Friday, September 05, 2014

A Small Mistake

I have been reading How China Became Capitalist by Ronald Coase and Ning Wang. It's a fascinating account and I will probably post more on it later, but one detail struck me.

When Mao died, The Economist wrote:

“In the final reckoning, Mao must be accepted as one of history’s great achievers: for devising a peasant-centered revolutionary strategy which enabled China’s Communist Party to seize power, against Marx’s prescriptions, from bases in the countryside; for directing the transformation of China from a feudal society, wracked by war and bled by corruption, into a unified, egalitarian state where nobody starves; and for reviving national pride and confidence so that China could, in Mao’s words, ‘stand up’ among the great powers.” (emphasis mine)

The current estimate is that, during the Great Leap Forward, between thirty and forty million Chinese peasants starved to death. Critics questioning that figure have suggested that the number might have been as low as two and a half million.

I am curious—has the Economist ever published an explicit apology or an explanation of how they got the facts so completely backwards, crediting the man responsible for what was probably the worst famine in history with creating a state "where nobody starves?" Is it known who wrote that passage, and has anyone ever asked him how he could have gotten the facts so terribly wrong?

113 Comments:

At 1:26 AM, September 06, 2014, Blogger Tibor Mach said...

Is it possible that at the time of Mao's death it was not yet widely known what truly happened during the "cultural revolution" and the "great leap forward" and that the author of that nonsense was gullible enough to just cite an official Chinese source?

That seems to be an only way someone could ascribe this to a man who is responsible for deaths of more people than Hitler and Stalin together (although killing just your own people seems to be "better"...Hitler is despised much more than Stalin, and Stalin, who also killed mostly his own but is not wholeheartedly endorsed by his current country's government, still more than Mao).

 
At 2:20 AM, September 06, 2014, Blogger Stuart said...

This is shocking. I didn't find any apology or correction (but that doesn't mean it doesn't exist).

It hardly excuses them if they didn't know any better and just took Chinese propaganda at face value.

Even now, people are so keen to find excuses for Communism. See Oliver Stone's recent series (and book).

 
At 4:42 AM, September 06, 2014, Anonymous Anonymous said...

A lot of people, especially young ones, are utterly clueless about the tens of millions of people who, under communism, either died from starvation or were outright murdered by the authorities. The ever fashionable left-wing media, including the entertainment sector, does not want to discuss this.

 
At 8:35 AM, September 06, 2014, Anonymous Anonymous said...

One example of why the Economist has been called the Ecommunist.

 
At 11:14 AM, September 06, 2014, Anonymous Anonymous said...

The Economist has always had a statist slant. They revere power.

 
At 4:47 PM, September 06, 2014, Anonymous MikeP said...

It depends upon what the meaning of the word 'starves' is. If 'starves' means 'nobody starves and nobody has starved' that's one thing. If it means 'nobody starves today', that was a completely true statement.

 
At 7:01 PM, September 06, 2014, Anonymous Patrick said...

"If it means 'nobody starves today', that was a completely true statement."

Though by that definition, Mao would also be credited with making a "state where nobody starves" if he had caused *everyone* to starve to death, since there'd be no one left to starve today.

 
At 9:33 PM, September 06, 2014, Blogger Foo Quuxman said...

But that wasn't True Communism, so it doesn't count.

And when the next one fails it will not be True Communism either.

 
At 1:25 AM, September 07, 2014, Blogger Jonathan said...

The Economist believes in anonymity, so it's always hard to pin errors onto specific writers.

It has a "statist slant", and so does every other newspaper. A complete absence of statist slant would probably lead to an almost complete absence of sales.

It seems to me to have less of a statist slant than most other newspapers, which is why I subscribed to it for decades.

The particular quote given in the original post seems odd; but The Economist has published a vast amount of text by many different writers, and it would also be odd if there were no gaffes to be found.

I'm guessing, but perhaps The Economist believes that apologizing for past gaffes is for losers: be positive and talk about your successes.

It would be interesting, though, to know whether The Economist has since published a different evaluation of Mao. I suppose it probably has done.

 
At 3:27 AM, September 07, 2014, Blogger Tibor Mach said...

Jonathan: I don't know The Economist very much, but anonymity of writers seems like a strange policy to me. I don't have a problem with reading something written by someone with certain biases (because everyone has them)...but I want to know what the biases of a particular author are, so that I can be more careful about some of his claims and more "gullible" about others (if a left wing economist says that minimum wages increase unemployment for example, it is a stronger statement, for me, than if a libertarian economist says the same thing...because the first one is less likely to like such findings, so less likely to express them unless he is completely sure he cannot "get around" them).

One thing is a "statist slant", another is endorsing a mass murderer :)

Otherwise, I agree. I would probably rather read The Economist than Reason magazine (I read neither). In Reason, I would find more stuff I agree with, probably, but I think it is good to expose yourself to someone who holds a different opinion and can argue for it reasonably well and honestly. From the Mao article, it seems honesty (or competence) is not always in place in The Economist...but maybe it is just a (nasty) exception to the rule.

 
At 10:26 AM, September 07, 2014, Anonymous Anonymous said...

Mao died in 1976, ~40 years ago. How many magazines, even those of libertarian bent, like 'reason', have made analogous major errors in that same timespan?

Seems to me reaching back that far to deride The Economist is reaching.

 
At 12:03 PM, September 07, 2014, Anonymous MikeP said...

I am surprised by the antipathy toward The Economist being shown here. Indeed, my Clintonism above was not entirely facetious. The context around that sentence could be that the Cultural Revolution and the Great Leap Forward were terrible events, yet the resulting society is, in context, surprising. Or the context could be frank amazement that so large and poor a communist nation could avert starvation at all with so little use of markets.

Regardless of what may indeed be an egregious error by a writer and an editor opining about a then-closed society forty years ago, The Economist is the most libertarian-minded known weekly there is. The world is much better off with it than without it.

I subscribe to both Reason and The Economist. Similarly, while I have never voted for non-Libertarian Party candidates, I am nonetheless happy that Rand Paul exists.

 
At 6:45 PM, September 07, 2014, Blogger Mike Huben said...

What famines has China had since the Great Leap Forward's Great Famine?

Famine was an annual event in China for thousands of years, Mao ruled roughly 15 years after the Great Famine: were there fewer or smaller famines?

If the problem of famine ended within Mao's reign, then The Economist doesn't owe any apology for a correct statement.

Why Does China Not Have Famines Anymore?

 
At 5:55 AM, September 08, 2014, Anonymous Daublin said...

Very interesting! It reminds me of the fawning over the Soviet Union in Samuelson, that gradually got dialed back in subsequent editions over the years.

To a lesser degree, I am reminded by the fondness for Obama when he was first running for president. The level of hope in the air was impressive (and to me, surprising).

I would love to know some of the related questions being floated around by commenters. Did other publications make the same mistake in the 70s?

 
At 8:16 AM, September 08, 2014, Blogger Don Balboa said...

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At 3:57 PM, September 08, 2014, Blogger Richard O. Hammer said...

I enjoyed reading How China Became Capitalist. The transition described is more complex than I would have imagined. It was a great education for me.

The history told starts generally with Mao's 1976 death. Mao was so revered in the country that Deng and other reformers who gained power pretended (and perhaps believed) they were carrying Mao's program forward -- only experimenting as necessary to make it work.

I look forward to David's reactions.

In your second sentence at the start, David, you say a detail struck you, being that quote from The Economist. I don't understand the connection between the mistake in The Economist and the book How China Became Capitalist. Was it on the cover of the book, or in the book's text?

 
At 7:16 PM, September 08, 2014, Anonymous srp said...

I'd be interested how this compares to Huang's Capitalism With Chinese Characteristics.

 
At 6:16 AM, September 09, 2014, Blogger Richard O. Hammer said...

@srp:
Capitalism With Chinese Characteristics could be one name given to the many programs and experiments in relaxation of control which are described in How China Became Capitalist. So Capitalism With Chinese Characteristics does not suggest a different story, it is part of the same story.

 
At 9:15 AM, September 09, 2014, Blogger Will McLean said...

Because of Chinese secrecy and disinformation the scale and causes of the Great Chinese Famine were poorly understood in the west before the 1980s. Tombstone wasn't published in English until 2012.

 
At 10:07 AM, September 09, 2014, Anonymous Jon said...

I wonder when Chicago style economists will apologize for their many catastrophes. Take the former Soviet states and the effects of market reforms there. Millions dead. It was as if they'd been through a war. Oligarchs just gobbling up wealth while the bulk of the population descended into misery. It was as if they'd returned to pre WWI levels of development with the collapse in life expectancy.

The Economist is not really responsible for what happened in China. They may have been mistaken at the time, unaware of the relevant facts, but they weren't driving Mao's policies. But advocates of free markets were in fact driving Yeltsin's privatization efforts, destroying the public health services. I think rather than calling on those who are not responsible for millions dead to apologize we should look in the mirror first and apologized for millions dead that we were responsible for.

Also, why is it that the millions dead in China under what is often called socialism is such a frequent topic of discussion, but the many more millions dead in India under capitalism is irrelevant? Much of what we know about the great famine of China is due to work by Amartya Sen, who won a Nobel Prize in economics. Yes, the starvation was a direct result of the system they had; a totalitarian state where protest gets smashed, information doesn't make it's way back to the central authorities efficiently. They may not have really known the extant of the problem until after it was over. That's part of what Sen explains, and we all know it very well.

Sen goes on to contrast with India, which at about the same time adopted a democratic capitalist system. Yes, they didn't have these kinds of famines, as they had under British rule. But they also didn't adopt the Maoist rural education programs or public health programs. They did more our less our way, the way of capitalism. What was the result? Sen estimates 4 million excess deaths in India every year due to these policies as contrasted with China. Both see mortality rates decline, but it's much slower in India. So every 8 years or so you get the equivalent of what was the worst result that occurred in China, the Great Famine. why isn't this a topic of discussion, like Mao's atrocities are?

You could do the same sort of analysis throughout the world. Take Haiti as an example, a place where when a liberal candidate wins an election he's simply deposed so low tax, low regulation, free market policies can be retained. In fact you can go all over Latin America where they die not only from capitalism's economic consequences, but from US violence required to impose capitalism by force, as in El Salvador, Nicaragua, Guatemala. Go to Indonesia for more genocidal violence needed to retain capitalism, where anybody identified as a communist was just murdered, with US backing. There's a good movie about this on Netflix. "The Act of Killing" where the US backed thugs who murdered the socialists brag about their exploits and explain how they portrayed the communists as the murderers in their propaganda when in fact they were doing exactly what they portrayed the communists as doing.

Mao is justly condemned for instituting policies that led directly to the death of millions, but why do you think it is that atrocities of enemies of the state are so widely discussed in our society yet the many more millions dead due to our policies are never discussed?

 
At 10:39 AM, September 09, 2014, Blogger Tibor Mach said...

Jon: I think that if you looked closely at India, you would conclude that while it indeed was democratic, it would be quite an exaggeration to call it capitalist. It was not a 95% planned economy like China at the time (100 percent planned economy cannot exist, people cannot be controlled that much), but it was and largely still is very socialist. It followed the British Fabian socialism and regulated the market heavily.

In the recent 10 or 20 years, India is becoming more capitalist than it used to be, but still it is listed as 120th (improving from previous years) in economic freedom. That is below the world average (although still above current China...I guess that if you only counted special economic zones (not Hong Kong though...which is the 1st in the list), China would be above India, but outside of those, it remains largely socialist, it seems...at least from that statistic).

http://www.heritage.org/index/country/india

Other indexes of economic freedom list India on the same place. It is indeed very strange to say that India followed the advice of pro-market economists. It did not and it still largely does not.

It is actually a good idea to compare India and Hong Kong. Both used to be British colonies, while India was richer and more prominent a colony than Hong Kong. India also has many natural resources, Hong Kong has none, except for its harbour. India took the way of Fabian socialism bringing stagnation and - as you say yourself - hunger. Hong Kong went the opposite direction, becoming (one of) the most free economy in the world and quickly increasing both its GDP and the quality of life of ordinary people there. Currently it is the country (technically, it is not a country, being part of PRC, but practically it is and the locals largely seem to want complete autonomy even legally) with the highest life expectancy (or maybe second, it varies year from year among the top 3-4) in the world and it is also among the top in education. And if there is any country that followed suggestions of pro-market economists, it is Hong Kong (a few others as well...but HK is such a striking example since it grew from a 3rd world to one of the most developed economies in such a short time).

Also, I found it interesting that you suggest that "Chicago economists" somehow enforced certain policies in (more or less) democratic countries. Forget the Freemasons, it is the Chicago economists that rule the world from the shadows :)

But seriously, have a look at actual data and maybe don't just automatically accept everything people like Naomi Klein (I am not saying that your claims come from her work, but it is about the style she would use) write...because a lot of it is based on wishful thinking (not that there are no libertarians guilty of the same, but I guess you'd be more careful about citing their claims :)).

 
At 1:08 PM, September 09, 2014, Anonymous Jon said...

S Korea likewise has plenty of government intervention in the economy. Is it not capitalist? A case can be made that Mao's China was not communist or socialist, but I still concede that on the spectrum it is more socialist and I think it's clear that India is more capitalist. Why if we are going to condemn "The Economist" for praising Mao why aren't we likewise condemning the advocates of free market reforms in the Soviet states or capitalism in India? There's a lot more excess death there.

