decreasing an important incentive to take the risks necessary for creating wealth. Second, we have to recognize that transferism is addictive. No matter how much we transfer, people will always want more. The United States’ $23 trillion debt, the largest debt the world has ever seen, has come about because of American voters’ voracious appetite for transfers combined with politicians’ obvious incentive to provide them.
In the end, we have polluted our political discourse with two words that no longer have much meaning: socialism and capitalism.
The solution politicians have found is to pass off the cost of the transfers to taxpayers who haven’t yet been born by borrowing the money, thereby leaving to the next generation the problem of repaying the debt or enduring unending interest payments. It’s a house of cards to be sure, but from their perspective, it will be someone else’s house of cards.
In the end, we have polluted our political discourse with two words that no longer have much meaning: socialism and capitalism. In the process, we don’t call the animating principle of modern American politics what it actually is: transferism. The only winners have been the politicians who manage to gather votes by keeping the electorate in a near-constant state of friction. And they keep winning if people keep thinking in categories that ceased to have any real meaning years ago.
Dr. Antony Davies is the Milton Friedman Distinguished Fellow at FEE, and James R. Harrigan is Managing Director of the Center for Philosophy of Freedom at the University of Arizona, and the F.A. Hayek Distinguished Fellow at FEE.
Thirty years ago this week the Berlin Wall came down. The catalyst was Soviet Premier Gorbachev ordering armed guards away from the wall. He had deluded himself to believe that socialism could exist without fear. The event was international news for several days, and it led to the fall of the Soviet Union and the reunification of Germany. Of course Poland’s courageous Solidarity labor movement led by Lech Walesa, the work of Pope John Paul II, and the extraordinary partnership of Britain’s Lady Margaret Thatcher and President Ronald Reagan (who implored Gorbachev in a 1987 speech at Berlin’s Brandenburg Gate – “tear down this wall!”), were also essential figures.
But for many people in the United States, this was a ho-hum course of events. For America’s intelligentsia and their ignorati, Reagan was still a B movie actor and socialism was the dominant philosophy of America’s national media and universities. Josef Stalin’s Great Terror in Soviet Russia was not taught in schools, and neither was Mao Zedong’s Cultural Revolution in China. Only Hitler’s Final Solution was well known, and that is because Nazism was rebranded by western intellectuals as right wing fascism so western socialists could distance themselves from the 20th century depravity they shared with their comrades.
It is upon this anniversary that we introduce the Poetic Justice Warrior who witnessed, and personally experienced, the Great Terror. She swore to its victims that their story would be told for future generations to know and understand. She is the great Russian poet, Anna Akhmatova.
Requiem
In 1940, Akhmatova wrote a collection of poems titled Requiem. They eloquently express her personal raw emotions and those of the women whose husbands, sons, brothers and fathers became the subjects of Stalin’s mass imprisonment. They were artists, poets, and publishers after all. For example, her son had been arrested on numerous occasions for alleged “counter-revolutionary activity,” and she would cue for many hours, many times, in an attempt to deliver food to him and plead with his captors.
By 1938, Akhmatova had become a well known poet in Russia, and on one of these occasions outside a St. Petersburg stone prison she met a woman:
One day somebody in the crowd identified me. Standing behind me was a woman, with lips blue from cold, who had, of course, never heard me called by name before. Now she started out of the torpor common to us all and asked me in a whisper (everyone whispered there): ‘Can you describe this?’ And I said: ‘I can.’ Then something like a smile passed fleetingly over what had once been her face.
This became Akhmatova’s inspiration and motivation for writing Requiem, but she dared not publish it. Instead she memorized it and shared it only with close friends. Requiem was finally published in 1963, without her consent, in Munich, Germany. This was two years after the construction of the Berlin Wall.
In hindsight, Requiem may not have survived to foretell the Berlin Wall’s ominous presence, or celebrate its glorious crumbing, if she had published it instead of memorizing it. In 1993, it was revealed that Akhmatova had been under investigation by the intelligence agencies of the deep state. They had bugged her apartment and kept her under constant surveillance. Stalin’s spies had created a dossier that totaled 900 pages of “denunciations, reports of phone taps, quotations from writings, and confessions of those close to her”.
