What's in a name? That which we call a rose....
There has been some discussion on the forum for the appropriate term to assign a compulsory based service. Should we call government services socialist or not? There are those, including portions of major Austrian Literature, which have summarized smaller compulsory based monopolies which exist in an economy as being socialist. Others contend however that it is an equivocation to call such organizations socialist, that socialism is only realized when a State assumes the authority of the entire market process and takes ownership of all means of production. The latter definition is one most commonly described by Mises, and is often considered impossible to accomplish, at least for any duration of time as the market process would be in an unguided perpetual state of chaos and be unable to sustain itself for any significant length of time.
There are those that argue that the word socialism should be assigned to a situation where the means of production of an entire market is owned and managed by the state. I contend, on the other hand, that various parts of government are socialist because they mimic the model of genuine socialism only at an isolated level. Due to their inability to calculate they operate at the expense of the market, via taxation.
If genuine socialism is the absolute state ownership of the means of production than it's pinnacle flaw is economic calculation and the formation of meaningful prices. In a fully-fledged socialist state prices are incapable of forming and as such the state has no means of guiding resources and capital. I contend that this flaw also occurs in mixed economies but is isolated to programs inside of the state, and that those programs operate at the expense of the market as a whole. My argument should conclude that even isolated socialist programs operate without economic calculation and to remain solvent they leech resources from the existing market.
I think this discrepancy is very important because true genuine socialism is formed incrementally and that each new addition of the State and subsequent reduction of the market is one more stepping stone to that obtain point, genuine socialism. I would also contend, and I think Mises agrees though I cannot find the quote, that a genuine socialist state is next to impossible to be realized. It is impossible to remove the market. At some point the bloat of the state will consume such a large portion of the resources that people will stop operating through State means to do business. This is when black markets emerge as a more common attribute of the environment and observe little innovation and entreapaneurship. The general absence of full scale market activities will squelch the state of its resources ultimately causing it fall. Practically every failed communist and socialist state in our history was this way. They never reached full scale genuine socialism. The markets simply went underground and the state ran out of resources. Using my picture below you can see how I illustrate where a market is capable of operating without a state entirely; however a state is incapable of continuing its operation without a market. Therefore it is in the state's best interest to keep market activity optimal so that it can continue to expropriate its fruits, due to ideological reasons it does not realize this.
The yellow line indicates at some point in time when we should expect that specific state to fail.
The point of this paper however is to argue that even isolated sections of the market which have been annexed into the ownership of the state should still be considered socialist. That even those isolated segments of the market now owned by the state suffer from the similar economic calculation and pricing issues that full genuine socialism suffers from.
Since the fundamental flaw of genuine socialism is the inability of fabricating meaningful prices and as such a lack of economic calculation I will argue that smaller socialist organizations also have this same attribute. That government provided goods and services also do not formulate meaningful prices. To do so we need to have a quick recap of how prices are formed in the market as described by Mises; this plays a fundamental roll in the failure of isolated socialist organizations and full scale genuine socialism.
In Human Action Chapter 16, "Prices", section two "Valuation and Appraisement". Mises sums up the formation of prices.
The ultimate source of the determination of prices is the value judgments of the consumers. Prices are the outcome of the valuation preferring a to b. They are social phenomena as they are brought about by the interplay of the valuations of all individuals participating in the operation of the market. Each individual, in buying or not buying and in selling or not selling, contributes his share to the formation of the market prices. But the larger the market is, the smaller is the weight of each individual's contribution. Thus the structure of market prices appears to the individual as a datum to which he must adjust his own conduct.....
He continues later....
....It is ultimately always the subjective value judgments of individuals that determine the formation of prices. Catallactics in conceiving the pricing process necessarily reverts to the fundamental category of action, the preference given to a over b.
This to me is an excellent summary from which to build from a flow chart from. The formation of prices can be summarized in 4 easy steps.
1. Person feels uneasiness
2. Person evaluates his options and chooses his preferences.
a. In his subjective valuation he takes into consideration market prices. These prices are the result of this same process across all humans participating in the market. He derives his prices from step 4.
3. Person acts and chooses a specific option. The price he pays becomes historical data added to the collective data of the market.
4. Prices are adjusted
For illustration review the following diagram.
Socialism due to lack of a functional pricing is incapable of addressing the following economic problems.
In genuine socialism, where all means of production are owned by the state, the formation of prices cannot occur meaningfully. As you will see for the same reasons isolated socialized services also cannot create meaningful prices, and they only operate at the expense of the market as a whole.
