The ideology stikes back

"May you live in exciting times" goes the old Chinese curse. For decades since the fall of the Iron Curtain, most of us in Europe and the west have lived under a stable regime oscillating between centre-left and centre-right parties. If not in a two-party system like here in Malta, then in a system of political alliances dominated by centrist blocks.

This edifice that has been steadily eroding now shows signs of accelerating collapse. In Italy, France, Spain, Portugal and Greece parties that once dominated the political scene now share the opposition benches with their former rivals or share power with upstart new parties. In the United States and the United Kingdom old parties have been taken over from the inside or split down the middle and in Germany the establishment hangs by a thread.

The trend is clear; the dichotomy of centre-left and centre-right politics is at an end and voters are binning old parties for radical agendas and a return to ideology.

Ideology has always been a part of politics, but in the post cold war west it had become something of an after-thought. You could vote for a moderate that promised to increase the size of government through borrowing or for another moderate with the same plan and slightly different priorities.

This lack of differentiation must have bored many voters. However, until recently they mostly shied away from ideologically consistent parties like communists, anti-immigration parties and independence movements. These parties were always there and always had radical agendas, so why is it only now that the centre is being dumped for the fringes? Why is this happening in so many different countries at the same time?

Of course, sometimes the zeitgeist just happens to blow the winds of change in a particular direction, and future historians can only speculate and argue among themselves as to why a particular thing happened when and where it did. But to me it is quite clear what is going on, and understanding the cause of this transition does not fill me with hope for the future.

A similar thing happened before, not too long ago. After the Great Depression, many of Euorpe's moderate parties were defeated or taken over by radical agendas. The high unemployment and financial uncertainty angered voters who blamed their sitting governments for the malaise.

Voters punish the government and bring in the opposition. The opposition, also unable to magically improve the condition of the voters are also booted out. Voters start to cast their hopes further out as their frustration grows. Indeed it was common, as the Fascists and Communists knew, for the same voters to switch their vote from the far-left to the far-right and vice-versa. Such ideological inconsistency is actually consistent with the driver of their actions; frustration and desperation.

Hang on, you might say. Great depression era unemployment was massive and the world was gripped by a deflationary downward spiral. The economy in the west today might be a little flat, but we're not even in a recession, let alone a depression.

That's all true, however if you look beneath the surface of seemingly good ecnonomic data, a stealth depression lurks below and is entering its second decade.

Unemployment is nowhere as bad as it was in the depression, it is 8% in the Eurozone and below 5% in the US. However, that figure is misleading as it hides those who have dropped out of the labour force entirely and those who are underemployed. Shadowstats' more believable number puts unemployment in the US north of 20%.

Much worse are the governemnt's inflation figures. Hedonic substitutions, qualitative and seasonal adjustments allow governemnts to understate inflation. Their calculations ignore significant qualitative changes and shrinkflation. Here are some anecdotes: paying the same amount as you did last year for a new laptop counts as a massive saving as the CPU is faster. Your flight is €100 cheaper but the cost to add your seat, buy a meal and check in a bag are not captured in the goods basket. You pay 10% more for that bag of crisps, which now contain 20% fewer crisps.

This understating of inflation directly boosts GDP and gives the central banks cover to keep monetary conditions artifically easy. This easy money boosts asset prices which give an impression of prosperity and allows those who own assets to continue to live beyond their means. But what about those of us with no assets? Young people, loaded with student debt, look at house prices in dismay. They go to their part-time job and realise that at this rate, they will never move out of their parent's house. The parties of their parents created this mess, only the parties on the fringe are even willing to acknowlegde their plight.

So until we return to normal monetary conditions and suffer through the asset deflation we so desperately need, voters will continue to increasingly support radical agendas. There is no easy way out and it might already be too late, in some countries at least. The horses have already bolted and the best we can hope for is a rough landing and no wars.

Christchurch, UK, 2nd May 2019

 

TLDR: The transition to new political parties is a symptom of economic hardship

Democratic Fascism

From each according to his ability, to each according to his need. This, most agree, is the fundamental tenet of socialism. Socialism, despite being the single most deadly ideology in human history, despite leading to tyranny and misery every single time it has been tried, is experiencing a revival with renewed enthusiasm, particularly in places hitherto relatively unscathed by it's pestilence.

