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Guest Post: We're Heading For Economic Dictatorship
Authored by Janet Daley via the Ludwig von Mises Institute of Canada (originally posted on The Telegraph),
Forget about that dead parrot of a question – should we join the eurozone? The eurozone has officially joined us in a newly emerging international organisation: we are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America).
So here we all are. Like us, the member nations of the European single currency have embarked on their very own double (or is it triple?) dip recession. This is the future: the long, meandering “zig-zag” recovery to which the politicians and heads of central banks allude is just a euphemism for the end of economic life as we have known it.
Now there are some people for whom this will not sound like bad news. Many on the Left will finally have got the economy of their dreams – or, rather, the one they have always believed in. At last, we will be living with that fixed, unchanging pie which must be divided up “fairly” if social justice is to be achieved. Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking anything away from any other group, there will indeed be an absolute limit on the amount of capital circulating within the society.
The only decisions to be made will involve how that given, unalterable sum is to be shared out – and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal – virtually the only – significant function of political life. Is this Left-wing heaven?
Well, not quite. The total absence of economic growth would mean that the limitations on that distribution would be so severe as to require draconian legal enforcement: rationing, limits on the amount of currency that can be taken abroad, import restrictions and the kinds of penalties for economic crimes (undercutting, or “black market” selling practices) which have been unknown in the West since the end of the Second World War.
In this dystopian future there would have to be permanent austerity programmes. This would not only mean cutting government spending, which is what “austerity” means now, but the real kind: genuine falls in the standard of living of most working people, caused not just by frozen wages and the collapse in the value of savings (due to repeated bouts of money-printing), but also by the shortages of goods that will result from lack of investment and business expansion, not to mention the absence of cheaper goods from abroad due to import controls.
And it is not just day-to-day life that would be affected by the absence of growth in the economy. In the longer term, we can say good-bye to the technological innovations which have been spurred by competitive entrepreneurial activity, the medical advances funded by investment which an expanding economy can afford, and most poignantly perhaps, the social mobility that is made possible by increasing the reach of prosperity so that it includes ever-growing numbers of people. In short, almost everything we have come to understand as progress. Farewell to all that. But this is not the end of it. When the economy of a country is dead, and its political life is consumed by artificial mechanisms of forced distribution, its wealth does not remain static: it actually contracts and diminishes in value. If capital cannot grow – if there is no possibility of it growing – it becomes worthless in international exchange. This is what happened to the currencies of the Eastern bloc: they became phoney constructs with no value outside their own closed, recycled system.
When Germany was reunified, the Western half, in an act of almost superhuman political goodwill, arbitrarily declared the currency of the Eastern half to be equal in value to that of its own hugely successful one. The exercise nearly bankrupted the country, so great was the disparity between the vital, expanding Deutschemark and the risibly meaningless Ostmark which, like the Soviet ruble, had no economic legitimacy in the outside world.
At least then, there was a thriving West that could rescue the peoples of the East from the endless poverty of economies that were forbidden to grow by ideological edict. It remains to be seen what the consequences will be of the whole of the West, America included, falling into the economic black hole of permanent no-growth. Presumably, it will eventually have to move towards precisely the social and political structures that the East employed. As the fixed pot of national wealth loses ever more value, and resources shrink, the measures to enforce “fair” distribution must become more totalitarian: there will have to be confiscatory taxation on assets and property, collectivisation of the production of goods, and directed labour.
Democratic socialism with its “soft redistribution” and exponential growth of government spending will have paved the way for the hard redistribution of diminished resources under economic dictatorship. You think this sounds fanciful? It is just the logical conclusion of what will seem like enlightened social policy in a zero-growth society where hardship will need to be minimised by rigorously enforced equality. Then what? The rioting we see now in Italy and Greece – countries that had to have their democratic governments surgically removed in order to impose the uniform levels of poverty that are made necessary by dead economies – will spread throughout the West, and have to be contained by hard-fisted governments with or without democratic mandates. Political parties of all complexions talk of “balanced solutions”, which they think will sound more politically palatable than drastic cuts in public spending: tax rises on “the better-off” (the only people in a position to create real wealth) are put on the moral scale alongside “welfare cuts” on the unproductive.
