In the early ’80s, as Margaret Thatcher attempted to hack away at England’s substantial public sector, she found a frustrating degree of public resistance. The closer she got to the bone, the more the patient wriggled and withdrew. Thatcher doggedly persisted, yet her pace wasn’t fast enough for right-wing Austrian economist Friedrich von Hayek, her idol and ideological mentor. You see,… return to article
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Reader Comments (9)Page 1 of 1 pagesI have lately been thinking that the “free marketeers” are every bit as bereft of reality as their communist nemeses ever were and in exactly the same way: the theoretical structures of both equally ignore the impact of the same all important aspect of human nature—greed.
The communists never appreciated the need for greed (how self-interest motivates efficiency and innovation).
The free marketeers never understand the need to rein in greed with an adequate system of checks and balances (which hasn’t occurred naturally—that is without state intervention—since the beginning of industrialization). The belief that the oldest story of mankind—who’s going to eat whose lunch—can give way to some blind (market) mechanism is something psychologists (and rationale economists) might describe as “magical thinking”.
(Uniquely) in America we have a deep seated, long running problem with this literally mindless ideology. It is an ideology which on an operational basis reduces all solutions to: don’t do anything about the problem (“government isn’t the solution; government is the problem”). Hopefully, we are now in a period in which America can permanently shed this literally missing-marbles ideology.
Milton Freidman wrote that crisis is the only opportunity to change. By early 2007 (before the recent slight increase in the minimum wage), 25% of American workers were earning less than the minimum wage of 1968 (I wonder if Americans of 1968 would have seen that as a crisis if somehow they could have foreseen it). Using a realistic poverty measure, 25% of Americans could also be found living below the real poverty line (not the official—three times the price of the lowest possible food budget—poverty line) in 2007—up from 15% in 1968.
But, Americans must “find out” about the crisis first. The number one way to alert them could be for progressives to construct a realistic poverty line (a “Plan B” poverty line—the formula found in the 2002 book Raise the Floor sounds perfect) and to begin to refer to the realistic line in all their writings and attempt to get the media to follow suit (at least as an arguable alternative). Once Americans wake up to find out that poverty is approaching doubling since the LBJ began the war on poverty (even as average income doubled) a new national conversation will be on.
Then it may be time to note that in 1972 the top 1% of earners took in only 7.6% of overall income; by 2001 it was 17.6%, by 2005 22.5% and to wonder when it will reach 27.6%—that sounds like a crisis…
...for which there is a very simple solution: legally mandated, sector-wide collective bargaining (or some equivalent like the French system where all firms work under conditions agreed to by unionized firms)—the perfect, permanent checks and balances solution to the super bean counter management used all over the better paid OECD world.
Posted by ddrew2u on Nov 10, 2007 at 5:15 PM I should have finished up above—given the topic concerned the whole world—by saying that once American opinion finally accepts the idea that the free market is only the (truly remarkable) OS (operating system) and that the industrial default program has always been the “race to the bottom” since the beginning of the industrial age—without heavy legislative intervention (most importantly via fairly balancing the labor market as well as via transfers)—then, the issue will be pretty much resolved world-wide (there being nobody significant left espousing out-of-control market forces).
Posted by ddrew2u on Nov 10, 2007 at 8:42 PM The New Road to Serfdom.
Same as The Old Road to Serfdom.
The old road to serfdom was inspired by Marx-Engels Socialism, and grew to hold sway over a substantial portion of the globe, it’s peoples, and it’s resources, all in a period of about a century and a half. Then, in it’s various manifestations, it collapsed from corruption and inefficiency, rapidly in the Soviet Union, and more slowly as capitalist principles were embraced in China and India. The only remnants of the original Marxist serfdom are Cuba and NorK, two of the poorest, most benighted, corrupt, and inefficient countries on earth.
Interestingly, Chavez in Venezuela is trying to revive Socialism, financed by his windfall (and temporary) oil profits. Russia is trying to revive the toxic totalitarian aspects of the Soviet Union without the toxic Socialist label, also with windfall (and temporary) oil profits.