In this excerpt from Requiem, she expresses a few of the emotions that surrounded her in 1938. These included disbelief, rationalization, stunned grief, agony, deep mourning, and perseverance. All of which Akhmatova cycles through this set of poems.
For seventeen months I have been screaming,
Calling you home.
I’ve thrown myself at the feet of butchers
For you, my son and my horror.
Everything has become muddled forever –
I can no longer distinguish
Who is an animal, who a person, and how long
The wait can be for an execution.
Anna’s close friend, Lydia Chukovskaya, was also a dissident author and poet, and wrote about the tactics of their small trusted circle of friends who would create poetry and distribute it. The ritual was for them to write poems for each other on a scrap of paper, read it, memorize it, and burn it in a stove. Oral circulation was their mode of publishing, or as Chukovskaya describes, “It was like a ritual. Hands, matches, an ashtray. A ritual beautiful and bitter.” This was done while casually conversing in code for the electronic eavesdroppers and quieltly memorizing:
Silent flows the river Don
A yellow moon looks quietly on
Swanking about, with cap askew
It sees through the window a shadow of you
Gravely ill, all alone
The moon sees a woman lying at home
Her son is in jail, her husband is dead
Say a prayer for her instead.
In Akhmatova’s own words, Requiem was “One hundred million voices shouting through her tortured mouth.” And “A poem without a hero.” All for the inhuman ideals of socialism.
Requiem’s Hero
As poetic justice would have it, Requiem was published for the first time in Russia in 1987, two years before Berlin’s monument to fear was torn down. It’s existence had proved that the Soviet empire was not founded on a Marxist ideal for a better society. There’s no such thing, Lenin and Stalin knew it, that was merely a ruse for western intellectual suckers. Nobel prize winning Polish poet Czeslaw Milosz also proves it in his book about the mental anguish suffered by Soviet propagandists, The Captive Mind.
Lenin never visited his proletarian workers at their factories and Stalin’s ideal was the ratting out of everyone by everyone. In today’s China, the ruling elite’s reverence for so-called Marxist ideals is as insincere and unbelievable as America’s Democratic leadership’s reverence for Constitutional principles and Christian values. The idea that their democratic socialism can be implemented without the fear of violence cruelly avoids reality.
After regularly reading to Russian soldiers in military hospitals during World War II, Akhmatova was condemned in 1946 by Stalin’s Central Committee, along with others, for bourgeois, individualistic writing and expelled from the Union of Soviet Writers.
From Requiem’s section titled The Verdict:
The word landed with a stony thud
Onto my still-beating breast.
Never mind, I was prepared,
I will manage with the rest.
I have a lot of work to do today;
I need to slaughter memory,
Turn my living soul to stone
Then teach myself to live again. . .
Thanks to the smashing of the Berlin Wall thirty years ago, the people of Poland, Estonia, Latvia, Lithuania, East Germany and the rest of the Soviet orbit have the opportunity to teach themselves to live again. The self-reliance of the bourgeois individualists idealized in the poetry of Poetic Justice Warrior Anna Akhmatova are Requiem’s heroes. They are the ones victimized by the force of socialism in Soviet Russia and the freedom fighters armed with reason, purpose, and pride who ripped away the iron curtain. When celebrating the fall of the Berlin Wall, it is imperative to know and understand the people and events behind it.
It has been widely, vividly, but nonetheless wrongly believed that socialism is the appropriate system to improve the living standards of Africans. Worse yet, it has been misleadingly claimed that socialism is compatible with African culture because African culture is fundamentally a collectivist culture. However, one fact remains indisputable: socialism has failed wherever it was tried, and the African countries that have experimented with socialism were not exempted from its failure.
The undeniable fact remains that Africa has the lowest living standard of all continents after Antarctica. The reason why the living standard of the majority of African countries is so low compared to the rest of the world, is because socialism has impoverished the African continent. At the outset of the post-colonial era in the 1960s many African countries — such as Tanzania, Angola, Mali, Ethiopia, Ghana, Mozambique, Egypt, Senegal, Guinea, Congo and many more — have embraced socialism as their economic and political system.
