Archive for December, 2008
December 30, 2008
A free-market economy is capable of creating wealth. A Marxist economy is not capable of creating wealth. First of all, there is the impossible-to-duplicate complexity of a spontaneous market economy that human (Marxist) planners could never imitate (according to Friedrich Hayek). An economy as large as that of America (or as the old Soviet Union’s would have been) is made up of millions of spending and saving decisions every hour by the entrepreneur and the consumer. This process continues until a hopelessly complicated economic phenomenon has accrued.
That inevitable failure, on the part of human planners, to duplicate the complexity inherent in economic spontaneity can only result in botched economic projects, since economic growth, and thereby the creation of wealth, will be stifled outright by the intellectual limitations of those human planners, and the short-sighted, hubristic policies that will ensue.
Second, there is the issue of Adam Smith’s famous concept of the “Invisible Hand.” Given that free markets are governed by competition rather than by planning, each individual capitalist knows himself to be in a position of uncertainty. He knows that success is not assured, it is earned. Therefore, he will know it to be in his self-interest to work hard, be curious about others, and take chances, so that the probability of his bringing a worthy product to the market is greater. This will increase his chances of success as it also creates a market full of desirable goods to buy.
As he helps himself through self-interest, he helps the market, too, by creating its wealth through his hard work. Since a Marxist economy kills the goose that lays the golden egg, competition, as well as the individual initiative that it gives rise to, and replaces that golden goose with the ineluctable incompetence of human planners, the sure result is an economy that cannot possibly create wealth. It’s ironic that so many people who criticize America do so from the position of strength that only America’s economic power could have provided them.
Now, with the Invisible Hand banished in a Marxist economy, the only element that could have ended up producing wealth is gone, namely, free-market competition. What you will have now is empty shelves in the stores. Those empty shelves can only be filled by the self-interested activity of the individual capitalist in a free competition. The Soviet Union had some of the most spectacular reserves of oil and natural gas in the world. It was among the richest countries in the world in this regard. This reduced the urgency to create capitalist wealth once the necessary infrastructure to extract, process, and transport those resources had been put in place (by capitalist know-how, no less). The Soviet Union thought it could rely on selling off its furniture in order to stay afloat — it didn’t need capitalism.
It believed it could pay its way forever through selling technological know-how and arms to its satellites and to developing nations duped by its rhetoric, and through the exploitation and sale of all those natural resources. Thus the old Soviet Union never got around to developing a free-market economy, to its detriment. The problem here is that the Soviet Union fell behind in innovation. Who ever wanted Soviet blue jeans? Or Soviet music? Or Soviet anything? There was no stimulus to create, be curious, or work hard. (Only in their dissident literature was there any creativity, and it was there with a vengeance, since it was the rebirth of the spirit against the state.)
There is an old joke in former satellite communist countries: “The man who works hard in a communist country has everything he wants, and the man who doesn’t work hard has even more.” The rest of the world was not interested in trading with the Soviet Union except for bare necessities, for the stuff that was just simply in the ground. The fabulous conceit of Marxist economic theory is that it was using the superabundant natural resources of the Empire to fund itself while absurdly claiming the superiority of human economic planning over the spontaneous marketplace. No country poor in natural resources can afford the incompetence of Marxist economic policies.
Those policies cannot create wealth, they can only create empty shelves, and when there are no natural resources to sell off, the country will suffer grievously in the economic sphere. Many countries found this out the hard way. The tragedy is that a mistaken hatred of America — as if America created all the evil in the world rather than fell into the preexisting evil created by all of human history — compels some countries to try Marxism, only to find themselves impoverished. India tried Marxism in the 1970′s, found out how bad it was, and now is a staunch ally of America. India is one of the best allies America has, a member of the English-speaking countries and their common tradition of the rule of settled case law.
The Soviet Union was the Socialist Motherland by design, not coincidence. All those resources put Russia at risk for becoming the home of the most tragic and murderous experiment in human history: communism. With all that wealth under the ground, free of charge, the Soviet Union became the logical motherland of Marxism since all that free wealth could hide quite nicely the incapability of Marxist economics of creating any wealth. The more state-owned enterprises a country has, the more individual initiative will be in attrition, and the more the economy will be suffocated thereby.
The liberating truth is that capitalism is morally superior to Marxism, since the former opens up the possibility of freedom through the encouragement of private effort on one’s own behalf, and through the possibility of getting ahead through enrichment. There is a phony idea of altruism at the basis of Marxism that claims one can completely give up self-interest without annihilating the self (but only self-reliance can be the true definition of altruism).