People you are likely to debate on matters like this probably will not generally regard Heritage as a credible source. Their funding sets their agenda, and truth comes after that in my opinion. This "Economic Freedom" index is a good example. Haiti for instance, which has followed Washington Consensus policies for decades, is supposedly unfree, whereas Belgium, which is getting towards socialism on the spectrum, is free. To me this is apologetics for free markets and Koch preferences masquerading as scholarship. They naturally want to pretend that capitalist societies that are poor are in fact socialist, but this just turns the meaning of words upside down. If you prefer the Fraser listing the criticism is the same. Whether these groups are defending tobacco telling us it is good for us or telling us to deny the overwhelming consensus on climate change we can see what's truly driving their agenda and it's not truth but the preferences of their income sources.

You think it makes more sense to compare Hong Kong and India? In 1947 India had about 1/2 the life expectancy of someone from Hong Kong and about a fifth the income. China and India on the other hand were very close. But it's not my comparison, but that of Sen. People know half of what he says. The part critical of Mao's China. They don't know the other half, the part even more critical of the capitalism India was subjected to. And that pattern continues. Stalin is rightly regarded as a monster, but the death tolls due to market reforms in the Soviet Union rivaled that of Stalin's purges. Are we likely to hear apologies from the many advocates for those reforms?

I didn't say anything about Chicago economists operating in the shadows, I said "Chicago style" economists are responsible for many catastrophes. What I mean is that people that generally subscribe to this school of thought (a preference for privatization, low regulation, low taxes, Washington consensus type policies) openly advocate and influence policy. There's nothing about operating in the shadows. Op-ed's, talking heads, etc openly advocating the kind of reforms that occurred in the Soviet states. True, there were some actual economists trained in Chicago involved with a lot of it, but this is not my point.

 
At 2:55 PM, September 09, 2014, Blogger Mike Huben said...

Jon, you cannot take Tibor Machan's handwaving word salad seriously. His glib comparison between a large, impoverished nation (India) and an entrepôt (Hong Kong), as if their choices of economic systems were the determinant of their differences is either ignorant or dishonest. It is so ridiculously incomplete that he doesn't even use the word entrepôt. His ridiculous mention of an index of freedom makes no sense, since by that standard India should have done better than China.

But we don't need to refer to famines or historical claims to show the millions of deaths due to capitalism that dwarf the horrors of Maoist China. The tobacco industry alone is responsible for roughly 5 million deaths a year right now. The past decade puts them squarely ahead of the Great Famine in death toll. When you start adding in asbestos, lead, sugar, mining, fossil fuel and petrochemical industries, organized crime, slavery, child labor, workplace death and injury, etc, you will quickly exceed any totals due to government.

One of the indexes of my website, Critiques Of Libertarianism is: Capitalist Harms. I haven't yet put in an index for the harms of converting to capitalism, such as the British enclosure and the end of the Soviet era. If you (or anybody else) have some suggestions, let me know by email.

 
At 5:57 PM, September 09, 2014, Blogger Richard O. Hammer said...

@Mike Huben:
I have noticed hereabouts a commenter named "Tibor Mach". Commenter Jon seems to respond to Tibor Mach. But in addressing Jon, you refer to "Tibor Machan" the name of a real man who I believe deserves some respect, but not a name mentioned by Jon, unless I am mistaken.

 
At 11:46 PM, September 09, 2014, Blogger David Friedman said...

Richard:

The quote from the economist is in the book.

On the "nobody is starving now" point, I don't know how the author could have known that or why he would have believed it.

On the question of Mao's famines vs other famines, I may be mistaken but I am not aware of any previous Chinese famine on that scale. For some basis of comparison, the Taiping Rebellion, which the Wikipedia article describes as "one of the deadliest military conflicts in history," is estimated to have killed about 20 million.

 
At 2:15 AM, September 10, 2014, Blogger Tibor Mach said...

Jon: So you suggest that someone who is (in your opinion) wrong in his opinion about laws and policy and advocates that opinion well so that other people are persuaded and it then (I seriously doubt that, but let's say that it is true) leads to bad results, famine even, then those people are those responsible? Have those who voted for their policies and actually enacted them no free will or a mind of their own? I don't think that democratic is truly free, because a majority can always suppress the dissenting opinions. But it is definitely a lot freer than Mao's totalitarianism. You might be right that Mao's China was not truly communist...well, that is true of any country in the world in a sense, however, as the communist ideal society just cannot emerge (in a large enough society, it might work relatively well in a small commune of at most tens of like-minded people) - every time someone tried it, it turned to what communist doctrine actually succeeds to produce - totalitarian states. There are no exceptions in this and the number of trials was not even that low.

I concede that heritage foundation is partisan...then again that is any organization. The other list I referred to is by Fraser Institute which turns out to be a Canadian libertarian think-tank, so they are partisan too (in the sense that they would probably like to show that free market institutions lead to good results...otherwise, everyone is biased one way or another anyway). Then again, the author you mentions is probably biased in the opposite way. I am not saying heritage foundation's list is 100% accurate (if nothing else, it is difficult to capture everything well on a 1 dimensional scale...even though the final scores come together from different aspects of economic freedom), but your claims don't have to be either. Does the author present any data that would link free market policies to the bad results he mentions, or is his claim simply that "India was capitalist, there is poverty in India, therefore it is the result of its capitalism"? Similarly with the post-soviet republics.

By the way, I do agree that the transformation from almost fully planned to a more or less market economy does come with an initial slump (it did so even in Czechoslovakia after the revolution...it is however not an effect of any free market policies but rather of the fact that you abruptly change a lot and it takes some time for the new structures to emerge and start functioning well...it might make sense to make it slower in some cases perhaps and not others - the sooner you change from an ineffective model, the sooner it starts getting better. If that is the case, then you show something else in fact - that to change from a planned economy back to a market one is costly. That is not very surprising, but in order to show that free market policies are harmful themselves, you have to point out a country which largely adheres to free market and performs consistently poorly (in the sense that its performance is getting worse rather than better...if you change Switzerland to a mostly socialist country overnight, it will still do relatively well for some time, but it will get worse than it was...the difference is what matters here). There is no such country to my knowledge.

 
At 2:24 AM, September 10, 2014, Blogger Tibor Mach said...

Jon (this follows the previous, sorry for the length):

As for the Chinese vs Indian outcomes - China is somewhat strange in that it has many special economic zones in which the level of economic freedom is much higher than in the rest of the country. Those areas also produce most wealth...and it also usually stays there, central China is, at least to my limited knowledge, not a much more attractive a place to live in than India.

You mention that Belgium is trending towards being more socialist. I have to say, I don't have perfect knowledge of policies in Belgium. But I would be very surprised to find that it is harder to run a private business in Belgium than it is in India. It could be that current Belgian government is left-wing, but governments in democratic countries don't usually make radical changes of overall policy overnight. As for your claim of Heritage dishonestly simply labeling rich countries as economically free and poor as economically unfree, take a look at France. It is (still) among the richest countries in the world, yet its score by Heritage is very low. Chile is ranked 7th in the list, yet it is not a particularly rich country (however, one has to look not at absolute levels of wealth, but the differences - gains and losses - over time if he is to asses the quality of policy). This I think makes your claim a bit dubious.

As for Hong Kong vs India - I am not sure why it is often made claim that large countries cannot be compared to small ones with the unstated assumption (as I understand it) that the small ones will simply do better and so it is somehow "unfair" to do that. If that is the case (and I believe there is some merit to it...small companies are generally run more efficiently than huge corporations...which is why they sometimes actually manage to become huge corporations themselves, replacing the old ones), then the sensible thing to do is to divide countries into smaller ones (a good idea in my opinion for most countries)...or at least change the big countries into confederations of smaller highly independent states. It might be true that initial conditions of India and HK were not as similar as I thought in the 1940s/1950s. Still, if you again look at the difference between initial state of things and today's state, HK performed incredibly well, whereas India rather poorly. India was/is a largely socialist country (with some market elements, yes...I believe the term is a mixed economy? I may be wrong), HK the most or one of the most free market ones in the world. I think it is a mistake people often make that when they see private owned corporations in a country, they assume it is run in a more or less free market fashion. But there is nothing free market about cronyism in which it is the political connections and other influences that can make your company successful and not the actual market. A country in which business is highly regulated and some businessmen get generous state support, subsidies or privileges (licensing...or even outright legal monopolies or oligopolies) is not a free market one, even if the companies themselves are owned by private individuals.

 
At 2:26 AM, September 10, 2014, Blogger TheVidra said...

Jon seems to be a troll. To compare a group of millions of people who were killed as a direct result of one man's policies with various people who suffered from a myriad of disparate causes is ridiculous.

 
At 2:35 AM, September 10, 2014, Blogger Tibor Mach said...

This comment has been removed by the author.

 
At 2:46 AM, September 10, 2014, Blogger Tibor Mach said...

Mike, Richard: I am indeed not Tibor Machan, but this is not the first time someone made that mistake online :)

Mike: It seems to me that you simply ascribe everything you don't like to capitalism...which is exactly the claim (in reverse) that Jon made about Heritage foundation. Smoking is not healthy, but how is that related to capitalism? Do the people in socialist countries not smoke? Also, I believe that there is a great difference between "killing yourself" by smoking/eating a not-so-healthy diet/drinking alcohol etc. and dying of hunger because there is simply nothing to eat, or being outright killed by the regime. The first is an individual chose (however you might dislike it), the second is not.

I am even more amazed by your claim that organized crime is something inherently "capitalist". True, in totalitarian socialist countries, organized crime was usually weaker...but that was only because one "famiglia" was already running the whole show and it did not fancy much competition.

Slavery...well, that is very free-market indeed :)

And the rest is quite similar.

By the way, pollution levels in the USSR and its satellites were far worse than in the capitalist countries. In Bohemia (western part of today's Czech republic) where I come from, acid rains were not quite uncommon and often the windows in city houses would be covered by black dust (from the factories...which used no or very insufficient filters for their chimneys). There is no such pollution there today. Similarly, all other measures of quality of life have been steadily improving over the last 25 years (with the initial slump in wealth just after the revolution which I mentioned above). A country (Czechoslovakia) which used to be one of the riches in Europe before the WW2, was set back incredibly by the socialist regime that followed it and now is finally moving back (with PPP per capita comparable to Italy or New Zealand today, which was definitely not the case 25 years ago). If the different results here were not caused by socialist vs. (more or less) capitalist policies, then I don't know what else. Because nothing else really changed. Germany gives an even better comparison because there the two regimes operated simultaneously.

 
At 5:33 AM, September 10, 2014, Blogger Mike Huben said...

More word salad from Tibor.

"you simply ascribe everything you don't like to capitalism" That's simply a bullshit claim.

How is smoking related to capitalism? Can you really be that stupid?

You seem to confuse capitalism with free markets (which don't exist.)

Of course organized crime is capitalist. Its goal is obviously private profit. Capitalism has severe problems causing externalities: organized crime makes that fairly clear.

You still yammer on about Hong Kong, even though you show no signs of even understanding the word entrepôt. Let alone understanding the huge numbers of things that could be responsible for different performance besides the very few your ideology wants to harp on.

All I see from you is parroting of bullshit libertarian talking points, pretending that is somehow "understanding".

As for David, I don't see him addressing my question by listing ANY Chinese famines after the Great Famine. A simple task, one would think.

 
At 6:42 AM, September 10, 2014, Blogger Jon said...

Mike, I'll go ahead and post a couple of sources here rather than emailing you so others can peruse if they are interested. I found a summary of a UN report here. A compilation of various statistical information here.

I wonder if there's information on right wing think tanks defending asbestos, lead in paint or gasoline, etc.  I haven't noticed any calls for apology on things like the defense of smoking at Heritage, which like you said takes a lot more lives.

 
At 7:49 AM, September 10, 2014, Blogger Jon said...

So you suggest that someone who is (in your opinion) wrong in his opinion about laws and policy and advocates that opinion well so that other people are persuaded and it then (I seriously doubt that, but let's say that it is true) leads to bad results, famine even, then those people are those responsible?

David is saying that someone from The Economist should apologize for a mistake regarding Mao. If that's what's to be expected where is the apology from the free market advocates that pushed these various disastrous policies throughout the world? I do think these pundits are responsible, but even if you don't agree would you agree that they are more responsible than The Economist is for Mao's atrocities? They weren't pushing policies that led to famines. However the neoliberals were pushing policies that drove life expectancy in the Soviet states down. They do encourage places like India to reject the rural health programs and rural education programs that come as a public service, the same programs that saved 4 million lives a year in China as compared to India. They have a greater responsibility to apologize than The Economist.

every time someone tried it, it turned to what communist doctrine actually succeeds to produce - totalitarian states

Every time it is tried it is attacked aggressively by the US and it's allies. If socialism/communism is so bad why is it that societies that pursue it, like Vietnam, Cuba, and Chile, why are they not allowed to pursue it without interference, and just let the chips fall? When you go to war with a society that society will naturally become more dictatorial as a defensive measure. Look at how the US has reacted to 9-11. Mass surveillance, militarizing the police force. 9-11 was in fact small as compared to terrorism inflicted on places like Cuba and Chile when you consider it on a per capita basis.

And really you should compare honestly the treatment stemming from the Soviet Union towards it's satellites and that of the US towards the nations it had under it's sphere of influence. Death squads roaming in El Salvador, murdering priests and anyone else suspected of Communism. I already recommended the Errol Morris documentary "The Act of Killing" on Netflix. If a person from Guatemala or Indonesia woke up one day in the 70's or 80's and found themselves in Poland they'd have thought they'd died and gone to heaven. The Soviet Union was a dictatorial regime with a lot of blood on it's hands, but I think it's just too easy to only consider their crimes and avoid looking in the mirror, which is I think exactly what David is doing here.