But the question remains as to why Africans deeply believed in socialism and embraced it in the 1960s. In Africa, socialism was presented as an anti-colonial and anti-imperialist ideology while capitalism was perceived as the ideology of the oppressor, the colonizer, and of profit. Africans strongly believe in socialism because they think that socialism is compatible with African culture since African culture is a collectivist culture. African culture values the group over the individual. It values the concept of sharing, solidarity, and altruism. Of course, all these moral virtues are well-intended, but they play no substantial role in the improvement of the living standard of people. What improves the living standard of people is the ability to retain private property, to voluntarily exchange with one another what we own in order to create capital. Some African countries in the post-colonial era resisted the socialist temptation; notably countries like Côte d’Ivoire, Kenya, and South Africa.
For example, in the 1960s and 1970s, Côte d’Ivoire was the most economically advanced country in West Africa. While its neighbors were embracing socialism, Côte d’Ivoire opted for a market economy. Despite having an authoritarian political regime, like all African countries during that time; the Ivorian people were, nonetheless, economically free. They had the freedom to create businesses, and to expand private property. From 1960 to 1979, the GDP in Côte d’Ivoire grew at 8.1 percent per year, which means that in real terms capita, it increased from $595 to $1,114. Cote d’Ivoire’s economic expansion during that period was called “The Ivorian Miracle” because the country was exporting agricultural goods to the neighboring countries have had a shortage of food production due to their socialistic policies. The Ivorian Miracle made Côte d’Ivoire the most prosperous nation in West Africa between 1960 and 1980.
What Africans have failed to grasp about capitalism and the free market is that, it is not a system intrinsic to Western culture. It is a system intrinsic to human nature regardless of race, ethnicity, or the local culture. Socialism has failed in Africa as it has failed in Eastern Europe, India, China and in South America. Even if Africa is culturally collectivist, it is important to comprehend that a group is a collectivity of individuals whereby each individual within the group is stimulated by the pursuit of his own interests. The pursuit of one’s self-interests is an intrinsic factor of human nature that no central authority can change regardless of the goal of the common good. Despite the collectivist nature of African culture, African culture is not exempted from that natural law of human nature. Coercing human nature to do something that is not in harmony with the nature of human understanding, will result in failure. That is why socialism, wherever it is tried, will always fail.
Germinal G. Van is an author, political essayist and libertarian scholar, born in Abidjan, Côte d’Ivoire, West Africa. This article first appeared at mises.org.
Robert Lawson and Benjamin Powell are well-known free market economists, and they do not look with favor on a disturbing trend among American young people. “In the spring of 2016,” they tell us, “a Harvard survey found that a third of eighteen-to twenty-nine year olds supported socialism. Another survey, from the Victims of Communism Memorial Foundation, reported that millennials supported socialism over any other economic system.” (p.8)
Unfortunately, the young people in question have little idea of the nature of socialism. Lawson and Powell would like to remedy this situation, but they confront a problem. Ordinarily, one would urge students to read Hazlitt’s Economics in One Lesson, Mises’s “Economic Calculation in the Socialist Commonwealth,” and similar classic works, in order to understand the basic facts about the free market and socialism, but the millennials are unlikely to do so. One must attract their attention. What can be done?
Lawson and Powell have had the happy idea of presenting elementary economics in a humorous way that will appeal to those “turned off” by serious and sober scholarship. In the latter adjective lies the key to their approach. Both of the authors enjoy drinking beer, and they travel around the world to various socialist countries in pursuit of their beloved beverage, making incisive comments about the economy of each country as they do so. They write in a salty style that will make millennials laugh, though some readers will find it jarring.
For the young, “socialism” means no more than vague ideas about “fairness”, but, the authors note, the term has a precise meaning: “To separate the state from socialism in any large society is like trying to separate private property from capitalism. It can’t be done. I’ll say it once more for the people in the back: socialism, in practice, means that the state owns and controls the means of production.” (p.128) No country is completely socialist, but some are more socialist than others. How can the degree of socialism be evaluated? Lawson has, along with James Gwartney, produced an annual economic freedom index for the Fraser Institute, which the authors use to answer this question, sometimes with surprising results.
