The Reformer’s Plight in The Great Idea

I’m a fan of dystopian fiction, but I overlooked Henry Hazlitt’s The Great Idea (subsequently republished as Time Will Run Back) until last December.  I feared a long-winded, clunky version of Hazlitt’s Economics in One Lesson, but I gave it a chance, and my gamble paid off.  I read the whole thing (almost 400 pages) on a red-eye flight – feeling wide awake the whole way.

The book’s premise: Centuries hence, mankind groans under a world Communist government centered in Moscow.  People live in Stalinist fear and penury.  Censorship is so extreme that virtually all pre-revolutionary writings have been destroyed; even Marx has been censored, to prevent anyone from reverse engineering whatever “capitalism” was.  However, due to a marital dispute, Peter Uldanov, the dictator’s son, was raised in an island paradise, free of both the horrors and the rationalizations of his dystopian society.  When the dictator nears death, he brings Peter to Moscow and appoints him his heir.  The well-meaning but naive Peter is instantly horrified by Communism, and sets out to fix it.  In time, he rediscovers free-market economics, and sets the world to right.

Yes, this sounds trite to me, too.  But Hazlitt is a master of pacing.  It takes almost 200 pages before any of Peter’s reforms start to work.  Until then, it’s one false start after another, because so many of the seemingly dysfunctional policies of the Stalinist society are remedies for other dysfunctional policies.  Here’s Peter arguing with Adams, a reform-minded Communist minister.

“…The hard fact is that some people simply have to do more unpleasant chores than others, and the only way we can get the unpleasant chores done is by compulsion. Not everybody can be a manager, or an actor or an artist or a violin player. Somebody has to dig the coal, collect the garbage, repair the sewers. Nobody will deliberately choose these smelly jobs. People will have to be assigned to them, forced to do them.”

“Well, perhaps we could compensate them in some way, Adams—say by letting them work shorter hours than the others.”

“We thought of that long ago, chief. It didn’t work. It unluckily turned out that it was only the pleasant jobs, like acting or violin playing, that could be reduced to short hours. But we simply can’t afford to have people work only a few hours on the nasty jobs. These are precisely the jobs that have to be done. We couldn’t afford to cut our coal production in half by cutting the hours in half, for example; and we just haven’t got the spare manpower to rotate. Besides, we found that on most such jobs a considerable loss of time and production was involved merely in changing shifts.”

“All right,” agreed Peter; “so under our socialist system we can’t have freedom in choice of work or occupation. But couldn’t we provide some freedom of initiative—at least for those who direct production? Our propaganda is always urging more initiative on the part of commissars or individual plant managers. Why don’t we get it?”

“Because a commissar or plant manager, chief, is invariably shot if his initiative goes wrong. The very fact that he was using his own initiative means that he was not following orders. How can you reconcile individual initiative with planning from the center? When we draw up our Five Year Plans, we allocate the production of hundreds of different commodities and services in accordance with what we assume to be the needs of the people. Now if every plant manager decided for himself what things his plant should produce or how much it should produce of them, our production would turn out to be completely unbalanced and chaotic.”

“Very well,” Peter said; “so we can’t permit the individual plant manager to decide what to produce or how much to produce of it. But this is certainly a big disadvantage. For if someone on the Central Planning Board doesn’t think of some new need to be satisfied, or some new way of satisfying an old need, then nobody thinks of it and nobody dares to supply it. But I have in mind something different from that. How can we encourage individual plant managers to devise more efficient ways of producing the things they are ordered to produce? If these plant managers can’t be encouraged to invent new or better consumption goods, at least they can be encouraged to invent new methods or machines to produce more economically the consumption goods they are ordered to produce, or to produce a higher quality of those consumption goods.”

“You’re just back to the same problem,” Adams said. “If I’m a plant manager, and I invent a new machine, I’ll have to ask the Central Planning Board to get somebody to build it, or to allocate the materials to me so that I can build it. In either case I’ll upset the preordained central plan. I’ll have a hard job convincing the Central Planning Board that my invention or experiment won’t fail. If my invention does fail, and it turns out that I have wasted scarce labor and materials, I will be removed and probably shot. The member of the Central Planning Board who approved my project will be lucky if he isn’t shot himself. Therefore, unless the success of my invention or experiment seems absolutely certain in advance, I will be well advised to do what everybody else does. Then if I fail, I can prove that I failed strictly according to the rules…”

Finally Peter settles on a seemingly simpler radical reform:

“Well, I can think of one more kind of freedom,” Peter said, “and I am determined to create it. That is the freedom to criticize the government.”

