March Towards Freedom

With the recent elections in the UK I thought it was time to delve into the present political structure, how history has shaped where we are and what is to come during the 21st Century. I believe history will look back at the 21st Century as a golden era in humanities progress. Not only from a technological view, but politically also. 

We have to start with a conventional view of the current system. At school you are taught about the political spectrum, a view that places all political views on a sliding scale from left to right with current positions of the political establishment rooted in the center. The picture below illustrates this concept for anyone who is not familiar with the spectrum.

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I have plotted various political ideologies along with popular UK political parties. In school you are taught that both the left and right sides of the spectrum are political extremes and should be avoided, leaving the centre ground as the only option by default. Incidentally this ground is occupied by all major western political parties. For example in the UK I have drawn from left to right, Labour, the Liberal Democrats and the Conservatives as this represents their historic political views but in recent years they have blurred to the point of being nearly indistinguishable.

I started having a real problem with this picture as I began to branch out my thinking during my twenties and saw alternatives. Such alternatives could not be mapped onto this conventional model. Even before I formed such views I still had issues with the old model as it places both Communism and Fascism at opposite ends yet both ideologies share common views. They both despised Capitalism, favoured central planning, implemented price controls along and deficit spending. The right wing is supposed to be the side of Capitalism, yet as Joseph Gobbels said;

"It would be better for us to go down with Bolshevism than live in eternal slavery under capitalism"

Nazism was called National Socialism as its members aligned more with Socialist principles than Capitalists and free marketeers.

Therefore a new political model is required not only to make this anomaly correct but the very nature of it assumes society with be stuck in stasis with a state.

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I have labelled it "Real Political Spectrum" as I believe all political views can be mapped onto such a model with consistency. The real spectrum has at one end Totalitarianism and slavery. Such regimes have little or no rights for the individual. In the past all of the western world used to fall under such a description. Our ancestors lived under serfdom which closely resembled slavery and the landowners could do as they pleased with the people who worked there. Slowly people gained more rights removing the shackles of serfdom. Democracy would take a long time to establish itself. In the past the King had complete autonomy over the people but this belief would be challenged. The Age of Enlightenment espoused radical ideas such that an individual had the right to pursue happiness and a freedom. These concepts were non-intuitive to many at the time who had always been directly governed by strict central authorities. Such ideas began in Scotland, England and Holland with the emphasis on tolerance to one another. Thinkers such as John Locke would inspire a whole generation to emigrate to the Americas and spread the concept of liberty. Schools were appearing as early as the 15th Century, such as the scholastics of Salamanca in formulating a theory which declared the rights to life and liberty; at the time a novel thought. Later schools would come along, such as the Austrian School, repeating and supplementing arguments for subjective value, price theory, business cycles, inflation, interest rates and so forth. These ideas enlightened many who found them.

During the age of reason another group of thinkers began distorting the word freedom. Jean-Jacques Rousseau argued that true freedom was the individuals submission to the wills of others in power. Freedom of the individual was not real freedom. Real freedom was the collective view of the elite few over the many. These ideas were explored in further detail by a later generation of thinkers. Hegelianism explained that the state had supreme rights over an individual. Such views would influence next generation thinkers such as Karl Marx. The left would go on to pollute the very essence of freedom, liberalism and human rights. Freedom became associated with a submission to the state for a collective good. Liberalism was associated with state grand plans to organise and plan for societies needs. Rather than individuals choices, human rights became one that was ever more influenced by the states needs.

During the 19th century regions such as Britain, the Low Countries, North America and Scandinavia became incredibly rich as liberty and the individuals rights to pursue happiness were embraced. America experienced deflation and a rapidly growing economy, Sweden had moved from a relatively poor country in Europe to one of the richest by the end of the century. Germany unified and became a world beater in the Chemical Industry due to its liberal patent system compared to Britain and France where the State still granted monopoly patents. Freedom was creating wealth and materialism for the first time in human history. 