Many professed socialists look to Sweden for inspiration, but according to the freedom index, “Sweden gets a 7.54 rating, which is good enough for twenty-seventh place out of the 159 countries in the study. . .Bottom line: Sweden is a prosperous, mostly capitalist country.” (pp.10-11)
The authors must now confront an objection. Why should we not prefer welfare-state capitalism to the straightforward free market economy the authors want? They reply that Sweden prospered under freedom, but the increased taxation needed to finance the welfare state has brought about stagnation. “Sweden grew most when it was freer than it is today.” (p.13)
If some people admire Sweden, few except fanatics have good words for the economy of Cuba. Nevertheless, must we not recognize the wonders accomplished by the Cuban socialized medicine? We must give the devil his due. Lawson and Powell are not convinced. “Official Cuban health statistics are impressive. . .Yet, we also know that the hospitals most Cubans use are so poorly equipped that people often have to bring their own sheets. What gives? The silence [on the streets} is part of the answer. The lack of automobiles means a lack of traffic fatalities. Since automobile accidents are a leading cause of death among younger people, the lack of automobiles has a disproportionate impact on life expectancy statistics for reasons that have nothing to do with health care. The low rate of infant mortality is a product of data manipulation.” (p.53)
Why has Cuban socialism, like all other centralized socialist economies, failed? The authors present with great clarity the essential point: “’[A]lmost a hundred years ago, the Austrian economist Ludwig von Mises explained that socialism, even if run by benevolent despots and populated with workers willing to work for the common good, could still not match capitalism’s performance. Socialism requires abolishing private property in the means of production. But private property is necessary to have the free exchange of labor, capital, and goods that establish proper prices. Without proper prices, socialist planners could not know which consumer goods were needed or how best to produce them. . .Socialism also gives tremendous power to government officials and bureaucrats who are the system’s planners—and with that power comes corruption, abuse, and tyranny.” (p.37)
Socialist tyrants were the greatest mass murderers in history, and the young must be apprised of this melancholy fact. “Stalin ranks just behind Mao as history’s second greatest mass murderer, with Hitler coming in third—and all three dictators were, of course, committed socialists of one sort or another.” (p.115)
Some millennial socialists respond with a distinction. The despotic governments mentioned were not genuinely socialist. The authors answer with appropriate severity: “This is the same dirty trick socialists have played for decades. Whenever things go south, as they inevitably do, they claim that it wasn’t ‘real’ socialism. I [Lawson[ find the whole thing more than a little disingenuous and very irritating. When socialists, democratic and otherwise, held up Venezuela as a great socialist experiment in the 2000s, the message was, ‘See, we told you so; socialism works!’ but when failure happened, the message changed to, “No, wait—that’s not real socialism!’ They want to claim socialism during the good times but disavow it during the bad.” (pp.127-128) A related gross error, the famous “nirvana fallacy,” is to compare an ideal state of affairs, conjured up by socialists, with difficulties of real-world capitalism.
If the authors are ready to rebuke the errors of misguided youth, they look with sympathy on some of their hopes. Many young people condemn the drug war, with its rampant racism and mass incarcerations, and they are right to do so: “The U.S. government’s war on drugs is unwinnable because, in the language of economists, it is a supply-side war, when demand isn’t very price-sensitive. This means when the U.S. government scores a ‘win’ in the war, the price of the remaining drugs goes up more than the usage falls. As a result, net revenue to drug cartels increases, which increases their ability to corrupt law enforcement and buy weapons and other smuggling equipment. The result has been an endless cycle of increasing violence along the entire supply chain in Central and South America. . .” (p.135)
It is not only the drug war, but the war on terror as well, that ought to be condemned, and here once more, the many millennials who protested against the war are in the right. “We feel the same about the war on terror. The wars and violence associated with it in the Middle East are a major reason for Europe’s immigration wave. . .advocates for capitalism can be against war precisely because war undermine capitalist institutions and freedoms.. . .Chris Coyne wrote a book entitled After War: The Political Economy of Exporting Democracy, in which he shows that when the U.S. engages in foreign intervention, it rarely creates the kind of lasting institutional change that supports what some might call a ‘neoliberal’ society.
