Wednesday, 6 June 2012

Socialist Utopia

Another generation, another group of people who believe they can take us all to the promised land. A recent article written by Owen Jones, a left wing activist and author, titled "If socialists really did run the show, working people would benefit" displays the usual naivety and/or arrogance that has persisted with each successive generation of state planners who believe they can change the world for the good. Excepts taken from the article, accompanied with my commentary can be read below.

The taxpayer splashes out three times more subsidies on private train companies than they did on publicly owned British Rail.
History reads different. Steam power and Railways were not created by the state but by private initiative and capital. The whole railway network during the 19th Century was funded completely by private money, during which time steam power costs continually came down, allowing people to go on holiday to coastal resorts for the first time and enabling goods and services to be transported to traditionally remote locations at reduced costs. Britain then exported this knowledge to the world. The reason railways got in a mess was from state interference. During the two World Wars the network began to be progressively nationalised, initially for wartime needs, then for the 'Socialist Good'. Private railways began struggling during this period because the state began to subsidise the road network, meanwhile unfairly railways had to upkeep not only the trains but also the rail tracks. Auto-mobiles, in the form of buses and lorries had their infrastructure paid for by the state (a classic case of how destructive state subsidies/interference becomes) so had an unfair advantage. They only had to pay for the auto-mobiles, not the infrastructure. After the Second World War the UKs railway network, as part of mass nationalisation, was put in State hands for around 40 years during which time they became a mess and woefully mismanaged. If as Owen says they just need to be renationalised to fix their ills, then what did the state do for 40 years with the network? The state subsidises the railways because it feels its helping everyone, when in reality all it does is waste resources. Railways only exist due to Capitalism and free markets, so give it all back to its creator rather than the current hybrid state/market system and let prices correct years of Government mess.

Private landlords get away with charging extortionate rents, knowing that the state will pay billions subsidising them through housing benefit.
I'm not sure where to begin with this oxymoron. On the one hand private landlords charge too much rent, but on the other Owen admits that these artificial high prices have been created by the state? Simple, stop subsidising rents a flaw of Socialist policies, not free markets.

Wealthy individuals enjoy tax relief on their pensions worth billions.
So does every tax paying person in the country, which is why we are all told to save into pensions as its very tax effective. Not only do we get tax relief on our salary contributions but also on any earnings/dividends from the savings that are invested. Its not an 'elitist' perk.

Socialism for the rich is thriving while, for everybody else, it is capitalism red in tooth and claw.
I agree, Socialism always benefits the rich and ensures the poor suffer. Cuba, Soviet Russia or China, the party elites enjoyed beneficial health treatment, exotic foods and lavish lifestyles while the majority endured rationing and hardship. Its no different with our political system, just to less extremes. Factional reserve banking, Central Banking, patents, regulation, Government money production and so forth, all enrich the wealthy at the expense of the poor. All instigated by the state. Abolish the state, empower individuals, then the poorest in society will benefit the greatest.

If socialists really were running the show in Britain, they would be building a society run by, and in the interests of, working people. Our banks – propped by the British people – would be taken under genuine democratic control, forcing them to operate in the interests of society as a whole.
How many Statist leaders have said this line before? All of them end up impoverishing the people, taking away individual liberties and freedom, extinguishing any prosperity. A true free market HAS to operate in the interests of society. Organisations that don't become extinct.

Our booming wealthy elite would be forced to pay a fair share of tax (or, in some cases, any tax whatsoever).
How would this exactly happen. Is Owen and his 'apparatchiks' going to hold a gun to this so called 'wealthy elite' and force them to pay? Such people would simply flee along with their capital and talent to places where they wouldn't be persecuted in a wealth witch hunt. Meanwhile this would leave people who stayed in such a country in a poorer state as they would be deprived of such expertise and capital.

Owen, like many on the left, are misguided by the belief that they can generate wealth by simply taxing (taking the means of production, with no form of merit) people more. Owen attempts to make the higher tax argument here (go to 7 minutes, 20 seconds in), however as Andrew Neil points out, when top rate tax rates during the sixties were 98% the top 1% only contributed 5% of total taxation, while now with a top rate of 40%, 30% of income is generated by the top 1% of earners. As Andrew Neil correctly points out - this is Socialism, one of the reasons behind sluggish growth as compared with the sixties. We already tax the rich far too much (for the record I do not qualify for high tax rates, incase you belief I have a vested interest). Michael Moore and others conclude the same misinterpretations, when America had similar high tax rates but conveniently ignores that no one paid their taxes at this rate, or the brackets were so high that only small numbers qualified. People stop paying tax at a certain point and it just pushes wealth away.