Then again, the author you mentions is probably biased in the opposite way.

Heritage and Fraser are not just biased. Their income stream depends on them pushing a particular viewpoint, the viewpoint favored by their wealthy backers. A lot of economists find themselves in a similar position, like the economists that pushed deregulated finance who it turned out were employed by Goldman Sachs and other financial service institutions. There's nothing wrong with having a bias, everyone does. But does a biased person state facts that withstand scrutiny or do they sell the story preferred by big tobacco that turns out to be false? That what Heritage offers.

 
At 7:50 AM, September 10, 2014, Blogger Jon said...

you have to point out a country which largely adheres to free market and performs consistently poorly

Haiti, Guatemala, the Dominica Republic, the Bahamas, all of Africa, the Philippines. Basically the entire third world. The countries that have unfree markets are Japan, Britain, S Korea, Germany, the United States. The first world. A good book on this is Ha Joon Chang's "Bad Samaritans". Of course Haiti is not strictly free market, nobody is. They do pursue the polices preferred by neoliberals. Low taxation, low regulation, few limits on capital flows, etc.

But I would be very surprised to find that it is harder to run a private business in Belgium than it is in India.

Mike is right when he says that you confuse capitalism and free markets. Nobody is free market, but plenty are capitalist. Keynes was a capitalist. His policies were in fact an effort to save capitalism.

Capitalism is a system whereby a minority earns the bulk of their income via property rights (investors retain a portion of the revenue created by workers though they don't actually DO anything except grant people permission to use the tools they own), the majority earns the bulk of their income from wages, and prices are set by and large in a free market. Socialism doesn't have investors, doesn't have people that earn the bulk of their money through a claim of property. So Belgium and India are both capitalist. China today is capitalist, though under Mao it wasn't. If a government intervenes, as in the US, Japan, or Korea, this doesn't change the fundamental feature of the investors acquiring a portion of the revenue created by workers who are paid wages.

So if we're going to talk about the worst results due to non-capitalism (as in China, which certainly wasn't capitalist, though calling it socialist is a stretch in my mind), why don't we also talk about the greater disasters of capitalism?

But there is nothing free market about cronyism

The policies preferred by free market ideologues lead immediately to the kinds of cronyism they pretend they are not responsible for. Chile was on a socialist path when the coup ended democracy there. By the time government was properly scaled back (public services radically cut, government restrictions on corporate behavior reigned in) those same corporations now take control of the toothless government and restructure it to serve them. The government ends up bigger than before, now with more military to control the population that objects to having a government that serves corporate interest first and people second. Of course it's not a free market environment. Following Chicago style policy recommendations never leads to free markets because it leads to corporations seeking to maximize profit. If a corporation, by taking control of government, can undermine a free market so as to maximize profit, then this is what it must do. It's what is to be expected when you follow the policies recommended by the Chicago School.

 
At 9:16 AM, September 10, 2014, Anonymous Anonymous said...

Given that David seems to have ignored Mike's question, perhaps both sides can agree that the Economist would have been more correct, or at least less ambiguous, to write:

"...into a unified, egalitarion state where, although somewhere between 15 and 43 million were lost in the Great Chinese Famine, famines no longer occur..."

See:

http://en.wikipedia.org/wiki/List_of_famines

It should be noted that while the Great Chinese Famine dwarfs most famines, Mike is perfectly correct that there have been no famines in China since.

Finally, Jon's points deserve to be answered or accepted.

 
At 9:33 AM, September 10, 2014, Anonymous Anonymous said...

How is smoking related to capitalism? Can you really be that stupid?

I'd really like to see you go through your thought process on this as well.

Of course organized crime is capitalist. Its goal is obviously private profit.

One does not follow from the other.

Let alone understanding the huge numbers of things that could be responsible for different performance besides the very few your ideology wants to harp on.

Very apropos in regards to your own comment, insofar as you appear to blame externalities on the specific form of property allocation you want to harp on with very little surrounding analysis.


As for David, I don't see him addressing my question by listing ANY Chinese famines after the Great Famine.

After the great famine, there followed a liberalization of farming practices, which makes it difficult to point to a specific shortage or famine and specifying whether it was a result of Mao's original policies or of the later liberalization of those policies or in spite of both.

----
Excel

 
At 10:14 AM, September 10, 2014, Blogger Tibor Mach said...

Mike: Well, the word capitalism is often understood differently by different people, so it is perhaps not the best to use as confusion can arise. So let me clarify -to me more free-market means more capitalist, less free-market means more socialist (which includes cryonism, corporatism and all such as well).

I will not react to the rest of your post (or any further posts probably). You do not seem to be interested in a discussion at all (unlike Jon, who otherwise might hold similar views as you do), instead you just enjoy throwing insults at people who don't fully agree with you. There are people who do this in any political camp, unfortunately.

I will just recommend you a great book about partisanship (which I am currently reading) by Jonathan Haidt. It is called Righteous Mind: Why good people are divided by politics and religion

http://www.amazon.com/The-Righteous-Mind-Politics-Religion/dp/0307455777

Maybe if you read it, you would not be as hostile to anyone who expresses opinions you don't like. In case you wonder, the author's political inclination seem to be on center left.

 
At 10:32 AM, September 10, 2014, Blogger Tibor Mach said...

Jon:

I think the main problem is that while Mao's responsibility for the great famine during the cultural revolution is an undisputed fact, the claim that pro-market reforms in some post-soviet republics or India caused famine is disputed at best. In fact, I would say your opinion on this is very much in the minority. That does not automatically mean you are wrong of course. But it does explain why those who do not agree with you on the facts of the world do not feel like they need to apologize for something they believe actually leads to an improvement.

Conversely, if you convinced those people that you are right, and their favoured policies were misguided and lead to bad things, I think many of them would in fact apologize for (in their present opinion) misguided advice.

I think you are too quick to ascribe immoral motivations to those who hold opposing views. That is common to most people, sadly, but I think it is largely wrong. I think it is better to a priori assume the other people are honest (if biased...as we all are) and sincerely believe in what they say...until proven otherwise. The fact that CATO or Heritage foundation or others are sponsored by wealthy libertarians or conservatives does not seem to me to be enough. It shows their bias. But it does not show dishonesty. There are left-wing think-tanks that receive their founding from left-inclining wealthy individuals too. Would you claim they are dishonest because of that? A partisan author who is not a part of any institute or an organization writes books for his audience and is at least tempted to make things look a bit his way. His income also depends on what he writes and for a lot of people their customer base is very partisan itself. You could then say that libertarian/conservative/leftwing/monarchist/... authors are dishonest as well, since their income partly depends on presenting their worldview in the brightest colours.

I mentioned Klein because I had the misfortune of reading one of her books (Shock doctrine) which is full of errors, many of which I should call fraud, because either Klein is completely incompetent or she is deliberately dishonest. In any case, that was a reason for me not to read her.

If you can point out to such (particular) things on the "other side", I will welcome them. Some libertarians are dishonest as well, I am eager to find them out so that I don't waste time reading what they write. But vague claims about financing are not enough.

 
At 10:46 AM, September 10, 2014, Blogger Tibor Mach said...

Jon:

I know you don't like Heritage's list, but it is all I can work with, I don't know of a better (or just any other...other than Fraser institute and there we have the same problem) summary of economic freedom. If you can supply a different one, please do so. So here I list the ranking of the countries you mentioned:

Haiti : 156 , way below the world average

Guatemala: 83, about the world average

Dominican republic: 80, basically the same score as Guatemala

Phillipines 89. In addition to that, the country was pretty much demolished by the Japanese and Americans during the WW2.

Bahamas: 36, that is relatively high, so it would be worth looking at it more carefully - including the history.

Africa is quite a vague term, though most of the countries are among the worst in terms of economic freedom. And pretty much all of Africa has experienced countless wars and highly unstable regimes in the past decades (and before). That is then an environment in which nothing thrives (no matter the public policy...because it is largely on paper only as the law of the strongest really applies).

A further look at the Bahamas shows that they can hardly be considered a poor country:

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita

Ranked next to New Zealand and South Korea in terms of per capita PPP, they are doing better than Italy, Spain or the Czech republic.

 
At 10:51 AM, September 10, 2014, Blogger Tibor Mach said...

Jon: You cannot have cryonism without a powerful and influential state. I fully agree that a lot of companies try hard to get special privileges from the state and that is bad. But a state which, say, cannot restrict a certain type of business by licensing, is one in which this type of cryonism cannot happen. Similarly for other privileges/restrictions. I have never heard a pro-market economist argue for anything of this kind, quite the contrary.

If you call this capitalism, then ok, I am not in favour of capitalism but of free markets. They may not exist anywhere today in their ideal form, but definitely one can compare two countries and say which one is more free market oriented than the other.

 
At 11:51 AM, September 10, 2014, Blogger Tibor Mach said...

Jon: And actually similarly for the countries you mention as not free. Maybe if you look at one dimenson only, let's say income taxes. But this is why Heritage uses other data as well (their methodology is available online), since one tax is hardly descriptive. Then you reach rather strange conclusions...as you did with Germany for example (I happen to live there at the moment).

Germany is listed 19th in the heritage rating (USA is 10th), so in the better half of the "mostly free". Taxes might be quite high in Germany, but what are low taxes good for if you live in a country where you can only do business if you have government connections and have to bribe the magistrate first (which costs you money anyway)? But that is commonplace in 3rd world countries.

 
At 3:35 PM, September 10, 2014, Blogger Will McLean said...

"The current estimate is that, during the Great Leap Forward, between thirty and forty million Chinese peasants starved to death."

I think this overstates what we actually know. There are estimates in that range, and as low as $2.5 million and as high as 60. The available data is limited and unreliable. The figures are usually presented not as "starved to death" but "excess deaths", bringing in people that didn't actually starve, but died early because they were malnourished.

The challenge there is that it requires a normal baseline to compare the famine years to. The argument that the Chinese undercounted the death rate in the famine years may be true, but the pre-famine baseline also looks implausibly low.

 
At 3:53 PM, September 10, 2014, Blogger Will McLean said...

Cormac Ó Gráda, who knows something about famine, has presented plausible arguments that the real excess deaths may have been closer to 15-30 million than 30-40. Still terrible, but millions less.

 
At 6:09 PM, September 10, 2014, Blogger Will McLean said...

David:

How Mao's famine compares to previous ones depends on what estimate you accept for excess deaths for the GLF and earlier disasters.

20 million seems to be a lower bound for the deaths linked to the Taiping rebellion, and 20-30 million is often estimated. If you believe that 15-30 million is the correct estimate for the GLF excess mortality, then they are comparable in absolute terms. However, China's population seems to have been significantly greater by the mid 20th c., so the death rate as a share of the living was greater for the Taiping years.

Even worse were the "four famines" of 1810-1849, when it was claimed the 45 million died.

 
At 6:52 PM, September 10, 2014, Blogger Jon said...

I'd be surprised if my claim about the Soviet Union is a minority view. You can check the link I provided to Mike above, which is a summary of a UN Development Program report. They attribute the death to the collapse of the public health service, the privatization which led immediately to massive unemployment and reduced wages. This led to alcoholism, drug use, abuse, crime.

I'm not sure what you are referring to regarding immoral motivations attributed to those that hold opposing views, I do agree that neoliberal views are held sincerely by it's proponents usually. Sometimes I think people become convinced of things that happen to be convenient truths. The rich will naturally see the merit in the view that taxes on them should be low and this is what is best for everyone. So I do think there are sometimes underlying motivations that a person may not recognize in himself. I think Heritage writers really believed tobacco was fine. But of course if they weren't the kind of person that was convinced of these truths that happen to benefit the tobacco industry they wouldn't have been hired in the first place.

Sean Hannity probably believes everything he says, but if he didn't believe it he wouldn't be sitting where he is.

Sorry, I said Bahamas but meant to say Jamaica. But like I say Heritage is nothing but the spin on behalf of wealthy donors. Of course they must say that Haiti does not follow their policy recommendations. Haiti is the poorest country in our hemisphere. They naturally don't want to make it appear that this is the fruit of their work. But it is.

 
At 6:53 PM, September 10, 2014, Blogger Jon said...

Ha Joon Chang covers this very well as he contrasts Haiti with S Korea. S Korea did everything that they weren't supposed to do according to neoliberalism. They blocked imports. The completely controlled capital movements. No citizen was permitted to invest their money anywhere but in other Korean companies, and the penalty for violation was death. The government dictated what development companies would pursue. Hyundai, Kia, LG. They were simply told to pursue automobile development or electronics development. A citizen couldn't buy a foreign car. Totally managed capitalism from the top down. Actually they were quite brutal. But they developed amazingly fast, just as the US grew amazingly fast during WWII when we were essentially a command economy.

Haiti has taken a free market approach. No restrictions on trade, no dictates from government what work industries must pursue, no limits on capital flows, private property vigorously enforced. Even slight movements leftward are immediately crushed. Aristide was elected by the people. They know that neoliberalism wasn't working, but he was immediately ousted because of capitalist preferences for someone that kept taxes low and business incentives high. This is exactly what neoliberalism prescribes, unlike Japan, the US, and all the other rich countries.