This is not even a recipe for standing still: tax rises prevent growth and job creation, as well as reducing tax revenue. It is a formula for permanent decline in the private sector and endless austerity in the public one. But reduced government spending accompanied by tax cuts (particularly on employment – what the Americans call “payroll taxes”) could stimulate the growth of new wealth and begin a recovery. Most politicians on the Right understand this. They have about five minutes left to make the argument for it.
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Well, you may sneer at this article from Janet Daley, but I see you have little to say whch actually disagrees with her view of where we are all heading. As A Brit, I can honestly say that she is spot on and her views exactly reflect -- not only the strategy of our socialist Labour Party -- but also exactly reflects what was happening for 13 years when they were in government, and now being emulated to some extent by the two year old coalition government under David Cameron. Same thing is now happening in the US under the socialist Obama.
Even totalitarian governments in the past allowed some private businesses to exist and only moved in to take control if such businesses posed a risk to the power of the Almighty State.
Calling the modern Labour party "socialist" strongly leads me to believe you're not British.
"Tony Blair's moral decline and fall is now complete"
That's coming from the Graud, which isn't socialist, or lefty, unless you're a muppet. Hint: find out the funding, the tax structure and the web of links to places like the RSA. It's nice and fluffy Capitalism, but it's Capitalist to the core.
I am British. I normally use the term socialism as an umbrella term for the myriad of political poisons that operate on the Left, from communism to fascism and everything around them.
Old Labour/New Labour are all socialists and end up as totalitarian, running police states to enforce their will. The main difference between the two is which poison they represent. Old Labour has its roots in communism, whilst Blair and his crony New Labour were fascist-lite (but only because of the limitations imposed by democracy). Do not ignore that corporatism is really crony capitalism and is a feature of fascism but has little to do with free market capitalism.
Given the chance Blair would have extended his fascism/crony capitalism much more than he did, and he will do so if he gets the next job he covets so badly: the unelected President of The United States of Europe, where Barroso is on record saying that "Europe's future is too important to be left to democracy."
I should have added that you're the first person I've ever encountered who claims that the Guardian is not a Lefty newspaper, steeped in Lefty political correctness and almost always a strong supporter of the Labour Party. Do not be fooled by its occasional critical analysis of Labour Party policies. Its pages are overflowing with job ads for the public sector. I know of at least two people on the Right who've been blocked from making comments on their site because their opinions don't fit into the Guardian's Lefty agenda.
Some swotting up on your part of the definitions of Left & Right and where fascism/corporatism fit on the political spectrum would not go amiss. Hint: they are all on the Left :-)
So on one side you have social welfare (Democrats), and on the other you have corporate welfare (GOP). Both are abysmal...but quite frankly, given the choice I'd take social welfare over corporate welfare any day of the week. Call me soft if you want, but I care more about people than dumping another few billions on companies that DON'T NEED IT (like Exxon).
Given the choice, I'd rather make sure that homeless person you see in the street while driving to work doesn't die...or that the single mom without a job can still feed her kids. As opposed to handing money to corporations which really don't need it.
Unfortunately there CAN be an argument made by the corporations. Since you mentioned Exxon let's use it as an example.
The heads of Exxon could state that they care a LOT about the homeless because they, Exxon, are trying to make energy widely available, and that this distribution DOES make it to the homeless, that the homeless do find some refuge in places that are serviced by Exxon's end-products: soup kitchens, hospitals... This view could be offered under the phrase/slogan of "trickle down" (and I mean this in a neutral context, not the negative tag that it's gotten pinned with).
I'm NOT taking sides, just playing devil's advocate (I like doing that, as it's a good exerciser of logic).
Bottom line: if we're talking economics then we're talking about how goods and services are to be distributed, the aim of being able to adequately describe what is happening; unfortunately, ANY "welfare" (which should really be exchanged with a better discussion word, one that I believe is best descriptive, "subsidy*") distorts things, makes it easy for people to hide things, and hiding (from the good) never ends up well.
* Which in turn says that something is not sustainable (looking around I see little of anything that, in physical reality, nature, is sustainable).
Unfortunately that corporate welfare doesn't automatically result in lower prices...instead, all it does is increase shareholder returns.
Just look at oil prices in relation to subsidies...prices go up whether you have subsidies or not.
And it's not as if those oil companies would stop selling oil if those subsidies went away...hell, they probably wouldn't even raise prices as they are fixed on a GLOBAL basis rather than based on a single country's tax rate or subsidies.