Adams started. He seemed to waver between incredulity and alarm. “You mean that you would permit people to criticize the actions of the government, and perhaps even denounce the government, and go unpunished?”

“Exactly!”

“Why, chief, you and I would be destroyed in a few weeks! If we allowed people to criticize us with impunity they would lose all fear of us—all respect for us. There would be an explosion of criticism that would blow us out of our seats—out of Wonworld. And what would we accomplish? Our successors would, of course, immediately suppress criticism again, for their own survival. “

What happens surprises them both.

Peter eagerly looked forward to the results of his reform. There weren’t any. None of the things happened that Adams had predicted. On the other hand, none of the consequences followed that Peter had hoped for. There was simply an intensification of the kind of criticism that had already been going on. People in superior positions continued to criticize people in subordinate positions; they continued to put the blame for failure on people who were not in a position to protect themselves; they continued to accuse people in minor positions of being deviationists and wreckers.

This was what had always been known as communist self-criticism. Peter put out still another proclamation. He ordered a stop to this sort of criticism. For a while it greatly diminished. But still no subordinate criticized his superior, and no one criticized the Politburo, the Party, or the government itself.

“What happened, Adams? Or rather, why didn’t anything happen?”

Adams smiled. “I should have foreseen this, chief. It should have been obvious. All that happened is that nobody trusted your proclamation. They thought it was a trick.”

“A trick?”

“Yes—a trick to smoke them out. A trick to find out who were the enemies of the government, and to liquidate them. Everybody waited for somebody else to stick his neck out, to see what would happen to him. Nobody wanted to be the first. So nobody was.”

Much the same happens when Peter orders free elections.  Later, he launches a seemingly plausible experiment in worker management:

“One of our great troubles, Adams, is that we are trying to plan more than any human mind can hold. We are trying to plan every industry—and all their interrelations—and all the rest. Why not let the workers of each industry control and police their own industry? That would decentralize control and break up the planning problem into manageable units.”

“The idea has possibilities, chief . . . but it might lead to results we couldn’t foresee.”

“Precisely,” said Peter; “and that is why we ought to try it out.”

[…]

“Why not try it out, then, only on a small scale? Why not apply the idea, Adams, in only one province—far away from Moscow? Why not throw a censorship around that district, so that no news could get in or out until we were certain that the experiment was a success?”

“Have you decided, chief, who our guinea pigs would be?”

“How about the Soviet Republic of Peru? That’s certainly remote enough!”

Here’s what goes down in Soviet Peru:

At the very start he found himself confronted in Peru by a problem of unexpected difficulty. He wanted each industry to be self-governing and independent. But what was an industry? Where did each industry begin and end?… At the end, when the Peruvian commissars he had appointed had finished their work, they had named fifty-seven different industries…

A temporary head was named for each industry. Someone jokingly nicknamed these heads the industry “czars.” Each industry was told to organize itself in any way it thought fit, provided each worker was allowed an equal vote. The industry could fix its own production, its own prices or terms of exchange, its own hours and conditions of work, its own entrance requirements.

Some Peruvians called the new system “syndicalism”; others called it “guild socialism”; and still others liked the name “corporativism.”

Peter returned to Moscow, promising to be back in Peru in six months to see how the new system was working. He left a secret cable code with the three top commissars to keep him informed.

Before two months had passed he received urgent cables begging for his return.

He came back to find a chaotic situation bordering on civil war. The first thing the workers in each industry had done had been to exclude anybody else from entering the industry. Each industry had quickly discovered that it could exact the best terms of exchange for its particular product by rendering it relatively scarce. There had then developed a competitive race for scarcity instead of for production. The workers in each industry voted themselves shorter and shorter hours. Each industry was either withholding goods or threatening to suspend production altogether until it got the prices it demanded for the particular kind of goods it had to supply.