So how is Haiti so low on the Heritage rankings and the US high? You know what makes the US different economically? Advanced technology. Computers, the internet, satellite communications, lasers, automation. You know what all of these developments have in common? Public subsidy at the root. Computers for instance were developed based solely on government funding for decades on end. That's not free markets. How is the US high and Haiti low? Haiti is doing everything it's supposed to be doing as far as policy. Sure, there's crime. There's manipulation by corporations that have a free reign to control the government. They use it to their advantage. That's what happens when you create a business friendly environment where the government gets out of the way.

 
At 6:54 PM, September 10, 2014, Anonymous Anonymous said...

Soviets smoked like chimneys and were not kind to their environment.

 
At 7:03 PM, September 10, 2014, Anonymous Anonymous said...

If you can produce food, tanks, or farming equipment in a non-capitalist society you can produce cigarettes in a non-capitalist society. And indeed, communists smoked as much as anyone.

 
At 10:18 PM, September 10, 2014, Anonymous RJ Miller said...

Oh Mike...

"Of course organized crime is capitalist. Its goal is obviously private profit."

Organized crime is about violating property and other individual rights. Thus it is not compatible with private ownership.

"Capitalism has severe problems causing externalities: organized crime makes that fairly clear."

Unless you have a real example that actually is "capitalist," I can only conclude this claim is bogus. Especially when making comparisons between systems.

 
At 3:41 AM, September 11, 2014, Blogger Mike Huben said...

Anonymous: you might as well try to claim that capitalist nation's tanks don't kill people. The vast majority of the tobacco industry worldwide is capitalist. The high consumption of tobacco products has been created by strenuous efforts of the capitalist tobacco industry.

RJ Miller: Maybe you don't understand the word capitalism: the private ownership of the means of production. It has nothing to do with how that private ownership is arrived at, maintained, or destroyed. Or with whether it causes violations of laws or rights. A murder-for-hire company or your friendly local drug lord is still capitalist.

Here's a clear definition of capitalism: you will see that it includes organized crime.

 
At 5:03 AM, September 11, 2014, Blogger Tibor Mach said...

Jon: I will look at Chang then. But please be patient, I suppose it is more than a few paragraphs and so it will take some time to get to it.

I can tell you what heritage thinks makes Haiti worse than US (in which criteria it is worse):

Property righs
US 80 Haiti 10
Freedom from corruption
US 72 Haiti 16.9
Government spending
US 48.1 Haiti 66.3 (here, Haiti ranks better than the US)
Fiscal Freedom
US 65.8 Haiti 80.3 (again Haiti is better)
Business Freedom
US 89.2 Haiti 33.3
Labor Freedom
US 97.2 Haiti 68.5
Monetary Freedom
US 75.4 Haiti 73.3 (about the same)
Trade Freedom
US 86.8 Haiti 70.4
Investment Freedom
US 70 Haiti 40
Financial Freedom
US 70 Haiti 30

Now what do those actually mean (I cite their website):

Property Rights

The property rights component is an assessment of the ability of individuals to accumulate private property, secured by clear laws that are fully enforced by the state. It measures the degree to which a country’s laws protect private property rights and the degree to which its government enforces those laws. It also assesses the likelihood that private property will be expropriated and analyzes the independence of the judiciary, the existence of corruption within the judiciary, and the ability of individuals and businesses to enforce contracts.

Freedom from Corruption

Corruption erodes economic freedom by introducing insecurity and uncertainty into economic relationships. The score for this component is derived primarily from Transparency International’s Corruption Perceptions Index (CPI) for 2010, which measures the level of corruption in 178 countries.

Fiscal Freedom

Fiscal freedom is a measure of the tax burden imposed by government. It includes both the direct tax burden in terms of the top tax rates on individual and corporate incomes and the overall amount of tax revenue as a percentage of GDP.

Government Spending

This component considers the level of government expenditures as a percentage of GDP. Government expenditures, including consumption and transfers, account for the entire score.


Business Freedom

Business freedom is a quantitative measure of the ability to start, operate, and close a business that represents the overall burden of regulation as well as the efficiency of government in the regulatory process. The business freedom score for each country is a number between 0 and 100, with 100 equaling the freest business environment.

 
At 5:06 AM, September 11, 2014, Blogger Tibor Mach said...

Jon (following):

Labor Freedom

The labor freedom component is a quantitative measure that looks into various aspects of the legal and regulatory framework of a country’s labor market. It provides cross-country data on regulations concerning minimum wages; laws inhibiting layoffs; severance requirements; and measurable regulatory burdens on hiring, hours, and so on.

Monetary Freedom

Monetary freedom combines a measure of price stability with an assessment of price controls. Both inflation and price controls distort market activity. Price stability without microeconomic intervention is the ideal state for the free market.


Trade Freedom

Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that affect imports and exports of goods and services.

Investment Freedom

In an economically free country, there would be no constraints on the flow of investment capital. Individuals and firms would be allowed to move their resources into and out of specific activities, both internally and across the country’s borders, without restriction. Such an ideal country would receive a score of 100 on the investment freedom component of the Index of Economic Freedom.

Financial Freedom

Financial freedom is a measure of banking efficiency as well as a measure of independence from government control and interference in the financial sector. State ownership of banks and other financial institutions such as insurers and capital markets reduces competition and generally lowers the level of available services. In an ideal banking and financing environment where a minimum level of government interference exists, independent central bank supervision and regulation of financial institutions are limited to enforcing contractual obligations and preventing fraud. Credit is allocated on market terms, and the government does not own financial institutions. Financial institutions provide various types of financial services to individuals and companies. Banks are free to extend credit, accept deposits, and conduct operations in foreign currencies. Foreign financial institutions operate freely and are treated the same as domestic institutions.

More precise methodology is here:

https://thf_media.s3.amazonaws.com/index/pdf/2013/methodology.pdf

Now, there is also some stuff about Haiti specifically, not just the numbers:

http://www.heritage.org/index/country/haiti

Now, I am not saying it is necessarily accurate. But I don't know much about Haiti. Please point out to what you think does not describe the real state of things there, so in which way is the statistic rigged here.

 
At 5:18 AM, September 11, 2014, Blogger Tibor Mach said...

Jon: One more comment to the first part of your last post.

I did not say that it is a minority view to think there were problems with the transition of post-soviet republics to a more market-oriented regime. But I do think it is a minority view to suggest that those countries would be better of today had that not happened.

To the other post. I thought you think the proponents of free markets are dishonest for two reasons:

1) because you suggested that they write what they do because of money. In other words, that they would not express those opinions if they were not paid for it. If they would, then they are not dishonest...and in that case it does not matter who gives them financing.

I never said they are unbiased (I stressed that out a few times, actually). But since in practice the only unbiased people are those who do not care about a topic at all, it is not a practical tool for dismissing someone's opinions. It is good to know it. If a libertarian author presents data that support a conclusion he does not like, I will trust it more than if a left-wing author (or a conservative author for some other issues) does the same. Conversely, if Paul Krugmann presents an empirical analysis tomorrow that strongly supports the free market, I will give it more weight than if a libertarian economist does the same...both because the authors are likely to first make sure to find all ways possible to explain the "annoying" data away.

And in any case, if the people who make certain suggestions actually believe they lead to good things and not to bad things and that the bad things that happened were either misinterpreted or caused by something else, then they are obviously not going to apologize. The case of The economist is different...unless the author is willing to argue that Mao did not cause (quite likely at least partly intentionally) a massive famine in China.

 
At 5:28 AM, September 11, 2014, Blogger Tibor Mach said...

Jon: Specifically, do you disagree with these two descriptions (from the Heritage Haiti page)?

Rule of law

Endemic corruption continues to limit Haiti’s political and economic development. Smuggling is a major problem. The judicial system is underfunded, inefficient, corrupt, and burdened by a large backlog of cases, outdated legal codes, and poor facilities. Most commercial disputes are settled out of court if at all. There is no comprehensive civil registry. Bona fide and undisputed property titles are virtually nonexistent.

Regulatory efficiency

Haiti’s already poor regulatory efficiency is undercut by economic and political uncertainty. Launching a new business is costly and time-consuming. Completing licensing requirements takes over 1,000 days. A considerable portion of the workforce is underemployed or dependent on informal activity. The state-owned and-subsidized electrical utility consumes 12 percent of the national budget but serves only 25 percent of the population.

This is nowhere close to a free-market system. The only way in which it is more free-market than the US or EU countries is that the taxes are lower. But as I said before, low taxes are not much good if you pay extra to the state via necessary bribes and if your private property rights are very insecure.

...it should also be noted that in addition to this, there was a huge earthquake in Haiti in 2010.

 
At 6:13 AM, September 11, 2014, Blogger Mike Huben said...

Tibor, posting a large collection of factoids and citing Heritage Foundation propaganda hardly constitutes a good argument. You should know better.

You also show your ignorance by using the term free market. It has two major uses: (1) as a term in economic theory for an ideal (nonexistant) model of markets and (2) as a propaganda term for unregulated markets (which lack protections against fraud and include markets for slavery, murder, etc.)

 
At 6:53 AM, September 11, 2014, Blogger Jon said...

TM, the way I see it following neoliberal prescriptions leads to conditions where you don't get free markets. Corporations don't want free markets. Where would Boeing, Apple, Microsoft, and Google be with free markets? They wouldn't exist. I'm not going to repeat the policies Haiti follows, I've said that a couple of times. Sure, these lead to conditions where it's hard to start a business or regulatory functions are inefficient.

This is why Republican administrations, stacked with advisors from Heritage and Hoover, why they produce governments that are bigger than ever. Yeah, they shink in terms of helping people, but they grow to help corporations.

So when you say that Haiti is not an example of the results of Chicago style politics because it's hard to start a business or the regulatory apparatus is weak, that's kind of like saying that I'm not at fault when I recommend large quantities of ice cream for weight loss. Sure, you ate the ice cream, but you got fat, and getting fat is not what I'm recommending. The policies recommended by the Chicago school are producing the large government that they claim to oppose. What actually would work to grow an economy is what we've seen work in the past. Lot's of government control over corporations. Japan, Britain, the US, S Korea. Look at the US during the war as I mentioned. We've never done better economically. In Haiti they do what neoliberals recommend. Let corporations have a free reign. It's failed for decades.

 
At 9:38 AM, September 11, 2014, Blogger Tibor Mach said...

Jon: I would say that having a system in which it takes more than 1000 days to start a business actually means a lot of government control (or rather restriction) over corporations.

I agree with you that many big companies use the state to make it regulate the way they want it to through their lobby. And I wholeheartedly agree that it is a problem. But I don't see how having a government with the power to actually exercise such control is going to solve it. To me it seems like quenching fire with gasoline. If I know that certain influential interest groups (such as corporations or labour unions) will influence the state and bend the rules in their favour, why would I advocate government with the power to do just that? Is it not more sensible to ask for a government which is limited in the sense that no interest group can bend the rules through it because it simply has not the power to bend the rules?

As I said, I don't know the Haiti situation well. But you might as well be right that there are corporations (and perhaps other interest groups) that take advantage of the weak rule of law there and make the state bend the rules their way. That is a problem, sure. But what you want then is a government that cannot make arbitrary rules in favour of interest groups, that is you need a limited government. Limited does not mean weak in enforcing rule of law. In fact, as is the case of companies and basically all organizations, the smaller and simpler ones are more efficient than the larger (not necessarily in geographical size, but in scope).

From what I gather, most "Chicago style economists" advocate such a government. I don't know which ones you mean specifically, so I cannot judge those. Among other things it includes cutting "social" spending, but it is hardly the only thing. I remember reading a CATO article the other day which estimated the subsidies given by the US government to various corporations and suggested that to be cut above all (which sort of goes against your claim that these organizations serve "corporate interests"...although that was not your exact wording, I think). The problem is that when you have a big government with a lot of power, it is really hard to take that power away from the interest groups that use it. Haiti might need a stronger government (which enforces property and other laws and is not so horribly corrupt), but definitely not a bigger government.

And this is also why Heritage can list the US above Haiti (significantly), because it is not just about the level of (official) government spending and taxation.

 
At 2:44 PM, September 11, 2014, Anonymous Anonymous said...

I don't think and apology is necessary. It wasn't necessarily technically incorrect just a completely ridiculous point to make considering the full story.

 
At 12:19 PM, September 12, 2014, Blogger Jon said...

TM, I think we keep saying the same thing to each other. I assume you'll agree Haiti is capitalist. You just claim that it's not the kind of capitalist (free market) that you or other libertarian style economists advocate.

Such a system as the one you advocate though has never existed and I suppose never could. Corporations that want to maximize profit are not going to sit by when there's a power vacuum created by the weakened government. Profit maximization means taking control of government and reshaping it to fit your profit needs. That's what you see in Haiti. It's not as if they pursuing socialism. It's capitalism, and in the real world that's corporate state capitalism.

You say the Haitian government has power over corporations. Take a look at what happened a couple of years back when they tried to get a rise in the minimum wage. Wikileaks broke this story. The Obama administration intervened on behalf of Hanes and Levi-Strauss to keep it down around 30 cents an hour, not the 60 cents that was being threatened. Free market recommendations which prevent governments from controlling capital flows, which prevent them from acquiring tax revenue which is needed to fund health services or education services, these produce governments that aren't totally without power. They have the power to harm small businesses. But looks what happens when they try to do something that would affect a larger already established operation? They can't get it done. That's free markets in the real world. It's a theoretical concept that always collapses immediately.