Meanwhile, back in the real world, von Hayek’s free market followers are faring somewhat better:
* Chile hit an economic peak about 1910, based on commodity (nitrates) economic strength, but commodities are a poor basis for long-term growth and stability. The Chilean economy fared poorly thereafter, and by the late 1960s was suffering 35% inflation rates, with accompaying economic and social disruptions. In 1970, Allende, with the help of his KGB and Cuban Socialist advisors, nationalized the agricultural sector (shades of the Ukraine catastrophe of the 1920s) and later the copper industry. Injecting lots of money into the economy, Allende caused wages to rise and inflation to rise even faster, hitting 120% annual rates. (Inflation is theft.) Pinochet stabilized Chile, and von Hayek’s free-market principles were applied. Chile is now the only country in Latin America that is rated as “Free” by heritage.org, and it has the strongest economy in Latin America.
* After the collapse of the Soviet Union, all the countries of Eastern Europe eagerly embraced Western freedoms, none more so than Estonia. At the age of 32, Mart Laar became the Prime Minister of Estonia. He claims that the only thing he knew about economics was what he read in Friedrich von Hayek and Milton Freeman. Laar must have been a fast study, because Estonia is now the fastest growing, most properous country in Eastern Europe.
* Ireland was the economic pits as recently as 1975 (contemporary with Chile’s Allende). Embracing free-market principles, Ireland has enjoyed steady growth and prosperity, and is now rated as one of the most prosperous nations of Western Europe.
In a variety of circumstances, freedom, as characterized by von Hayek’s teachings, has led to personal freedom and economic growth and stability. In a variety of circumstances, Socialism has led to stagnation, corruption, inefficiency, death, and destruction.
Klein resurrects Hayek’s argument and inverts it, showing how time and again, the “economic freedom” envisioned by Hayek and his ilk has been imposed at the expense of political freedom, often, Klein writes, “midwifed by the most brutal forms of coercion.” And then cites Chile as an example.
But that is dishonest. Under Allende, the KGB, and their Cuban advisors, there were plenty of “the most brutal forms of coercion”. Pinochet’s reforms were benign in comparison, and led directly to, not only “political freedom”, but to economic and individual freedom as well, as demonstrated by Chile’s current prosperity and freedoms.
So, I doubt if Klein’s book will rank with Marx’s Communist Manifesto or with von Hayek’s The Road to Serfdom in geopolitical impact, for good or evil. If Klein and Hayes are lucky, The Shock Doctrine: The Rise of Disaster Capitalism will be about as influential as a comic book on the high side, or the New York Times on the low side.
Posted by scorp on Nov 10, 2007 at 11:03 PM When I read anything using the word “ilk” a red flag goes up. “Ilking”” a group goes hand in glove with tagging words like “never” and “always.”
What makes it reasonable to label markets in totalitarian fashion and weld them to liberal/conservative, good/bad, or any other simplistic categorization?
re: The inseparability of political freedom and economic freedom—
Would the author care to give an example of a nation where there is one without the other? Is it not a matter of degree with each of these?re: greed —
It seems to me this is a universal and timeless human characteristic — also by degrees.Economics and political views are neither innately moral or immoral and are seldom pure. Rather than an ON/OFF switch they run on a rheostat.
The free market to my knowledge has never truly been applied by any country. It is similar, however, to gravity — ultimately unavoidable. Supply and demand (availability and desirability) will eventually determine the market and the price of anything.
We do not have and have never had a free market economy in my lifetime. There have been regulations and limitations in effect, both good and bad, temporary and long-term.
Think of child labor laws, safety regulations, speed limits (Nixon’s 55 mph). Today lax import inspections have given us cheaper prices along with poisoned pet food and toys and questionable prescriptions. The push for competitive advantage has made billionaires and an evaporating middle class.
Greed (self gain) within limits creates jobs and uncheck destroys them. Regulation is not either/or, but which and how much.
Economic theory is only as moral or immoral as the individuals applying it.
Posted by whattheheck on Nov 12, 2007 at 3:46 PM Since Adam Smith’s “perfect competition world” of small entrepreneurs and skilled artisans was replaced by the industrial world the simple (if catastrophic) problem for (100 times more productive) interchangeable workers has been the RACE TO THE BOTTOM. The simple solution now practiced all over the better paying world is SECTOR-WIDE labor agreements (or some equivalent).
This is not ideology. This is merely mechanical. It is that simple.
Posted by ddrew2u on Nov 13, 2007 at 3:59 PM ddrew2,
There have been times when I wished I had lived in an earlier era — there is something very appealing when visiting a place like Williamsburg, VA or reading of the slower pace a century ago.
