[118443] in Cypherpunks
Rise and Fall of Socialism
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Tue Sep 28 09:29:15 1999
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Date: Tue, 28 Sep 1999 08:12:00 -0400
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From: Robert Hettinga <rah@shipwright.com>
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From: "Mises Institute News" <news@mises.org>
To: <miseslist@mises.org>
Subject: Rise and Fall of Socialism
Date: Mon, 27 Sep 1999 15:08:31 -0500
Sender: miseslist-owner@mises.org
<http://www.mises.org>www.mises.org today features an attack on the
Clinton administration's suit against cigarette companies. Also,
here's a good piece from the Wall Street Journal today, September 27,
1999. It quotes Llewellyn H. Rockwell, Jr., president of the Mises
Institute, twice.
* * * * *
How We Got Here: A look at the ups and downs of free-market thinking
in the 20th century
By JOHN M. LEGER
Socialist government in France sells off more state-owned companies
than did its Conservative predecessor. The British Labor Party,
steeped in socialism, wins a general election without ever mentioning
the "S" word. And the Chinese Communist Party says "to get rich is
glorious."
What's wrong with this picture? Plenty, if you're a dyed-in-the wool
Marxist. But there aren't many of them around anymore, which just
goes to show how much the world has changed since the end of World
War II. In fact, all of this would have been unthinkable not just 50
years ago but as recently as a decade ago.
The spectacular collapse of communism proved beyond a doubt what
free-market economists like Ludwig von Mises and F.A. Hayek had said
many years earlier: that central planning couldn't deliver the goods.
Moreover, the overthrow of communism happened to coincide with a
process that was well under way in many noncommunist countries:
economic liberalization, including privatization of state-owned
enterprises, deregulation of industry, and less government
interference in the economy.
Reform Moves Left
Ten or 15 years ago, these kinds of reforms were associated almost
exclusively with conservative governments, such as those of Margaret
Thatcher in Britain or Ronald Reagan in the U.S. Now, even socialist
or left-wing governments have taken steps to free their economies.
That even includes countries in the developing world that used to be
sympathetic to Moscow or Beijing.
Result: a resurgence in economic liberalism, in which there's a
vibrant market economy, private ownership, property rights and
limited government intervention. Free-market thinkers like Hayek and
Mises were "liberals" in the classical, European sense of the word.
They advocated limits on government power and were incensed that
"liberal" came to mean exactly the opposite in the U.S.: an activist
government that pushed social spending and redistribution of incomes.
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Case for Capitalism
A selection of influential books by 20th-century free-market thinkers
F.A. Hayek
The Road to Serfdom (1944)
The Constitution of Liberty (1960)
The Fatal Conceit: The Errors of Socialism (1988)
Henry Hazlitt
Economics in One Lesson (1946)
The Failure of the "New Economics" (1959)
Ludwig von Mises
Socialism (English edition, 1936)
Human Action (1949)
Liberalism (English edition, 1962)
The Anti-Capitalistic Mentality (1956)
Ayn Rand
The Fountainhead (1943)
Atlas Shrugged (1957)
Capitalism: The Unknown Ideal (1966)
Carl Snyder
Capitalism the Creator (1940)
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To be sure, governments still intervene in the economy, especially by
imposing social or environmental regulations on business, figuring
out new ways to spend tax revenue, or engaging in trade disputes. For
example, France plans to mandate a 35-hour workweek. The European
Union seeks to "harmonize" some taxes among its member nations, which
will mean increases, not reductions. An argument rages in the U.S.
Congress over whether to make modest tax cuts or spend budget
surpluses to "save" Social Security.
"Of course politicians are meddlesome. It's in their nature," says
Llewellyn H. Rockwell Jr., founder and president of the free-market
Mises Institute in Auburn, Ala. "They have a grab bag of dumb ideas
they are constantly trying out, from new environmental controls to
mandatory trigger locks on guns to new schemes for trade sanctions."
Some even argue that socialism, far from being dead, survives by
reconstituting itself in different forms. "State-run enterprises are
now frowned upon, but the ever-expanding volume of regulation --
financial, environmental, health and safety -- serves to empower the
state by other means," says John Blundell, general director of the
free-market Institute of Economic Affairs in London.
Even so, wrangling over regulations is a far cry from the titanic
intellectual battles that raged earlier this century. That's because
the majority of the world's people now live in some kind of market
economy -- even in countries with authoritarian governments. "The
large debates, such as central planning vs. free markets, are today
no longer in play," says Donald J. Boudreaux, president of the
Foundation for Economic Education in Irvington-on-Hudson, N.Y.
Steering the Market
Central planning was a hallmark of communist countries, where just
about everything was owned by the state and the state attempted to
control all aspects of economic life. Even non-communist countries
like Britain and the U.S. attempted some kinds of economic planning.
While Western democracies largely had market economies, plenty of
politicians and economists advocated far-reaching government
intervention.