Using our summarized model we have taken an extremely complex system and summarized it into 4 steps. Steps 1 through 4 as described above. Some of these steps are more eloquently summarized in Lilburn's Comic's and other Austrian Literature. In genuine socialism we need to ask ourselves what parts of this process are broken and compare it to isolated socialized firms to find similarities. Let's consider the action of a person in genuine Socialism based on the steps described.
I will get into more detail on why the state fails in other aspects of providing services, but for now it's important to realize that genuine socialism breaks on step 2. The subjective valuation of man, and subsequently his choices are removed from him. He is no longer able to add his valuation as data into the market system. Consumer sovereignty does not exist under genuine socialism.
I know I may not have been too clear on some of these points but I simply wanted to summarize the argument of economic calculation in genuine socialism. In the absence of the market prices are arbitrary and there is no clear guider of where resources/goods/services should be allocated.
To conclude, with the lack of pricing there is no economic calculation, and pricing cannot form without the subjective valuation of man which become data inputs into the market. Now I hope to show you that isolated organizations of the state who claim only a portion of the market also fundamentally break down in the same way at the same spot, step 2.
What I mean by isolated socialism is a situation where the state has annexed a portion of the market under its own control. That this particular good or service is now provided in its entirety from the State. In order to function appropriately the state must assume the role of compulsory monopoly. Otherwise competition may undermine the whole purpose.
Any prices that are assigned by the state in socialist institutes, even if operated in the market, are still entirely arbitrary. The state assign's it's prices top down, not from consumer input as I'll describe below. If we follow our summarized steps to the formation of prices we can see that the same result occurs as under genuine socialism accept that it is isolated only to a specific industry. Subjective valuation and preferences are not extended to the consumer but decided by the state for a particular good or service. The state will decide which which good is suitable for you in said industry. Now I can get into more detail on why state decisions breaks down typical market activities.
State organizations or 'isolated socialist institutes' have no way of determining the following.
For this specific annexed industry
Notice the similarities in problems that an isolated socialist industry has as compared to genuine socialism across all industries. Socialized programs suffer from the same issues as genuine socialism, only that their problems are isolated and can be perpetuated by extracting wealth from the functional part of the market via state tools like taxation.
A socialized service provided by the state is incapable of determining consumer demand. It simply cannot measure how much of a good or service is needed. As such it arbitrarily decides the quantity and what usually results are excessive shortages and surpluses. Note that surplus's that do occur happen at the expense of productive industries. SO it cannot be said that the economy became wealthier because there is a surplus of goods that no one wants voluntarily.
Typically in a market the allocation of resources and capital are driven by consumer demand and entrepreneurship. If consumer demand is high than the entrepreneur will see this in the pricing schema of the market. Profits will naturally attract entrepreneurs and capitalists into those areas. Entrepreneurs decide where to expand operations based on consumer demand, where purchases are made. In other words the Entrepreneur looks at human preference and sees that man prefers B to C. So he invests his capital and risk into producing more of C. Or he sees that so much capital has been invested in C that those consumers who preferred B are being neglected, so he focuses on the niche market and capitalizes on it as such. In this way the quantity of consumers who want B get it, and those who want C get theirs, and the providers of those services have the opportunity to profit and generate new market wealth, raising the standard of living for everyone.
For the state however consumer demand is neither high nor low nor does it fluctuate. The state provides a service and consumers are compelled to pay whether they partake in this service or not. Due to this the state has no mechanism from which to determine how much to produce and for whom to produce it for. All consumers are already forced to participate. Individuals pay for this service by way of taxation, this ensures that all citizens are essentially consumers, whether they want to be or not, and also ensures that the state's accounting is as obscure as it possibly can be, since payment for services are not direct.
To conclude, the state has no way of filtering out who needs their provided service, since all citizens are forced to participate in the service whether they like it or not. Because of this the state has no way of determining how much they should produce, and for whom they should produce it for. This is a fundamental flaw of state offered services/goods where the state owns a monopoly in that service or good.
Thanks to the Mises forums I have also been able to understand various forms of sovereignty amongst consumers. In a profit oriented system consumers are sovereign. All businesses are at the mercy of the desires of the consumer. Those firms which produce goods and services which please the consumers benefit the most. In a not-for-profit business it is the donors who are sovereign. All not-for-profit business's must operate in such a way so that their donors remain pleased. Charitable institutes are kept in line by the donors who have various strict beliefs on how their charities should be distributed. In either situation, profit or not-for-profit the sovereignty is still determined by voluntary participants in the market.
A compulsory based monopoly, the state, is sovereign in and of itself. So long as it wields the power of compulsion over the masses it can never be judged by its poor performance an inadequacies. The state does not need to produce a higher quality service to attract new customers; it already owns the right to all customers.