Economist Robert Higgs’s classic book, Crisis and Leviathan, shows how crises in the United States, especially wars, have led to expanded government at the expense of markets. Chris’s latest book, Tyranny Come Home: The Domestic Fate ofU.S. Militarism, co-authored with another friend of ours, Abby Hall, has shown how U.S. military interventions abroad ‘boomerang’ back to the United States in ways that decrease our freedoms at home. See, anti-war isn’t a uniquely leftist position. Capitalists should be anti-war too.” (pp.136-137. I regret the use of “neoliberal” as a term of praise and the solecism “advocates for.”)
I confess that I approached the authors’ project of a drinking tour of the socialist countries with skepticism. Would it be more than a jeu d’esprit? Reading the book has laid my skepticism to rest. Socialism Sucks has the potential to do great good, if it gets into the right hands, and its impressive sales suggest that it will do so.
David Gordon is Senior Fellow at the Mises Institute, and editor of The Mises Review. Originally published at mises.org/wire.
In a Democratic primary field that looks like the cast of a Christopher Guest ensemble mockumentary, three candidates have established an early lead — Joe Biden, Bernie Sanders, and Elizabeth Warren. Sanders and Warren represent very distinct visions of the party’s left flank, but not in the way many assume.
Sanders, who proudly wears the badge of socialism and just announced a $16 trillion Green New Deal staggering in its scale and scope, is not the radical candidate. At his core Sanders is a redistributor, fighting along the same big-market/big-government axis on which American politics has focused my entire lifetime. To be sure, Sanders is less shy about pushing things much further toward the big-government end of the spectrum than any mainstream Democratic candidate in decades.
Warren presents herself as a tireless, technocratic savior of capitalism, but her plans give the U.S. government far more control over individual firms, households, and markets than anything proposed in recent memory. Warren, a legal scholar by trade, has moved into the complex realm of a modern economy, where a lawyer’s penchant for sweating the details is usually counterproductive and causes considerably more damage along the way.
Go to the section of Warren’s website entitled “Plans” and at the time of this writing you’ll have a choice between a staggering 43 links. Many of the plans could hugely impact our economy, but one stands above the rest in its potential to overhaul our commercia landscape. Warren calls the reforms she envisions to corporate mandates and governance “accountable capitalism.”
Corporations sometimes do bad things, and Warren’s plan might stop some of them. But accountable capitalism does nothing short of rethinking what it means to be a business in the United States and opens the door to negative consequences so severe that ignoring them involves a sort of magical thinking that would make even Warren’s starry-eyed socialist opponent shake his head in disbelief.
The Perils of Warrenism
So just what is accountable capitalism? It was originally a bill proposed by Senator Warren last year. In a fawning write-up in Vox, Matthew Yglesias inadvertently exposed the idea’s flimsy intellectual foundation:
Warren’s plan starts from the premise that corporations that claim the legal rights of personhood should be legally required to accept the moral obligations of personhood.
The morality that comes from “personhood” is not given to us by law, nor is it forced upon us by the government. Morality emerges and evolves as we interact and empathize with one another. Perhaps Warren and Yglesias should start an Adam Smith book club and begin with The Theory of Moral Sentiments.
What will this legally imposed veneer of corporate morality look like? It’s clear from Warren’s campaign materials that it will involve a new and large bureaucracy, but the rules to be enforced are less clear. In short, accountable capitalism means government mandating that corporations do what Elizabeth Warren wants them to do.
Warren’s plan requires corporations valued at over $1 billion to obtain a special federal charter. This charter exposes corporations to regulation from a new Office of United States Corporations that “tells company directors to consider the interests of all relevant stakeholders — shareholders, but also employees, customers, and the community within which the company operates — when making decisions.”
There are a few specific rules — misguided one-size-fits-all requirements about the number of workers on company boards, how executives can sell stock, and how companies can make political contributions. But it mostly appears to be a means for our elected political leaders to micromanage America’s largest corporations at their own discretion.
Watchful eyes might indeed rein in some amount of corporate excess or wrongdoing. But this abrupt shift in the objective of American corporations would be a potentially cataclysmic shock to the economy, and the means of enforcement would only increase the scope for corporate rent-seeking and cynical politicking that Warren currently condemns on the campaign trail. But her proposals simply wish these fatal flaws away.
