Tuesday, December 18, 2018

The Opportunity Costs Of Democratic Socialists

Final outcomes of Socialism.
Coincident with the 200th anniversary of Karl Marx’s birth, socialism is making a comeback in American political discourse. Detailed policy proposals from self-declared socialists are gaining support in Congress and among much of the electorate. It is unclear, of course, exactly what a typical voter has in mind when he or she thinks of “socialism.”

But economists generally agree about how to define socialism, and they have devoted enormous time and resources to studying its costs and benefits. With an eye on this broad body of literature, this report discusses socialism’s historic visions and intents, its economic features, its impact on economic performance, and its relationship with recent policy proposals in the United States.

We find that historical proponents of socialist policies and those in the contemporary United States share some of their visions and intents. They both characterize the distribution of income in market economies as the unjust result of “exploitation,” which should be rectified by extensive state control.

The proposed solutions include single-payer systems, high tax rates (“from each according to his ability”), and public policies that hand out much of the Nation’s goods and services “free” of charge (“to each according to his needs”). Where they differ is that contemporary democratic socialists denounce state brutality and would allow individuals to privately own the means of production in many industries.

In assessing the effects of socialist policies, it is important to recognize that they provide little material incentive for production and innovation and, by distributing goods and services for “free,” prevent prices from revealing economically important information about costs and consumer needs and wants.

To this end, as the then–prime minister of the United Kingdom, Margaret Thatcher (1976), once argued, “Socialist governments . . . always run out of other people’s money,” and thus the way to prosperity is for the state to give “the people more choice to spend their own money in their own way.”

Whether socialism delivers on its appealing promises is an empirical question. We begin our investigation by looking closely at the most highly socialist cases, which are typically agricultural economies, such as Maoist China, Cuba, and the Union of Soviet Socialist Republics (USSR).

Their nondemocratic governments seized control of farming, promising to make food more abundant. The result was substantially less food production and tens of millions of deaths by starvation.

Sanders & Cortez will send Americans to their gulags.
Even if highly socialist policies are peacefully implemented under the auspices of democracy, the fundamental incentive distortions and information problems created by large state organizations and the centralized control of resources are also present in industrialized countries, as is currently the case in Venezuela.

Lessons from poorly performing agricultural economies under socialist regimes carry over to government takeovers of other modern industries: They produce less rather than more. These countries are examples of a more general pattern of socialism’s negative output effects.

Such outcomes have also been observed in cross-country studies of the effect of greater economic freedom—quantified as an index of taxation and public spending, the extent of stateowned enterprises, economic regulation, and other factors—on real gross domestic product (GDP).

This literature finds a strong association between greater economic freedom and better economic performance. It suggests that replacing U.S. policies with highly socialist policies, such as Venezuela’s, would reduce real GDP at least 40 percent in the long run, or about $24,000 per year for the average person.

Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards. Inmany respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism.

For instance, they do not provide healthcare for “free”; Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes.

The Nordic countries also tax capital income less and regulate product markets less than the United States does. However, the Nordic countries do regulate and tax labor markets somewhat more; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies.

Living standards in the Nordic countries are at least 15 percent lower than in the United States. It may well be that American socialists are envisioning moving our policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with economists’ traditional definition of socialism. We estimate that if the United States were to adopt these policies, its real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.

The Nordic and European versions of socialized medicine have been viewed as so desirable by modern U.S. socialists that they have proposed nationalizing payments for the healthcare sector (which makes up more than a sixth of the U.S. economy) through the recent “Medicarefor All” proposal.

This policy would distribute healthcare for “free” (i.e., without cost sharing) through a monopoly government health insurer that would centrally set all prices paid to suppliers such as doctors and hospitals. We find that if this policy were financed out of current Federal spending without borrowing or tax increases, then more than half the entire existing Federal budget would need to be cut.

Or if it were financed through higher taxes, GDP would  fall by 9 percent, or about $7,000 per person in 2022, due to high tax rates that would reduce incentives to supply the factors of production. Evidence on the productivity and effectiveness of single-payer systems suggests that “Medicare for All” would reduce both short- and long-run longevity and health despite increasing somewhat the population with health insurance.

