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Economics: What might work, what should work, what has worked (command v. open market)


Ser Scot A Ellison

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It’s also worth pointing out that basically every country in the world has entered the modern era now, and all these failed states like the USSR and China etc that adopted state controls of he means of production were all trying to universally modernize their country. 

That is to say that he life of a rural peasant in 1910 China or 1910 Russia was basically indistinguishable from the life of a respective rural peasant in 1810 or 1010 and so on and so forth.

The rapid modernization that occurred in the twentieth century is more or less unprecedented and it is worth wondering if these states all failed because they were doomed to fail by human nature or if they failed because their starting conditions were so similar, so far behind and and so mal adapted to even the beginnings of the industrial revolution. Was it too much too soon too fast and the bridge from pre modern to modern collapses because it couldn’t structurally support the loads it was forced to carry?

theres a 1930 Russian film called “earth “ that is about how much change is brought to one village by one tractor. It’s quite amazing.

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1 hour ago, lokisnow said:

It’s also worth pointing out that basically every country in the world has entered the modern era now, and all these failed states like the USSR and China etc that adopted state controls of he means of production were all trying to universally modernize their country. 

That is to say that he life of a rural peasant in 1910 China or 1910 Russia was basically indistinguishable from the life of a respective rural peasant in 1810 or 1010 and so on and so forth.

The rapid modernization that occurred in the twentieth century is more or less unprecedented and it is worth wondering if these states all failed because they were doomed to fail by human nature or if they failed because their starting conditions were so similar, so far behind and and so mal adapted to even the beginnings of the industrial revolution. Was it too much too soon too fast and the bridge from pre modern to modern collapses because it couldn’t structurally support the loads it was forced to carry?

theres a 1930 Russian film called “earth “ that is about how much change is brought to one village by one tractor. It’s quite amazing.

The thing is that there were other countries that started from equally undeveloped standards and still succeeded. 

South Korea, Singapore, and Taiwan went from almost medieval living standards to being comparable to the West within the span of a single generation. 

South Korea is an especially interesting example since we have such a great comparison: North Korea.

So what we have is a country that in 1953 was artificially cut into two parts, that then started out with almost identical conditions: Same cultures, same history, the same almost blank slate economies (what little the Japanese colonists had built up was mostly destroyed during the war). But one country got a communist government and the other a capitalist one. 

So what happened after? Well, South Korean GDP per person is now about thirty times higher than it was in 1953, while North Korea's has barely changed at all. 

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11 hours ago, Khaleesi did nothing wrong said:

If we are talking longer trends then another fact is that Western countries that adopted free market based systems in the 1800's have increased their incomes per person thirty or forty times over by now, after adjusting for inflation.

You mean since the industrial revolution? Hmmm... I wonder if there could possibly be some factor other than the free market that might have contributed to the rise in income and reduction in work hours?

Adjusting for inflation, income for most people in the US has been pretty stagnant for decades; well under 1% increase per year on average.

11 hours ago, Khaleesi did nothing wrong said:

The income of the average Chinese has increased fifteen times over since they started scrapping Communism in favor of a more market based system 50 years ago.

Funnily enough, that's around when China started industrialising on a large scale... do you think maybe there could be a connection between large scale use of increasingly sophisticated technology and rising average income? A wild theory, I know.

10 hours ago, SeanF said:

Well, yes.  If you're on the left why not aim to create a society like Denmark, which has impressive social services, and redistributes income, but still has a an efficient market economy, rather than doing things like confiscating assets or banning the stock market?

https://en.wikipedia.org/wiki/List_of_Danes_by_net_worth

Denmark is a lot less awful than the US, but it still has billionaires. Which means a significant chunk of GDP being wasted on obscene luxury for the megarich instead of more/better goods and services for everyone else. :commie:

6 hours ago, Scott de Montevideo! said:

I appreciate that point.  My point is that those state that go for the "State owns the means of production" tend to be those that are repressive and authoritarian.

Have you considered that might be due to the rulers of repressive and authoritarian states choosing to accumulate more wealth and power for themselves, rather than a problem inherent to state ownership? Are there any examples of an established democratic, prosperous, low-corruption country choosing more state ownership and it going badly?

3 hours ago, Khaleesi did nothing wrong said:

So what we have is a country that in 1953 was artificially cut into two parts, that then started out with almost identical conditions: Same cultures, same history, the same almost blank slate economies (what little the Japanese colonists had built up was mostly destroyed during the war). But one country got a communist government and the other a capitalist one.

North Korea is a feudal hereditary monarchy; that's pretty much the exact opposite of a communist government.