 
At 12:22 PM, September 12, 2014, Blogger Jon said...

http://www.businessinsider.com/wikileaks-haiti-minimum-wage-the-nation-2011-6

 
At 1:05 PM, September 12, 2014, Blogger David Friedman said...

" I assume you'll agree Haiti is capitalist."

I've mostly been keeping out of this exchange, but I think it would be useful if you would define what you mean by "capitalist." It may not be the same thing that people you are arguing with mean by it.

 
At 2:04 PM, September 12, 2014, Blogger Tibor Mach said...

Jon: Actually, I think we are getting somewhere (but read David's comment above please)

Actually, I would not say that Haiti is capitalist. At least as long as the description given by Heritage (1000 days to start a business, little to no enforcement of property laws and so on) is accurate (which you actually seem to agree on).

It seem so me that to you more capitalist either means simply lower taxes or just the plain fact that the country does not have entirely planned economy (in which case all countries are capitalist, except for North Korea and Cuba, although there the economic freedom is slowly growing as the government does not have the money to keep the command economy going...and is unwilling or unable to change the country to a one big gulag like North Korea).

To me, more capitalist means simply closer to the free-market ideal. As ideals are rarely realized in practice, you have to do with approximations. In that sense, I will call Hong Kong to be a capitalist/free-market economy, Germany less so, but still highly capitalist/free-market in comparison to most other countries and Haiti as a mostly socialist country.

So I use the term capitalist pretty much interchangeably with the term free market and I use the term socialist (in a way probably more general than it is used usually...at least outside of libertarian "circles") to mean a country in which a government plays a huge role in people's lives. I don't differentiate between who controls the government, whether it is the One True Party (btw, in Germany there is a not so seriously meant political party called "die Partei"...they won 1 seat in the EU parliament :) ) or a clicque of interest groups of any kind.

As I said, I agree with you that it is a good idea if a government is strong (not big) so that it can enforce rule of law. I also agree that the government of Haiti is not such. I disagree that you need high taxation to do that. If you look at the spending of developed economies with a relatively fine rule of law (definitely so compared to Haiti), you will find that the police force or courts hardly amount to much in the budget. I will give you an example of the Czech national budget for 2012 (because I remember a nice site where it is available in detail (even in English):

http://monitor.statnipokladna.cz/en/2012/statni-rozpocet/

As you can see, only 8.5% of the budget goes to national security and legal protection...so only 8.5% goes to police force, courts and army. That is (maybe not the army) what I think (correct me if I am wrong) we agree that Haiti needs the most.

Now 12.7% goes to industry and agriculture...so these are subsidies to people who can milk the others of their tax money. Note that this is more than all the really crucial stuff (the one before). And the staggering 45.2% goes to social affairs. I am not quite sure what "services for the population" and "general public services" are, but they amount to another 30%. The government spending amounts to about 40% of the GDP, in Haiti it is 30%, so that is not strikingly different.

Now if your claim is that the government needs enough money to be strong enough to resist the various interest groups, then you don't need extremely high tax rates to do that (you may argue that Haiti will need more than 10% for the essential stuff, because it is overall poorer and those influential groups are often quite resourceful...but it won't be 10 times as much). I think a much better strategy is to have the government smaller in size and more focused on these crucial elements. It is much easier to keep a small government transparent and much easier to hide a lot of shadowy stuff in a huge organization.

 
At 2:07 PM, September 12, 2014, Blogger Tibor Mach said...

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At 2:27 PM, September 12, 2014, Blogger Jon said...

FYI, I have to run and won't have access to the internet for a couple of days, but briefly let me post what I said earlier, which is perhaps not the clearest definition, but it will serve to give a sense of what I mean for now. And I'll also point out that Michael earlier said the key is control of the means of production. What control do sweat shop workers in a Hanes factory in Haiti have? Pretty much none if the means of production is controlled by owners, whereas on socialism they would have a say. Here's what I said earlier:

"Capitalism is a system whereby a minority earns the bulk of their income via property rights (investors retain a portion of the revenue created by workers though they don't actually DO anything except grant people permission to use the tools they own), the majority earns the bulk of their income from wages, and prices are set by and large in a free market. Socialism doesn't have investors, doesn't have people that earn the bulk of their money through a claim of property. So Belgium and India are both capitalist. China today is capitalist, though under Mao it wasn't. If a government intervenes, as in the US, Japan, or Korea, this doesn't change the fundamental feature of the investors acquiring a portion of the revenue created by workers who are paid wages."

 
At 9:39 PM, September 12, 2014, Blogger Tibor Mach said...

Jon: Please point out a country that has ever been socialist by your definition, because I don't think there has ever been one. Those countries which call(ed) themselves socialist and boasted about worker's control of the means of production were in practice less egalitarian than the capitalist ones. Yes, theoretically every company was owned by "the people", but what it meant in practice was that a couple of influential politicians and their friends were in charge of the companies, enjoyed special benefits that were out of reach of everyone who did not have connections. The people were still paid wages, still had bosses and so on. But they could not chose to try their luck with a good new idea or simply a better run enterprise. In fact, the only companies I have ever heard to (successfully) run on a "egalitarian" form of organization do so in a more or less capitalist environment and are private organizations themselves. The American software company Valve (they run the Steam software which is a computer game platform and also develop games themselves, Half-life is probably their most famous one) is probably the best example.

In a market economy, there are people who built the companies, or those who inherited them from those who did. Then there are people who do not want to try such a risky endeavour and prefer to be employees instead. Both options have their merits. However, anyone who is bold enough can start his own company (and anyone skilled and lucky enough can succeed with it)...that is in a capitalist system. You object to the fact that the workers don't control the means of production on Haiti, that their only choice is to work for a wage. Well, they would have much more choice if starting a new business there were not such an extremely cumbersome legal process...which makes it very difficult for those who would prefer to run their (small at first) businesses instead of being employed. In this sense, Haiti is very far from being capitalist. I visited Hong Kong recently...you can see so many little businesses everywhere there. But taxes are low there and starting a business is a simple process from the legal standpoint. The tax form in HK has one page. Most of the expenses related to starting a small business are legal ones. In a complete absence of regulation, if I want to be a hairdresser, I need a pair of scissors, a mirror and a chair...and at least some rudimentary skill so that people come to me again. That does not cost much. But if it takes 1000 days to fill out all the forms. Or, as is the case of Czech regulation (I know this from my ex girlfriend who considered starting her own cosmetic salon, being a qualified cosmetitian), you need not only a diploma from the hairdressing school, but also 2 years of practice under someone else who already has the licence (which reminds me of a medieval guild system). It may be so that a lot of similar regulations are a result of a lobby of big companies who try to cut competition down before it even starts. I think at least part of it is however due to protectionist concerns ("protecting the customers", "ensuring a basic quality standard" and so on). If you are a factory worker, you cannot just open a new factory outright, but you can start a small business and if you are good enough (and lucky enough) you might end up with a factory one day.

In other words, I understand (or at least I think I do) and partly share the concerns you have. But I think that if you look at how socialist economies actually work, you find that the workers there have far less choice than the workers in a free-market system. Again, mind my definitions of the words capitalist and socialist. A caste system of private oligarchs with government connections who use the state to prevent anyone else to interfere is not what I consider to be capitalism.

 
At 9:39 PM, September 12, 2014, Blogger Tibor Mach said...

John (following):

It seems to me your objections are mainly with cronyism, corporatism or whatever you want to call it. That nobody here probably supports. But while you think that by giving even more power to the government you can get rid of these problems, I believe you can either make them even worse (if the interest groups have a lobby powerful enough to influence the state on a regular basis, will they not be tempted to do even more so if the state has even more power?) or "solve" them by creating an even worse problem (a planned centralized socialist economy which has with no exceptions worked in the way I describe above). My opinion is that a better way to ensure the rule of law we would both like to see is to cut the state power down to the basic things, so that nobody can easily use it to influence things in his favour. And that does not require high taxes as I tried to show on the Czech budget example above. The really important stuff - police, courts, army - amounts to less than 10% of the budget...less that the various industrial or agricultural expenses which probably mostly translate into more or less direct subsidies for companies. And I doubt the Czech republic is a special case in this.

I am also unsure whether you advocate a planned economy or some kind of a mixed protectionist one (with no foreign investments and so on). I wish you'd clarify that. And it if is the second option, then please be specific.

 
At 10:15 AM, September 13, 2014, Blogger David Friedman said...

Going back to the question of whether the Economist's claim was technically correct ... . At least according to the Coase and Wang book:

"In Mao’s era Chinese agriculture had suffered badly, including during the catastrophe of the Great Leap Forward. Compared with industry, agriculture had been chronically underfunded. Worse, profits generated in agriculture had been diverted to subsidize industrialization, through savings forced upon the rural population and artificially depressed prices for agricultural products. As a result, starvation had been a problem for a large section of the rural population and was a looming threat for the Chinese government during Mao’s time."

So it sounds as though people starving was a problem through most of Mao's reign, making the Economist's claim false even if one ignores the mass famine of the Great Leap Forward.

 
At 11:05 AM, September 13, 2014, Blogger Will McLean said...

"The demographic catastrophe, however, was not known to scholars before the release of demographic data in the late 1970s"

http://www.scarsdaleschools.k12.ny.us/cms/lib5/NY01001205/Centricity/Domain/202/greatleapcause.pdf

 
At 11:47 AM, September 13, 2014, Blogger Mike Huben said...

Really, David, you cannot conclude that from one vague sentence in the one book you're referencing.

Look, cite some statistics for Chinese famines after the Great Leap Forward if you want to claim Mao didn't end famine in China. Simple enough?

 
At 12:00 PM, September 13, 2014, Blogger Will McLean said...

"Like most Chinese, Yang (Jisheng, author of Tombstone) had no grasp of the extent of the calamity and believed his village an isolated case. Awakening came after the 1989 Beijing massacre, when Yang began his research into the causes of the famine."

http://www.bostonglobe.com/arts/books/2012/11/03/review-tombstone-the-great-chinese-famine-yang-jisheng-translated-from-chinese-stacy-mosher-and-guo-jian/yuFFCEmLIxORRuesm3LjXI/story.html

 
At 10:42 PM, September 13, 2014, Blogger David Friedman said...

Mike and Will seem to be saying that it was an adequate basis for the Economist's statement that Mao said he had ended famine. No evidence to support it, and it wasn't true.

And given the number of refugees pouring into Hong Kong well before Mao's death, it's hard to believe that a reporter who cared could not have discovered that starvation was indeed a continuing problem.

Would they have the same view if the Economist had asserted, as fact, that Saddam Hussein was working on building an atomic bomb—because the Bush administration said so (although not in quite such clear language)?

When a magazine states as fact a claim they have no reason to believe and it turns out to be wildly false, you don't think they owe their readers some sort of explanation and apology?

 
At 12:57 AM, September 14, 2014, Blogger Mike Huben said...

By your logic, David, if I said "public health systems have transformed the world by eliminating smallpox", you would claim that they had not because there had been smallpox during the existence of the public health systems.

And you would be demanding an apology.

The critical issue for judging the statement correct or not is whether Chinese famines were ENDED by the time of Mao's departure.

At this point, you are making an argument from ignorance: you don't know, so you assume with expressions such as "it is hard to believe". That's not a very strong reason to demand an apology.

 
At 3:31 AM, September 14, 2014, Blogger Tibor Mach said...

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At 3:33 AM, September 14, 2014, Blogger Tibor Mach said...

Mao died in 1976, the system did not stay Maoist for long in the country and from 1990s there has been a slow but steady economic liberalization, at least in the coastal parts of China. I don't know how often famines happened before Mao. Had that not been as frequently as every 5 years, the fact that no famines happened after Mao does not account to much. If Mao's system as he designed had lasted longer (with no famines after it was fully implemented), one could argue that it managed to deal with famines (albeit at a cost of life amounting to a large number of famines of the pre-Mao scale). But this way, one could also easily attribute the lack of famine in China to market liberalization.

I would also expect a certain drop in famines after his rule one way or another. China, as did the Soviet Union, has a lot of various ethnicities that the regime is/was not keep about. Stalin starved people to death on purpose and I doubt Mao did not do the same. A lot of the famine was likely engineered.

Also, the idea of the "great leap forward" was to convert a lot of farmland to industrial areas...thus becoming a "developed country" overnight. I don't see how that can solve a famine problem, people can't eat steel and as a communist country China was quite isolated from international trade (it did not have all so very friendly relationships with the USSR either and even if it did, there were famines in the Soviet Union as well, at least while Stalin was still alive, maybe even after that)

 
At 12:44 PM, September 14, 2014, Blogger David Friedman said...

Mike writes:

"The critical issue for judging the statement correct or not is whether Chinese famines were ENDED by the time of Mao's departure."

Famines are rare events. The question would be whether people starving was ended, or at least had become much less common than it had been in the past. What evidence did the Economist have that that was the case, other than the claims of Mao's government?

Do you seriously believe that the author of that article could have honestly written it if he thought that, under Mao, something like thirty million people had starved to death?

If, to take your example, public health systems had produced the largest smallpox plague in history, with tens of millions of deaths, but it was over by the time you wrote, could you have honestly described the person responsible as eliminating smallpox on the grounds that there had been few smallpox deaths in the year before he died? Without mentioning the plague?

Reread the thread yourself and see if you aren't engaged in extreme contortions of special pleading.

 
At 1:24 PM, September 14, 2014, Blogger Mike Huben said...

