The Trump Card

To many, the world has stopped making sense. People "out there" have lost their minds. Brand new political parties are winning big elections, Britain voted leave and of course, Donald J. Trump.

To me, this all makes perfect sense. While I did not think Trump was going to win, I did believe he had a much better chance than many were expecting. What did I know that so many missed?

Indeed, why did trump win? What will happen in 2020? It wasn't the Russians. Yes, I'm sure they try and influence elections where they can and I'm sure they try and sow instability in their rivals' turf. But to say they were able to swing the whole election with some social media bots is asinine. Advertisement is not hypnotism and we don't need such an outlandish explanation to explain why Hillary's campaign and candidature were so lacklustre and why Trump's message had legs when there is a much better explanation staring us in the face.

The real reason Trump won is the same reason Bernie almost got the Democratic nomination. It's the same reason why Jeb and the rest of the establishment tanked. Of all people, Hillary really should have known: it's the economy, stupid.

Living in Obama's recovery USA, I could see a lot of anecdotal evidence of people struggling. College grads working multiple bar jobs and moving back in with their parents and Uber drivers explaining how they used to be retired. Work trips to Ohio and Michigan really opened my eyes to a recovery that wasn't

There are lies, damned lies, and then there are statistics. Government economic data is thoroughly biased as evidenced by the changes to the formulae for inflation, GPD and unemployment that always coax out better numbers than the older formulae. Hedonic substitutions then really allow the bureaucrats to cheer-lead the economy. Shadowstats, economists or the Austrian school and contrarian thinkers had it right: the Fed's unprecedented inflationary policy had brought the good times back to Wall street, but on Main street, unemployment was still north of 10% and and inflation was a lot hotter than 2% (making real GDP negative).

One other person saw all of this: Donald. He called the stock market a "big fat ugly bubble". He said unemployment was more than 20%. He said America was no longer great. Hillary, on the other hand, stood on Obama's shoulders, who said that Trump was "pedaling fiction". But the rust belt knew what reality they were living. They voted against four more years and for something different. Anything different.

Almost as soon as he had won, Trump changed his tune and declared victory. The big fat ugly bubble was now a bull market. The worst economy in history was now the best economy in history. Excitement about tax cuts and deregulation changed sentiment and the stock market reached record highs while unemployment reached new lows. However, the underlying economy was still the same. Nothing of substance has changed. The deficits are bigger, people are still struggling, waiting for Trump's America to arrive. It's not coming. Trump's irrational cheer-leading leads me to my next prediction: Trump is toast.

Trump will be a one-term president. Trump's 2020 slogan of "Keep America great" will be another four more years the electorate won't want. As the recession worsens and the data becomes undeniable, the voters will be ready to bring in anyone, as long as they are everything that Trump is not. America is going to lurch hard to the left in 2020. Of course, that won't work either.

Similarly, and for similar reasons, the rest of the west will lurch left and right, sliding ever farther from the centre and down the slope towards totalitarianism. In some places it will be universal socialism and in others, nationalist socialism.

Our only hope is to recognise and refute this trajectory. The only answer that works is real free market capitalism. Not the crony, over-regulated special interest system we have today, but the true free markets that made us rich in the first place. Getting there will not be easy. After all, we need a recession. We might even need a depression. The real economy has been so screwed up for so long by so much bad macro policy and regulation that the transition must now be long and arduous. So much debt now has to be written down. So many people expecting a social safety net will have to be let down. So many malinvestments have to be liquidated and re-allocated. If that sounds grim, I assure you it could and might be worse. After all, 2035 might start to look a lot like 1935.

San Jose, January 24th 2019

TLDR: Economic issues are the root cause of the west's political instability

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.