Is There Such a Thing as a Small Government Socialist?
Thursday, January 13, 2011 at 11:37PM If you ever want to elicit a large response there is one sure-fire way to do it: Criticize Canadians. If you haven't had much contact with Canadians lately, take it from me, a Canadian, that as nice as they seem, underneath the facade of nice-ness has been a growing pride and patriotism, best described as a smugness and they will be helpless to hold their tongues when the greatness of Canada is questioned.
When I grew up in Canada in the 70s and 80s I actually liked the Canadian style. Growing up near our more boisterous and chest-thumping neighbors to the South I always quite liked that we were, for the most part, nice and humble people.
Something changed, however, in the late 1990s. After years of the Canadian Loonie (dollar) writhing in complete obscurity and much of the public thinking it was practically worthless and holding US dollars whenever they had the option, all of a sudden the Loonie began to rise. Or, to be more correct, the US dollar began to fall and all of a sudden the Loonie neared par with the great US dollar.
Around the same time commodities began to awaken from a multi-decade slumber. Worthless things like the Canadian Oil Sands, which I grew up only a 1 hour drive from, were all of a sudden worth vast fortunes - whereas only years earlier they were mostly talked about as a geological oddity of little value.
All manners of other commodities that Canada has in droves began flying including grains, potash, uranium, gold, silver, nickel, copper and many others.
Canadians, who always looked at themselves as being America's poor little brother (yet, they never questioned why they were poorer - hint: socialism) all of a sudden were feeling kinda rich. Limousines started showing up to the ever-popular hockey games and box-suites were being sold for millions of dollars to all manners of companies, from resource, to the banks and brokerages who helped finance them, to real estate companies feeding off of the liquidity.
And with that, something changed. Canadians, in general, went from being nice and humble to being superficially nice but just beneath the surface, if you ever questioned the greatness of Canada or of their amazing system of socialism you would be immediately attacked.
Earlier this week we poked some fun at Kanadians as being socialist and this, as expected, sparked a torrent of responses. Literally hundreds of Canadians wrote in, most of them to state that they aren't socialist, personally. But the overall theme of the responses was that Canada "is great".
We received one letter from a Canadian, however, who wrote in to say he is a socialist and he explained his viewpoints. He was, as are most Canadians, quite nice and thoughtful, but we do take exception to some of this thought process and thought we'd respond to him in our blog today.
Here is the email:
Jeff and Ed,
Thank you for your entertaining and informative newsletters. Time for me to add my gold fleck’s worth. I am a Canadian Socialist.
But I have a lot of overlap with your world views, so I wish to share where I agree with you and where I might persuade you to open your minds.
Capitalism has proven to be the most amazing system for creating wealth. Any time I think about the positive changes that have occurred in my lifetime due to the unleashing of capitalism’s strengths it boggles me.
The domination of Capital over Labour and Government is about as extreme as it can get (I hope). In my view, a healthy balance of power is 45% Capital, 45% Labour, and 10% Government.
We have way too much government. Yes, I can be a Socialist without believing in big government. Here we agree.
Big government has created a deep sense of entitlement that will be stripped out one way or another as the system collapses and a new system forms.
No one knows what the new system will look like. But to be healthy and stable, it will need to restore a healthy balance of power between the three branches of a modern economy.
Capital has become dominant through shifting its purchase of Labour to low wage areas, through co-opting of Big Labour in the advanced economies and through co-opting of Government (e.g. – “Free” Trade deals, political campaign funding, etcetera).
Capital is running out of large pools of low wage areas to exploit (I use exploit in the positive sense; the same sense as when my clients exploit me). Labour will rise again, with the leadership emerging in those low wage areas. Southern India is my best guess.
This time, Labour will go global in the same way that Capital has gone global. If Capital wants to assemble a car, they will have to negotiate the cost of the Labour to assemble that car from the International Auto Workers Union. Same wage no matter where.
You get the picture.