Perhaps the most prominent advocate was the British economist John
Maynard Keynes. In the 1920s, he favored large-scale public-works
programs to eradicate unemployment, an idea later embraced by the
Roosevelt administration during the Great Depression of the 1930s.
Keynes's greatest contribution to economic thinking was his 1936
book, "The General Theory of Employment, Interest, and Money." He
argued that governments could avoid boom-and-bust cycles by varying
the levels of spending and taxation.
Policy makers in many Western countries embraced Keynes's ideas,
especially after World War II, when "faith in capitalism and free
markets was at an all-time low," in the words of the late economist
Gottfried Haberler. But not everyone advocated more government
intervention in the economy. Some saw it as the problem rather than
the answer. In fact, Hayek was in such despair that he wrote what
later became one of the most famous tracts in the history of
free-market ideas, "The Road to Serfdom," in 1944. He warned that
increasing government intervention in economic and political life
could lead to tyranny and that socialism was not compatible with
individual freedom.
Taste of Socialism
Many countries got a taste of socialism after the war. France and
Britain, for example, nationalized great swaths of their economies
and put extensive welfare systems into place, paid for with increased
taxes. The Chinese Communists came to power in 1949 and started
building a totalitarian state. Eastern Europe fell under the sway of
the Soviet Union and quickly lost its economic and political
freedoms. Most of the developing world, with some exceptions in Asia
and Latin America, had strongly interventionist governments that
nationalized industry and imposed high protective tariffs.
Yet some countries helped to revive economic liberalism. Take
Germany, where free-market economics had been dead for a long time, a
victim not only of the Nazis but also of Bismarck, who in the 1880s
imposed compulsory social insurance. In 1948, Germany introduced a
new currency, exchanging 10 old Reichsmarks for one new Deutsche
mark. Price controls were lifted, shortages ceased and economic
confidence returned. Mostly due to the efforts of one man, Ludwig
Erhard, the German economic miracle was born.
While many European countries were increasing public spending,
raising taxes and enacting social legislation at home, they were also
taking steps in the international field to promote prosperity. David
Henderson, the former head of the economics department at the
Organization for Economic Cooperation and Development in Paris, cites
liberalized cross-border transactions beginning in 1947.
In his book "The Changing Fortunes of Economic Liberalism," Mr.
Henderson says Europe largely dismantled import quotas in the late
1940s and 1950s. Moreover, European countries made "dramatic
advances" toward free trade and introduced convertibility of their
currencies. In Asia, Hong Kong, Singapore and Malaysia maintained
open economies, helping to spur rapid economic growth.
These kinds of measures on the international front helped many
nations to prosper. But the economic climate deteriorated in the
early 1970s as inflation surged and growth faltered throughout the
industrialized world. Instead of relying on market forces in these
years of "stagflation," governments tried a variety of
interventionist measures, including wage and price controls, company
bailouts and "voluntary" export restraints.
Turning to Marlets
Through most of the 1970s, economic liberalism suffered one setback
after another. But things began to change late in the decade as many
governments concluded that economic intervention was
counterproductive. Mr. Henderson puts the turning point at 1978, when
the industrialized countries agreed to free energy prices, and the
U.S. embarked on wide-ranging airline deregulation. In addition,
China under paramount leader Deng Xiaoping started to experiment with
open markets. In 1979, Britain elected Mrs. Thatcher's Conservative
Party, which abolished exchange controls, rolled back the privileges
and began an ambitious program of privatizing state-owned companies.
The following year brought the "Reagan Revolution," which ushered in
personal and corporate tax cuts. And for the first time in many
decades, an American president was openly scornful of government and
urged restrictions on its power.
Many other nations were inspired to deregulate industry and to sell
off plodding, loss-making state-owned companies. For instance,
France's Socialist government has become one of the leaders of
privatization -- even though a previous Socialist government
nationalized banks and other enterprises in 1981.
The collapse of communism 10 years ago removed a strong anti-liberal
force from the world scene. Not all countries of the former Soviet
empire have fully embraced free-market economics, but most are taking
steps in that direction. Moreover, the utter failure of central
planning makes it unlikely that anyone anywhere will try it again
anytime soon.
A victory for economic liberalism? Perhaps, at least in the battle of
ideas. Free-marketers are savoring the advances of the last two
decades. They've got hundreds of think tanks and Internet sites
promoting free-market ideas. Books like Ayn Rand's "Atlas Shrugged"
and Carl Snyder's "Capitalism the Creator" have achieved cult status.
"Fifty years ago, 10 big shots could get together in a room and
redesign the world economy and political system," says the Mises
Institute's Mr. Rockwell. "They were busy carving up spheres of
influence. They were planning production, prices and wages. Today,
all this is unthinkable."
-- Mr. Leger is deputy chief of The Wall Street Journal's London bureau.
c) 1999 The Wall Street Journal
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-----------------
Robert A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