Consumer sovereignty gives business's incentive to constantly strive to improve their services and goods. Lack of doing so could mean loss of business's to a more efficient competitor. The state does not have this incentive; it already owns the rights to all consumers in this specific industry. It does not need to worry about losing or gaining customers. In addition, it also does not know when to improve its services. The state also does not compete with other goods or services on the market. It claims ownership over a percentage of the consumer's income. So there can be no conflict from the competitive market.
In the market firms compete with each other technologically where their quality and production efficiency can be improved, as such they can undermine their competitors. The state does not live on this competitive plain. It has no one to compete against and is not concerned with loss of business, by law it cannot lose business. The state as such keeps their processes rudimentary. In some cases the opposite occurs however, the state over-invests in a new technology where consumers had not signaled that they were ready to pay for this new process. The state cannot measure this need or demand in consumers, it is already extracted from them automatically via taxes. The state does not know when to make objects more efficient or when to be conservative.
To conclude the state is not sovereign or dependent on consumers in any way. They are sovereign in and of themselves and by way of compulsion will have their serfs follow.
Meaningful prices can form in the absence of a compulsory based monopoly. In the absence of coercion things function as normal. Consumers are given a choice and prices then form based on their participation.
When there is only one single government option though we run into several issues. In a market monopoly consumers can still choose not to participate in the services of the monopoly. As such consumers are still sovereign over market monopolies and dollar for dollar market monopolies compete for all classes of goods. A compulsory based monopoly gets around this by forcing consumers to participate in its service whether they choose to or not.
The government can attempt some form of accounting based on the number of transactions it provided. Although the government cannot not know that if given another option would consumers continue to choose the government provided option? Or, if given other options would current consumers who do not participate in the service, but are forced to pay for it, would they choose an alternative route if one was given. Government typically falls into this fallacy caliming to prove its use by showing empirical evidence of where people have chosen to use its services. What we need to address however is would people use its services given another option, and even more so if consumers were given an option not to pay for a government provided service would they continue to do so.
It's pretty apparent that government institutes fear private firms. Socialists themselves concede that in order for their alleged models to work they need absolute control and ownership of a specific industry. Any competition would distort things, or more correctly show how inadequate it's services really. Though they contend that competition is 'less efficient'.
So the point of this section is to show that the state has no meaningful way of determining whether or not their service is needed or wanted. We can easily refute the position that said service is needed, for if it were needed it would have been provided adequately on the market voluntarily. If people NEEDED said service you would not have to force them to partake in it.
Since all consumers, by default, are already paying for the service government assigns its prices from the top down. In this way consumers do not determine the price of a good or service but the state does. The state will employ various algorithms and mathematical models in hopes of achieving a meaningful value but without the subjective valuation of the individual man its conclusions will always be arbitrary, I imagine based off production.
Even in the existence of a market the socialist institution will not know what the market price of its specific goods and services are suppose to be. In reality no organization can know what a price is supposed to be. Only a genuine market can create this. Government has no competing prices and already has sovereignty over all consumers in the market by way of compulsion. Therefore prices are created administratively and are designed to cover costs of production. Costs are spread socially across the entire populous. This is where the break fundamentally occurs. This is step two of our summarized model above. This is where genuine socialism breaks and isolated socialism breaks. Pricing is arbitrary, even in a market system a socialized service has arbitrary prices. Prices are not determined by the market or consumers in either case.
Conventional historical wisdom grants heavy weight to this argument. Due to the inability to calculate socialized services are almost always insolvent and their insolvency is represented in ever increasing tax rates, state national dept., and monetization of said dept. Had the state been able to calculate correctly its socialized services would return a profit, not a loss. Perhaps the most startling point of all is that even though the state owns a certain percentage of each individual's personal property, taxation, they still canot return a profit. Therefore they prove to waste natural resources and like a cancer cell consumer a percentage of our economy. (Shoot maybe GDP should be calculated subtracting government's portion, not adding)
Private firms in retrospect are capable of returning large profits while only extracting a percentage of the populous property by way of voluntary trade. This fundamental flaw of isolated socialized services is the economic calculation problem. The point of the economy is to address the needs and desires of individuals. If individuals must be forced to participate in a good/service than it is not addressing the individual's needs. If the state was providing goods and services that people needed and wanted they would not need to apply force to provide it. They would be profitable as well.
As the state continues to expand its operations in a market it alters the decisions of the individual and changes the activities that occur in step 2 of our summarized model. Consider the two diagrams.
