Venezuela’s Road to Literal Serfdom

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Friedrich Hayek’s classic book The Road to Serfdom describes the popular delusions that have led to the breakdown of civil society in Venezuela.

Barry Brownstein writes: In his classic 1841 book on financial bubbles, Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay observed, “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

“In societies turning to socialism, there is no appreciation of scarcity. There is no appreciation that ‘things cannot all be done at the same time, that anyone of them can be achieved only at the sacrifice of others.’”

Mackay covered religious and political delusions, too. “We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple,” he recounts, “and serfdomneither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity.”

[Order Friedrich Hayek’s classic “The Road to Serfdom” from Amazon.com]

Venezuela is sowing its harvest of “groans and tears.” Due to the breakdown of civil society in the country, even war-plagued Syrians feel more safe in their homes than do Venezuelans. Venezuelans are so hungry that they cried at the sight of food in Columbia. Recently the hungry broke into a zoo to kill a horse for its meat. Literally, they have become serfs that may be required to work 60 days or more in agricultural fields.

“The hard to give up delusion of socialists is that there are coercive plans that will benefit all. Venezuelans have seen the means of production nationalized in the name of the common good and with every intervention their standard of living fell further.”

Venezuela has the world’s worst rate of economic growth, and the worst inflation rate. It has become like “a gangster state that doesn’t know how to do anything other than sell drugs and steal money for itself.” Socialism has virtually destroyed civilization in Venezuela making it seem like a “hurricane [has] swept things away.”

[Read the full text here, at Foundation for Economic Education]

When the history of this tragic period in Venezuela is written, the population will have plenty of “culprits” to blame. In blaming many will eschew their own responsibility. Some will blame Chavez; others will blame Maduro. Some will follow their beloved leaders and continue to blame the “elite” and the capitalists. The true believers will continue to insist there is no inherent flaw in socialism; they will simply say mistakes were made that will not be made again.

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“Believing that the “coercive or arbitrary intervention of authority,” can coordinate and adjust our individual activities is delusional. With this delusion comes disbelief that a market economy can solve problems and advance society. Those who cherish such delusions may find themselves hungry.”

We are not the victims of the world we see. Our delusions, our beliefs have consequences. The fact that our delusions are often invisible to us does not make them any less powerful or any less consequential. Again, Mackay observed that a population subject to delusions “only recover their senses slowly, and one by one.”

The new idea of freedom “gave the socialists another word in common with the liberals and they exploited it to the full.

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Venezuelans have not yet recovered their “senses.”  Caracas radio host Glen Martinez stubbornly insists that the “reforms” that Chavez instituted will never be reversed. “We are not the same people we were before 1999,” Martinez said. Many share Martinez’s sentiments; daily the true believers still march and  promise to spill their blood in support of the government.

“The fact that our delusions are often invisible to us does not make them any less powerful or any less consequential.”

There is no better book than Friedrich Hayek’s classic The Road to Serfdom to explain the popular delusions that helped to virtually eliminate the market economy and civil society in Venezuela. Writing during the depths of World War II, Hayek intended his book as a warning “to the socialists of all parties.” What happened in Venezuela can happen wherever a critical mass of the population begins to hold certain delusionary beliefs.

Popular Delusion 1: Freedom Means Freedom from Necessity

Hayek points out that freedom in Western countries traditionally meant “freedom from coercion, freedom from the arbitrary power of other men.”

Socialists point to a “new freedom” which is “freedom from necessity” which releases us “from the compulsion of the circumstances which inevitably limit the range of choice of all of us.”

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Hayek adds, “the demand for the new freedom was thus only another name for the old demand for an equal distribution of wealth.”

Believing that these two types of freedom can be combined is delusional. Hayek points out that the new idea of freedom “gave the socialists another word in common with the liberals and they exploited it to the full….Few people noticed [that the word freedom was being used differently] and still fewer asked themselves whether the two kinds of freedom promised really could be combined.”

Popular Delusion 2. Only Coercive Planning Can Coordinate Activity

Almost every individual and organization plans. Writes Hayek, there is no “dispute about whether we ought to employ foresight and systematic thinking and planning our common affairs.”

Hayek thought that to plan or not to plan is not “the real question.” Instead, we should ask if “the holder of coercive power should confine himself in general to creating conditions under which the knowledge and initiative of individuals is given the best scope so that they can plan most successfully; or whether a rational utilization of our resources requires central direction and organization of all our activities according to some consciously constructed ‘blueprint.’”

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Those who cherish such delusions may find themselves hungry.

