What History Teaches Us About Socialism

Our subject: Who’s dumber, more dangerous…

…those who want to reform capitalism and control it?

…Or those who want to do away with it altogether?

Fix capitalism?

The question springs from several recent news items. First, Alexandria Ocasio-Cortez was elected…and New York Magazine came out with ‘When Did Everyone Become a Socialist?’

Then, America’s most successful hedge fund manager, Ray Dalio, claimed that capitalism needed to be fixed:

I have also seen capitalism evolve in a way that it is not working well for the majority of Americans because it’s producing self-reinforcing spirals up for the haves and down for the have-nots. This is creating widening income/wealth/opportunity gaps that pose existential threats to the United States because these gaps are bringing about damaging domestic and international conflicts and weakening America’s condition.

And then, Financial Times correspondent, Edward Luce, piled on:

History tells us that elites who do not share power are ultimately doomed (see French revolution). Those with the wisdom and foresight to bend find they are far less likely to eventually break. The question America’s financial and tech elites must ask is “what price social peace?” I would say social peace is worth several carried interest loopholes. As TB Macaulay, the great British historian, remarked: “You must change in order to stay the same”.

Both outright socialists and capitalist reformers have more or less the same goal — to bang, bend, and bamboozle the world into a shape that is more pleasing to them.

They think the rich don’t pay enough in taxes. Or that income is improperly distributed. Or that the Chinese are getting away with something. Or that people shouldn’t use so much fossil fuel. Whatever their own prejudice or predilection, they want to make it the law of the land.

One way or the other — that is, either by innocence or imbecility — they missed the biggest lesson of the 20th century.

Compelling evidence

And here, we pause. We tip our hat and say a silent prayer for those uncounted millions of people who provided such stark and compelling evidence.

Thanks to their poor, gloomy lives and early, pathetic deaths…

…the National Socialists (Nazis) in Germany, the Bolsheviks in the Soviet Union, the Maoists in China, the Peronists in Argentina…the communists in Cuba…and all their victims…

…thanks to them, we know how socialism works.

To make a long story short, at the end of WWI, Germany was close to starvation. Farms had been woefully neglected during the war; young farmers were wasted in the trenches. And then, Britain’s blockade prevented importing food.

Like Scarlett O’Hara, the young Adolf vowed that would never happen to him again.

But rather than let the farmers keep their money and buy tractors, the amateur economist came up with an outrageous plan — build tanks, not tractors, and use them to take farmland away from the Poles!

That is, he rejected the win-win deals of a civilised economy. Instead, he went win-lose…all the way…and lost, big time.

For its part, the Soviet Union looked like a going concern in the 1920s and 1930s, too. Leading activists, such as George Bernard Shaw and Eleanor Roosevelt, went to have a look. They came back impressed.

One of America’s leading economists — Paul Samuelson — was impressed, too…He thought the Soviet economy was doing so well it would overtake the US by 1984.

Samuelson won the Nobel Memorial Prize in 1970 for doing ‘more than any other contemporary economist to raise the level of scientific analysis in economic theory.’

Scientific analysis? What a joke!

You can make it look as scientific as you want. Just put in some formulae and a few Greek symbols. But economics is not a science.

Win-lose deals

You can count rolls of steel, man-hours of labour, and miles of railroad track. And tanks, too. But what are they worth?

To know the answer to that, you need free markets…with honest prices. The Soviets permitted neither. Win-lose deals don’t work that way. World improvers don’t allow people to decide for themselves; they want to make the decisions themselves.

Like socialist Germany, the Soviet Union was only simulating a healthy economy, not stimulating one. People had jobs. Factories belched smoke.

Lame economists tallied the gains. But it was a system based on win-lose deals from top to bottom; a waste of time and money from start to finish.

Jobs were given by the government. The feds ran the important businesses and set prices, too. And like all win-lose deals, the longer the Soviet system ran, the more real wealth it destroyed.

We got to see that in person. With our own eyes.

Stay tuned.

Regards,

Bill Bonner


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.


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