“Occupy Wall Street” and its Futility

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Roubini, Marx, Capitalism, Socialism, and Interventionism

Very nice discussion:

Words and language can hold a lot of power. If your task is to destroy the people’s desire for peace and individual liberty, and if you can convince them that the US system over the past century is what free marketers mean when they say ‘capitalism‘, then your job is pretty much done.

But today’s shifts in public opinion seem very clear to me, just from comments I gather here and there: Fewer and fewer people are buying this story. More and more are beginning to try and think for themselves, simply out of plain necessity.

I have been harping on this for about 5 years now: The key concept that public discourse is still missing, the one word that explains all of today’s economic and political troubles is Interventionism.

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Socialism for the Rich a.k.a. Neoliberalism

Here is an accurate analysis as to why libertarians shouldn’t count on most conservatives out there when it comes to defending what they view as free markets:

Because that’s what “privatization” means, to the typical “free market” wonk at Heritage or AEI: Instead of taxing the public to organize a public service through government bureaucrats who operate as a legal monopoly, you tax the public and hire a private company to perform the service. A private company which — thanks to no-bid contracts and all sorts of legal protections — usually operates as a monopoly and has the same outrageous cost-maximizing incentives as a “defense” contractor or public utility. And the tax burden may well actually be greater, because rather than just paying a bunch of white collar civil servants with GS classifications, you’ve got to pay white collar corporate drones — plus the cowboy CEO’s salary and the shareholder dividends. Taxpayer-funded either way, but with “free market reform” you get two layers of parasites instead of just the one. Woo-hoo!

See, it’s only “socialism” if you give the money to poor folks. If you give the money to corporations, that’s “pro-business.” And “pro-business,” of course, means “free market.”

I would be fully content with lefties using the term neoliberalism if they ever clarified that what they are talking about is a system with heavy government intervention, yet with the bulk of the money being distributed to businesses instead of bureaucrats.

This is really something that liberals and conservatives out there (who think they are oh so different from each other) need to grasp at some point if they care to make any sense:

Us voluntaryists and consistent libertarians are not proposing that extorted money be handed to the rich instead of the poor. We are proposing that aggression, and with that extortion, be universally proscribed; that there be no extorted money to play with in the first place!

You’re not a “free market guy” if you continue to tax people and, instead of paying government bureaucrats directly, you hire private businesses out of the voluntary market to do the job.

Just look at the unspeakable killing sprees, such as the murders of 1.4+ million Iraqis along with who knows how many injured for life or languishing in refugee camps, that had to occur in order to transfer wealth from US taxpayers to well-to-do war contractors.

I would argue that there seems to be a lot of evidence out there that hiring a private business for public money leads to far fewer checks and balances and less oversight and to far more chaos and wealth destruction, than if you use the money to pay government bureaucrats directly.

To be sure, the difference is one in degree not in kind. A shit sandwich is still a shit sandwich.

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A Simple & Tangible Experiment in Socialism

Whether or not this actually occurred in real life is not so important, but I like the idea in general. A user on reddit recently posted this message:

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A….

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy.

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise…..they all failed, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

I mean, it’s not “Obama’s plan” since Obama is just your average interventionist and since Congress writes the laws and not the president anyway, but even if he was, he’s not collectivizing all the means of production; that said, it IS a good experiment to convey one important aspect of the problems with socialism.

The root problem with socialism of course being the impossibility of economic calculation due to the absence of prices, as Mises has already explained 90 years ago.

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The Next Failed Socialist Experiment – Cuba to Lay Off 1,000,000 Government Workers

Historically, I would say this will certainly be remembered as a memorable event.

BBC reports Cuba to cut one million public sector jobs:

Cuba has announced radical plans to lay off huge numbers of state employees, to help revive the communist country’s struggling economy.

The Cuban labour federation said more than a million workers would lose their jobs – half of them by March next year.

Those laid off will be encouraged to become self-employed or join new private enterprises, on which some of the current restrictions will be eased.

Analysts say it is biggest private sector shift since the 1959 revolution.

Cuba’s communist government currently controls almost all aspects of the country’s economy and employs about 85% of the official workforce, which is put at 5.1 million people.

As many as one-in-five of all workers could lose their jobs.

Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls and losses that hurt the economy,” the labour federation said in a statement.

“Job options will be increased and broadened with new forms of non-state employment, among them leasing land, co-operatives, and self-employment, absorbing hundreds of thousands of workers in the coming years,” the statement added.

Free enterprise?

To create jobs for the redundant workers, strict rules limiting private enterprise will be relaxed and many more licenses will be issued for people to become self-employed.

Private businesses will be allowed to employ staff for the first time.

The self-employed will have access to social security and will be able to open bank accounts and even borrow money to expand their businesses.

They will also have to pay tax on their profits and for each person they employ, something which could dramatically boost the government’s income.

And they will be able to negotiate contracts to provide services to government departments.

A minority of Cuban workers already work for themselves, for example as hairdressers and taxi-drivers, or running small family restaurants.

There is also a thriving black economy, with many people working independently without proper permission from the state.

The BBC’s Fernando Ravsberg in Havana says salaries in Cuba’s state sector are so low that many employees could be better off working for themselves.

But he says not everyone has the skills and initiative necessary to be self-employed.

He adds that the government plan does not foresee any kind of advice being offered to people seeking to set up their own businesses.

Economic crisis

President Raul Castro outlined some of the changes in a speech in August, saying the state’s role in the economy had to be reduced.

We have to end forever the notion that Cuba is the only country in the world where you can live without working,” he said.

Cuba’s state-run economy has been gripped by a severe crisis in the past two years that has forced it to cut imports.

It has suffered from a fall in the price for its main export, nickel, as well as a decline in tourism.

Growth has also been hampered by the 48-year US trade embargo.

Mr Castro became Cuba’s leader when his brother, Fidel Castro, stepped aside because of ill-health in 2006.

Almost 100 years ago, Ludwig von Mises already explained with precise and uncompromising rigor why Socialism is flawed and will never work. It is due to socialism’s inherent inability to allow for accurate prices to emerge in order to optimize the allocation of factors of production.

Is this a sudden enlightenment on the part of Cuban officials? An epiphany that government intervention is immoral, always and everywhere? Hardly so … But what is going on is that Cuban leaders are realizing that there will be a lot more to loot via taxation if you leave people a little bit more freedom.

History has shown always and everywhere that when the government shrinks, the economy thrives, more valuable goods are produced and services provided, people have more disposable income, and thus more money to get ripped off from them.

There is a reason why farmers prefer free range cattle farming to locking their animals up in a small box. There is a reason why slave masters made it a point to convince slaves that they are where they belong and should police themselves. The lower the cost of ownership, the easier it is to rule over people.

Cuba has a perfect example of such an interventionist experiment right next door in the US. And it has indeed bestowed upon its politically connected people enormous riches in a relatively shielded and domestically peaceful environment. That experiment is coming to an end and the country is headed for the inevitable and slowly creeping culmination of interventionism: A complete collectivization of the economy, viz. socialism … Ironically, the exact opposite of what’s now happening in Cuba.

To be sure, such a system of interventionism, too, will not last forever. It will fail. But for as long as it’s in place, it allows the ruling class a lot more riches, comfort, and pseudo moral justification than the overt all round management and controls of socialism.

Two little references that I always like to remind people of:

Ayn Rand wrote in Atlas Shrugged in 1957:

“Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.”

Ludwig von Mises wrote in his analysis Interventionism in 1940:

The various measures, by which interventionism tries to direct business, cannot achieve the aims its honest advocates are seeking by their application. Interventionist measures lead to conditions which, from the standpoint of those who recommend them, are actually less desirable than those they are designed to alleviate. They create unemployment, depression, monopoly, dis­tress. They may make a few people richer, but they make all others poorer and less satisfied. If governments do not give them up and return to the unhampered market economy, if they stubbornly persist in the attempt to compensate by further interventions for the short­comings of earlier interventions, they will find eventually that they have adopted socialism.

On a sidenote: Observe how many socialists will immediately tell you how Cuba was not a socialist experiment, and how they completely misinterpreted true communism/socialism/collectivism. And then ask to what extent they are, in their rigorous and relentless fight for logical consistency and evidence, giving the ideas of capitalism that same benefit of the “misinterpretation tale” :)

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