As a retired graphic artist (formerly known as a commercial artist) who has sold a few “fine art” pieces, I can tell you I would have starved if not for industrial clients. Many of the revered masters’ works in museums did little for the artist during his lifetime. I hated switching to digital production and have often compared drawing with my hands versus with a mouse as being like Playboy Magazine is to real sex.
But to use more universal examples, picture life without the advancements industrialization has brought us —
A chemist could hardly provide enough aspirin tablets for a medium sized city even if modern science weren’t needed to develop them and thousands of other medications.
Without mechanized farming we could provide far less food, but then, I guess with the high rates of infant death of the olden days we wouldn’t need as much.
And we would not be having this discussion without the industrial capacity to have made our computers, the wires, the satellites, the CDs, etc.
I’m very disturbed by what has happened to our economy now that our government is run by CEOs through their lobbyists, but I didn’t like it back when the unions were able to dictate conditions either. Detroit was turning out junk until the foreign makes made them shape up. My brand new 1973 Pontiac LeMans was one of the worst cars I ever owned. It was exactly one year to the day that I traded it for a VW and have had a total of six since (My 1991 Jetta is still fun to drive and gets 25+ mph in town).
Greed has no exclusive home. We need to constantly rebalance power whether in business or government. Now is a time to do it again before the nation disintegrates.
Posted by whattheheck on Nov 13, 2007 at 8:21 PM whattheheck,
Hate to break it to you (German car fan) but German workers have the most powerful union setup in the world: mandatory, sector wide labor agreements: everybody doing the same job in the same locale must by law work under the same labor contract even though they work for different employers.I am not knocking industrialization—just recognizing the (easily remedied—did someone say sector-wide bargaining?) difference in the labor negotiating power between Adam’s era and the industrial era: the catastrophic race to the wage and benefit bottom.
Today, I had the bright idea that if Adam Smith had been born 50 years later he would have included in his Wealth of Nations an understandable explanation of the race to the bottom (don’t know if he would have thought of unions—Marx didn’t—least of all sector-wide contracts) as neat and understandable as his famous depiction of the hidden hand.
Posted by ddrew2u on Nov 15, 2007 at 5:16 AM ddrew2u,
I’m not opposed to organized labor, I’m opposed to either management or labor having too much power and lording it over the other.
I always worked alone (except for 3 years and my military service) as a one man business, but it seems to me neither is any good without the other. In the 1970s labor was strong and management figured it was better to give them whatever they asked than to shut down and lose their big salaries and bonuses. The result was our cars were less dependable than foeign ones. This was the beginnning of the end for thousands of good U.S. jobs.
The best companies I ever did work for were the medium sized ones which were either run by the second or third generation owners or where most of the stock was locally held. They had a genuine respect for each other and joint pride in what they made.
As they got bigger and brought in outsiders as managers everything went to hell. Soon all that mattered was what Wall St. thought of their chances to raise the stock price. About 1990 or a little before they started dumping the most experienced long-time workers and shifting to cheap foreign countries.
We are about to see a very tough time economically in this country. I remember my parents telling of their experiences during the depression and until recently never thought I would live to see it — but it has already begun to unwind.
As a retiree I don’t have to travel. I feel sorry for those who could only find work out of town and now can’t sell and move — not a good tiime for a lot of people, black or white, but it will be worst for those who can least afford it.
As for European unions, they have gone way to far in their benefits and will be giving them back just as our UAW is doing. In the U.S. Companies have been bailing out of pensions beginning with the 401(k) plans. It is the pension plans which are preventing our companies in competing with other countries.
France has a 10 percent unemployment rate and is once again battling the unions who only work very short hours per week and retire early. Germany has had 50 age retirement age for “train drivers” (engineers) and can’t cope with the cost of such benefits either.
Corporations have largely abandoned national loyalty and have become global — to the sole benefit of management.
Posted by whattheheck on Nov 16, 2007 at 8:32 PM Mr. Hayes,
If the capitalist system is a mere imagined utopia, please describe your alternative. Everyone knows there are problems with our current form of government. I, for one, would like to start hearing ideas on solutions.
Thanks.
Posted by seedy11 on May 16, 2008 at 12:10 AM Page 1 of 1 pages -
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