I presume that somewhere in this blog should be a brief statement about Karl Marx, the hero of socialists and the deity of communists. My book, Socialism, addresses the life, the writings and theories of Marx in some detail, since he is so important. Even the socialist who claims he is not a follower of Marx generally follows the same principles and evinces the same preferences as other socialists who follow Marx. I reproduce below an introduction to this topic which appears as a synopsis of a chapter on Marx from the book.
To understand why Marxian socialism is bitter and negative, one should understand Marx’s life. Somewhat surprisingly, it was founded upon a secure childhood. Since he never held a job, Marx was never an exploited worker. As a student he studied philosophy and religion, but thought very little of religion. He married Jenny von Westphalen, the daughter of Baron von Westphalen, but there was little class struggle in the marriage. For political reasons, he was not able to become a professor, so he went into journalism. Because of the opposition stirred up by his radical views, he spent time living in various places in Germany, France and England. For quite some time, Marx’s unwilling parents supported him and his family. As a library researcher, writing radical tracts and tomes on economic theory, he also received help from his friend and colleague, Friedrich Engels, thanks to the Engels textile factory and its exploited workers. From them Marx received a pittance insufficient for all his family to survive.
Marx’s most famous writings were The Communist Manifesto and Das Kapital, the latter being a three-volume critique of capitalism. The first volume of Kapital took him ten years to complete and the next two volumes were published posthumously by Engels. Critics tend to believe the publication postponement beyond Marx’s death was a result of the author’s dissatisfaction with his own attempt to resolve the incongruities in his theory of value. He never could free the theory of contradiction.
The real problem with socialism, whether of the centrally planned or of the “democratic” type, is that it is not a market system. That statement gives me great pleasure and provides me with some appreciated entertainment. It gives me pleasure because it is true and provides entertainment for me because it requires explanation.
Socialists rarely have a solid understanding of the rather straightforward concepts of market economics. They are not the only ones, of course. By definition, socialists are hostile to the notion of free minds and free markets and hardly ever refer to “market economics”. Rather, they characterize the market system as “capitalism,” a term derived from the ideas of Marx’s das Kapital and one that they perceive to be an epithet rather than a simple descriptor. But the market system has some most beneficial characteristics that can be credited for much of the material abundance our planet has to offer.
We should all understand how markets work. Unfortunately, the economics profession has done too little to get the word out to the public on even the most basic aspects of the discipline. I can understand this, of course, since when I as a student learned the first principles of economics, I had no particular feeling for markets. Learning about how they functioned was like trying to get a grasp on the periodic table of elements for a chemistry class. I didn’t come really to perceive the positive characteristics of markets until some years later when I was living in a centrally planned economy and experiencing what happens when markets are not employed in the economic system. In hopes that people might be more perceptive than I was as a college student, I proceed on the conviction that a few lines on how the market system functions should be useful.
It was Adam Smith who first perceived the significance of individuals engaging in informal commercial transactions that made it possible for them, their families and their societies to subsist in prosperity. Through time, a number of fairly complex institutions grew up around the efforts of individuals to engage successfully in “the ordinary business of life.” That expression was the definition of the great Victorian economist, Alfred Marshall, of his chosen discipline. That ordinary business is rendered fruitful through the specialization and division of labor that Smith found to be the core of market economics. But the reasons capitalism tends to produce economic growth and wealth also include the positive incentives that are an intrinsic part of the market system. Many people in a given society will be inclined to work hard, study hard, and be creative in order to achieve a secure and financially sound life. We tend to look with suspicion on “materialistic” motives (despite the fact that we all pursue them), but where they are nonexistent, poverty and want prevail. In the centrally planned economies, for example, highly-prized economic equality was achieved admirably. Managers of large business enterprises made scarcely more money than the janitor on the shop floor. So there was a high degree of equality in a society that otherwise produced little more than poverty. Lacking the general social response to the powerful incentives of markets, the economy never could function effectively. Where the government steps in to come down hard on avarice, it also comes down hard on productivity.