In the first diagram we see an individual who organizes their needs in an orderly fashion employing the marginal theory of value, and in it the subjective theory of value. In the second diagram we see where the state has claimed ownership over a percentage of the individual's income and property. Understanding the marginal theory of value it should be obvious that the order of goods/services organized in the top diagram will likely be radically different than in the bottom diagram. We also see that the quality of living will shrinks and luxurious wants are pushed of the preference process. Individuals remove their desires from the top.
Now it may be that the government fills a percentage of the highest preferred list but we cannot tell whether or not the service provided is one that is most preferred as there is no market. It is typical that what is considered a 'public good' is entirely arbitrary.
The diagram which shows how government represents a percentage of someone's ownership not only is seen in an individual's income but also in their decision making process. Some of their preferences are chosen for them. If we continued this exercise and extended the portion that government claims up to 70% we can only imagine how this will radically change the preferences of the individual.
The point of this exercise is that while economic calculation s destroyed in internally to the government in each service it provides, economic calculation is also perverted in the market as a whole. Consumer's decisions are perverted and altered to adjust to the new conditions. This comes back to my opening statements of how socialism grows incrementally. Government, inch by inch, continues to claim a certain portion of your life. All of this occurs at step 2 of my summarized model.
My argument may be far reaching in that it re-defines genuine socialism to socialism in general. Under the new definition it becomes state directed compulsory based monopolies. Any compulsory based monopoly is socialist in this way. This applies also to fascistic models. Just because the state has outsourced a task to a single private firm does not change the facts outlined above. The single private firm is now simply the isolated socialized firm. Private firms that the government has outsourced to however are ultimately sovereign to the government, and the government is sovereign in and of itself.
Because of this it is a fallacy to consider private firms that the government outsources as being a part of the market in general. These are simply extensions of the government, the differences at this point in calling them private or public is pure semantics. The implications of this however is that fascism is just a form of socialism, one a little lest honest in their zeal to realize socialism.
True socialists are at least honest that they would prefer to see state owned and operated production of goods and services. Fascists pretend they get around it by hiring 'private firms'. The two models are the same, the only difference is accountability and transparency on what occurs at government level. Fascist organizations however still operate outside of the market. They are not sovereign unto the consumers. The quantity and quality of the product they create is by the arbitrary requests of the government.
So I would conclude that all market activities directed by compulsory based monopolies, whether private or not, are socialist.
Isolated socialized services operate at the expense of the market as a whole. The more socialized industries the government adopts the smaller the private sector becomes. The state in this manner is a cancerous growth. Since it is incapable of calculation it feeds off the section of the market that can calculate correctly. Just as cancer cells feed off the healthy cells of a human body for sustenance and growth, so do the states.
If we are not supposed to call individual state programs socialized what do we call them? I'll not accept bureaucracy as some have argued as even corporations can be bureaucratic but can calculate on the market correctly using prices. I would be willing to call them compulsory based monopolies but then I would have to argue to change the name of genuine socialism to something else. To me the application of calling individual programs provided by government socialist is entirely appropriate. It is also consistent with genuine socialism. Simply because a state has not yet achieved genuine socialism does not mean they do not offer socialized services. Those services suffer from the exact same flaws as genuine socialism but at an isolated level, the inability to calculate and create meaningful prices. The difference is isolated socialized services can continue to operate in the existence of a market, leeching from the markets fruit.
Please explain to me where I may be wrong, and how I may be misunderstanding economic calculation.
I realize this post is ridiculously long. I just feel that calling government programs socialists entirely appropriate and it helps people understand the link between genuine socialism and socialized services. I think it would be a step backwards and a victory for semantics to call it something else. Please critique my knowledge.
So:
1. The government programs are properly called Socialist. They buy higher-order goods at market prices, but dispose of their consumption-goods (that they produced) at government-fixed "prices". Usually at the cost of production (how government G it is counted, in GDP = Y = C + G + I + NX, by the expenditures method).
2. Now, cost of production "prices" is the backward of how market economy works (Menger said so). These programs do not make efficient use of resources. These programs are not part of economic calculation, because having cost does not imply the thing was demanded in the first place.
3. They are rewarded for spending. The more they spend, the more they "contribute" to GDP. They are rewarded for doing the backward of what a competitive firm actually does. This holds true for government granted monopoly to single private firms, because they receive instruction of what to produce from government.
4. And they 'crowd out' the satisfaction of preferences for higher-order goods by market producers, who are made to wait while government gets first pick (seeing as it can afford any price for the higher-order good, because government program revenue is politically determined, not imputed from the price of the consumption good).
5. This is unsustainable. The use of inflation allows government to obtain revenue to fund this unsustainable program; but inflation is basically a tax upon actual market production processes.