Famines in China have NOT been rare events. If you had taken the trouble to look in Wikipedia, under List of famines in China, it reports "Between 108 BC and 1911 AD, there were no fewer than 1828 famines in China, or one nearly every year in one province or another."

Evidently you haven't done the minimal homework needed to declare that their statement wrong.

By the way, the Taiping Rebellion's Great Famine is estimated to have been comparable or even larger.

 
At 2:43 PM, September 14, 2014, Blogger David Friedman said...

From I can find in a quick online search, including the source you cite, total deaths during the 23 years of the Taiping Rebellion may well have been larger than famine deaths during the Great Leap Forward, with estimates for total deaths ranging from 20 million to 100 million. Your source gives 60 million for total deaths, but gives the cause as the rebellion, drought, and famine, so it isn't clear if that is intended as a number for famines. Do you have a source that splits out famine deaths during that civil war?

So far as your point that famines are not rare, prior to modern transport systems, famines tended to be local. One famine a year somewhere in China doesn't make famine a common event anywhere. You will note that out of the 1858 famines mentioned in the Wikipedia article, only seven are listed with death counts of over a million.

In any case, the article didn't say Mao ended famine but that he ended starvation, so the question isn't whether any famines occurred in the last few years of his rule but whether any peasants were starving.

 
At 4:53 PM, September 14, 2014, Blogger Will McLean said...

The previous administration of China had a famine in 1928-1930 and another in 1936, both killing millions. Obviously, the Japanese had a hand in the one that followed.

Do you believe there was a famine on that scale in China after 1962? if so, why?

 
At 5:07 PM, September 14, 2014, Blogger Will McLean said...

David, you have chosen a very poor example to support your argument.

In Iraq, the US administration assumed, correctly, that the secretive regime would lie whenever it served their purpose. And that whatever the exiles and refugees said was probably true.

The first was true. The second, not so much.

 
At 5:11 PM, September 14, 2014, Blogger Mike Huben said...

Let's look at the initial quotation again.

He says "where nobody starves". What charitable interpretation do YOU give that? What do you think that meant to the author? People still starve in first world countries: do you really think he meant zero starvation? I think ending famines is an appropriately charitable interpretation.

He wrote "for directing the transformation of China... INTO". So he's talking about the end results of the process, not the middle of the process. Bringing up the Great Leap Famine does not refute his point any more than pointing out that China was not unified during the revolution. After the revolution, it was unified. And (perhaps) after the Great Leap Famine there was no more famine.

 
At 6:45 PM, September 14, 2014, Blogger Will McLean said...

David:

Do you seriously think that any western journalist writing in 1976 would have accurately estimated the number who starved to death under Mao? If so, how?

 
At 7:59 PM, September 14, 2014, Anonymous Anonymous said...

Looks to me:

- whoever wrote the Economist piece did estimate the number who starved to death under Mao. He / she estimated that amount as zero, nil, "nobody".

- Turns out this was a wildly inaccurate estimate. Off by several millions it would seem.

An error worthy of correction or apology at least.

 
At 7:21 AM, September 16, 2014, Blogger Jon said...

Tibor, regarding your question about where socialism has existed, it's definitely existed in pockets, if not in entirety within the borders of a country. So you could look at co-ops in the US. Workers do have a real say in the use of the tools. It's not that they just take orders because others have property rights, so they only keep a portion of what they produce. They get the full benefit of their own labor. Amish societies could be called socialist/anarchist.

Country wide is tough, but I've heard that Spain in 1936 was socialist/anarchist (these concepts largely overlap). In the world today Cuba is probably the closest thing to a full country, but of course it's not really socialist because the government is not democratic. I'd say the workers do have some say because the government is somewhat responsive to the people, but not to a large degree. It's really a continuum. They're definitely not capitalist in Cuba. They are as close to socialist on the spectrum as anywhere in the world probably.

In Spain apparently war came against them both from the fascists and the capitalists. Cuba's case is pretty well known. The US has been engaged in a terrorist war against them for 60 years. We're talking biological warfare, chemical warfare, the embargo, bombing after bombing. Despite this it is a much better place to live than their many capitalist neighbors, like Haiti, the Dominican Republic, Jamaica. Better for an ordinary person that is, the super rich in Haiti or the Dominican Republic do fine.

In this sense, Haiti is very far from being capitalist.

You are using very non-standard definitions of words. Can you point to a credible source that defines capitalism the way you do? There's nothing about socialism that says it should be difficult to start a business. Nobody is advocating that. This is not where the disagreement lies. It's in control of the means of production. Workers or owners?

It seems to me your objections are mainly with cronyism, corporatism or whatever you want to call it. That nobody here probably supports.

I read somewhere that Marx said that capitalism leads inevitably to crony capitalism. Capitalism must become crony capitalism. I think that's correct, whether he said it or not. Since I have a problem with crony capitalism I also have a problem with regular capitalism.

But while you think that by giving even more power to the government you can get rid of these problems

Socialism does not require government. It CAN operate under government, but this is not a requirement. Socialism is worker control of the means of production, and that can be done in a variety of ways, including an anarchist society. Did you ever see Monty Python and the Holy Grail? If so maybe you remember the anarchist peasant. "Come and see the violence inherent to the system". He described an anarchist society where workers were in control.

 
At 10:15 AM, September 16, 2014, Blogger Tibor Mach said...

Jon:

Thanks for responding.

1) I don't consider companies that are owned by the workers (so that they are in fact the owners) to be socialist. It is just a different way of an organization of a company. Sometimes it works well, sometimes it does not. Anyone is free to choose to start a company like that in a (more or less) free market society, so I don't see how that is antagonous to capitalism (as I understand the word).

But I like your example because it shows that the workers controlling the means of production is something that is entirely feasible in capitalism. And indeed a lot of the big corporations of today had humble beginnings of a guy or a few people who had no employees and just started a small business that was better than the competition. In the Czech republic, the name Baťa is very famous. The guy started as a regular shoemaker and eventually built a big company which is now employing thousands of people in 26 countries and has its stores in over 70 countries (most of Europe but not in the US for some reason). It is still family owned (although, unfortunately, the family had to flee from Czechoslovakia after the communists took over and confiscated all their property there...and they never returned).

http://en.wikipedia.org/wiki/Bata_Shoes

The only things that make lives of these "start-up" (as is the buzzword for this today) companies nowadays more difficult is an extremely strict regulation which makes it much more difficult to start a small business with little resources. But again, that is the effect of the state and its power to regulate (if perhaps abused by a lobbies of corporations and labour unions), not the effects of capitalism - i.e. free market capitalism.

2) Have you been to Cuba? I have not, my parents have (3 years ago). What they saw reminded them of socialist Czechoslovakia...only worse. The people there are poor, live often in houses that don't even have proper windows and the state takes most (not all, since Cuban government is becoming increasingly bankrupt, they have no choice but to legalize some minor entrepreneurship) of the money you make (even if you are one of those small entrepreneur). As for freedom of speech and other "personal" liberties, it is even worse.

Maybe read this blog sometimes:
http://www.14ymedio.com/blogs/generacion_y/

It is by Yoani Sanchéz, a Cuban dissident and a blogger. She has mostly managed to upload the posts by giving memory storage devices to people who have access to the hotels (which are one of the few places where internet is freely available...and Cuba does not have the equipment and power to build a Great Firewall like China). Now, since she's become well known world-wide she has it a bit easier (similar story with Václav Havel before the Velvet revolution in 89 in Czechoslovakia). But there are others who are not watched by international media and therefore are much more susceptible to the abuse and incarceration by the state. I agree that Cuba is a socialist country. But I would never want anything even close to that. The workers there hardly have a say, the factories are owned by the state and that in turn is de-facto owned by a small ruling clique. If you want to avoid monopolies in this way, you end up with one huge corporation which calls itself state and is firmly in control of a few (who fight each other for even more power, but rarely let anyone else have a say).

 
At 10:15 AM, September 16, 2014, Blogger Tibor Mach said...

Jon (following...and sorry for the length):

3) I am very fond of Monty Pythons, but I actually think this was a mockery of such anarchistic communes. But Pythons aside, I never fully understood the communist anarchist ideas. You either have no law at all, in which case the society is not very socialist, rather very bruttish (and extremely unstable), or you have a democratic rule, in which case you have a state (if perhaps a small one, or an atypical one) and cannot talk about anarchy. Or you have something along the lines of David's Machinery of Freedom which is a society that could (and to a minor extent likely would) contain groups that are run in a fashion you would call socialist (I would not, since as long as membership is not enforced, it is perfectly capitalist to me...as it is a free market arrangement), but which is probably best labeled as market anarchy or something like that (anarchocapitalism tends to be a bit confusing exactly because people have different notions of the word capitalism). To me, socialism means more government power, that is more power to an agency which has a special position and is much less subject to the law itself (David gives a better definition...it is interesting to note that organized crime satisfies the conditions of the definition of government - which I believe is not a bug but a rather neat feature of the definition). So it is very much at odds with anarchism (i.e. absence of such an agency with special privileges).

In any case, it seems to me you see bad conditions of some employees in relatively capitalist societies. I suggest to you that
a) part of the problem is that those societes are often fairly socialist in the sense that the state has a lot of power (which is partly abused by interest groups) which prevents or makes it more difficult for those with grit to start their own businesses.
b) A fully socialist societies (that to me means the state controlling the means of production...and most of other things usually, because if you have power over when people eat, you will end up wanting to have power about what they say and think) have with no exception so far been even worse, more abusive to the people and concentrating power (and wealth) in the hands of a small ruling elite. The fact that this was not the intention of those who supported a change to such a system indicates that there is something fundamentally wrong (not that there are not good theoretical arguments too) and that such a society engineered top-down can never work as intended. Small voluntary communes where people share most of their resources can work, at least for a time (and they tend to be more stable if they also have a religious element in them and are a bit restrictive about the interactions of its members with other people...with the ultimate threat of expulsion - that is the case of Amish, although they are a bit more complicated...David and his students have also written something about the Amish, it is an interesting read). But that is not truly socialist, because it is again a free arrangement (although it could be argued that there is an element of psychological manipulation), not at all at odds with a free-market capitalism.

I think the main problem is that I don't believe that capitalism leads inevitably to cronyism, in fact, I believe that the more socialist the country gets, the more likely and the faster you are going to converge to cronyism or in the worse case communism/fascism (there is a little distinction in practice). Would you agree that if, hypothetically, the free market was a stable arrangement, that it would be a desirable thing? I do agree that if I thought it lead to what you think it does, I would probably be far more socialist (not entirely, because the evidence that the fully socialist system does not work is overwhelming).

 
At 10:22 AM, September 16, 2014, Blogger Tibor Mach said...

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At 10:34 AM, September 16, 2014, Blogger Tibor Mach said...

Jon:

Actually, read this (it is not very long)
http://mises.org/daily/5226/How-to-Reach-the-Left

and tell me what you think about it. I think that is is very well written. And as I often do, the author notices that the goals of the left are often not that dissimilar to the goals of libertarians (well, I consider libertarians to be left wing, because free-market supporters were the ones on the left in the French parliament where the left-right dichotomy started...unless you count Optimates and Populars in ancient Rome). It is just both have a very different opinions about what the facts of the world are. This might explain the view of (at least some...I don't want to talk for anyone, but Long's article works for me at least) libertarians to you better then my litanies above :)

Note that the article is fairly emotional. I mostly don't like that kind of presentation when it is about politics...but very little says more about morals than emotions do (some people try to derive morals philosophically and logically, but I am very skeptical to those efforts...regardless of what kind of morals they want to show to be "right"...and often their "cold" logic contains a lot of emotions too).

 
At 10:47 AM, September 16, 2014, Blogger Tibor Mach said...

Jon:...one more thing (sorry)

http://generacionyen.wordpress.com/

This is the blog of Yoani Sanchez...I accidentally posted a different website (also this is in English, not Spanish).

 
At 11:11 AM, September 16, 2014, Blogger Jon said...

I don't consider companies that are owned by the workers (so that they are in fact the owners) to be socialist.

I can't help but laugh reading this. Capitalist propagandists have been hard at work obscuring what Socialism is, because often I find that when it becomes clear people don't think it's so bad, and capitalists don't want that. Why? Because on capitalism the wealthy get the bulk of the wealth while doing none of the work. Socialism has no room for investors. You want to earn money you have to work like everybody else. Capitalists don't like the sound of that naturally.

Have you been to Cuba?

I have not, nor have I been to the Dominican Republic, but a friend was recently there. You can vacation there, but they let you know that you don't want to leave the protected zone of the resort. Same in Jamaica. Life's pretty tough in Cuba, but like I said before still much better than life in capitalist states nearby for the ordinary person. This despite a very strict embargo and a terrorist war coming from the US.

And that terrorist war makes really good sense. You can read from US planners why they needed to implement it. If Cuba is left to it's own devices it will probably succeed, then it will be a model for others to pursue, a model that leaves investors without the large cut they take. That means more for ordinary people and consequently a better life for them. So for instance places like Guatemala and Honduras are havens for US corporations. The laborers add a lot of value, but via property rights they are deprived of it and it is shipped to investors. If people from Guatemala or Honduras started keeping all the value they produce for themselves that means they'd likewise have a better life. That means less going to the investors, most of whom are in the US. So right wing military dictatorships have to be installed in these countries to prevent them from following Cuba's example.

I agree that Cuba is a socialist country....The workers there hardly have a say, the factories are owned by the state and that in turn is de-facto owned by a small ruling clique.