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There are certainly examples of state-run companies, institutions and hedge funds that are doing well. The Swedish company that has a legal monopoly on selling alcoholic beverages, Systembolaget, is widely regarded as very good in many aspects (especially service and assortment range). The Swiss state-owned railway is legendary for its punctuality, and the Norwegian oil fund is the biggest fund in the world. There are of course lots and lots of similar examples around the world, so it seems to me like public companies are at least not automatically doomed to failure.

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I think there is a clear link between authoritarian regimes and state control over MOP. That's simply because the authoritarian control over the public and private sphere cannot be complete if the state doesn't directly or indirectly (see Russias system of loyal oligarchs) control the MOP.

The other way round is not so clear: a state that owns alls MOP doesn't - in theory - have to be authoritarian.

But in practice, the total state control over all MOP is a pretty good indicator for authoritarian Regimes. And that's because in a liberal democracy, it is very hard, probably impossible, for any state to just seize all the MOP from it's citizens: you'd have to seal off your country from international trade and other treaties, abolish or violate a number of constitutional rights, make sure you control the justice system and then make sure that you don't get voted out, during the inevitable economic turmoil.

So yeah, it is pretty obvious that first comes the authoritarian regime and then comes the complete seizure of all MOP. It's because you need the first to do the latter.

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9 hours ago, Khaleesi did nothing wrong said:

 South Korea is an especially interesting example since we have such a great comparison: North Korea.

So what we have is a country that in 1953 was artificially cut into two parts, that then started out with almost identical conditions: Same cultures, same history, the same almost blank slate economies (what little the Japanese colonists had built up was mostly destroyed during the war). But one country got a communist government and the other a capitalist one. 

So what happened after? Well, South Korean GDP per person is now about thirty times higher than it was in 1953, while North Korea's has barely changed at all. 

Except that the divergence isn't 1953. It's 1975:

https://thenextrecession.files.wordpress.com/2017/05/korean-gdp.jpg

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Hold on, I'm confused. Granted, I've both been fucked into unconsciousness and also masturbated into general 'Eeeeeh!!!!' in the last fortnight.

But... Is someone actually proposing something about something (or other) about a Communist government or something? Or do I need to stop drinking while at work>?

Seriously. I'm a P.A. now.

I don't prescribe drugs (directly), but I do prescribe treatment. If my patients might be negatively affected by Jace's judgement, the time to point out such a horrible possibility is now.

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Correct me if I am wrong but the fascist governments in Germany, Italy, Spain or similar ones in Latin America did not have soviet style control over the means of production. There was still plenty of "free market" in these economies, wasn't there.

Obviously, expropriation of big business and total control of the MoP presupposes a very strong authoritarian state. But authoritarian states like Chile have actually been advised by proponents of "free markets", so such states might not use their power to control the economy if they prefer otherwise.

For me the more interesting situation would be a test of the Hayekian claim (which to me seems unfounded but it is a popular one on the libertarian side) that 50s-70s style social democracy with some control of markets and some key industries (railways, energy etc.) being controlled by the state (inevitably) leads to "serfdom", i.e. to less democracy and closer to a soviet style control of both economy, restriction of civil rights etc. This has never happened as far as I know, but the question is of course if this was mere luck (because the eastern bloc collapsed and the West became less social democratic soon enough to prevent the Hayekian nightmare) or (what I suspect) that the claim is just wrong and such a development is extremely unlikely.

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7 minutes ago, Jo498 said:

Correct me if I am wrong but the fascist governments in Germany, Italy, Spain or similar ones in Latin America did not have soviet style control over the means of production. There was still plenty of "free market" in these economies, wasn't there.

You don't need to collectivize and own the entire MOP to seize control over the MOP. Let's take Germany for example: what we saw first, was the expropriation of critics and undesired. I.E. communist-leaning cooperatives were expropriated, jewish shop owners, bankers etc. were expropriated and so forth. And the message was clear: you have "freedom" - if you cooperate and support the regime. If you don't, your shop, factory, whatever is going to be confiscated (and thats probably not the only measure). Unions were abolished and with it the freedom to collectively negotiate the price for labour. Or, if you look at Russia where you will hard pressed to find an important company that is not owned either by the state directly or by an Oligarch who belongs to Putins inner circle.

An authoritarian regime doesn't have to implement soviet style measures to seize control over the MOP. Indirect control is often much more effective.

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so we have probably no real world example of a social democracy devolving into soviet style totalitarian socialism.

What we have witnessed on the other hand, is that the (broadly) social democratic systems of the 1940s-80s have almost all become far more neo-liberal/libertarian with more privatization of formerly public goods (often involving corruption and cronyism to a degree I would not have thought possible in advanced Western countries), scrapping of social services and welfare, rising inequality etc. Often this is mainly blamed on "external" factors, globalization and the collapse of the eastern bloc. But I fear that it points out to an inherent instability of "mixed economies", i.e. broadly social democratic systems. They have to be carefully maintained because contrary to Hayek they rather easily collapse into the plutocracies we are now beginning to experience, not into soviet style command economies.