In this way, while the whole economy is not correctly called entirely socialist, since the market for higher-order goods has not been destroyed entirely, but these individual programs are correctly called entirely socialist, because they exist only parasitically by redistributing wealth from actually productive firms to themselves .
Do we agree? I think we do. Good use of graphics.
I do agree. Thanks for the meaningful addition thelion!
I only read the conclusion, but I would agree.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
filc:Because of this it is a fallacy to consider private firms that the government outsources as being a part of the market in general. These are simply extensions of the government, the differences at this point in calling them private or public is pure semantics.
I think this is the linchpin of your argument. When there is a monopoly on force, all that are in any way connected to it become mere extensions of that monopoly on force to the exact degree of their connection. This notion of connection is vague, but generally it would incorporate the degree of aiding the state and the degree of benefiting from the state.
Hence, for instance, defense contractors are essentially a de facto part of the monopoly on force (the state), in that they are perhaps 99% connected with the state. They would be perhaps 99%-extensions of the state, because 99% of what they do is for the state's benefit, and 99% of their benefits come exclusively from the state.
But here's where it gets interesting: every taxpayer has some connection with the monopoly on force as well. Every taxpayer, by definition, feeds the state. Now of course we have no real choice in the matter. But be that is it may, taxpayers are perhaps 10%, 20%, 30%-extensions of the state. We could try to calculate it a little better (although these figures may be necessarily arbitrary) by saying, if we pay 20% of our income taxes to the state, "20% of our labor is used for the state's benefit, and perhaps 2% of the benefits we enjoy come from the state (because they could be better provided on the market, but we do get some benefit). Averaging 20% and 2%, we are 11% connected to the state."
Such a typical person would be 11% part of the monopoly on force, or if we discard the benefits from the state as meaningless, we are left with 10% or 20% connection depending on how you interpret it (to use a silly set of numbers). Shocking as this may be, this underlines what you say here:
filc:The state in this manner is a cancerous growth. Since it is incapable of calculation it feeds off the section of the market that can calculate correctly. Just as cancer cells feed off the healthy cells of a human body for sustenance and growth, so do the states.
In the very fullness of accurate analysis, I think we have to realize that the state - as long as it exists - is a systemic problem, much like cancer. The heart cannot but help the cancer grow, as it's pumping its blood.
This does not mean that we blame the taxpayer - any more than we would blame a cancer victim's heart - but that we keep this fact in mind for accurate thinking. I believe the solution, finally, is simply to eliminate the monopoly on force.
Why anarchy fails
A political description is qualitative rather than quantitative. You can granulate the system until you find components that are voluntary or not. The question then is whether you would call anything involuntary "socialism". That is not is not accurate. But, I do it anyway because there is nothing to be lost by misusing the word.
This seems to explain in detail (but is much more thought out) my own feelings about the use of the term socialism. "Marxists" and socialists like to claim that such and such "isn't socialism" because socialism is (very narrowly, so they claim) defined as "state ownership of the means of production". I've always seen this as a simpleton's semantical argument that completely misses the point. The state doesn't need to literally own anything to pursue the same types of policies and goals of centralization that a "true" socialist state would pursue.
And besides, if the government claims it has the right to tax your company whatever it chooses, this seems to imply that the company is actually government property--or at least to the extent that it's profits are taxed. If it was truly private property, the government wouldn't have any rights to even think about taking a cut of anything. So simply by collecting taxes at all, the government also indirectly "owns" a variable portion of everything being taxed.
Caley McKibbin:The question then is whether you would call anything involuntary "socialism". That is not is not accurate.
This is the discrepency I need to work out.
Thanks for the other contributions everyone.
I enjoyed this essay. The more I've been reading, though, the more I've come to conclude that properly, "segmented socialism" is better known as corporatism. Because the US government usually doesn't own stuff, it just expropriates a certain amount of the product of any given corporation or individual. The government also heavily regulates industry. This is more indicative of a big part of proper Italian fascism: corporatism.
Socialism, according to what you note as its proper definition, is where the state owns the means of production. This usually doesn't work and as far as I know, our government doesn't own much. Instead the US government just has a heavy hand in both regulating/directing industry through legislation and by taking a piece of the pie from industry.
Fascism and socialism are not the same things. I also don't think we really have fascism proper because there's no religious or spiritual wing to our government, which as I understand it, was a central theme to Mussolini's doctrine.
"Fascism desires the state to be strong and organic, based on broad foundations of popular support. The Fascist State lays claim to rule in the economic field no less than in others; it makes its actions felt throughout the length and breadth of the country by means of its corporative, social and educational institutions, and all political, economic, and spiritual forces of the nation..."
