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.

Labour Cuts, Tory Cuts, does it matter?

“This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear’s picnic.”
Niall Ferguson, British Historian, Part of comments made recently about a possible run on Sterling in the near future

As recent as two years ago politicians were avoiding talk of government spending cuts, seeing it as a poisoned chalice that should be avoided at all costs. Issues such as the environment, raising the Inheritance tax due to housing 'wealth' were the hot topics of discussion for flippant middle England. No party was seriously discussing the government fiscal deficits that were evident to people who noticed. No one was talking about off book debts, or even dared mention NHS cuts. Now all politicians want to talk about is cuts, the unsustainability of the previous spending policies. Again David Cameron has twigged onto this when it has clearly become an issue rather than stick his head out when he became the leader of the Conservative party, that would have gained him credibility. The public are still being misinformed, indeed the true severity of the situation has not been realised, with people truly believing that the deficit will be dealt with in due course and everything will run its course. It is the authors opinion that this is wishful thinking and that it is already too late to avoid the real crisis that will emerge over the coming years. Government deficits between 12.5 and 15 percent, is verging on banana republic status. Japan only obtained double digit deficits 7-8 years after its credit crunch, not months after the event such as in Ireland the US and the UK. How will the years to come look and how do we get out of this mess?

The state of California recently declared an economic state of emergency, promises to pay are being issued, positions and working hours slashed as the state is no longer solvent, in other words a lot of short term pain. They do not have their own printing press so have accountability over their spending plans. This is how it should be. Limits on government spending, the monopoly of money taken away from them, letting the market determine if they are creditworthy. It remains to be seen if they stay the course or if the US government does decide to offer some assistance.

So talks of UK Government cuts in the media still seem to be under the illusion that 'efficiency savings' or purging the Quangocrats will do the job, but much tougher decisions will have to be taken, cuts that also take time to implement especially when we are talking about vital services such as health and education for example.

If we first look at the NHS, it will be a huge burden on society as time passes, a burden the government will not be able to afford. The NHS was set up after the nation returned from war, turning their back on war leader Churchill in favour of Clement Attlee's more collective polices. Free health care for all and so on. Fast forward 60 years plus, and technology has come a long way. Medical science has ever more sophisticated tools and operations, able to diagnose all sorts of illnesses. With people living longer, more and more of us use this service as average ages have climbed. The NHS was not designed for these leaps in technology and associated costs, but no politician has had the will to reform the institution substantially. Myths are told by the left that Tory underinvestment killed the NHS during the Thatcher years but spending rose more in real terms than during the 1960's or 1970's - the perceived decline was from the above factors. This has followed on during Labour years, and despite Labour pouring money into this money pit, the result is still a shambles of a system, with many people on average wages shunning it for private health care.

If the government wishes to balance its budget at some point this will be one area they will not be able to neglect. So how bad could it be? With resources already so stretched how much more can it take? I honestly believe that people in the future will continue to look at the private sector for alternatives as the NHS crumbles and the quality of service continues to decline. It is a myth that government can simply just cut money in a matter on months from an institution like this, as the NHS still provides the majority with their basic health care needs. If cuts are too drastic people will suffer from more time off work, lowering working productivity. There needs to be further encouragement for people on reasonable incomes to move into private sector solutions. If people are penalised from opting out of the NHS then there is less incentive to get private health insurance. Its an opinion I hold myself, why pay income taxes, National Insurance etc, if opting out of the NHS is taxed as a benefit despite you doing the government a favour.

Education is a similar story. Cuts are also inevitable in this area. The government has promised the world to everyone without thinking through market needs or the costs involved. Higher education is a classic example, with quotas of students set at 50% and percentages that persecute against private schools rather than ability. Despite the waste producing graduates who end up in jobs that need no qualifications, the government pursues with this so they can claim they are improving peoples lives. It seems more like appeasing the middle class to ensure all their children go through 'higher' education. The reason why the student loan was introduced was due to these reasons as numbers began to swell during the nineties. Society just couldn't afford or had the need to send such numbers into higher intellectual pursuits, hence they imposed debts on people that wished to participate (by the way its not a real debt as so many misinterpret or whine about, its a tax as the obligation to pay is based on earnings not interest payments, in effect an extra income tax, something I do not begrudge paying). Higher education isn't a right as it has become, but a privilege where society invests in this segment of the population in order to have a skilled workforce.

Its the same story in compulsory education. Why will they move the age up to 18 from 16? Why was it at 16 in the first place? Many children are forced to go through the system for the sake of government rules, despite the fact the school won't put them in for exams as it would 'blemish' their position in the results table. Years ago they would have found a job that interested them early on. Commentators argue that we are now in the 'knowledge' economy and we need to invest in education, but its all nonsense. There are plenty of low skilled service sector jobs that require basic skills that are obtained earlier in life, but nothing taxing. Just sit back and think of all the jobs that people perform that require basic skills. The majority of jobs require no academic training, just work experience and common sense. By keeping kids in the dilapidated, overstretched state schools, it further expands a new underclass, a class of society who used to go into the workforce at 14 such as my Grandad, but now become despondent and angry, trapped in an education system that neglects them and destroys their self esteem. I think education is vitally important, in which it doesn't necessarily need a practical requirement. For years I have enjoyed reading history, but I haven't asked for society to pay for it. There is nothing stopping people pursuing intellectual activities in their own time.

Pensions will be a hot topic going forward. Why we rely on the government to provide us with a pension I will never know as the government never saves for them, just placing further future liabilities on their balance sheet. When pensions were introduced at an age of 70 one hundred years ago, you were lucky to collect one. Now it is deemed a young death if you don't reach retirement age. Real pensions are peoples saving which eventually buys an annuity. With increased capital in society this can be further invested, by financial intermediaries to build businesses and so on. Instead we have a system where pensions have become a drain on society, rather than a driver of prosperity, as the government have messed up yet again. The current public sector pensions can not be paid, they are too large and the government is already in a terrible fiscal position. They can't easily be cut either as people have made no alternative plans. Companies are already making cuts, the correct approach sooner rather than leaving it longer and allowing deficits to get too large or not giving people time to plan for alternatives like the government has done.

In the years to come interest payments are going to increase further, diverting spending away from real aspects of the economy such as education or health. The sooner the government begins the cuts the better the long term results. There is going to be hardship, but the cuts can be strategically carried forward like the post suggests. Cut University numbers, give people incentives to opt out of the NHS instead of taxing it as a benefit, some honesty regarding pension figures by bringing the numbers to the balance sheet and helping youngsters realise their potential by giving them choices. This article is not a critique of public sector workers, such as teachers, nurses or doctors as many offer a great deal to society but it is a criticism of the system they work under. Cuts are inevitable. It just doesn't have to be as painful as what I fear it will be as politicians don't like to abandon the status quo.