Mass rapes were common in Soviet gulags.

ELENA GLINKA, a 29-year-old engineering student, was arrested on false charges of treason, and spent six years in the Gulag. She was sent to one of the camps on the dreaded Kolyma Peninsula, where winter temperatures hover between -19C to -38C.

Having disembarked at a small fishing village, she witnessed one of the mass rapes, nicknamed the ‘Kolyma tram’ because of the brutal manner in which they were carried out. As the youngest of the prisoners, Elena was ‘chosen’ for the exclusive use of the local miners’ Party boss — and thus spared the worst of an ordeal that still left her so traumatised she could write about it only in the third person.

‘WOMEN in Burgurchan!’ The news spread like wildfire and within an hour men began flocking to the town hall — first the locals, then men from farther afield, some on foot, some on motorbikes. There were fishermen, geologists, fur-trappers, a team of miners and their Party boss and even some convicts who had bolted from their logging camp.

Cigarettes, bread, even lumps of cured salmon were tossed to the corralled women prisoners who, after two days at sea, swallowed the food without chewing. Then bottles began to clink and the men, as if on command, retreated to one side to drink vodka with the guards. There were songs and toasts, but there was also a clear purpose to this debauch as, one by one, the women’s guards passed out, dead-drunk.

Whooping and hollering, the men rushed the women and began to haul them into the building, twisting their arms, dragging them through the grass, brutally beating any who resisted. They knew their business; it was co-ordinated and confident. Benches were removed, planks nailed over the windows, kegs of water hauled in.

That done, whatever rags or blankets they had at hand — padded vests, bedrolls, mats — were spread out and the women thrown to the floor. A line of about 12 men formed by each woman and the Kolyma tram began. When it was over, the dead women were dragged away by their feet; the survivors were doused with water from the buckets and revived. Then the lines formed up again.

(Following is American Socialists’s desperate counter attack on Trumps Council of Economic Advisors’s Report released in October 2018.)

Socialism under attack from scared White House

The Trump White House did one thing right in its shoddy report: Interest in socialism and Marxism around the world is increasing. Since his inauguration, President Donald Trump has been fighting a nonstop battle against enemies both real and imagined—and his latest offensive is a real doozy.

“The Opportunity Costs of Socialism,” published on Tuesday by the White House’s Council of Economic Advisors, attempts to smear socialism—worker ownership of production—as a bankrupt ideology.

The 72-page paper uses the 200th anniversary of socialist thinker Karl Marx’s birth as a jumping-off point for condemning everyone who doesn’t pray at the altar of the free market. Not even capitalist social democracies like Norway and Sweden are spared from blistering attacks.

The paper itself is nothing new. It’s a regurgitation of old narratives deployed against socialist projects, meant to convince workers in capitalist countries there is no meaningful alternative to their being exploited. It applies an academic veneer to arguments we’ve heard a million times before and cites historians and researchers with reputations as staunch anti-communists. In doing so, the document distorts socialism’s record and deliberately avoids painting a clear and complete picture.

Poor scholarship aside, the paper did get one thing right: All over the world, there is renewed interest in socialism and Marxism. Monumental achievements by countries which took up the mantle of socialism are becoming harder and harder to ignore, especially as conditions for ordinary people in capitalist nations continue to worsen.

The U.S. can no longer point to relative stability and prosperity within its borders to stem the tide, as wages there have stagnated since the 1970s and nearly all wealth created since the 2008 financial crisis has gone to a tiny minority of rich capitalists. When an overwhelming majority of the “new jobs” touted by Trump and his White House are temporary or seasonal and carry no benefits, it shouldn’t come as a surprise when an immiserated working class starts looking for other options. This rehashed assault on socialism shows Trump is far more afraid of worker power than the Democratic Party—his official opposition.

He’s right to feel that way. In the U.S. alone, previously minuscule socialist parties and organizations have seen massive increases in membership. Pushback against popular narratives about the legacy of socialism has grown exponentially since the 2008 crisis and the 2016 presidential election. More and more people are doing independent research about the validity of socialist systems, and many are finding they have been lied to for a very long time.