Peter was indignant. He called in the various syndicates of workers representing each industry and denounced them in blistering terms for the selfish and shortsighted way in which they had “abused” the privileges he had conferred upon them. But as he studied the matter further he cooled off, and took a more objective view. He was forced to acknowledge to himself that the fault was his own. It was inherent in the system he had set up. He had allowed each industry to become an unrestrained monopoly. The more essential or irreplaceable the product that it made, therefore, the more it could and would squeeze everybody else…

He dismantled the new system entirely, and ordered the restoration of the old centralized socialism under the Central Planning Board at Moscow.

In most literary dialogues, at least one of the characters has the answers.  (“Yes, Socrates, you are quite right!”)  What’s novel about Hazlitt’s dialogues is that all the characters are deeply confused.  Even when they sound reasonable, the Complexity of the World repeatedly makes fools of them.

The Great Idea was originally published in 1951.  Stalin was still alive.  Fifteen years ago, Hazlitt wrote a new introduction with a grim forecast:

The Communist rulers cannot permit private ownership of the means of production not merely because this would mean the surrender of the central principle of their system, but because it would mean the restoration of individual liberty and the end of their despotic power. So I confess that the hope that some day an idealistic Peter Uldanov, miraculously finding himself at the pinnacle of power, will voluntarily restore the right of property, is a dream likely to be fulfilled only in fiction. But it is certainly not altogether idle to hope that, with a growth of economic understanding among their own people, the hands of the Communist dictators may some day be forced, more violently than Lenin’s were when the mutiny at Kronstadt, though suppressed, forced him to adopt the New Economic Policy.

Hazlitt was, of course, thoroughly wrong.  As far as we can tell, Gorbachev never had any intention of restoring capitalism.  But Yeltsin – a career Communist – did just that.  And despite all the disappointment Putin has provoked, the former Soviet Union has seen nothing remotely approaching the horrors of the Russian Civil War.  The actually-existing dystopia of the Soviet Union practically died in its sleep, proving Hazlitt’s fiction to be the opposite of wishful thinking.

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Thanos, Renegades, Working, Anarcho-Capitalism, & Technology (32m) – Editor’s Break 128

Editor’s Break 128 has Skyler giving his commentary on the following topics: what New Years means to him; why Thanos is a villain; the importance of cultural and economic renegades pushing boundaries toward the fight for liberty; the necessity of working to prevent starvation; how anarcho-capitalism explains reality; who the so-called “addictive” qualities of technology is a problem for; and more. Happy New Year 2019!

Listen to Editor’s Break 128 (32m, mp3, 64kbps)

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On Capitalism III

Noam Chomsky and other left anarchist types criticize capitalism and wage labor by arguing that workers can’t give valid consent because their alternative to working is starvation. Nevermind that employers are not the force creating the prospect of starvation (that’s Mother Nature’s doing), but doesn’t this criticism apply equally to every other arrangement? Can workers in a commune or syndicate give consent if their alternative to working is also starvation? It seems to me that everyone’s alternative to either working or leeching is starvation. As such, decrying wage labor because of less than desirable alternatives that exist for everyone is disingenuous at best, dishonest at worst. And before you say that capitalists are just leeching off of workers, do your homework on the roles of capitalists and entrepreneurs in the economy. You might be surprised by what you find. And that’s today’s two cents.

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The Siren of Democratic Fundamentalism

In an otherwise outstanding primer on Scandinavian economic policy, Timothy Taylor remarks:

I won’t try to make the case here either for or against the Scandinavian model of capitalism. Strong majorities of people living in those countries seem to like the tradeoffs, which is all the justification that is needed.

“All the justification that is needed”?!  Frankly, this is a textbook case of what I call “democratic fundamentalism.”

Almost all economists, regardless of ideology, would scoff at the following argument: “Market decisions are voluntary, so we should respect market outcomes.”  But say, “Political decisions are democratic, so we should respect political outcomes,” and even economists salute.

Every economics textbook explain how market outcomes can go wrong.  Externalities.  Monopoly.  Asymmetric information.  Irrationality.  Democratic outcomes can easily go wrong for all the same reasons.  Is it possible that Scandinavians simply underestimate the severity of the disincentives their policies generate?  Is it possible that they ignore the externalities their welfare state imposes on others – most obviously, by providing a rationale for immigration restrictions?  Is it possible that Scandinavians vote for what sounds good, even if the actual effects of their preferred policies are bad?