So a market economy is really just about producing to satisfy the acquisitive desires of productive people. Life is, of course, much more than just work and income. But once work has assured an acceptable income, we still have time in our lives to pursue the other activities that can make life truly rewarding. Those other things are what we do when we are not at work eliminating poverty. And in a healthy market society there is plenty of room for charitable endeavor, cultural expression, religious participation, civic participation, sports, educational pursuits, and on and on. When the socialist government steps in with its youth (indoctrination) program and other mandated programs, exerting control over all the aspects of life it can manage, society is quite sterile indeed. I have had many experiences, both alone and with my family, in the formerly communist countries of East Europe and the Soviet Union. Marxist socialism was a failure in economic terms and did little better in terms of the social and cultural effects it produced. I write of some of these in my book, Socialism, and can assure the reader that a free society is the only place you want to live.
Part II: But How Do Markets Work?
Seeking to improve their situation in life, many individuals are willing to work hard to produce and enjoy greater wealth. The pursuit of self-interest is to enhance the well-being of all. Smith wrote: “It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses (sic) to depend chiefly upon the benevolence of his fellow-citizens.” This process is not limited to single communities or even to the nation state; it implies international trade and ultimately even economic integration in pursuit of the economic growth it makes possible.
It’s quite simple, really, why a free market works. Individuals must produce or purchase things essential for themselves and their families to subsist. As they discover that they can produce some commodity effectively, they realize that someone might be interested in an exchange of some other vital item for the commodity they are producing. Or someone else might willingly purchase that commodity, thus permitting the purchase of needed goods and services. If no outside parties interfere in the process, an individual offers to passing travelers, say, food for their journey.
The traveler will likely find the offer of a potential trading partner an auspicious one and will be pleased that he got what he purchased at a reasonable price. The seller will likewise probably find the transaction beneficial and agreeable. Neither is forced into the exchange – there is rarely both a big winner and an exploited loser in free transactions – since either buyer or seller is free to walk away if the deal is an unfair one.
Lenin, famed for his total conviction and commitment to Marxism, expressed the contrasting socialist view this way; the only question about each market transaction is “kto kogo?” The translation is “who whom?” a brief sentence equipped with everything but a verb. The question is “who exploits whom,” “who rips off whom?” “who cheats whom?” “who does a number on whom?” and so on. The verb didn’t need to be expressed, since all good Marxists understand exactly what is happening when a member of the bourgeoisie is dealing with someone from the proletariat. (At least the Russians get the who
and whom correct grammatically, which is something that would not likely happen in the United States. Here, journalists appear not to perceive when to use “who” and when “whom”. But enough of the terribly complex linguistics subtleties; my point is that Marx and Lenin were flat-out wrong. Commercial life is not as Marxian pessimism perceives it: there is not an exploited party in every transaction.
Part III: Benefits of Competitive Markets
A great advantage of the market system is that it requires no external controls to function. No government is necessary to manage the day-by-day activities of buyers and sellers, but only to enforce contracts and maintain basic law and order in the production and sales of commodities and services. Markets function with an automaticity that is most beneficial to the social order. To demonstrate how markets function automatically when buyers and sellers transact a purchase, or sale, a chapter early in my book on socialism describes the nature of market supply and demand. Without the use of mathematics, or even of the inevitable supply and demand curves of an introductory college course in economics, the book describes markets in which expansion occurs in response to strong demand for a given good. Market expansion normally causes prices to rise and profits to appear.
The existence of net revenues is a signal for new firms to enter the market and share the profits. The growth in numbers of firms will increase the supply and cause the price to fall to a level where only enough profit is earned, i.e., a “normal” profit, to cover all costs, including a market rate of return to the manager and the owner or stockholder. This market groping for the truly just price is an automatic feature of free entry into the growing market. Symmetrically, an automatic adjustment occurs when the overall market demand is declining.
Where losses in an industry occur, perhaps because demand and the market price are declining, firms will begin to exit the industry. The resultant reduction in supply will cause the price to stabilize; although it could ultimately rise again, no more than a normal profit can be expected in the long term. All this occurs to the general well-being of the firm, its workers, and its consumers.
Market activity is expressive of personal freedom, creative productivity in response to perceived wants, and exchange that benefits both buyer and seller. A successful seller and natural entrepreneur will inevitably organize a few of his neighbors as workers in a firm. Large-scale production and specialization and division of labor may enhance the productivity of the group substantially. And what motivates the members of this fledgling firm? If they are productive and can keep costs down, through greater sales they can generate significant revenues which can become a source of general well-being for all involved.