It's pretty clear to me that you really don't know what socialism is and as stated before I don't think you know what capitalism is. Not trying to sound mean or anything and I'm very sympathetic because I was in the same boat years ago. Go to Wikipedia and just read what Socialism is and what Capitalism are.

To me, socialism means more government power

I think if you read from socialists you'll find that this is not true (not that I've read much). One book I would recommend, one of my favorite books from which I learned a great deal, is David Schweickart's "Against Capitalism".

 
At 11:11 AM, September 16, 2014, Blogger Jon said...

Would you agree that if, hypothetically, the free market was a stable arrangement, that it would be a desirable thing?

I tend to doubt it, but it's hard to say because it has never existed, at least in a capitalist society. What I think free markets don't do, which they need to do, is look at the real world instead of living in their theoretical world. As I mentioned Ha Joon Chang looks at the real world closely. There can be no question that the managed capitalist societies of S Korea, the US during WWII, Japan, Britain, these are the world leaders, and they experienced their most rapid economic growth during the period of stronger government management. I stand by my claim that Haiti is among the best examples of government getting out of the way of corporations, which in the real world means corporations manipulating the government to serve their interests, including making it difficult to start a competing business. The government can't raise the minimum wage above a level acceptable to the major corporations. Can't levy taxes, can't impose regulations preferred by ordinary people. That's why when a hurricane goes through Haiti you'll have tens of thousands dead and the same hurricane will not cause any death in Cuba.

Cuba's a tough place to live in comparison to the US, but do a fair comparison and compare it to it's neighbors, who haven't been subjected to a crippling embargo and don't have US based terrorist action being implemented to undermine the government. Do you know that from the US biological weaponry was introduced that required Cuba to slaughter it's entire pig population? Do you know that CIA operatives worked with a man that ultimately bombed a Cuban civilian airliner in what was the worst act of terrorism in our hemisphere involving an airline prior to 9-11? George H W Bush pardoned the admitted mastermind, which allowed him safe haven in Miami. We are at war with this country for reasons I explained above, and yet they still produce a decent life for their people. Way better than their neighbors. Look at their life expectancy, their education level.

A blogger can complain about Castro in Cuba, but try that in El Salvador where reporters just get hacked to death with machetes for complaining. The violence from the right wing military dictatorships imposing capitalism by force is much worse than Castro, it's just that we don't talk about it.

 
At 4:40 PM, September 16, 2014, Blogger Tibor Mach said...

Jon: In Cuba people get often jailed for complaining or abused in different ways. Sanchéz is well known worldwide which gives you a certain amount of protection. Others are not so lucky and she did not use to be either. And it used to be a lot worse. Guevara (with Castro's consent of course) killed a lot of people without a trial during and shortly after their revolution.

If being an investor is so easy, why do most people not quit their jobs and start their businesses themselves? It takes a) a great amount of risk (for example when my father started a business in the early 90s, he took a loan from the bank and our house was at stake...had he and his colleagues not succeeded we would have become homeless), b) a huge amount of work, at least at the beginning, c) a delayed return. If you work for a wage, you get your money every month. If you invest your money to start a new business you may wait years before you get a return...and sometimes you end up broke and indebted instead.

Nobody is preventing the workers from pooling resources and starting a worker-owned factory...the problem is that few people are keen to face the risks and wait until there is a return.

I think we have a fundamental disagreement about what capitalism and socialism is. To me, Haiti is a socialist country (for the reasons I explained above), to you it is a capitalist country for mostly the same reasons I consider it socialist. Regardless of what you call it, I find it puzzling that you clearly see a problem in one scenario (government power is prone to abuse and is in fact actively abused by powerful interest groups), but miss (or try to explain it away) it in a different one (socialist Cuba, which does indeed work as a one huge monopolistic corporation). You mention US hostility towards Cuba, but you fial to mention the incredible amount of support by the Soviet Union and ( to a much smaller extent) current Russia. Cuba was subsidized by the USSR as it had a strategic location in the Cold war...same reason the US tried to break the regime there much more than they did for example in East Germany or Czechoslovakia.

Now, CIA may have done (and may still be doing) a lot of bad stuff. But what has that to do with capitalism? CIA is a government organization (and, being a secret service, it is in a way a state within a state). There are probably very nasty regimes in other South American countries. But in each and every case, it is through the state, through the government that the abuse is being done. You see that and are still apologetic of more government power. I don't understand that :)

 
At 4:41 PM, September 16, 2014, Blogger Tibor Mach said...

Jon: In Cuba people get often jailed for complaining or abused in different ways. Sanchéz is well known worldwide which gives you a certain amount of protection. Others are not so lucky and she did not use to be either. And it used to be a lot worse. Guevara (with Castro's consent of course) killed a lot of people without a trial during and shortly after their revolution.

If being an investor is so easy, why do most people not quit their jobs and start their businesses themselves? It takes a) a great amount of risk (for example when my father started a business in the early 90s, he took a loan from the bank and our house was at stake...had he and his colleagues not succeeded we would have become homeless), b) a huge amount of work, at least at the beginning, c) a delayed return. If you work for a wage, you get your money every month. If you invest your money to start a new business you may wait years before you get a return...and sometimes you end up broke and indebted instead.

Nobody is preventing the workers from pooling resources and starting a worker-owned factory...the problem is that few people are keen to face the risks and wait until there is a return.

I think we have a fundamental disagreement about what capitalism and socialism is. To me, Haiti is a socialist country (for the reasons I explained above), to you it is a capitalist country for mostly the same reasons I consider it socialist. Regardless of what you call it, I find it puzzling that you clearly see a problem in one scenario (government power is prone to abuse and is in fact actively abused by powerful interest groups), but miss (or try to explain it away) it in a different one (socialist Cuba, which does indeed work as a one huge monopolistic corporation). You mention US hostility towards Cuba, but you fial to mention the incredible amount of support by the Soviet Union and ( to a much smaller extent) current Russia. Cuba was subsidized by the USSR as it had a strategic location in the Cold war...same reason the US tried to break the regime there much more than they did for example in East Germany or Czechoslovakia.

Now, CIA may have done (and may still be doing) a lot of bad stuff. But what has that to do with capitalism? CIA is a government organization (and, being a secret service, it is in a way a state within a state). There are probably very nasty regimes in other South American countries. But in each and every case, it is through the state, through the government that the abuse is being done. You see that and are still apologetic of more government power. I don't understand that :)

 
At 4:54 PM, September 16, 2014, Blogger Tibor Mach said...

Jon (2nd part):

I think you should take a look at the history of central Europe a bit more. As I mentioned, Czechoslovakia was one of the richest countries in Europe before the communist takeover. After the Velvet revolution, it was very underdeveloped.

But Germany is perhaps an even better case. The country had no preexisting differences between East and the West (it did between North and South though...South being poorer...but had the fortune of being part of BRD and not DDR...now Bavaria is the richest Bundesland). But 40 years of separate development left one half of the country (the half which had to install machine guns and build walls and barbed wire fences to keep its citizens from emigrating) in a terrible condition while the other prospered. The quality of life of ordinary people was so much better in the Western part in pretty much any way imaginable. Even today, if you plot socioeconomic data over the map of Germany, you can still often see the former border. 25 years after the fall of the Berlin wall have erased the worst bits, but it will perhaps take another 25 to erase it completely (perhaps more...it is usually easier to destroy than to build).

I think that in this particular case (planned centralized economy) the evidence is so clear that you have to try to avoid it in order to be able to support such a system. I'm not saying you do it consciously or with malice. But I am convinced that you do so. I do believe one can hold some left wing opinions and still be reasonable, but taking into account the overwhelming evidence against planned economies (which all points one way), not mentioning very solid arguments of economic theory, I just cannot consider your standpoint to be reasonable.

In a sense, I wish US and Western Europe had experienced socialism in its "full glory" as well. Not that I would actually wish it on the people. But it would perhaps open a lot of eyes. I am fairly sure there are far more convinced communists in the US than in Cuba :)

 
At 6:39 AM, September 17, 2014, Blogger Jon said...

I think we should start with this. Where are you getting your definitions for socialism and capitalism? If Haiti is a socialist economy than I can see why you'd have a problem with socialism. But by what definition?

 
At 1:23 PM, September 17, 2014, Blogger Tibor Mach said...

Jon:

To do business in Haiti requires a lot of paperwork and a lot of dealing with the state. Given the combination of state power to regulate and widespread corruption (those two are actually very correlated) you need to bribe and/or have friends in the government.

What I see as socialist about that is precisely that you have to deal with the government in the first place. I would regard Haiti as capitalist if it were easy (in legal sense) to start a business there and if private property rights were respected. I regard it as (mostly) socialist because that is not the case. It is the kind of socialism which leads to cronyism or corporatism or whatever you want to call it...so to a state of things where those successful in business are not those who make the best products, but those who have most political connections. Such a system may look capitalist at a first glance, but it is rather a parody of capitalism.

As I mentioned above, to me more capitalist means basically more free-market oriented. Less free-market = more socialist. There may not be a 100% capitalist/free-market country in the world today (or indeed ever so far), but some are quite close. Some are close in some respects, but far in others...the Nordic countries are an example of places with high taxes and government redistributive spending, but not too much trade restrictions and good rule of law which translates into good respect of property rights...on Haiti property rights seem to be very selective and dependent on your political influence - that is very far from what I call capitalism.

As I mentioned, it may be confusing to use the term capitalism precisely because it is understood differently by different people (whereas there seems to be a bit less confusion about the term free market).

 
At 5:45 PM, September 17, 2014, Anonymous Jon said...

You're telling me what YOU regard as capitalism. I know you regard socialism as a system where there is a lot of paperwork and big government. I'm asking you to provide a source that says it's not capitalist if it involves a lot of paperwork or it's difficult to start a business.

I assume you already looked and didn't find a credible source that agrees with you. You won't.

And as far as property rights you are quite wrong. Another obfuscation from capitalists is the conflating of posessions with what property rights is really referring to; control of the means of production. Levi Strauss stock holders control the means of production totally in their Haitian factories, and this is the heart of capitalism. Socialism brings the prospect of taking control of the tools away from investors and putting it in the hands of the sweatshop workers. Where has this happened in Haiti? Have workers ever in these factories had the power to decide what was built or hou revenue was distributed? They are completely powerless. This is the polar opposite of socialism and is capitalism exactly. Again I invite you to just go to Wikipedia and read about what socialism and capitalism are.

 
At 8:15 AM, September 18, 2014, Anonymous Beliavsky said...

What did other publications, for example the New York Times, Wall Street Journal, National Review, New Republic, and The Nation say about Mao upon his death. If they were saying similar things about Mao, it may be harder to blame the Economist for bad judgement.

 
At 11:13 AM, September 18, 2014, Anonymous Anonymous said...

The Economist is a member of Managerial State cheerleaders.

http://en.wikipedia.org/wiki/Managerial_state

 
At 11:19 AM, September 18, 2014, Blogger Tibor Mach said...

Jon:

Who decides what is the "official" definition of capitalism? Or any other terms for that matter...And do the words matter that much? Let's forget the word capitalism for a moment. You agree with the factual claims if I am not mistaken. Now, why do you think that such a corrupt government would flourish from having even more power (and thus being an even more attractive target to the various interest groups, including big corporations)?

 
At 5:30 PM, September 18, 2014, Anonymous Jon said...

The words really are important. Remember, this all started with Heritage, and what I regard as their bogus "freedom" index. Heritage is just a propaganda arm for the wealthy. What do the wealthy want? More money without doing any work. Workers having control of factories is a threat to that, so the job at Heritage is to try to make that concept look bad and the concept of sending the money you create over to investors, as done in Haiti, that idea needs to sound good.

The problem is Haiti is a hell hole having followed the capitalist model so closely, so at Heritage they want to pretend they haven't followed that model. Up becomes down and suddenly Haiti is socialist. Haiti has big government.

Haiti has government that is big enough to push around a little guy that might want to start a lemonade stand. That's why it's difficult to start a business. Corporations want it that way. Truly powerful governments have the power to push back against a corporation. We still have that somewhat in the US. Take BP for instance. A spill like that would be fine in Haiti, though in the US there are some penalties. In fact spills like that happen all the time in African nations, which likewise have had neoliberal policies imposed on them by force. Totally toothless governments, and so the residents are forced to drink from rivers filled with oil.

It's true that there is some confusion about these concepts because a country can have a system where there is overlap. A socialist country would normally permit a small business, like say a law service where an owner has 10 teenage workers. Those workers are only paid a small portion of the value they create and the owner gets the excess. Socialist societies might permit that up to a certain point, maybe 100 employees, at which point control would have to be shifted from the owner to employees because of the externalities and problems resulting from the concentration of power that exists in the hands of an owner getting more wealthy.

 
At 5:31 PM, September 18, 2014, Anonymous Jon said...

And really that's what it's all about in Haiti. Power in the hands of a few or power in the hands of many? Capitalism creates concentrations of private power. Those concentrations of power naturally use that power to create more wealth and more power. They don't necessarily want small government. They want government that doesn't constrain them, but then they'll ultimately want government that shovels money into their pockets, so sometimes that can mean big government. Notice that Republican administrations tend to grow government more that Democratic ones. These governments serve people less and corporations more.

What you advocate (small government getting out of the way) creates concentrations of private power. Corporations without government constraint find themselves having power with few limits, power they abuse. They use it to do whatever they want with government, possibly growing it, and you can't stop it. It's like Frankenstein. A monster of your own creation.