Sure, you could object, “Couldn’t Americans be making analogous mistakes?”  The answer, of course, is: “Of course.”  My point is simply that political popularity proves next to nothing.  Scandinavians could be wrong.  Americans could be wrong.  Both could be wrong.  And if they are, bad policies will normally win by popular demand.

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Has Trump Been Good for Libertarianism?

I saw someone post that Trump is the most libertarian president and there was a long thread of people debating this. I think this idea is super wrong, and likely a hard stance to defend. I don’t think any of my friends would take the challenge to try to defend Trump as a libertarian president. That being said. I think I will make a post of why I believe Trump provides the presidency that libertarians should love the most since, at least Nixon, but probably since Grover Cleveland.

1. Trump is no worse than any other president.

Trump’s record is bad, but it is hard to point to a recent president that has a better record. While he is worse with tariffs, he is probably better with war. When you go through his record and compare it with other presidents, it is hard to find a president who did worse than Trump from a libertarian perspective. This is not because Trump is a libertarian or isn’t a giant pile of shit, but partially because of other factors I will expand on in #2.

2. Not much can be done under Trump since he is so Polarizing.

Anything backed by Trump can only go through Congress on a party line vote. The legislation that goes to congress has been relatively favorable to libertarian ideology. A lot of the legislation that he would love to pass that would be horrible doesn’t even go to congress because it doesn’t stand a chance.

3. Trump diminishes the presidency.

Trump is an asshat clown. He makes everything and everyone he touches look like clowns. He erodes faith in the presidency and government overall.

4. Trump makes the media look like fools.

In theory, libertarians should love the media since it is a private check on government power. However, in reality, the media has suffered under the inverse of regulatory capture … they have been captured by statism.

The media suffers from the bad incentives provided by desiring government access. They suffer from staffing government employees in order to boost ratings. They suffer from desiring and promoting bad news rather than no news. They suffer from the natural weeding out process of attracting people who “want to make a difference.” They suffer from group think. They suffer from being centered in areas with little ideological diversity. The modern media is a horrible institution that promotes statism, war, and government.

Trump makes everything he touches looks like shit. That is his magical power, and he makes the media look like partisan hacks. It is impossible to watch CNN, MSNBC, or any other “objective” news source and not see the partisan and personal hackery inspired through their hatred of Trump.

5. Trump reveals most every politician and political person as tribalistic hacks.

It is fun watching republicans defend ideas that they are supposed to oppose. It is fun to watch Democrats fight vigilantly against ideas that they are supposed to favor.

Trump shows these political actors to be rank hypocrites.

6. Gorsuch is great.

Trump has not intended to be good and he isn’t a libertarian president. However, I can’t imagine alternatives providing better Supreme Court nominations. Gorsuch is amazing, and Kavanaugh is tolerable. Yes, Kavanaugh sucks on 4th amendment issues and is crumby is some ways, but it is hard to imagine better candidates coming from the likes of Romney, McCain, Bush or Clinton.

7. Trump inspires division, tribalism and animosity.

This one will be split with libertarians. Some libertarians believe that the goal towards progress is to inspire good will in others and to change their minds towards liberty. Others, like me, think that the natural inclination of government is to always grow and that proper check on government is people opting out.

I don’t believe the way to get a more libertarian world is by convincing more people to be libertarians. People move for capitalism and vote for socialism. I don’t believe libertarian political movements are stronger than natural human incentives. I believe the way to get a libertarian world is by having successions, smaller governmental units and freedom of association. I believe the way we keep government small is by forcing governments to compete with other governments for citizens. In short, I want the US to split into smaller units. The way to do this is by inspiring division and animosity.

Conclusion. Trump isn’t playing 4D chess. Trump is a fool who would love to make the world worse. However, I believe his presidency is having a highly positive effect for libertarians.

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On Labor Day

Perhaps Labor Day would best be celebrated by recognizing the source of wage labor: capitalism. Economist George Reisman had it correct when he wrote that few people could survive by selling products. Many more people survive by selling their labor. Before capitalists entered the scene, people either survived on subsistence or by earning profits by selling their own products. Capitalism, rather than impoverishing wage earners, made it possible for earning wages by selling labor to exist at all. The Marxists were wrong; capitalists did not invent profits, they invented wages, and thus invented the Middle Class, lifting billions out of poverty. And that’s today’s two cents.

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