Part IV: Socialist Pessimism Regarding Markets
At this point the socialist mind perceives only the potential for great evil. What if the capitalist manager can find in his heart no good will for his neighbors as they become his hired helpers? Surely, he will be so money-hungry and money-grabbing that he will pay them only an unjust fraction of the earnings their products or services produce. Surely, in the haste to build an industrial empire he will force his laborers to work long hours in hazardous and environmentally detrimental conditions! When a gay couple enters the establishment to order a wedding cake, this blossoming robber baron will decline on the basis of prejudice to provide the cake. Consumers who get a wedding cake, other bakery goods, or any other commodity will be forced to pay exorbitant amounts. Once established, the producer will obviously form a monopoly by reducing his prices just long enough to drive all of his competitors out of business. Then, of course, the prices will go back up higher than ever to enrich the monopolist. Karl Marx proved, so the Marxists suppose, that all these things are inevitable and must irrevocably persist until the starving workers end the evil in a revolutionary bloodbath. Where Marx went wrong is explained at length on the basis of the analysis of numerous great minds who have rejected Marxism root and branch. Marx went wrong historically in that his predictions never came to pass. And his view of history has helped historians neither reach a realistic understanding of how the world should work nor to make successful predictions about how societies would actually function.
But What about Evil Markets and Evil Capitalists?
Socialists will still worry that the conditions mentioned in the previous paragraph will ultimately be realized. They will then attempt to convince all voters that it is time for government to step in and put a stop to the abuses of the capitalists. (Communists would, of course, prefer a revolution than a ballot-box victory.) It is true, of course, that some capitalists really are greedy and dishonest. For them, we must have a government to enforce contracts and police efforts to thwart cheating. At the same time, history taught the capitalists over the past century or so that profits can be made without underpaying workers and overcharging consumers. Scholarly and prescient observers (although such cannot be said, perhaps, either of socialists or of governments) gradually discovered that the saving grace of market activity is competition. If monopoly (which is characterized by a single seller) is avoided through good policy, and if monopsony (characterized by a single buyer, such as a firm that is the only buyer of labor in a given area) is likewise avoided, workers and buyers will have choices so that their business cannot be monopolized.
If there are free choices, the gay couple seeking a wedding cake can simply purchase elsewhere. In spite of the politically correct views of so many contemporaries, the freedom of the bigoted cake baker to choose his transactions partners should be honored as a traditional freedom of the market system. A free society values the freedom of all citizens, both the saints and the bigots. If the prejudiced producer wants to lose the business of the gay cake consumers, his business will be less profitable and his disappointing bottom line will be sufficient punishment. (My book on socialism reviews much of the discussion on liberty that has gone on through the course of the history of socialism’s failure.) Of course, if society’s hatred for haters becomes sufficiently intense, the socialist solution may be preferable. Society will then punish the hater by dispatching him to the guillotine, which will make the world a more loving place. (I discussed the loving and loathing of socialism in a previous blog.)
Where monopoly power threatens the happy outcomes of competitive markets, wise policies can discourage monopoly power. It can do so, for example, by opening markets to new entrants from other geographic regions. Moreover, even anti-trust activities might be helpful in some cases.
If government activism and market interventionism persist long enough, however, markets may reflect anything but the benefits of competitive performance. The U.S. health care system, which is somewhere between Obama and Trump at this writing, is a clear example of the harm that increasing encroachment by bureaucratic forces can wield over time against public welfare.
The Population Bomb, a 1968 blockbuster book by Paul Ehrlich, taught that society’s biggest threat and harm was the geometric growth rate of the population. According to Ehrlich there were too many births, too many people for the good of the environment and the economy. The modern era, beginning somewhere around the 1950s has been one of limiting family size. Many believe, like Ehrlich, that the population is too large. Today, although population growth continues for the time being, a long-standing trend of declining birth rates brings new concerns for humanity.
There are several main reasons why birth rates have begun to decline. Families had been large in the previous, largely agricultural era, since children could be farm laborers and were viewed as a positive. In the new era, children began to be viewed as a negative; they had to be entertained, cared for, and educated. The arrival of feminism taught that they were a hindrance to the self-development of mothers who should really be in the labor force. The availability of prophylactics meant that couples could avoid having children, and many did just that. The sexual revolution had similar causes and effects. Sexual satisfaction became decoupled from both marriage and human reproduction. Cohabitation and promiscuity were no longer inhibited by the potential hazard of the arrival of an unwanted child.