The humanitarian disaster in Venezuela has been a long time in the making. In 2010, the hungry waited while “2,340 shipping containers with more than 120,000 tons of rotting food (estimated to feed 17 million people for one month)” sat at the government run port of Puerto Cabello. Read the rest of this entry »


The Socialist Economics of Italian Fascism

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If classical liberalism spells individualism, Fascism spells government. Sound familiar? 

Lawrence K. Samuels writes: The economics of Italian Fascism is often ignored or trivialized because so much of it is found in today’s world economies. Consider some of the components of fascist economics: central planning, heavy state subsidies, protectionism (high tariffs), steep levels of nationalization, rampant cronyism, large deficits, high government spending, bank and industry bailouts, overlapping bureaucracy, massive social welfare programs, crushing national debt, bouts of inflation and “a highly regulated, multiclass, integrated national economic structure.”1

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“The Fascist conception of life accepts the individual only in so far as his interests coincide with the State…Fascism reasserts the rights of the state. If classical liberalism spells individualism, Fascism spells government.”

— Benito Mussolini, from “Doctrine of Fascism

On numerous occasions, Benito Mussolini identified his economic policies with “state capitalism”—the exact phrase that Vladimir Lenin used to usher in his New Economic Policy (NEP). Lenin wrote: “State capitalism would be a step forward as compared with the present state of affairs in our liberal-fascismSoviet Republic.”2 After Russia’s economy collapsed in 1921, Lenin allowed privatization and private initiative, and he let the people trade, buy and sell for private profit.3 Lenin was moving towards a mixed economy.

[Order Jonah Goldberg’s book “Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning”  from Amazon]

He even demanded that state-owned companies operate on profit/loss principles.4Lenin acknowledged that he had to back away from total socialism and allow some capitalism.

 “In his 1928 autobiography, Mussolini made clear his dislike for liberal capitalism: ‘The citizen in the Fascist State is no longer a selfish individual who has the anti-social right of rebelling against any law of the Collectivity.’”

Mussolini followed Lenin’s example and proceeded to establish a state-driven economic model in Italy. In essence, Mussolini’s fascism was simply an imitation of Lenin’s “third way,” which combined market-based mechanisms and socialism—similar to Red China’s “market socialism.” In short, Lenin’s revised Marxism culminated in “socialist-lite” policies that helped inspire Mussolini to craft his own Italian-style fascism with a right-wing socialist twist. Thus, one could argue that Lenin’s politics were the first modern-day version of fascism and state-corporatism.

01 Adolf Hitler and Benito Mussolini during Hitler's 1938 state visit to Italy

“As the effects of the Great Depression lingered, Italy’s government promoted mergers and acquisitions, bailed out failing businesses and ‘seized the stock holdings of banks, which held large equity interests.’ The Italian state took over bankrupt corporations, cartelized business, increased government spending, expanded the money supply, and boosted deficits. The Italian government promoted heavy industry by ‘nationalizing it instead of letting the companies go bankrupt.”

Economist Ludwig von Mises, who fled the Nazi conquest of Europe, contended that the “economic program of Italian Fascism did not differ from the program of British Guild Socialism as propagated by the most eminent British and European socialists.”5,6

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“The Fascist conception of life accepts the individual only in so far as his interests coincide with the State…Fascism reasserts the rights of the state. If classical liberalism spells individualism, Fascism spells government.”

— Benito Mussolini

In The Concise Encyclopedia of Economics, Sheldon Richman succinctly states: “As an economic system, fascism is socialism with a capitalist 36b25ade-47bd-11e1-9a92-00144feabdc0.imgveneer.”7 He contends that socialism seeks to abolish capitalism outright, while fascism gives the appearance of a market-based economy, even though it relies heavily on the central planning of all economic activities. According to authors Roland Sarti and Rosario Romeo, “[U]nder Fascism the state had more latitude for control of the economy than any other nation at the time except for the Soviet Union.”8

[Read the full text here, at Library of Economic Liberty]

Interestingly, Mussolini found much of John Maynard Keynes’s economic theories consistent with fascism, writing: “Fascism entirely agrees with Mr. Maynard Keynes, despite the latter’s prominent position as a Liberal. In fact, Mr. Keynes’ excellent little book, The End of Laissez-Faire (1926) might, so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud.”9

After the worldwide Great Depression, Mussolini became more vocal in his claims that fascism explicitly rejected the capitalist elements of economic individualism and laissez-faire liberalism.10 In his “Doctrine of Fascism,” Mussolini wrote: “The Fascist conception of life accepts the individual only in so far as his interests coincide with the State…Fascism reasserts the rights of the state. If classical liberalism spells individualism, Fascism spells government.” In his 1928 autobiography, Mussolini made clear his dislike for liberal capitalism: “The citizen in the Fascist State is no longer a selfish individual who has the anti-social right of rebelling against any law of the Collectivity.”11 Read the rest of this entry »