Fiddling as Wealth Burns
In Warren’s utopia of technocratic micromanagement, one needn’t worry about the unintended consequences that come with major new government regulations. Accountable capitalism would change the goal of America’s largest corporations from a relatively objective metric, shareholder value, to a subjective balancing of the interests of several stakeholders, with the executive branch peering over management’s shoulders.
This would send shares of the largest companies tumbling overnight. No matter, says Warren, 84 percent of stock is owned by the wealthiest 10 percent of Americans. Under the disturbingly ascendant view that “democracy” sanctifies whatever 51 percent of the population likes, 10 percent isn’t important.
Of course, 73 percent of stocks are owned by Americans 55 and older, meaning the skewed wealth distribution noted by Warren is due in large part to the fact that people at or near retirement have accumulated more savings than younger people. Warren’s vision of capitalism through a funhouse mirror would surely destroy significant amounts of that wealth by diluting corporations’ fiduciary responsibility to shareholders.
Next, Warren seems to believe that her Office of United States Corporations will possess a sort of omniscience usually reserved for the realm of fantasy. Large corporations do things we don’t like all the time, but a centralized office with pushback on the level Warren imagines risks doing greater damage. Smith and especially Hayek stress the importance of local knowledge. How will a centralized office take the several hundred largest corporations in the country and order them to increase their payroll or decrease their stock buybacks? By how much?
We don’t need to keep our corporations safe from the meddling of Elizabeth Warren out of some starry-eyed hero capitalism that reveres big business. We need to do so because these corporations are the arteries through which information pumps in our economy. Some workers may have extra time to serve on company boards, as Warren mandates, after they lose their jobs from the overall economic damage wrought by the government’s attempt to legally impose its notion of good citizenship.
The Red Carpet
Warren has spent much of her career crusading against the harmful and unjust cozy relationships between Wall Street and government, often to her credit. It’s curious that someone with such expertise in the matter doesn’t seem at all concerned that this new “accountability” would multiply the number of meetings, phone calls, and emails between senior regulators and the titans of the private sector.
These billion-dollar corporations already employ armies of lawyers and accountants to navigate regulatory minefields and turn them into weapons against their smaller competitors. Does Warren believe this practice will stop overnight?
If most rent-seeking were a matter of nefarious corporate executives buying off weak or greedy officials, we could just elect better people. The fact that this problem persists over decades is indicative of a more subtle process. Rent-seeking is an inevitable systemic feature in a network with thousands of contact points between business and government.
Unless one ascribes mystical power to Warren’s moral presence, her plan represents a fertile breeding ground for mismanagement and corruption. And then comes the day when the people’s champion leaves the White House.
Candidates with big ideas that increase government power often seem to adopt an implicit fantasy that their election will usher in a golden age where “the people” will no longer make mistakes and elect candidates from the other party. What will happen when the unprecedented power Warren wants to assume over corporations falls into the hands of the next Donald Trump? This alone should give the Left serious pause before supporting game-changing deeply misguided reforms to our system.
Left-Wing Nationalism: Yet Another Threat to Liberty
Elizabeth Warren is smart, tenacious, caring, and catastrophically wrong on a host of issues. She’s running on a left-nationalist platform, where corporations turn away from their natural role serving shareholders and instead serve whatever interest the aspiring president believes is important.
I’ve spent multiple articles and podcasts kvetching about Bernie Sanders’ sky-high taxation and grandiose government programs. Sanders would divert large sums away from a private sector that derives its unique dynamism from the emergent and evolutionary processes that only occur when millions of individuals make decisions using the information they uniquely possess.
I’d take whatever Sanders calls socialism over accountable capitalism any day, because rather than starve the dynamic private sector of resources, Warren’s vision stifles the dynamism itself. One cannot overstate the importance of this point over the next year. Warren has convinced many voters, members of the media, and even herself that she is the Left’s pragmatic option. In this regard, the law professor whose staff is known for their prolific production of white papers is reduced to simply wishing reality away.
Max Gulker is an economist and writer at AIER.org, where this article first appeared.