That poor homeless chap or single mom on the other hand would really suffer if you took away subsidies. And those are your fellow citizens! Patriotism alone should make you lean more towards social welfare than corporate welfare.
As Spock said: The needs of the many outweigh the needs of the few.
Well said. Governments of all stripes have allowed megamergeredmulticorps to do exactly what Adam Smith warned about, namely corner the market, create cartels and establish thinly-veiled monopolies, all underwritten by the taxpayer. This ditz from the LvonM Institue (and I'm wondering if it's a mental institue) is simply braying the most shallow of simplicities. Money velocity is a joke, job growth is zero, wage growth is zero, so there's no surprise that government social programs are growing. Wanna stop that? Restore balance to the system and unravel these massive concentrations of unproductive wealth.
Yup...and trickle down economics CLEARLY doesn't work!! ;)
Everytime someone mentions "job creators" I wanna punch that person because it's such a dishonest slogan.
and...?
One sign that the govenment knows what is happening is toward the legal use of "sweet weed". For those of you, with nothing to do, just smoke up and sit back and mellow.
Our government is on the right track with its introduction. Afganistan has its poppies and American has its cannabas (sp?). This will also return a smile to many faces but the down side is more people will become fat.
Another load of over-simplistic garbage. The real battle is between productive versus unproductive capital. Central banks have built a system that revels in unproductive 'rentier' and re-distributes all else to the nth degree. ZIRP is for banks only, not for proles who get jacked relentlessly. There's only enough 'socialism' to keep the suckers playing the game and believing they may yet win. It's a Powerball economy. Unproductive capital is choking the deployment of productive capital. The global political struggle is shaping up to be one of economic freedom. If you're looking for a Hollywood style premise to describe it, think 'Running Man'.
You, sir are 100% on the money.
I had to laugh when you used the term "Powerball economy" because I thought how senseless and a waste of time were reports on both Bloomberg and CNBC about how best to keep your Powerball winnings.
I mean, seriously, with the odds of winning 1 in 175 million, who really needs such advice? One or two people or a small group of actual "winners?"
Anyone who engages in such ludicrous behavior as actually buying a lottery ticket deserves nothing more than what we currently have... a shit system that promotes sloth over real productive work.
People ask me why I watch the financial news channels. I respond that it's mostly market research. I need to know just how stupid and dumbed down the media is making people, so I know how to position/promote my business. That, and background noise and/or entertainment, though in warmer weather, I don't pay much attention as observing and interacting with nature is far more interesting and satisfying.
Likewise! My clients are in the city, I live in the country and do as much as I can online...I give them a break for every time I don't have to travel and blow meaningless hours in a boardroom stating the blatantly obvious for the umpteenth time. If they insist, of course, I'm only too happy to invoice accordingly...
Cheers!
"and ever-increasing resources"
http://www.youtube.com/watch?v=rrUync3ghsQ
"assume an eternal supply!"
Because there's no well-documented "hard redistribution" of assets to robber barrons in our history or anything.
Socialism allows the "ruling families" to hand pick the ones that should be successful and blocks all others from getting there.
Socialism also keeps "ruling families" atop the financial pyramid without challenge.
This is accomplished by high taxes and over regulation supported by big government and in the name of "the people", because we can't do without our safety net and entitlements that often disappear after the herd has been convinced they exist. To unwind this is political suicide and takes decades.
Where ever there is/was a monarchy, king, dictator, etc - a socialist system replaced it, but not really. The socialist system keeps the dictators in power without being labeled dictators, but bloodlines remain the case in most/all of Europe.
The US ran differently in the past.
Simply removing the safety net wouldn't work though...not unless it comes along with other reforms (tigher financial regulation, decent salaries, better employment protection, affordable health care, etc.). As long as those points aren't delivered simply removing the safety net would end in a disaster...as in, you'd have people starving in the streets and the vast majority not being able to afford a decent education.
And since you only seem to mention social welfare...what about corporate welfare?? That's just as bad and clearly only results in higher shareholder returns without any real benefit to society (because guess what, most of them can't afford to be shareholders).
No, they won't make that argument. Materialism brought us forth and toward Materialism and it's consequences we stumble. Keep on keepin' on spend/print/tax-ing.