‘Neoliberalism’ – A Term Both Ubiquitous and Ill-Defined – is an Evolving Body of Market-Driven Ideas. Or a Conspiracy by Elites to Torment the Poor…

Margaret Thatcher arrives in Washington, November 1988 (courtesy Ronald Reagan Library)

Margaret Thatcher arrives in Washington, November 1988 (courtesy Ronald Reagan Library)

Spontaneous Order: Looking Back at Neoliberalism

Tim Barker  writes:  “The owl of Minerva,” Hegel famously wrote, “flies only at dusk”: historical events can be theoretically comprehended only in retrospect. Is this the case with neoliberalism? A term ubiquitous in the academy but scarcely used outside it, the concept is difficult to define with precision. A common shorthand identifies it as the economic and philosophical ideology behind the Reagan-Thatcher revolution; it is also often agreed that this ideology contributed somehow to the financial crisis of 2008. Now, with the recession technically over but recovery still ambiguous, two recent books attempt to describe neoliberalism’s historical origins and explore its current political implications.

Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism

by Johanna Bockman
Stanford University Press, 2011, 352 pp.

Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics

by Daniel Stedman Jones
Princeton University Press, 2012, 432 pp.

In Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics, Daniel Stedman Jones charts the rise of neoliberalism, which he defines as the “coherent, if loose, body of ideas” that underwrite our contemporary “market-driven society.” He begins with the intellectual biographies of three exiled Central European thinkers—Ludwig von Mises, Friedrich Hayek, and Karl Popper—who challenged the industrial West’s consensus around social welfare programs, full employment, labor unions, and state intervention. This first, émigré generation (joined by kindred Americans and West Germans) were “neoliberal” in their opposition to central planning, but also “neoliberal” because they sought a reformed liberalism for the middle of the twentieth century, not a simple return to the laissez-faire of the nineteenth. Hayek’s Road to Serfdom, for example, countenanced significant departures from laissez-faire, including universal health care.

Read the rest of this entry »


NBC: ‘Making Lies Sound Truthful and Murder Respectable’

NBC Praises Communism as One of History’s ‘Pivotal Experiments’

4349565134_nbc_communist_logo_answer_3_xlarge“The towering presence, the empire that ascended to affirm a colossal footprint. The revolution that birthed one of modern history’s pivotal experiments. But if politics has long shaped our sense of who they are, it’s passion that endures. As a more reliable right to their collective heart. What they build in aspirations lifted by imagination. What they craft, through the wonder of every last detail. How magical the fusion of sound and movement can be. How much a glass of distilled perfection and an overflowing table can matter. Discover the Russian people through these indelible signatures. Discover what we share with them through the games that open here tonight.”

George Orwellcall your office. As he wrote in “Politics and the English Language, in 1946, such euphemisms are “designed to make lies sound truthful and murder respectable,” and certainly describing Communism as “one of modern history’s pivotal experiments” fits the bill in spades.

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Why I Am an Anarcho-Capitalist

LewRockwell2011Llewellyn H. Rockwell writes: A great many people – more than ever, probably – describe themselves as supporters of the free market today, in spite of the unrelenting propaganda against it. And that’s great. Those statements of support, however, are followed by the inevitable but: but we need government to provide physical security and dispute resolution, the most critical services of all.

Almost without a thought, people who otherwise support the market want to assign to government the production of the most important goods and services. Many favor a government or government-delegated monopoly on the production of money, and all support a government monopoly on the production of law and protection services.

This isn’t to say these folks are stupid or doltish. Nearly all of us passed through a limited-government – or “minarchist” – period, and it simply never occurred to us to examine our premises closely.state-vs-market-graphic

To begin with, a few basic economic principles ought to give us pause before we assume government activity is advisable:

  • Monopolies (of which government itself is a prime example) lead to higher prices and poorer service over time.
  • The free market’s price system is constantly directing resources into such a pattern that the desires of the consumers are served in a least-cost way in terms of opportunities foregone.
  • Government, by contrast, cannot be “run like a business,” as Ludwig von Mises explained in Bureaucracy. Without the profit-and-loss test, by which society ratifies allocation decisions, a government agency has no idea what to produce, in what quantities, in what location, using what methods. Their every decision is arbitrary, in a way directly analogous to the problem facing the socialist planning board (as Mises also discussed, this time in his famous essay “Economic Calculation in the Socialist Commonwealth“).

In other words, when it comes to government provision of anything, we have good reason to expect poor quality, high prices, and arbitrary and wasteful resource allocation.

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