For the child still arriving unexpectedly, the later phenomenon of mass legal abortions has been seen as a means of constraining population growth. But now the birth rate has fallen below the rate required to maintain the population at the current level. We have come to the recent recognition of demographers and social scientists that populations not only grow with geometrical rapidity, but also decline the same way. Today, the advanced countries have birth rates too low to offset deaths and national populations have begun to decline.
I can remember forty years ago teaching that in a century from that time, the German nation will have declined from about 80 million to 10 or 15 million, all of which would be descendants of the Turkish people who came as guest workers to Germany. On March 17, 2017, Turkish president Recep Tayyip Erdoğan called on Turkey’s European citizens to increase their rates of procreation and have five children each. He insisted that a booming Turkish population would be the best answer to the EU’s “vulgarism, antagonism, and injustice” (so reported the UK’s Telegraph). He is convinced that within a few decades Europe will belong to the Turks.
The Economic Problems of Demographic Winter
Consider just a couple of problems that will arise with falling populations. The housing market can accommodate families considerably larger than the one or two children standard of the recent past. And houses have been built for a substantial population, but what will happen when the baby boomers of the post-World War II era and the declining population to follow them want to downsize and put their larger than convenient homes on the housing market. In the future there will be a large glut of such homes on the market as there will be increasingly smaller cohorts of buyers to purchase them.
When social security was introduced there were about sixteen people in the labor force to provide the goods and services for one retired person. Social security is not an insurance program in which one’s continual contributions are set aside as savings for that person’s retirement. It is simply a transfer program where the money people pay in (if not confiscated by politicians for other purposes) is transferred to people currently retired. With a declining population we will discover that we now have only three or four people contributing to the retirement of each retiree. In the future we will see yet fewer contributors for each retiree. Ever fewer workers will not be able to sustain the growing number of retired persons they would need to support.
Other Problems of Declining Populations
The economic problems won’t be the worst of societal difficulties once an increasingly rapid population decline begins within few decades. It turns out, according to social scientists, that children who do not enjoy the benefits of the nuclear family do not gain the concern for others, the normal development of skills valued in the market place, or the cognitive stimulation and development that occurs in families. Many different kinds of statistics describe serious problems that children without siblings encounter in their development. When they fail to gain the social and developmental skills needed, many are unable to contribute productively to society and become candidates for welfare statism. One of my recent blogs on the increasing death rate of whites over 25 years of age indicates the issues already arising for much of the American middle class.
Jesus Christ prophesied of our time when He said “the love of many shall wax cold” (Matthew 24:12). Those who use their sexuality only for personal gratification and who live only for their own personal goals and aspirations can easily be alienated from other people. Siblings of families learn to care for others; even if they sometimes don’t get along as well as their parents would hope, they later become parents and care for their own children. Cold hearts will mean loneliness for many children. Those who develop poorly view governments only as institutions to provide for their personal needs. They may easily find socialism appealing because it permits them to think they are championing the interests of others. But they feel no personal urge actually to give back or to be involved in service to those around them. They often seem more interested in being on governmental recipient lists.
Socialism is the personal philosophy growing out of the economic and cultural conditions developing in Western society. It gives lip service to the welfare of everyone, but hearts of people are locked on their own incomes and future prospects for income and wealth. Socialism is mostly self- concern. In the United States, socialist policies have promoted many of the activities and attitudes that have resulted in declining birth rates. Promotion of abortion, of denigration of women choosing motherhood rather than labor force participation, and promotion of the idea that environmental damage is a function of excessive population are common ideas for socialists.
One reviewer of my book on socialism, a German Professor of Economics, was very positive about the book, but when he read my account of the American media and of his American idol, President Obama, he was livid. In Socialism I described the American media as a volunteer American propaganda ministry. Its primary function is not to report news, but to spin it in favor of the government’s political positions. Our media under Obama performed the same functions as propaganda ministries in some other countries. The difference is that the American media promoted government policies not as a political assignment, but as a volunteer propaganda force acting in the president’s behalf.