During the next century these countries would all succumb to the collective will of the state. Loss of freedoms and the expanse of Government was a slow process. During the Great Depression in America people still believed they were better off dead then accepting handouts from the state. How societies morals changed over the course of a couple of generations. The social ratchet kept tightening as the size of Government expanded. Some countries decided to nationalise the farm, notably Russia, Eastern Europe, many parts of Asia, South America, Africa and sporadic islands most famously Cuba came in for good measure. Britain, the Low Countries, North America and Scandinavian, the very nations who cradled liberty, expanded their states but never going the full distance. Swedens state expanded vastly during the 1950's, 60's and 70's, slowly destroying the gains that free market capitalism had bestowed on them during prior years. Americas slow abandonment of their founding fathers constitution and growing Government influence which got worse during the 1960's guns and butter programs left them with a social system that made a mockery of their slogan "land of the free". Reaganomics had shown how muddled the term liberty and free markets had become. Regan spent more than any previous president with large deficit spending policies and expanded the size of Government, yet ironically was labelled a free marketeer. Britain descended into the abyss on a couple of occasions; blackouts, never ending strikes, decline of industry and mass socialist programs. The biggest shock came in the form of Germany the only country to fall into a totalitarian state. The atrocities were no different than those committed in China, Russia or Cambodia. Mao once commented that a nuclear war would be good; it would clear out half the worlds population to start again. The fascination that Nazisim brings to people is the fact it happened in Germany, an industrial power. 

After the war Germany was split, one side more free than the other. Other countries had a similar setup. China and Hong Kongs relationship, North and South Korea. These real life examples would show us all the benefits of individual autonomy over submission of our free will to central authorities. West Germany would become one of the economic powerhouses in Europe once more, South Korea gave its people some of the best living conditions on the continent, despite the fact that the North started out richer and Hong Kong; well in the end China under Deng Xiaoping just copied its neighbour with similar polices. Taiwan, Singapore and notably Japan all blazed a trail in showing the power of unleashing individual autonomy. Japan's 1950's, 60's and 70's bee-like workers transformed one of the poorest nations (just after it had lost everything during WW2) to one of the wealthiest; a first world nation.  

Meanwhile cracks were beginning to show under countries that had opted for the submission to the state. The Soviet bloc would begin to unravel and its leaders gave its people more autonomy over their lives. China and India would move out of their shadows and during the later part of the 20th Century would begin to show their potential. Chile has now become one of the most prosperous nations in South America due to its belief in free markets. Pinochet was a nasty piece of work but this had nothing to do with the economic policies put in place. America, Canada, Britain and many others who had traditional left leaning parties would become pro-market. New Labour was created in the UK; their direction was copied from the Clinton administration who realised that people had spoken and they wanted the Government off their backs.

The trend will continue throughout the 21st Century. At the other end of the spectrum is the endgame for society, freedom for all individuals on the planet and I believe over the course of the 21st Century we will make tremendous progress towards such a goal. The 20th Century will be viewed as a tragic experiment with the state and the submission of our rights in the false belief that this was true freedom. Holocausts, wars; regressions in many nations of basic human freedoms. More people were killed through State inflicted conflicts than in any previous century in human history. Many countries regressed into insular Totalitarian states. Countries that had so much potential; Russia, India, China, Spain, Italy; even Germany. Whole continents such as South America, Africa and Asia all embraced centralised dictatorships. 

Many of developing countries have gained ground and will continue gaining ground on the West but it will be the West that continues to spearhead the charge towards freedom and an abolishion of the state. Its Citizens are still the freest. They are critical thinkers with little respect for their elders conventional views. Many of its brightest and dynamic don't follow; they lead. 

