by Alasdair Macleod, GoldMoney:

The thirtieth anniversary of the fall of the Iron Curtain coincides with a popular resurgence of communism and a drift into more socialism. A collective amnesia sees a return of the Soviet Union’s failed policies in a Marxist Labour party in Britain. Increasing socialism is expressed by US Democrats contending for the primaries.

This article explains the basic economic fallacies common to both. It clarifies why state ownership of the means of production does not resolve the problem of economic calculation in a socialist economy. It also explains the errors in socialistic condemnation of free markets.

And finally, it points out that very few of us realise we are more socialist than we think when we endorse government control of possibly our most important common commodity, which is our everyday money. But there is a simple solution: stop accommodating crony capitalists.

Introduction

This week saw the thirtieth anniversary of the breeching of the Berlin Wall. The elapse of time means most people younger than their mid-forties fail to understand what it was all about. Indeed, many folk older than that will have forgotten that the reason the Berlin Wall fell was because the communist states in eastern Europe and the old Soviet Union were no longer able to suppress their people. And the people were suppressed because suppression of personal freedom is central to communism, the creed that says people must make sacrifices for the common good. Besides the passage of time, the uncomfortable part which makes people want to forget its horrors is that communism is the both the basis and the final destination of modern socialism.

Ever since Lenin and his Bolsheviks obtained power, they forced communism on the Russian population. People lost the rights to their property and their personal freedom, both of which became the property of the state. They were commanded by planners, administrators and bureaucrats as to what they could and could not do. In the absence of personal incentives, the Soviet economy went downhill rapidly, and the bureaucrats faced with allocating economic resources ended up creating surpluses of unusable and unwanted goods, and shortages of what were wanted. In their efforts to correct this mess, the people who communism claimed to free from the yoke of the bourgeoisie were blamed and accused of insubordination and either shot or deported to the gulags. In the USSR alone it is estimated that between twenty and sixty million people died of starvation, in the gulags, or were executed.

People lived in constant fear of the secret police and their informants. It was hardly surprising that the fall of the Berlin Wall was a scene of much rejoicing and the visual manifestation of freedom regained.

The reason we should remember how Marxist and Stalinist communism affected ordinary people is they are being offered a choice to vote for it again. In the UK, hard-line Marxist-Leninists control the main opposition party, and from what one can see from the Eastern side of the Atlantic, various Democratic Party contenders for the presidency are offering a softer version of the same socialist creed to their supporters.

Some observers claim our collective amnesia on such important matters is due to a cycle of human behaviour, but more likely it is due to an astonishing level of public ignorance, not helped by the poor quality of debate at the political level. The reason Theresa May bodged her general election in 2017 is she did not address the destructive delusions of the Labour Party’s Marxists, which can only be explained by ignorance of why Marxism is so economically disastrous. She will have either forgotten the real reason for those joyous scenes in Berlin thirty years ago or failed to understand the message. While being a paid-up Tory notionally in favour of free markets, in common with many other Tory MPs her politics appear to be those of a controlling Christian socialist, in common with the political mainstream in the EU.

She was not alone, and the entire British political establishment, like a pale imitation of the politburo, had become a managerial class believing more in itself than in democratic accountability. This, not trade, is the central issue behind Brexit. And it is still true of America’s deep state, despite President Trump’s democratic mandate and his attempts to change it. It is a condition that pertains in any government that claims the sacrifice of personal freedom is in the interest of the common good.

The problem with Marx and his half-baked ideas

At its bedrock modern socialism is based on Marxism, which despite all evidence of its viciousness retains widespread support. Not only do university students everywhere have a tendency to support fervent socialism, but in the UK, pollsters estimate a substantial majority of university lecturers prefer a Marxist Labour party compared with the Conservatives. It’s no wonder that for many decades the Soviet KGB so effectively recruited their useful idiots and spies from the UK’s top universities.