Now doesn't that sound more like what we have now rather than a situation where the government literally owns everything? I mean what does the government really own?
Notice he's not talking about owning the companies, he's talking about having his hands in them. He's talking about having them as a part of the State. One could argue that the Fed is a purely corporatist institution because it gets its power from the government but is owned by its private member banks. In the same way, the health insurance takeover is going to be done with mandates and regulations, but they're probably going to keep private ownership of the health insurance companies. Single payer would've been more socialist, in the sense that it would've been redistributive but it would've still operated through privately owned hospitals and medical practices.
I'm not saying I know more than you about economics, I'm just good at finding criteria for things. I like to categorize things properly, and I feel based on the criterion we see, corporatism is a better definition for our current situation than socialism.
@filc, tremendous post. Fantastic work.
bloomj31:corporatism is a better definition for our current situation than socialism.
It isn't. There is a point at which categorizing things too finely is meaningless, because every single idea, notion, event, person, moment is unique and differentiated.
It is generally understood by the people on this forum that all statism is socialism, and that fascism is also socialism.
There is only the state and the market.
liberty student: It isn't. There is a point at which categorizing things too finely is meaningless, because every single idea, notion, event, person, moment is unique and differentiated. It is generally understood by the people on this forum that all statism is socialism, and that fascism is also socialism. There is only the state and the market.
But fascism and socialism are very different even in terms of practical application and historical manifestation. Stalinist Russia was almost purely socialist. Mussolini's Italy was almost purely Fascist.
They were both products of what I consider to be the left (although I've certainly heard arguments that put Fascism on the far right) but their practical application was much different. In Russia, the government really did own almost everything. Not so with Mussolini's Italy.
You may not value categorizations, but I do. In my opinion, there is a continuum of ideas here that cannot be adequately dichotomized as "market" or "state.'
Also, as you have told me before, something isn't necessarily true just because everyone agrees with it.
Here's another interesting quote:
"At the present time, there is no branch of economic activities in which the State is not called on to intervene. Were we to give way to this latest phase of capitalism we should slide into State Capitalism, which is nothing more nor less than State Socialism reversed." - Mussolini
Not that the government owns everything, but that the government has its hands in everything. This, he says, was the final stage of capitalism. Now, I think it would be best to call this "Corporatism", wouldn't you?
bloomj31:But fascism and socialism are very different even in terms of practical application and historical manifestation. Stalinist Russia was almost purely socialist. Mussolini's Italy was almost purely Fascist.
But it doesn't matter, because it is not the market.
bloomj31:You may not value categorizations, but I do. In my opinion, there is a continuum of ideas here that cannot be adequately dichotomized as "market" or "state.'
bloomj31:Also, as you have told me before, something isn't necessarily true just because everyone agrees with it.
For the purpose of communicating ideas, it is necessary to use clear language. This isn't an argument to populism, it is pointing out that there is very little difference between socialism and fascism, to someone who rejects statism. It's like a group of pacifists arguing over who was the better axe murderer or vegetarians arguing over who makes the tastiest all beef cheeseburger.
It's great you're into breaking down statism into all sorts of different personalities, events and structural minutiae. But that has nothing to do with the purpose or direction of the OP.
'has its hand in' is just code for 'part owns'. if they are the only hand, they are the owners.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Ok, fine. But for someone who accepts statism, like me, the differences seem huge.
nirgrahamUK: 'has its hand in' is just code for 'part owns'. if they are the only hand, they are the owners.
Couldn't one direct something without owning it?
bloomj31:Couldn't one direct something without owning it?
nirgrahamUK: bloomj31:Couldn't one direct something without owning it? i think you have in mind directing as 'suggesting' but if you think about what it means to have the right to manipulate the good in question in a certain way, and to exclude others from interfering, what else is that other than ownership ?
I understand what you're saying. And perhaps, functionally, they can look identical. But, at least nominally, the corporate state leaves the deed of ownership in private hands. Also, the degree to which the corporate state "directs" production and consumption varies. In a truly socialist state, the deed is not in private hands and all levels of the production and consumption cycle are completely controlled by the state.
Take, for instance, banks in America. They're privately owned, privately held. The profits the companies retain are distributed in the forms of dividends and higher share values to the shareholders. But, there's also a safety net. That safety net is financed with public money. So if they fail, they're bailed out. It's the PPCC game. Privatize profit, commonize cost. But this isn't the same thing we'd see under a socialist state, where both the profits and the costs would be commonized.