I can not explain exactly how we will transition or when the state will go in its entirety or geographically where this will occur; that's for the future to decide. My excitement lies with the fact that I know it will happen and its only a matter of time. The state will fall from a combination of factors. One they will over-stretch themselves. In doing this they will wittingly and unwittingly hand over more of societies functions to the free market. Second, people will create new de-centralised systems that can not be shut down through acts of third party aggression and will directly bypass Government controls. These systems will run in parallel to the established industries, covertly changing the public's perception that certain services must be provided by a Government. The Internet has proven itself to be a remarkable source of free-willed information. Dictators, notably in Egypt tried to shut it down only to find their economies have now become too dependant on the platform and had to turn it back on. China tries to ban information but projects such as Tor are allowing these people to exchange and read ideas that the state has tried to blackout. Bitcoin will revolutionise money and finance. It or its successor, will prove hard to contain. Many other decentralised systems are coming into play subverting the central authorities. The third reason; new Blood. Young people are great. They have no baggage, no pre-conceived ideas or ideologies that they have espoused for a lifetime. Instead they are open minded and receptive to new concepts with an inquisitive nature unlike older people who are comfortable with the reality they have always known. I was once new blood and during my twenties rejected all beliefs I held dear. My parents held conventional views, all my relatives had no background in social and political issues. I was the first on my mums side to go to University and many people I came across had no interests in such topics. I formed my views completely on my own and through inquisitiveness and sheer graft. When there is no one to show you the door, finding the right one can be hard and time consuming taking a lot of effort. My point is, if I can do it with my background anyone can. All the time its getting easier as more and more convert to realising that individuals have the right to their own destiny.

The mental shift I believe is already starting. Voter apathy, with cynical views towards politics as it seems to fail no matter who obtains power. People bad mouth all the mainstream political parties and are no longer dogmatically tied to a single party, instead select on the day which "handouts" they like best (one of the reasons the parties have all merged to a very common centre ground chasing the ever increasing floating voters). More people are embracing liberty and its principles of limited Government. People who are non-politicised are getting more sceptical of broken promises made by successive parties. 

History will view the 21st Century as a Golden Age in human prosperity and progress. There will be steps back, volatility, ups and downs; its all part of the ongoing struggle to distribute complete autonomy to the individual, to have complete control over their own life. I like many others look forward with excitement to what the future will bring. You should too.

Socialist Technology

One of the great myths during the Cold War was the belief that Russia had more advanced technology than the West. With hindsight we saw that this was not the case. Russian people during the time didn't have personal computers, mobile phones they didn't even have fitted clothes or adequate food to eat.

During the rule of state planners Russia became a complete basket case. Russia is one of the most resource rich countries in the world, this factor helped Socialism go on for so long. People forget that Russia are the number one oil producer ahead of even Saudi Arabia. Before it became Communist, Russia was ruled under an absolutist monarchy, the Tsars. Despite this dated social system Russia exported grain and agricultural produce to Europe. During Communism this went into reverse where the country became so desperate that during the 1960's Khrushchev had to sell huge Gold holdings just to prevent starvation. 

Most of the technology Russia had was stolen from the West. They stole the H-Bomb, they stole Rocketry, they stole what little knowledge they had on computers. They had a network of spies in the West whose sole responsibility was to steal knowledge of the latest technology. However as we all know technology in a free market moves fast. The spies used to joke that as soon as they stole the technology, sent it back to Russia and allowed engineers to study the ideas, it was already out of date and obsolete. 

The space race was a classic example of how the free market was able to land people on the moon. Russia had no hope, they were no where near as they didn't have the expertise in microcomputers that were crucial to the moon landings. The Rocketry they had was stolen from WWII and crudely refined. They never really got past the point of firing a rocket into space. The Americans were able to fire a three man crew, perform lunar obits and land a small craft on the moon with the help of early computers. 

As the video states the Russian car industry again used free market ideas. They used Fiat as a model and basically made it worse. Russia was never short of great engineers and mathematicians - they were short on giving these people the freedom to express themselves. Startups are formed by individuals having ideas and having the capability to try them, away from the frustrations of big bureaucratic organisations. Some ideas fail, some succeed. There is a saying, 'The person who never makes a mistake, never tries anything new'. Free markets allow people to try different ideas and to innovate. We all know of failed concepts but without these failures we can not learn from them and make the new technology that helps human prosperity. Any innovator will tell you their greatest success were what they learnt from their failures. Prosperity always has and always will come from the bottom up, not a top down central planning approach. The do-ers need the freedom to use their talents in order to make all our lives better.

Viva La Revolution!