It seems extraordinary that in defiance of history and the advance of philosophical knowledge anyone should be so delusional to believe in the politics of Karl Marx, the founder of modern communism and the basis of modern socialism. More than anyone, through wrong-headed ideas he bears responsibility, indirectly admittedly, for the deaths of an estimated one hundred million people in the last century, and at one time the severe suppression though economic and social servitude of fully one third of the world’s population. And if you also include those who have suffered under the yoke of Marxist-inspired modern socialism, the philosophy that says the state is more important than the individual, you could argue nearly the whole world is under Marx’s destructive influence today.

His philosophical stance was comprehensively set out in one of his earlier works, A Contribution to the Critique of Political Economy, published in 1859. The fundamental principle behind Marxism is stated early in the preface, where he defines his deduction from the Hegelian dialectic: “It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.”^[i] In other words, social organisation takes precedence over the individual, and it therefore follows that the individual is subordinate to the social organisation.

Marx argued that it followed from this logic that the classes which formed on the back of material interests force members of those classes to think and act in their narrow class interests and not independently in their personal interest, there being no such thing. For Marx, ideologies evolved on class lines, where the interests of the minority, the bourgeoisie, dominated. And as the bourgeoisie profits from the labour of the proletariat, it is in their interest to keep the proletariat suppressed. The accumulation of wealth in the hands of the bourgeoisie was entirely due to the exploitation of the proletariat.

Marx’s world was a black and white one of haves and have-nots, the exploiters and the exploited. As Emmanuel Kant (1724-1804) put it, “If one man has more than necessary, another man has less”^[ii]. The only way this apparent wrong could be righted would be through the collapse of the capitalist system, which led to these imbalances in the first place. The final solution was a classless society of the proletariat, handing them the means of production administered on their behalf by a revolutionary government. Headed, of course, by Marx himself.

Marxian dogma was and still is riddled with intellectually derived half-baked ideas. Partly, this was due to the state of human knowledge when Marx derived his scheme for world domination, which formed the basis of any dialectical debate. Darwin contemporaneously proposed his evolutionary theory, that Man had evolved from animals and was not a species apart favoured by God. This played neatly into Marxian philosophy and to this day Marxists are atheistic.

It was also before the development of psychology by Sigmund Freud and Josef Breuer. It was previously thought that all human brains were the same, just as we have other internal organs with specific functions within the body. The concept, that humans differed in their intelligence, their acuity, while commonly observed was unexplained by medical science. Even mental illness was believed to be a disorder emanating from the body and not the brain and suicides were routinely dissected to establish which organ was the cause. To Marx, drawing on Hegel’s dialectical approach, it could have seemed logical that we are all the same, and that the obvious social differences are down to our upbringing in one or the other class.

He never defined class, which is too slippery a concept to pin down. Instead, he separated humanity into the exploited majority, the proletariat, and the minority that controls the proletariat, the bourgeoisie. He expected the proletariat to eventually rebel, forcing the bourgeoisie into the lower class, to be ruled over by a socialist administration. He believed that this would happen, because under capitalism, he argued, the impoverishment of the workers was inevitable, leading to a workers’ revolution.

Yet, at the same time, he believed in the iron law of wages, most associated with David Ricardo. According to this law, wages were set by the availability of labour and the payments required to subsist. Higher wages than this basic level would lead to an increase in the availability of labour over time, while lower wages would reduce the labour pool. In this way, the cost of labour was expected to rebalance always at a subsistence level. Labour was regarded as a simple commodity, whose supply was regulated by its demand. However, Marx’s belief in the iron law of wages is at odds with his supposition that the proletariat would be gradually impoverished by the bourgeoisie. You cannot subscribe to both.

Subsequent improvements in economic knowledge and empirical evidence have disproved both theories anyway. Marx’s approach was to arrogantly assume workers are unthinking work-slaves, which they are not. They are individuals with individual aspirations and as their living standards improve those aspirations soar. And as Freud and Breuer showed later, they have brains separate from their physicality, with individual mental abilities that govern their needs and wants. Marx even despised the trade unions of the day, arguing that striking for higher wages was colluding with members of the bourgeoisie by negotiating with them, when instead they should be seeking their destruction.

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