This German economist, an acquaintance of mine, supposed I was comparing President Obama to Joseph Goebbels, Hitler’s Minister of Propaganda. Well, that ministry was under Hitler’s control, but I had referred to the American media as volunteering to suppress bad news about the Obama administration and to spin anything favorably that they considered news fit to spin. The effort I perceived to be coordinated only informally, so there was no indictment of President Obama as managing his own news. Nevertheless, even though our voluntary propaganda ministry is in the private sector it worked hard to back President Obama as he would wish to be backed. With the ascendency of President Trump, the mainstream media have done their best to smear him, his policies, his convictions, his aspirations, and his electoral supporters. They attempt to paint this very wealthy and highly successful businessman become highly successful politician as an unmitigated idiot. In doing so they completely overlook numerous significant accomplishments achieved by this “idiot” in a short period of time. They have nothing to say about the state of the economy, the undoing of many industrial regulations and administrative orders that have been stifling business institutions, the appointment of Justice Gorsuch and the changing American judiciary system, the cessation of the war on carbon, and much more.
President Trump learned during the Mitt Romney campaign for the presidency that mature political civility cannot insulate a candidate against the demonization supplied by the Democratic Party, which with sufficient success painted the Republican candidate as a heartless “vulture capitalist,” completely distorting the intent and the effects of venture capitalism. President Trump decided in that campaign that, should he run for the presidency, he would strike back vigorously at lies and misrepresentation. He has persisted in that endeavor and it has cost him much support and numerous friendships. Nevertheless, the last time I checked he is the President of the United States.
Since WikiLeaks revealed that a CNN presidential debate host leaked and coordinated debate questions with the Clinton campaign, one need no long wonder whether there really is coordination between the democrats and the media. In any case, long before the presidential campaign, high-profile broadcasters and numerous of the country’s main newspapers were expressing views and opinions more than just on the editorial page. The management of the news in a clearly biased manner made it apparent that the media have for some time been unreliable for those seeking news rather than opinions.
In September of 2016 it was reported that Americans’ trust and confidence in the mass media “to report the news fully, accurately and fairly” had dropped to its lowest level in Gallup polling history, with 32% saying they have a great deal or fair amount of trust in the media. That was down eight percentage points from the previous year. In April of 2016, the Huffington Post had reported that only 6 percent say they have a “great deal of confidence in the press,” which was about the same level of trust Americans had at that point in Congress.
Socialism in contemporary America has filled the ranks of urban professionals with individuals who have been indoctrinated from an early age in school and college (see my previous blog on “Socialism and Social Learning). They have gradually adopted a conviction that their primary role is to defend good progressive principles. The notion that integrity in journalism means to bring news facts objectively to the public has long since slipped between the cracks for a small army of journalists.
European journalists have apparently been successful in thoroughly indoctrinating their public, which has precious little direct exposure, for example, to President Trump. They generally learn what they know about him from their own media, which have swallowed the American media cuisine whole. And is it any wonder that so many Americans began by being suspicious of Donald Trump, then graduated to a genuine hatred of him after he was smeared by a Clinton campaign that raised c. $1.2 billion, much of which was spent calling Trump and his supporters a “basket of deplorables”. While this was happening, the media were spending many, many millions of dollars laughing at, mocking and prevaricating about the Trump candidacy and presidency. The media attacked him so viciously that it appears they ultimately came to believe their own distortions and fabrications. One can easily see, as President Trump has averred to have seen, that current media broadcasts are full of more hatred than information.
John Cassidy (2009, How Markets Fail: The Logic of Economic Calamities) tells of his own education and how his indoctrination occurred. He has remained true to his liberal faith, of course, and would not agree today that he was indoctrinated, although he himself describes the process. “When I began studying economics at Oxford during the early eighties, Hayek was widely seen as a right-wing nut. True, he had received the Nobel Memorial Prize in 1974,” but Cassidy “made it all the way through undergraduate and graduate school without reading any of his articles or books, and I wasn’t unusual. Until recently, few economics textbooks mentioned Hayek’s name, and there was no scholarly biography of him available.”