Additionally, the state grants certain privileges to certain institutions. So they pick and choose who does well. Bear Stearns and Lehman Brothers didn't get picked. Goldman Sachs seems to have come out great in all this. This isn't indicative of socialism to me. In my mind, it's corporatism, pure and simple.
I dont know why but something is FUBAR'd on this thread. I can't post any meaningful replys.
Wow filc, the extent to which you've actually carefully studied Mises is admirable and heartening. I'm rather blown away by this post.
I must still disagree, and still hope that you do not convince many people. But even so, this post is highly valuable for the cogent expression of the Misesian fundamentals you've marshaled to make your case.
filc:If we are not supposed to call individual state programs socialized what do we call them? I'll not accept bureaucracy as some have argued as even corporations can be bureaucratic but can calculate on the market correctly using prices.
I think it is a misnomer, in Misesian terms, to call a corporation bureaucratic. Corporations should be said to be managerial, but not bureaucratic, because they operate under profit management, and not bureaucratic management. I'll post again this passage which I've recently posted elsewhere:
"Bureaucratic management, as distinguished from profit management, is the method applied in the conduct of administrative affairs, the result of which has no cash value on the market. The successful performance of the duties entrusted to the care of a police department is of the greatest importance for the preservation of social cooperation and benefits each member of society. But it has no price on the market, it cannot be bought or sold; it can therefore not be confronted with the expenses incurred in the endeavors to secure it. It results in gains, but these gains are not reflected in profits liable to expression in terms of money. The methods of economic calculation, and especially those of double-entry bookkeeping, are not applicable [p. 309] to them. Success or failure of a police department's activities cannot be ascertained according to the arithmetical procedures of profit-seeking business. No accountant can establish whether or not a police department or one of its subdivisions has succeeded." (Human Action, ch. 15)
Also, a bureau is a parasite on a market, while an autarkic socialist state (autarky being necessary for a state to be considered socialist in the strict sense) is a parasite on whatever paltry means there happens to be in a non-market barbarous mass of humanity. I think it is useful to distinguish between the two.
Another advantage with the "bureaucracy/socialism" divide is that the terms are dissimilar. A "socialism in particular/socialism in general" divide will lead to confusion between the two terms. We have enough confusion fostered by such non-dissimilar divides as "capital good/capital value", "general profit/pure profit", "prices (speaking loosely to include fiat prices)/prices (speaking strictly to exclude them), "inflation (money supply)/inflation (price level)", and many others. We shouldn't be deliberately creating more.
Also, in terms of rhetoric, if we go your route, we can no longer use the calculation argument to say that socialism is theoretically impossible. This statement has gotten a lot of mileage in tarnishing the prestige of socialism, and I think it would be disadvantageous to throw it away.
bloomj31:The more I've been reading, though, the more I've come to conclude that properly, "segmented socialism" is better known as corporatism.
Yes I didn't get into the specific taxomony if different types of government models but I would assign corporatism as being a type of fascism, which is ultimately type of socialism. It's socialized because the costs are shared amongst all citizen's against their will and the fascist private firm are directed by the state. It is no less a socialized service though, it's cost is shared amongst the entire nation. Even if it is a private firm the state is paying for.
bloomj31:Socialism, according to what you note as its proper definition, is where the state owns the means of production. This usually doesn't work and as far as I know, our government doesn't own much.
Well in my essay above I haven't attempted to classify our present government programs in a specific type of model. My essay is showing the link between all models. What you provided here was the traditional definition of socialism, that is not what my essay argues as I explained in the opening paragraphs. My essay is showing that socialist programs are socialist because they cannot calculate, they are incapable of calculating because of the use of coercion which breaks step 2 of my summarized model to the formation of prices. With step two broken we cannot adequately read what consumers desire.
So in my essay I try to explain that coercive monopolistic programs are what we call socialist. I know that this has far reaching consequences and Caley McKibbin has brought this up, but considering things from a calculating stance I think it's all very consistent. Ultimately it's the difference between voluntary and involuntary trade.
bloomj31:Now doesn't that sound more like what we have now rather than a situation where the government literally owns everything? I mean what does the government really own?
On paper the government may not own it, but they still control and direct it's productive use. The only reason why they don't own it is red tape. Fundamentally the difference between fascism and socialism is red-tape, and who's names are on various titles of ownership. The mechanical process of fascism and socialism are identical however. The only difference is where/who owns the capital. But even if the capital is owned privately, if it is being operated and managed by the state the same results will occur, inability to calculate.
bloomj31:Notice he's not talking about owning the companies, he's talking about having his hands in them. He's talking about having them as a part of the State.