BTW, NASA just announced that August was the warmest August ever recorded. This is where corporate power without constraint leads, and if we don't stop it we'll all be screwed.

 
At 4:23 AM, September 19, 2014, Blogger Tibor Mach said...

Jon:

Well, this is where we separate. I believe that if you have a small government which cannot impose regulations and therefore it cannot be abused by interest groups such as corporations and labour unions, then the overall size of the corporations will be smaller and the competition higher than if you have a big government which has the power to impose those regulations because it is likely to be abused. In other words, I don't believe that unconstrained free-market leads to monopolistic organizations, I do believe that regulation is often rigged in the way that it in fact eliminates unwanted competition and makes the corporations bigger and less numerous. One example - if you are a small company and go bankrupt, well, your problem, tough luck...if you are GM your lobby will get you a bailout because you are very big and employ a lot of people...which in turns means short-term political costs for the politicians who would let you go. And politicians rarely think in the long terms (those who do are almost always voted out by the next-election-maximizers). A similar thing with the banks. Without government interference GM, which is a very big corporation, would simply not exist today.

And I am completely sure that planned economy is the worst possible. It is like trying to hammer nails with an atomic bomb. In order to "solve" the risk of monopolistic corporations, you simply create a huge one that controls everything. And despite your claims to the contrary, there has not been a single one that would "listen to the people"...unless you mean high-level members of The Party (whether it calls itself National socialist party or Communist party or anything else).

In other words, I understand your concern about monopolization. But the policies actually help it happen, quite considerably so. The people in the government cannot be relied to do the "right thing", they are just as everyone else. They will do the thing that is most profitable for them (this is a simplification both for the government and other people, but by and large it is true). And given how imperfect the democratic process is, that is often at odds with what is the best course of action. I think you look at private companies with a rightfully sceptical eye, but you should do so with the government also. Big business and Big government are not enemies, they are usually good friends (even if they may not show off their friendship publicly very much).

As for BP, I would be less optimistic. If I come to your house and smash a few things I would be required to pay all of it. BP did not have to cover all the costs of its accident, the costs were externalized, at least in part.

 
At 9:25 AM, September 19, 2014, Blogger Will McLean said...

Tibor:

One could have socialism without a planned economy. For example, the government might own most of the industries through a sovereign wealth fund, and collect a quasi-Georgist land rent.

 
At 1:22 PM, September 19, 2014, Blogger Jon said...

And I am completely sure that planned economy is the worst possible. It is like trying to hammer nails with an atomic bomb.

Speaking of the atom bomb, you know how it came about? Not the free market. A planned economy, the economy of the US during the war, which actually produced the best output and economic growth in our history. And created this kind of a turn around during the Great Depression.

You can take just about any element of the US economy that makes it superior to others today and it's root is in the public sector. Computers, the internet, satellite communications, the transistor (via a government sanctioned monopoly, Bell Labs). Automation, commercial aviation (nothing but war bombers modified for civilian use). There is no iPhone without US government funded R&D. Lasers, the real game changing medicines. This is what makes us different from Haiti. Not free markets.

The people in the government cannot be relied to do the "right thing", they are just as everyone else. They will do the thing that is most profitable for them

What do you think a corporation will do? At least the government is in principle susceptible to public pressure. Corporations are basically tyrannies, and they are making decisions that affect us, like warming the planet.

I am skeptical of government and agree that it is a source of danger. The problem in my view is always the same. Concentrated power. Concentrations of power lead to abuse.

What is the greatest threat to our species and humanity in general right now? By far it's private concentrations of power. Corporations. I don't like big government, but who besides government can conceivably stand up to corporations? Corporations have mostly defeated unions, unions can't stand up any more. Who's left? Until corporations are dismantled we have no choice but to rely on government, despite the fact that government tends to get capture by the same corporations that are currently threatening us all.

 
At 4:55 PM, September 19, 2014, Blogger Tibor Mach said...

Will: I'm not sure what you mean exactly. The government would own the land (and collect taxes for using it) or the industries themselves?

Jon: The pre-WW2 Nazi Germany also showed a great growth and "output". But this is borrowing from the future. You can inflate "growth" by either printing a lot of money or borrowing from others. Either way, you will have to pay it in the future...The reason I use the hyphens is that a lot of that "growth" is building something people don't actually want and would not pay to buy themselves.

Also, corporations are subject to a much less unforgiving force than the government (which is often in fact very sympathetic for their cause and helps them further their goals in ways that would not be otherwise possible...as I talked about above). And that is the market. If they do stuff people don't want, the companies which cannot get government help (because the government simply would not have the power to do so) would go bankrupt. They could not externalize their costs, because there would again be no government to help them with that, having not legal power over such things...and without the help of the government, the corporations actually have almost no real power at all. They don't have a private army or police at their disposal, so they cannot really force you into anything. They can only do so through the state. By supporting more state power you are helping exactly these things you want to eradicate. That is at least how I see it and what a lot of good theoretical arguments and empirical evidence supports.

And the evidence against planned economies is extremely overwhelming. They are the worst possible way of doing anything not only in theory but in any example from history (so far...hopefully there will be no more such experiments). You can make a statistical growth for a few years that way, but you have to pay it back sooner or later...with interest.

 
At 4:55 PM, September 19, 2014, Blogger Tibor Mach said...

Will: I'm not sure what you mean exactly. The government would own the land (and collect taxes for using it) or the industries themselves?

Jon: The pre-WW2 Nazi Germany also showed a great growth and "output". But this is borrowing from the future. You can inflate "growth" by either printing a lot of money or borrowing from others. Either way, you will have to pay it in the future...The reason I use the hyphens is that a lot of that "growth" is building something people don't actually want and would not pay to buy themselves.

Also, corporations are subject to a much less unforgiving force than the government (which is often in fact very sympathetic for their cause and helps them further their goals in ways that would not be otherwise possible...as I talked about above). And that is the market. If they do stuff people don't want, the companies which cannot get government help (because the government simply would not have the power to do so) would go bankrupt. They could not externalize their costs, because there would again be no government to help them with that, having not legal power over such things...and without the help of the government, the corporations actually have almost no real power at all. They don't have a private army or police at their disposal, so they cannot really force you into anything. They can only do so through the state. By supporting more state power you are helping exactly these things you want to eradicate. That is at least how I see it and what a lot of good theoretical arguments and empirical evidence supports.

And the evidence against planned economies is extremely overwhelming. They are the worst possible way of doing anything not only in theory but in any example from history (so far...hopefully there will be no more such experiments). You can make a statistical growth for a few years that way, but you have to pay it back sooner or later...with interest.

 
At 6:19 PM, September 19, 2014, Blogger Will McLean said...

Tibor;

Both. In my hypothetical scenario, the government is the ultimate owner of the land, with landholders having secure property rights in their holdings as long as they pay rents somewhat less than the unimproved value of the land. The state also has an interest in the industries, but only in the sense that other shareholders might. I come back to the example of sovereign wealth funds, or state pension funds in the United States. You have socialism without a planned economy. I don't advocate this, but present it as an example of social ownership of the means of production without a planned economy.

 
At 2:43 AM, September 20, 2014, Blogger Tibor Mach said...

Will: Yes, I guess I would call that very socialist, although still not as socialist as a planned economy (where the state holds 100% of the shares).

 
At 1:01 PM, September 20, 2014, Blogger Gordon said...

Jon's statement that "Levi Strauss stock holders control the means of production totally in their Haitian factories" would be challenged by many critics of the corporation precisely because they claim that that shareholders do not totally, or, indeed, in any meaningful sense, control the means of production. Such control is exercised by management, which typically owns only a very small percentage of the corporation. Furthermore, no one "owns" a corporation; what is owned is shares or bonds associated with a corporation.

Jon's real objection seems to be to a system that permits a person to make money without laboring. I think the issue here is that a "free" or, if you prefer, "unregulated", market system will allow for this possibility, unless a relatively powerful government imposes specific restrictions to prevent it. And, libertarians are rightly, in my view, concerned about what such power implies.

Ironically, I was in China from when this thread started until now, unable to access David's blog through feedly.

 
At 9:05 AM, September 21, 2014, Blogger Jon said...

And the evidence against planned economies is extremely overwhelming. They are the worst possible way of doing anything not only in theory but in any example from history

Any example from history? I keep bringing up the US during WWII, the period in America that had the best economic growth. Post war US had government funded R&D that today makes the US the richest in the world. I keep talking about S Korea where the powerful government directed industry, directed the investment options of the people, and it worked very well from an economic growth perspective. Ha Joon Chang covers this in detail in "Bad Samaritans". Highly recommended. What you're saying is really quite the opposite of reality.

The failures of planning or like what David talked about here, where China still did better than capitalist India in terms of life expectancy. The Soviet Union likewise had many problems, but the nations under it's dominance generally did better than the nations under US dominance (Guatemala, Haiti, El Salvador, Brazil, Argentina, Uruguay, Indonesia). The comparison is often made between the US and the Soviet Union, but it's not really fair because post WWII the US had 6% of the world's population but half the wealth. Compare countries that started from similar places in 1917, maybe Russia and Brazil.

Yes, I guess I would call that very socialist, although still not as socialist as a planned economy (where the state holds 100% of the shares).

That's just not what socialism is. It's not complete state ownership of shares. Socialism CAN have state ownership of the means of production, but this is not necessary.

If you are hostile to an economic system but you don't know what that system actually is, or if you are supportive of another system (say capitalism) and don't really know what it is, I think you should ask yourself why?

 
At 11:40 AM, September 21, 2014, Blogger Tibor Mach said...

Jon:

I think I gave you the examples of Germany, Czechoslovakia...or just pick any country that was (in case of Germany partly) in the Eastern block. Planned economy brought poverty, stagnation, pollution, profiling based on state and party loyalty and generally decreased the quality of life. This is not an isolated case gone bad in an otherwise functional system. The planned centralized economy was set up in many countries, had these same effects in all of them.

Or compare China to Hong Kong. True, HK is a much smaller place, so perhaps it is not entirely fair to compare it to China on 1 to 1 basis (but that also means it is easier to govern it and perhaps a good argument to at least reduce the size of countries in general). But the differences in results are enormous (especially during the pre-liberalization period in China). The culture was the same (more or less, Hong Kong is mostly populated by Cantonese, but Canton region where a lot of Hongkongese come from, has been a part of PRC since its beginning), but the people were the same, but the system was not.

My opinion of an increased growth in the US during WW2 is described above. You can inflate growth statistically by borrowing or making a lot of money. It either creates debt or inflation...but most importantly, it is not real. Also, US was still not a planned economy, not even during the WW2, neither was South Korea. A planned economy is such where there is a central planner who decides how much of what is going to be made in the whole country in the next time period (mostly those plans were 5-year for some reason).

And the fact that a place is somehow affiliated with the US government does not make it capitalist, or does it? That is by the way also at odds with your claim about South Korea...which was in a sense created by the US (had they not intervened, there would probably be just one - centrally planned - communist Korea today). And the US government had its interests there also.

How do you explain the European "experiment" with socialism? Why has that not worked out well but quite the opposite? Note that I am not comparing USSR to Russia. I am comparing particular countries in Europe to each other. I used the Germany example because there you have one country but with two states and two very different system. One more or less capitalist and the other radically socialist. And note that pre-WW2 Czechoslovakia was richer than Germany of the time. Then compare it again in the year 1990...and I am not even talking about freedom, just about wealth.

 
At 12:01 PM, September 22, 2014, Blogger Jon said...

You said look at "any example in history" to see the failures of planning. Are you saying that planning has never worked? S Korea, Japan, England?

West Germany had the world's most powerful economy pumping money into it to rebuild it in order to combat the Soviet Union. But do a fair comparison. Take the countries that weren't being propped up by a Marshall Plan, like the places in Latin America where the US did not feel the need to prop them up. Take say Haiti vs Czechoslovakia. Where would you rather have lived?

Hong Kong is the place where all the wealth in China fled because Mao was confiscating property. The best, brightest, wealthiest, most privileged went there. China would be a complete back water in comparison. Hong Kong was basically Wall St. The financial hub to the east. They had some advantages that I think makes the comparison poor.

The growth the US experienced during the planning years of WWII and subsequent years of heavy government sponsored investment, which led to things like computers, the internet, satellite communications, lasers, commercial aviation, automation, this growth was not just debt and inflation, it was real growth. Real standard of living improvements for Americans, the best in our history.

The Asian tigers as they are often called were handled much differently than Latin America because of the threat of the appeal of communism, so these capitalists states (Japan, S Korea, Singapore, Taiwan) were compelled, sometimes through extreme violence, to stick with capitalism, and capitalism that not only made the rich rich but made others rich as well. That is, managed capitalism, kind of the Keynsian variety. The idea is that if the people end up better off they won't be enticed to function like the Soviet Union.

The differences in EU are for similar reasons. The US rebuilt these nations to prevent them from becoming socialist. To see what a place would look like without US economic support see Latin America.

 
At 3:01 PM, September 22, 2014, Anonymous alaska3636 said...

Socialism is the inevitable end of capitalism, so why the animus? The socialist commonwealth is just around the corner when the workers shrug off the yoke of capitalism, hold hands and rejoice at the collective ownership of capital. The problem of economic calculation being shrugged off with capitalism, scarcity of resources, subjective value, market risk and even the specialization of labor need not be observed as the universe comes to a perfect stand still and everyone lives in a near constant state of bliss. No one will ever disagree, tolerance will abide. Oh, and the Lord of the Rings is just a story about some hairy midgets out for a stroll.

 

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