No country is entirely socialist or entirely capitalist, so it is hard sometimes to nail down the criteria of what makes a country socialist. Proponents of socialism claim that Norway and the Netherlands are socialist countries, while detractors prefer Venezuela and North Korea as good examples. Based on Marx' maxim that I started this article with, we can ascertain that  policies and economies are more or less socialist depending on their propensity to redistribute money and material goods or services from one group of people to another, to limit or eliminate profits and private property and increase the amount of central planning and central direction of the economy. This broad definition of socialism is widely accepted by both supporters and detractors of socialism.

So which countries are socialist? Or rather which countries rank highest on the socialist scale? By these criteria, it is clear that Venezuela and Cuba, having very large portions of the economy run directly by the state, nationalised industries and state run services are very socialist countries. By this measure we can also see that North Korea is far more socialist than South Korea or even China as in the former's case, the state virtually runs the entire economy whereas in the latter's case, there is a large thriving private sector where capitalists are allowed to allocate the factors of production in pursuit of profits.

What about the Nordic countries and the Benelux? While they have high redistribution rates (high taxes and 'generous' welfare programs), government involvement in the economy is low with even most schools and hospitals being in private hands. Private property and profit-seeking enterprise is not only tolerated, but encouraged. In Europe, The Netherlands (which I am most familiar with, having lived there) is by our criteria far less socialist than France, Spain, Italy, Greece or even the UK.

It is also often argued, by the advocates of socialism, that the horrific totalitarian regimes of the Soviet Union, Nazi Germany, Mao's China or Pol Pot's Cambodia were not socialist. The Soviet Union, they say was communist, not socialist. The soviets themselves disagreed, communism was the utopian ideal they had not yet reached, and described themselves as socialist republics. Indeed, the near total ownership of the economy by the state and the daemonisation of profit-seeking capitalists leaves little doubt to as to where they stand on our scale.

Although thoroughly explained by Hayek's Road to Serfdom, many still do not recognise that the German Nationalist Socialist party was a socialist party. Hitler’s economic policies championed state direction and Capitalism, which according to Hitler was run by a cabal of Jews, was derided as the biggest evil in the world. The Third Reich featured many government infrastructure programs, price controls, industry nationalisation and widespread economic regulation. The main difference between the Soviet Union and Nazi Germany was that one embraced the ideology of universal socialism, whereas the latter embraced national socialism. As Hayek also explains, redistributive policies and nationalised industries always lead to nationalism and friction with extra-national people within and without the state's borders. The more that is done by the state and the less left to the individual, the more important it becomes to define who is part of the state and who is not.

There being almost 200 countries in the world, it will take too long here to investigate and rank each one on our socialism scale. Ranking high on the socialist scale are fascist kleptocracies like Iran and Zimbabwe that use state interference in the economy to benefit a small elite instead of the unwashed masses. Lower down on the socialist scale there are southeast Asian countries whose citizens have low levels of political freedom, but high levels of economic freedom.

So given that the most socialist countries in the world today, and in the past are and have been the worst places for people to live in general and given that these places have seen rampant human rights abuses and the highest levels of inequality and human misery and murder, why would socialism appeal to anyone? I think the fundamental reason for the appeal of socialism and the general low opinion of capitalism is due to the fundamental error of attributing values to ideologies instead of to the outcomes they produce.

Ideas like socialism and capitalism don't have values. It is not correct to say that socialism is compassionate and capitalism is greedy. Only people have values. The reason that socialism always fails (and fails more the more it is applied) is the conceited idea that planners can do a better job of making decisions about where someone should work, what they should buy and from where, who deserves what portion of the fruits of their labour, what someone should learn and whether or not that person should be allowed to live at all better than those people involved can themselves. Inevitably, the planners get it wrong, and the more they try to achieve ‘social’ justice, the more they pervert actual justice and the more misery they sow into the ground.

So adding a word like "democratic" to an idea as flawed, dangerous and old as socialism will not change its outcome. Indeed one should not be distracted by political marketing labels such as "liberal", "conservative", "freedom" or "democratic". One should instead look at the policy proposals of parties and governments and ask: is this increasing the state's role in the economy or not? Such an increase, whoever it is who champions it, will always move you further down that road to tyranny and misery.

Porto, September 17th, 2018


 

The long downward road is paved with good intentions and tarmac

TLDR: Democratic socialism doesn't make socialism any better.