Democracy is not foreordained to survive forever, or even for very much longer.
In his book Capitalism Socialism and Democracy, economist Joseph Schumpeter surveyed a vast swathe of history and the prevailing political and governmental institutions, and he identified 4 conditions for democracy to flourish.
Condition 1: High Quality Politicians.
The first condition is that the human material of politics – the people who staff the party machines, are elected to serve in parliament, rise to cabinet office and high positions in the bureaucracies – should be of sufficiently high quality.
American democracy clearly flunks this first condition. Just look objectively at the low levels of integrity exhibited by James Comey or of probity by Adam Schiff or of fidelity by Mark Sanford. Or consider this tweet from Representative Eric Swalwell.
Swalwell’s childish, middle school playground level expression was condemned by observers (such as @jeffdeist) on twitter as “embarrassing”. When citizens find their democratic representatives embarrassing, we have gone beyond Schumpeter’s condition of high quality for the human material of politics.
And, as Patricia McCarthy observed about the current crop of Democratic candidates for President:
One thing was made clear: these are the most hate-filled and, at the same time, the most ignorant group of people ever to grace a stage.
Condition 2: Limited Government.
The second condition for the success of democracy is that the effective range of political decision should not be extended too far.
Here, Schumpeter refers to the nature of limited government It was a part of the concept of the Founding Fathers and the first (unamended) American Constitution. Article 1, Section 8 of the original document listed what government had the power to do. James Madison and Alexander Hamilton told citizens that if a power was not enumerated, the government had no authority to execute it. That smokescreen lasted until the second year of the Washington Administration, when the first US Bank was set up in violation of the list of enumerated powers. In other words, Madison and Hamilton lied. Or, more important, pieces of paper with words on them indicating that there is a limit to the size and scope of government are worthless. Government will grow and expand indefinitely in a democracy. Not only can democracy not stop this expansion, it feeds it. Seeking votes via promises of government handouts gets politicians elected and expands government.
Condition 3: Bureaucrats With A Strong Sense Of Duty.
As a third condition, Schumpeter declared that democratic government in modern industrial society must be able to command the services of a well-trained bureaucracy of good standing and tradition, endowed with a strong sense of duty and a no less strong esprit de corps.
There is no doubt that in America, we have a large government bureaucracy, or, rather, a large collection of large government bureaucracies. We are a bureaucratic state with a bureaucratic government. Do these bureaucracies have a strong sense of duty? No. Think of the EPA, whose duty should be to the welfare of the American people but is now viewed internally as some kind of “save the planet” mandate executed by limiting industry and construction and recreation in defiance of what people actually want. Or think of the CIA which appears to conduct wars abroad, wars within its own ranks, and wars with other government departments and personnel. Is there a strong esprit de corps? How can there be when internal political rivalries within the bureaucracy’s own ranks are pervasive and dominant? Bureaucrats often give the impression that they hate each other and hate the citizenry.
Condition 4: Democratic Self-Control.
The fourth set of conditions “may be summed up in the phrase Democratic Self-control”. In his definition, Schumpeter included:
All groups that count in a nation are willing to accept any legislative measure on the statute book;
The same groups must be willing to accept all executive orders issued by legally competent authorities;
All electorates and legislative bodies must be on an intellectual and moral level high enough to be proof against the offerings of the crook and the crank.
Politicians in the legislature must resist the temptation to embarrass the government each time they can do so.
We are currently consumed in a constant battle of the legislature and interest groups against presidential executive orders, immigration legislation, budgeting and military operations. Embarrassing the government is not only the full-time activity of the political opposition, but also of their media allies. The intellectual and moral level has sunk to what must be all-time lows.
Finally, says Schumpeter about democratic self-control, effective competition for leadership requires a large measure of tolerance for difference of opinion. Would anyone claim today that there is a large measure of tolerance for difference of opinion amongst American politicians. Analysis tells us that the partisan ideological divide is greater than ever. Partisan division does not tolerate difference of opinion. The political opponent is irredeemably wrong and quite possibly evil.
The Outcome.
Schumpeter’s 4 conditions are all thoroughly violated. He predicted an inevitable descent towards authoritarian socialism. Democratic candidate debates, anyone?
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