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11 minutes ago, Jo498 said:

so we have probably no real world example of a social democracy devolving into soviet style totalitarian socialism.

What we have witnessed on the other hand, is that the (broadly) social democratic systems of the 1940s-80s have almost all become far more neo-liberal/libertarian with more privatization of formerly public goods (often involving corruption and cronyism to a agree I would not have thought possible in advanced Western countries), scrapping of social services and welfare, rising inequality etc. Often this is mainly blamed on "external" factors, globalization and the collapse of the eastern bloc. But I fear that it points out to an inherent instability of "mixed economies", i.e. broadly social democratic systems. They have to be carefully maintained because contrary to Hayek they rather easily collapse into the plutocracies we are now beginning to experience, not into soviet style command economies.

I decided some time ago that social democracy is inherently unstable. Either it goes too far for the comfort of the Establishment, who use the mechanisms of globalised capital to punish the offending nation (especially easy in a post-1991 era), or it sells out to the Establishment and becomes liberalised. The cherry on top is that if it succeeds, it creates a massive middle-class, who suddenly lack the interests their working class parents and grandparents had, and are more than willing to vote for liberalisation.

In hindsight, I really wonder how much the Eastern Bloc made social democracy uniquely viable - the Establishment put up with it, because the alternative was Moscow.

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19 minutes ago, Jo498 said:

For me the more interesting situation would be a test of the Hayekian claim (which to me seems unfounded but it is a popular one on the libertarian side) that 50s-70s style social democracy with some control of markets and some key industries (railways, energy etc.) being controlled by the state (inevitably) leads to "serfdom", i.e. to less democracy and closer to a soviet style control of both economy, restriction of civil rights etc.

I think we have some evidence that unrestricted capitalism is more likely to lead to serfdom - see the treatment of Amazon employees for an example. State control at least has the potential for democracy, while private owners are completely unaccountable oligarchs in a system that actively selects against empathy and the common good.

And I'm not suggesting soviet-style control; I want to keep a decentralised free market, just redirect the profits towards public services instead of private shareholders, and expand the goals of companies to include factors other than the purely financial. This isn't possible in a mixed system; a publicly owned competitor for Amazon with better pay and working conditions for its employees would have to charge higher prices, fail to attract any customers, and go out of business. Under capitalism, the rich have to keep getting richer; at best, the process can only be slowed down, and the rich use their wealth and power to ensure we don't get the best.

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The marxist would probably have said the the social democrats were sell-outs already in the 1920s and of course their will be unstable. The problem as always is lack of control groups. While we have some cases of industrialization without free market capitalism (and so can to some extent delineate wealth/standard of living improvements due to either factor) we do not have a postwar period without an eastern bloc etc.

another possible explanation is that the power differences or more bluntly the undemocratic influence of the capitalists and the very rich overall were still so large in the social democratic era that it is hardly surprising it could not go on forever. Democracy is put on as a show to keep the masses content (together with some bread and lots of circuses).

If one can only curtail the influence of the .1% (and their enabling bunch of lawyers, lobbyists etc. usually in the top 10-20%) to a small degree it is only to be expected that they will do everything to use and increase that power. But then again, the measures to be taken to really restrict that power are maybe to extreme to find majorities. (Partly because in an age of PR one can rather easily convince enough of the majority that what is good for the 1% is also good for them.)

@felice: I completely agree. But I think some libertarians feel that the currents systems with their remnants of state control, restrictions and welfare are already socialist, so they will probably claim that Hayek was correct.

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7 hours ago, felice said:

You mean since the industrial revolution? Hmmm... I wonder if there could possibly be some factor other than the free market that might have contributed to the rise in income and reduction in work hours?

Adjusting for inflation, income for most people in the US has been pretty stagnant for decades; well under 1% increase per year on average.

Funnily enough, that's around when China started industrialising on a large scale... do you think maybe there could be a connection between large scale use of increasingly sophisticated technology and rising average income? A wild theory, I know.

https://en.wikipedia.org/wiki/List_of_Danes_by_net_worth

Denmark is a lot less awful than the US, but it still has billionaires. Which means a significant chunk of GDP being wasted on obscene luxury for the megarich instead of more/better goods and services for everyone else. :commie:

Have you considered that might be due to the rulers of repressive and authoritarian states choosing to accumulate more wealth and power for themselves, rather than a problem inherent to state ownership? Are there any examples of an established democratic, prosperous, low-corruption country choosing more state ownership and it going badly?

North Korea is a feudal hereditary monarchy; that's pretty much the exact opposite of a communist government.

There are very rich people in Denmark, but so what? Its people have a high standard of living and excellent social services.  

That's preferable to your proposals that would see most peoples' standard of living crashing.