After the disastrous failures of market economics, real socialists would be taking our utilities – such as the railways and rip-off energy companies – into social ownership: not old-style, statist nationalisation, but democratically run by workers and consumers.
Market Failures? The technology sector is run with no regulations, no state intervention, no subsidies. Yet it continues to drive down costs and improve quality. The biggest beneficiary's? The poorest among society. The Internet along with many of its high quality services are free for anyone to use. Computers can now be picked up for a couple of hundred pounds once the preserve of large Corporations and Governments, with people now even carrying computers in their pockets. People in third world countries even have access to such sophisticated capital goods. Large flatscreen TVs have become the norm, DVD players cost the same as a single DVD. People can connect with anyone in the globe, at their fingertips is billions of terabytes of information. All thanks to free markets, not elitist state planners.

Railways have been covered above, meanwhile our utility network was driven into the ground by Nationalisation and has only recently started to correct the previous state run ills. However contrary to how it looks utility companies are not run by the free market but state granted regional monopolies, one company for one geographic area. Prices are determined not by supply or demand but at the whim of regulators who determine 'fair' prices, preventing price rises in order to mobilise private capital investment which over the long term would bring down costs and increase supply (again benefiting the poorest in society). Even the Institute of Civil Engineers understand basic economics, supply and demand controlled by prices, reporting that the price of water should rise in order to ensure correct use of the resource for the long term and to increase infrastructure spending. Not rationing (hose pipe bans).

Nationalisation, sorry 'Social Ownership' (obviously Owen realises Nationalisation is a discredited phrase with the public so conjures up another alias), a dogma to arbitrarily align resources to workers and consumers under a 'democratic' system is fairy tale economics. A Socialist never understands we live under constant scarcity. In order to meet our infinite needs with limited productivity we need a system that channels these resources effectively. Free markets do this. Now Social Ownership is the same as any other centralised solution, it sows its seeds to its own demise. Presumably people could vote on if the price was right? So consumers would constantly say "I think the price should be lower". Meanwhile the workers would constantly say "I think I should be paid more". Under a free market increased purchasing power occurs spontaneously, but under Owens system, rationing and hardship would endure, resulting in lower living standards. We all want more for less, but we need a rational system that can deliver such desires.

They would bring down welfare spending, not by kicking people at the bottom, but by building social housing, introducing a living wage, and creating jobs.

If I was a statist I could create jobs. Get half the unemployed to dig some holes, then get the other half to fill them back in. Job done. We could alternatively just regress our capital structure. Why use tractors when we can plow fields by hand, consuming vast amounts of human labour. Creating jobs is easy, creating wealth producing jobs is hard and can only be done by entrepreneurship.

So why the current mess with unemployment? As with anything there are many contributing factors, however they all have their root in the state. Unemployment will always exist within a society as people opt to take breaks, or find themselves between jobs. However the persistent high levels of unemployment we see is a direct product of State arbitration. Governments have created a class of people, due to failed state education and a benefits culture, who are unemployable. Minimum wage laws makes it increasing hard for such people to find jobs as their productivity level is priced out of the market place (read here for a detailed discussion). Rigid labour laws prevent prospective employers from easily hiring people. Its no coincidence that Spain has some of the highest unemployment levels caused by some of the most backward labour laws in the Western world. The credit crunch, created by Government economic mismanagement has created a serious mis-allocation of economic resources, preventing employment lines from recovering. And social housing has been a disaster, effectively creating ghettos on both sides of the Atlantic. 

And they would be reversing the scandalous lack of rights that workers have in the workplace, which is what ensured that wages were declining for many before the crash had even happened.
We have too much workers rights in the workplace not too little! We want to make it easy for companies to fire people because it makes it easier for them to hire the unemployed. Its not in the interests for companies to fire people at will. Getting new labour is expensive, time consuming and you can end up with people who are not as effective as the original person you fired. If employees want to goof around and then wonder why they got fired well maybe they should have been fulfilling their employment contract. If the working conditions were too harsh then walk and get a job elsewhere. If you felt you were unfairly dismissed then the company that let you go won't stay in business long, and you would find it easy to get work elsewhere, as the competitors can take on these people with ease due to easy hiring laws.

Wages have risen in real terms as when I was a child a VCR and a computer was a luxury item. Now we watch TV on demand and all have access to multiple computers. All consumer goods supplied by free markets have become more accessible to the poorest in society.

There are more fallacies in the article, I have only highlighted a select few. The comments section also distorts facts just as bad. One of the comments claims that because China is run under a Communist party that somehow their growth can be attributed to Socialism. So I guess the millions who died under Mao were not victims of Socialism? The impoverishment only ended when Deng Xiaoping took over after Mao's death and as history quite clearly showed Deng embraced capitalism. He allowed foreign capital, expertise and entrepreneurship room to create prosperity. The Communist party is nothing but a legacy, the real engine of growth for the country now is capitalism. Millionaires  and Entrepreneurs are now celebrated in China, whilst in the past under Mao they were persecuted.

The whole article is history regurgitated, another generation of Socialists who believe they have the means and knowledge to deliver a fair, just and equal society for all. I share those ideals but I'm not naive or arrogant enough to believe that I and a few select people can deliver on such promises. Instead I believe that people should be given freedom to achieve these goals under their own free will. We don't need a third party to interfere with our lives, such as the state. Let people run their own affairs. The world will work under its own accord.