But as socialism’s popularity grows, so do the reactionary forces attempting to suppress this new wave of enthusiasm. This paper is likely only the beginning, as Trump continues to demonize countries he sees as rivals over problems his own policies have caused. We’re teetering dangerously close to a second Cold War, and if the world plunges into conflict yet again, there will be no doubt over who’s to blame.

These idiots have never tasted the Socialism in their young lives.
But there is an alternative to war. As many of these new activists are discovering, and no matter what Trump would have us believe, there have been numerous triumphs across socialism’s still-brief history.

The Soviet Union rapidly recovered from two devastating wars, turning a semi-feudal agrarian society to a world industrial power in only a few decades. Cuba and North Korea have proven resilient to a seemingly endless period of siege, withstanding perpetual economic and military assault and retaining their independence.

The embargo against Cuba—more akin to a blockade—has been in effect for 60 years, yet despite this and a period of hardship in the 1990s, the small island nation has worked miracles. Its healthcare sector is the envy of the world, providing free medical treatment and achieving incredible research breakthroughs like a vaccination for lung cancer.

The White House released its anti-socialist “report” earlier this week.

Perhaps the biggest retorts to claims of socialism’s failure come from the People’s Republic of China. Similar to the Soviet Union, China has emerged from an impoverished feudal past, becoming the world’s second-largest economy in a short period of time. It has done so while maintaining its sovereignty and choosing its own path—a fatal mistake for others who flouted capitalist dogma, like Salvador Allende in Chile and Mohammed Mossadegh in Iran.

By introducing certain market mechanisms while upholding state ownership of key industries, as well as sustaining the leadership of the Communist Party of China as the vanguard of the working class, China has been able to grow by leaps and bounds while expanding incomes and benefits for all its people.

A staggeringly successful poverty elimination drive is the centerpiece to this mission. Over the last 40 years, more than 800 million people have been lifted out of extreme poverty in China, a feat unmatched anywhere else in the world. The White House paper attempts to credit capitalism for this accomplishment but conveniently ignores the U.S. poverty rate has stayed more or less level since the 1960s.

Capitalist countries keep a certain proportion of their populations poor and unemployed, both as an inevitable consequence of extracting profit and as a method of discipline for the working class. But in China, poverty and unemployment continue to drop, as eliminating these social ills is a top priority for the CPC. This would not be possible in a Western-style capitalist system.

It’s true some countries have prospered and developed under capitalism, like Japan and South Korea. But they still made use of heavy state intervention and had to strictly abide by U.S. and Europe’s rules. Japan, in particular, saw its rise in the 1980s cut short by interference from the West, as U.S. demands and marketization led to a calamitous asset bubble.

After the end of the Soviet Union, the Russian Federation underwent a U.S.-guided capitalist transition that saw freefalling life expectancies and soaring unemployment. As these examples and many others show, following Washington’s lead has severe consequences.

China and other countries governed by communist parties stand alone in that they have been able to chart their own course and resist imperialist aggression. They have not been subject to the same stringent limitations which keep so much of the developing world languishing in poverty and debt, limitations following the same rules of profit extraction analyzed by Marx in Capital.

The White House paper quoted former British Prime Minister Margaret Thatcher’s famous dictum: “The problem with socialism is you run out of other people’s money.” Knowing what we know now, a more accurate one would read: “The problem with capitalism is you run out of other people’s countries.”

Their death wish should be granted so that they will taste the hell and beyond like we Burmese once did.
(Blogger's notes: On 6 January 1966 General Ne Win's  Revolutionary Socialist Government  suddenly and stupidly prohibited the civilian populace from transporting, storing, distributing, and trading of 460 basic commodities including the staples such as rice, peanut-oil, and salt . Overnight all those commodities had disappeared from the shops as fearful people panicked and emptied the shops. The horrifying result was the 1967 Chinese Race Riots where hundreds and hundreds of local Chinese in Rangoon were slaughtered by the Burmese mob as people in urban centers starved and took it out on the relatively-wealthier Chinese.)

Related posts at following links:
Oxymoron Demo-Socialists: No Democracy In Socialism!
1967 Rice Riots To Race Riots In Socialist Burma