June 12, 2010

The free market and socialism are not totally incompatible. It’s true that a free market cannot exist legally under a socialist government. That’s what they call a black market. However, socialist countries usually do have a black market and probably would soon collapse without it. This is because socialist bureaucrats do a really dismal job of trying to achieve what the free market does so well; the assignment of the available labor, materials, and capital to efficiently satisfy the wants of consumers. That’s what economics is all about.

What I say about socialism applies equally to all of its variants: communism, socialism, fascism, the welfare state, and others. The differences between them are more a matter of degree than of principle.

Socialism can exist within a free market. The oldest form of commune, the family, has always been an essential tool of survival. Communes of any size can exist legally within a free market system, provided only that membership in the commune is voluntary. However, the larger a commune becomes the less efficient and the more dictatorial it becomes. Only strong bonds of family, tradition, or religion can hold it together.

A commune within a free market system soon reveals its inefficiency by its poverty in contrast with the prosperity of the people in the free market. This strains the bonds binding the commune together, and hastens its eventual collapse.

The solution for socialism is to completely isolate the commune from the outside world. Thus after WW2, the Russian empire (The USSR) proceeded to block all contact with the rest of the world. Winston Churchill put it aptly, “An iron curtain has fallen across Europe”.

All Russian soldiers who had contacted Europeans during the war, even if only in combat, were sent off to labor camps in Siberia, quarantined there until they had been decontaminated of any possible negative thoughts about communism. For decades the Soviet leaders tried to hide from their people their poverty in contrast with the prosperity of the rest of the Western world. Now the USSR has collapsed and Russia has adopted what might best be described as a “corporate welfare state”.

Meanwhile, the USA has become an ever-expanding welfare state with politicians buying votes, and gaining campaign contributions, by granting privilege and power to assorted special interest groups. Why do we so easily sell our votes? Do voters realize that they are being bought? Do they care?

Do they all believe that somehow each of them can get more out of the pot than they put in? (That’s impossible). Those who do get more out than they put in are parasites. The rest of us are their victims. This is theft, not a free market exchange, where each party profits by the exchange.

Government budget bills are always loaded with amendments submitted by congressmen to allot some money for some project which will benefit the people of their particular congressional districts. This is called the “Pork Barrel”. This is how your congressman tries to buy your votes. He has no trouble getting his amendment inserted in the budget bill. It’s an unwritten agreement among all congressmen; “you vote for my bit and I’ll vote for yours”.

I suspect that most of the public goes to the polls uninformed, except for the sound bites repeated over and over on TV, and paid for by campaign contributions from the corporate and special interest groups. If we are that careless about our votes, perhaps we deserve to be taxed for the benefit of these parasites.

The men who produced our Constitution imagined informed voters electing wise, public spirited men to represent them in Congress. What we got instead must have shocked them. How do you remove such corruption from government? Power is what creates corruption. Is it possible to create a government without power? Free market anarchy is the only answer I can see. If you can think of something better, please add your comment to this blog.


  1. FENG Says:

    To have socialism, the government must have enough budget. The U.S. didn’t do well in that. Health care is costing it 16.7% of its GDP!
    State capitalism may offer a solution, just look at China and Russia, yet private firms are simply too weak to compete with those state-owned enterprises. Will America adopt state capitalism? I doubt.
    One day there will be a huge debate on the fairness of state capitalism.

    • glennodell Says:

      Thanks, Feng, for your comment, and thank you for bringing a different perspective into the discussion. I would welcome any further comments on my Blog.

      I would say that under full socialism, the government owns the whole economy- 100%. That ownership means total lack of economic freedom. Even Cuba has partially abandoned that. I suppose what you mean by state capitalism is something like China’s huge state enterprises. China’s smaller, privately owned enterprises are proving more agile and creative. China’s communist party seems quite willing to allow economic freedom so long as the party retains power. Russia maintains an appearence of independence for the giant corporations it has created, but in reality Putin is still firmly in charge.

      America has been trying for 100 years to abandon its original state enterprise, the Post Office, to the free market, but still props it up with monopoly power. America’s love affair with The AMA and big Pharma, culminating in Obamacare, is a huge subsidy to a greedy and incompetant state-enabled monopoly that I call the medical mafia. Our medical care system is broken.

      All three countries are practicing the old program of the Whig parties in England and the USA- mercantilism- a love affair between government and business to enrich business, empower government, and rob the taxpayer.

      The issue of fairness (we have 7 billion definitions of that) usually boils down to robbing Peter to pay Paul. My issue is freedom- where each interaction between people is voluntary, with no coercion. At heart I’m an anarchist. To quote Ludwig Von Mises, “Government is the negation of freedom”. I see State capitalism as incompatible with economic liberty. Real competition is not permitted.


  2. David Jahntz Says:

    I suppose my point is that any amount of government regulation or oversight makes a 100% free market impossible — just as any amount of peer pressure (unorganized socialism) diminishes the possibility of true anarchy existing. So I am looking for the greatest freedom within the gray area between absolutes. How little can be stolen from Peter and how little can be given to Paul when most people have grown up believing government is their substitute for private charity in this country?!

  3. glennodell Says:

    Anarchy is mainly theoretical as yet. But most of the theorizing includes “peer pressure” to enforce the few simple rules of anarchy- no violence, coercion, theft, or fraud. People who break the rules are excluded- their violations are publicised and nobody will do business with them. Murray Rothbard wrote some excellent books on Anarchy- available from Mises Bookstore on the internet


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