As the majority of the Western world went into a synchronised recession, Cuba was consequently hit hard by the relative hardships inflicted on our countries. Cuba's main source of hard currency to pay for imports is tourism. A country that has been stuck in permanent depression ever since the Communists took power from Batista with a philosophy of the state mobilising economic resources has meant Cubans productivity has fallen woefully behind other nations around the world. 

History has always shown that the best way to innovate is to let individuals who understand their respective market mobilise resources. The Google empire used to be two guys working in a garage. Mighty Microsoft was once a small two bit outfit doing small time work in Alberquerqe. Sony, the Multinational Japanese electronics giant was two men who had a passion for technology. They set up their company after the Second World War, during Hyperinflation and resource shortages where many of the materials they required to make electronic components were not available. Its a testament that all the above ventures have improved all our lives immeasurably, driving up product quality and innovation and driving down costs. 

Cuba however followed the romantic ideal where the "people" would run industry for the "people" (despite the fact that companies are always created by ordinary people). Widespread nationalisation took place, giving economic resources to people who had no interest in such ventures. The popular Che Guevara for example took control as the minister of industries while serving as the national bank president. This was despite the fact that he had no interest what so ever in either ventures or had proven competence. Through the years the decline in living standards has been taking its toll on the country. Cuban people are getting restless. 

Since the collapse of the Soviet Union, Cuba could no longer leach from its big brother, Castro had no option but to open up to tourism, abandoning the autarky he had previously tried to maintain. The problem with this solution is the Cuban people began to see how the West were really living, contrary to the state propaganda they had heard. Fancy gadgets, multiple overseas holidays, all you can eat hotels (while the population has rationing) and the freedom to say what they want and do. Not ideal for a dictatorship.

From 1993 Cuba has also begun slowly abandoning its rigid dogma, now trying more market orientated solutions such as allowing individuals to make profits to increase production. Periodically these have been revoked as uprisings occurred. The resourcefulness of Cubans during the regime is quite remarkable. During my stay we were told they use sugared water as an alternative to brake fluid in cars as they can't afford to import the real stuff. All the old American cars are quite a sight, with people packed into them. Despite the resource shortages people are still able to keep such cars running. Due to the lack of motorised transport and fuel it is law that you have to give people lifts if you own a car and they wish to go the same way as yourself. Such is the desperate state of the country.

Within the news recently it is becoming apparent that more market alternatives are being considered. Its not only the West which are announcing cuts. Cuba has cut the subsidies paid to its pensioners on cigarettes. With monthly pensions of $10 and a pack costing around $0.33, its any wonder how they live on such a low amount (a serious smoker would need all their income to buy a pack a day. Now compare that with your own countries pension and cost of cigarettes). They have been removed from rationing along with other products - the government are now acknowledging you need real prices to direct supply and demand. Announcements have been made that more workers will be self employed and set up businesses, taking people out of the unproductive public sector and into the private sector. 

All of this is inevitable, that is Communist and Socialist systems break down. North Korea, China, North Vietnam, India, Russia, Zimbabwe and Eastern Europe. They all fall apart as peoples living standards decline. Cuba is no different. Often viewed under the academic romantic ideal it is no fun for its people. The free market will win out eventually.

The only reason any such country last as long as they do is usually natural resources. Venezuela is held up by the left as a great example of the good work socialism can do but in reality Chavez is becoming a tyrant and is propped up by all the Oil he sits on. He continually tries to blame 'speculators' and tries to control prices in a vain attempt to give something for nothing to his people. In reality he impoverishes them with product shortages in the long run. For nations such as North Korea who are resource poor they just rely on aid from others such as China and South Korea who are scared of the implications if such nations collapsed leading to a plague of people  rushing for the borders. 

Through this Century the free market will expand and with it Socialism will go into further decline.  We may have some turbulence to come but this will enforce the long term trend. In the West which are already viewed as free market entities they will go even more market orientated. Central Banks will loose the faith of the people as they mismanage the national currencies and people wish to find out why such events are happening. Alternatives will be put forth. Market alternatives, with money and interest rates moving away from political interference. 