I briefly tried to explained this in my section "Consequences of my argument". That ultimately it matters not who owns the capital, if owners cannot freely employ it as they see fit.
bloomj31:"Fascism desires the state to be strong and organic, based on broad foundations of popular support. The Fascist State lays claim to rule in the economic field no less than in others; it makes its actions felt throughout the length and breadth of the country by means of its corporative, social and educational institutions, and all political, economic, and spiritual forces of the nation..."
Yes and I'm not sure I'd hold Mussolini as an authority of economics and economic categorization. Marx does the same thing to capitalists, they are allegedly slave drivers to the laborer. It is ofcoarse just rhetoric, just as Mussolini's statement above. It has no real tangible meaning or value.
Well in my essay I'm explaining that the two fail for the same reasons. If we do not call them socialized programs what do we call them in terms that are not misleading? The only differences between the two systems are aesthetics, mechanically they operate the same. Most people understand why socialism fails, because it cannot calculate. Many folks however do not understand why fascism fails. The point of my essay is to show that they fail for precisely the exact same reasons. Using a more consistent terminology will help people understand this. The only difference between the two are aesthetics of who's name is on a piece of paper, like a title of ownership. The state however still dictates the control of said private property, regardless of whether it's state owned or not.
This goes back to the Consumer Sovereignty section I wrote. Ultimately it's the consumers who need to be sovereign. When they are not is when things break down. Again all of these attributes are identical for any type of coercive monopoly, regardless of what we call it.
bloomj31:I understand what you're saying. And perhaps, functionally, they can look identical. But, at least nominally, the corporate state leaves the deed of ownership in private hands
So the point of my essay is to show that the differences are simply aesthetics and superficial. Let me give you another analogy. It's like calling black people a different race from white people, but not calling red heads a different race from brown heads. Fundamentally there is one race, the differences can be found in our gene's. If we beleive black people are their own race then we also have to beleive that blue eyed people are their own race. What about blue eyed black people?
So the point is that they are not different. Humans are humans with different aesthetics, differences, preferences, ect... Fascism/Socialism are one in the same mechanically. I am not arguing the degree to which a specific state model is likely to socialize a market. It may be true that fascism smaller in size than heavy socialized countries, it may not. I am not debating at which specific model is more likely to annex the largest portion of the economy. socialism.
Thanks for the kind words LS, and thanks for the contributions everyone else. And thanks for posting Bloom.
Thanks for the response Lilburne. My ISP is crapping out atm but when it comes back up I'll give your response some consideration. I'm not disagreeing with you at all necessarily, my concern is that calling things bureaucratic by todays standards may confuse people of our position on why we think bureaucracy does not work.
Thanks filc. Enjoyed the post tremendously!
Fascinating article, great graphics.
Here are some things I thought about when I read it:
1. I think your analysis holds water for those services the state provides "for free", like roads, schools, police, things like that.
But what about if they nationalize an industry, then charge for it, like the post office? Would there not be feedback from the consumer in such a case?
2. Mises in Socialism disagrees with you. But I think he is talking about things like the post office, where the people have an option of not buying the product the state offers.
3. In an interventionist thing, like regulating an industry, or taking from the rich to give to the poor, I don't see how your above analysis would apply.
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Smiling Dave:2. Mises in Socialism disagrees with you. But I think he is talking about things like the post office, where the people have an option of not buying the product the state offers.
If the state has a national business and it's funded by no means of coercion(cannot be funded by taxes) then there is nothing wrong with that service at all. It's entirely subject to consumer sovereignty. The state would have all the normal incentives and feedback mechanisms to judge their performance.
The problem is the state does not do this, they force consumers to pay for the service via taxation, whether they actually use it or not. But all things aside, assuming no taxes, theres nothing wrong with government attempting to make a profitable business. The problem is it never does that, it always uses some level of force or coercion to keep it's bad business afloat.
Smiling Dave:3. In an interventionist thing, like regulating an industry, or taking from the rich to give to the poor, I don't see how your above analysis would apply.
Interventionism is still a disruption of the direction of the consumers. It's really another article all together but essentially the consumers are more or less directing things in a free market. When interventionism is applied the consumers wishes are what is lost.
When usually happens in that case is a State or government nationalizes a private industry, so they just end up in one of the models I describe above.
Thanks for the kind words Dave!
filc:But all things aside, assuming no taxes, theres nothing wrong with government attempting to make a profitable business.
What kind of gov't is that? Even a monopoly on currency via gov't is a tax on purchasing power.
wilderness:What kind of gov't is that? Even a monopoly on currency via gov't is a tax on purchasing power.
Indeed, seems like a fairytale notion. I would agree. A government that doesn't tax, and only offers business subject to consumer sovreignty is no government at all, but just another business. :)