 

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4 hours ago, Erik of Hazelfield said:

There are certainly examples of state-run companies, institutions and hedge funds that are doing well. The Swedish company that has a legal monopoly on selling alcoholic beverages, Systembolaget, is widely regarded as very good in many aspects (especially service and assortment range). The Swiss state-owned railway is legendary for its punctuality, and the Norwegian oil fund is the biggest fund in the world. There are of course lots and lots of similar examples around the world, so it seems to me like public companies are at least not automatically doomed to failure.

Individual companies, yes, but are there any nations with full state run economies that aren’t or haven’t been totalitarian basket cases?  Cronyism and corruption seems to walk hand in hand with full State control of a Nation’s economy.  Once again if I am not correct and there is an example where this isn’t the case I’d be very interested to look at that example.  Does one exist?

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Again: You do not have for comparison a capitalist country the size of the Russian Empire at the societal+technological state of 1917 that made it to Sputnik 40 years later while losing many millions in the worst war in recent history. The SU hardly had anything like a "normal" phase before the late 40s. That the SU finally "lost" to the Western bloc might have as one cause the ineffiency of centralized economies. But there are so many other factors that we cannot seriously know that it was the main factor for the eventual failure.

I am pretty sure that a rapid modernization of a huge mostly agrarian Empire that had medieval style feudalism up to only a few decades before the revolution would have been brutal in a capitalist system as well. (Watch how brutal the system change was in the 90s! Another indication is that even in Western countries that were "behind" the UK in the 19th century politically and economically we frequently have a period of civil war and totalitarianism in the first decades of the 20th century, I read once someone who claimed that these are almost inevitable birth pangs of modern states/societies, comparably to similar upheavals in early modernity ca. 400 years ago)

In the SU/Russia you basically have a development that took 1-2 centuries in the US or Western Europe (with lots of blood shed, slavery, starving peasants, social upheaval etc.) compressed into a few decades. And most of the time in competition with the most economically and military powerful opponent that ever existed.

It seems very misleading to me to claim that historically unique (because conditions are never similar enough) developments could be compared to failed experiments or business models.

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9 hours ago, felice said:

You mean since the industrial revolution? Hmmm... I wonder if there could possibly be some factor other than the free market that might have contributed to the rise in income and reduction in work hours?

But the industrial revolution and capitalism are intertwined. Industrialization began in Great Britain after it instituted capitalist reforms, and then gradually spread to other countries as they adopted similar systems. China only being one of the most recent examples. 

There have been attempts by socialist countries to industrialize as well, but best case they end up as bleak copies of capitalist countries (Cuba, DDR, to some extent the USSR after Stalin). The other outcomes being total nightmares (North Korea, Democratic Kampuchea, Mao's China), or somewhere in between.  

Quote

North Korea is a feudal hereditary monarchy; that's pretty much the exact opposite of a communist government.

North Korea is not feudal. Kim Jong Un hasn't handed out fiefs to vassals in exchange for them pledging their private armies to his service. On the contrary his country is extremely totalitarian. 

As for elections they obviously can't have those. They'd just be infiltrated by bourgeois spies and lobbyists that would trick the proletariat into voting against their own best interests. What are you, a CIA agent? Off to the gulag with you. 

 

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8 minutes ago, Khaleesi did nothing wrong said:

But the industrial revolution and capitalism are intertwined. Industrialization began in Great Britain after it instituted capitalist reforms, and then gradually spread to other countries as they adopted similar systems. China only being one of the most recent examples. 

There have been attempts by socialist countries to industrialize as well, but best case they end up as bleak copies of capitalist countries (Cuba, DDR, to some extent the USSR after Stalin). The other outcomes being total nightmares (North Korea, Democratic Kampuchea, Mao's China), or somewhere in between.  

North Korea is not feudal. Kim Jong Un hasn't handed out fiefs to vassals in exchange for them pledging their private armies to his service, as far as I know. On the contrary his country is extremely totalitarian. 

As for elections they obviously can't have those. They'd just be infiltrated by bourgeois spies and lobbyists that would trick the proletariat into voting against their own best interests. What are you, a CIA agent? Off to the gulag with you. 

 

The results of industrialisation under rulers like Stalin and Mao were certainly impressive in terms of producing good quality weaponry in large quantities, and appalling in terms of producing decent consumer goods.

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Just now, The Marquis de Leech said:

I decided some time ago that social democracy is inherently unstable.

This is something that I've long thought about and have no answer. My question is whether the wealthy of any society will be able to live with it and not try to undermine it at every opportunity.

I've said here on this thread I'm a bit skeptical of "marxist solutions". But on the on the other hand without the threats of militant marxist and  communist, I do have to wonder whether the wealthy of a society would even agree to a more moderate social democracy.

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