Twitter

A small mention that I will start using my twitter account to post snippets of my view on what's happening (as an alternative to the detailed posts I put here). You can view/follow what I have to say here if you use twitter.

I think we have some interesting news to come, especially when the budget cuts become reality and the Governments finances further spiral out of control. Inflation is already embedded here in the UK. Despite the recent GDP growth its all government driven and its all making things a whole lot worse. QE2 will recommence at some point despite the high levels of inflation. Interest rates will rise which is why they will try and hold these down over the short term using monetary policy. But like the Statist nations above that try to fix prices, the same disastrous consequences will occur. Shortages and further long term problems.

Central Banks are changing their Tune

This week the IMF began sales of their Gold reserves. I have mentioned previously that the IMF have been looking to do this, however how wrong was I regarding what may happen to Golds price! Two hundred tons came onto the market and rather than the price possibly dropping, the price instead soared. The Central Bank of India gobbled it all up in a single transaction. Many articles have already been published in relation to the event, and with good reason. The shiny stuff has risen in price for the past decade, despite european central banks selling huge quantities, the most infamous being my countries sale of half our reserves known appropriately as 'Browns Bottom'. The worlds central banks are suddenly looking at Gold from a different viewpoint. The move by India shocked everyone. The next sale could see multiple buyers apply, China, Russia, Brazil and other emerging nations will be feeling anxious - "How do we get out of our paper reserves"? One day there will be a rush for the exits, a dash for the ultimate form of cash. Meanwhile Geithner and Obama parade around the globe, reassuring foreigners of their strong dollar policy, their words contradicting their actions. A sound currency does not exist with zero percent interest rates, deficits as far as the eye can see along with printing more of the stuff. You don't need to be an 'A' grade economist to see the anomaly.

It's important to remember that you can't grow gold. Gold can't be produced in a factory, or planted as a tree. There has always been a finite supply throughout history and when there's no where for investors to turn, they head to safety, historically that has been precious metals. The limited supply can be seen with the recent "Sell your Gold" adverts, dealers buying the public's jewelry, melting it down, and selling it to institutional investors. While the recession continues to force the public to liquidate their hard assets for paper cash, the paper cash investors are diversifying into such assets. One only has to look at the events last autumn, bullion dealers ran out of stock which caused the adverts you now see. Hoarding along with limited ground supply has led the dealers to impell the public to sell.

One thing you have to understand is that China is sitting on 2 Trillion Dollars of paper promises. They currently have around 1,000 tonnes of gold. $2 Trillion could buy them an awful lot more, if they can find willing sellers. The recent IMF sale was $6.7 Billion for two hundred tonnes, I'm sure you can do the maths to see China's buying potential. Compared with nations in the West, many other emerging economies still have woefully imbalanced Gold reserves as the table details (original table taken from following article).



There are many countries who have plenty more cash to convert into Gold, histories ultimate form of payment. Germany, Italy and France hold approximately 70% of their nations reserves in Gold. Compared to China, India and Russia with 1.9%, 6.2% and 4.3% respectively, if I was a betting man I would say the latters percentages will inevitably increase.

For too long the West had a monopoly of talent and capital, corrupt regimes around the world ensured this. Battles between the far left and right in South America, Asia's experiment with Communism, Eastern Europe held back by the Iron Curtain, Middle Eastern states squandering the oil bonanza of the seventies and of course Africa's various despotic rulers. For too long during the 20th Century statism looked like the solution to peoples problems, when in fact it was the cause. Many talented individuals migrated to the West in search of a better life for their families. The collapse of Communism along with the revolution in telecommunications saw to it that many emerging nations began to realise their potential. Why emigrate to the West when they now have the same intellectually challenging jobs at home? Many Western countries still have one trump card - longevity in respect to human rights. No matter how bad my government messes up I always know I will be able to say what I want. I always know that the right path will eventually be trodden. I always know that Britain was the first nation to overthrow a monarchy on the continent during its Civil war, thus beginning the process towards the present inherently stable democratic system that has endured for centuries. The above may not seem much, but its amazing how we can all take this for granted. It won't stop the shift of power from West to East. Gold, it seems, is also moving in the same direction.