I received the same kind of indoctrination in college, but in those days the goat was Milton Friedman, whom my fellow graduate students referred to as “Uncle Milty.” Since Friedman was working very effectively in a compelling field, monetary economics, Keynesians could only mock for so long. Friedman ultimately was the leader of a rather revolutionary movement. Other conservative groups in economics, public choice scholars and the so-called Austrian school, for example, ultimately broke the Keynesian lock on economic thinking in the United States.
If professors are biased, whom can you trust?
It is crystal clear that nobody is completely without bias. But all biases are not equal. One cannot accuse conservatives of having being indoctrinated while in school or in college, since the academy as a whole is basically quite solidly liberal or progressive. In my view, the description of “socialist” may be just as appropriate. So how can you trust someone with strong convictions if they have simply been indoctrinated or have lost the capacity to judge objectively?
I have a suggestion for this problem. It is more prudent to pay attention to the people who were democrat and who can give you good reasons why they actually traded the ideology for a market-oriented philosophy of economics. There are not many of such people, but I know one such individual who, incidentally, was the author of my book, Socialism. Actually, I would hope that people would be willing to consider with an open mind the powerful verities I have revealed in my book. There, I lay out the reasons why I left the political faith I grew up with and actually began to worry about the implications of a society that might follow Bernie Sanders, Barak Obama, and other socialists.
I did not adopt a political ideology in lieu of religion. I actually grew up with religious beliefs which have become stronger through the years than when I was a schoolboy searching for answers. I mention this only to point out that I do not see my socialistically-oriented brothers and sisters as enemies who are to be hated with the partisan fervor of a CNN or NBC. Rather, the Christian scriptures suggest we are to love all our fellow men. The scriptures do not suggest, however, that we may not try to reason with different-thinking individuals, even if they do not reciprocate our positive feelings.
In the United States today, the logical order of progression is first to become a democrat and as the party continues to shift further to the left, one need merely remain a loyal democrat to become a socialist as defined in the previous blog. The party has shifted radically to the left since the arrival of Barack Obama on the political landscape. One will remember that an American socialist believes that one should advocate redistribution of incomes and programs of welfare policy. Since all contemporary political parties have long-since embraced these same policies, albeit in more moderate form, socialism as a political program has nothing new to offer. There’s nothing much left for socialists to do than demand ever more governmental entitlements or “freebies,” and to promote ever more radical social policies. They reject cultural norms and fiscal responsibility.
How does one become a democrat?
Many democrats come from democratic families and later cling to their beliefs as a matter of family loyalty. For some it’s almost like the family religion; loyalty requires that you stay the course and remain true to the faith. Others, however, come to the party when they are in school or in college. Then being a democrat is more a matter of being “credentialed.” Professors with an agenda are democrats and they let students know early on that anyone not promoting democrats is uneducated and unsophisticated. Once you are urbane and clued in you don’t have to do much research to keep up with the talking points and the party line. My book on socialism addresses not only the historically extended socialist abhorrence of the corporation, the market, and the bourgeoisie or business class, but also the indoctrination of young recruits with the anti-market mentality. It discusses this issue under the rubrics of “social learning.”
How does democratic indoctrination work?
John Cassidy (2009, How Markets Fail: The Logic of Economic Calamities) writes of an experiment by Solomon Asch in the early 1950s. Students participated in a “vision test” to compare the lengths of straight lines. The instructor asked each student to identify which two of the lines matched. The sight test was not at all difficult. The lines were drawn so that it was immediately clear which line on the second card matched the one on the first. In each of the groups, however, only one of the students was a genuine volunteer. All the others had been instructed to give the same wrong answer in two thirds of the trials, picking a line that was clearly not of the same length as the line on the first card.
This experiment was conducted with more than a hundred volunteers at three different colleges. About one in four of the subjects would maintain their independence and pick the right line every time. The remainder followed the majority in at least one of the trials, selecting the wrong line. “Some subjects gave the wrong answer virtually every time, completely ignoring the evidence of their eyes. In follow-up interviews with Asch, the subjects said they had suspected that the other people in their groups had been acting like sheep, copying the answer of the first responder, but despite these suspicions, they also copied their answers. Others said they quickly came to the conclusion that the majority was right, and then attempted to hide their own shortcomings by merging with the crowd…Asch concluded…“That we have found the tendency to conformity in our society so strong that reasonably intelligent and well-meaning young people are willing to call white black is a matter of concern.”