It is Labour that can address one of the great downsides of Capital – the downside whereby unconstrained Capital leads to a world with almost the entire human population hovering at or just below subsistence levels, while the elites perpetuate their rule for the sake of their immediate progeny.
Perhaps there is another way to avoid this dystopia. Perhaps a newsletter from before I subscribed has dealt with this? Or perhaps a future newsletter could provide your thoughts?
In my view, it is not enough to advise your readers on what to do to protect themselves during the collapse. Your willingness to share your perspective with your readers arises from a social conscience. And it is not a great leap from admitting to a social conscience to admitting to being a social-ist.
Thank you for your attention. Your comments or questions are most welcome.
Respectfully submitted,
Roy M.
My trusty partner, Ed Bugos, besides being one of the top gold mining analysts in the world is also a scholar of Austrian Economics and so I passed on this note to Ed for his thoughts. Here was his response:
Dear Roy,
Thank you for your letter.
I appreciate your candor and open mind. However, I can tell you as a life long student of economics there are many problems with your theory –or let’s first call it your world view. I don’t know if I can deal with them all in one letter. But here is a try.
I see your framework leans on a holistic approach…kind of a class like approach where you see capital, labor and government as branches of society that need to be in harmony or else they’re in conflict. But your view of harmony accepts that one of these groups “dominates” over another, and you don’t reject exploitation but rather accept it as a way of life.
For example, you stated:
>> “The domination of Capital over Labour and Government is about as extreme as it can get (I hope). In my view, a healthy balance of power is 45% Capital, 45% Labour, and 10% Government… Capital has become dominant through shifting its purchase of Labour to low wage areas, through co-opting of Big Labour in the advanced economies & through co-opting of Government…to be healthy and stable, it will need to restore a healthy balance of power between the three branches of a modern economy”
And,
>> ”Capital is running out of large pools of low wage areas to exploit (I use exploit in the positive sense; the same sense as when my clients exploit me). Labour will rise again, with the leadership emerging in those low wage areas. Southern India is my best guess. This time, Labour will go global in the same way that Capital has gone global. If Capital wants to assemble a car, they will have to negotiate the cost of the Labour to assemble that car from the International Auto Workers Union.”
Capital, Labor and Government are concepts. They are not actors, and often there is too much overlap to distinguish. The class framework had the same shortcoming. For example, I am both capital and labor. Also, you completely overlook the entrepreneur whose role is central to a working capitalist system, and he may or may not belong to any of those clear cut branches you define.
Our difference is foundational.
Economics ultimately deals with the laws that govern human action and looking through a lens of holistic (or collective) concepts that you assign human qualities to in the aggregate confuses things.
Capitalism is itself a bad term. Marx coined it. It is but a system of voluntary exchanges, each which by definition of the very exchange improves the lot of both parties to the exchange.
Socialists never understood this. They view the world through the exploitation framework and feel that one side is always getting a better deal at the expense of the other. But in truth, exploitation is the use of force in the exchange. Thus we say that government exploits but in business the strong support the weak.
You will I’m sure disagree with this view. But the free market is not an exploitive system; it is an engine of progress…wealth creation. 90% of what you might see as corruption or exploitive I would say is not. In reality, if an exchange is voluntary it is rarely exploitive. I know you can pull out the stuff about the sex trade, etc. In the end, however, socialists view every exchange as intrinsically exploitive. They also see the market system as inherently unstable.
I would implore that you consider reading this letter to socialists by Gustave Molinari (the father of the modern day free market anarchist movement of which I am part) in 1848 Europe.
I am no Molinari, and cannot write as clearly as the best economists / scholars. In it you might find reconciliation between our views or you might not.
Certainly, the truth is that capitalism is simply freedom in the economic sphere and it should not surprise anyone that labor benefits more from capitalism than from socialism which claims to be its own ideology…call it from the dominance of capitalism if you want. But that’s just the point. Your framework – lens – is wrong to see it as dominance of one concept over another.
It is conceivable to speak like this in reference to ideologies but not to liken an economy to something as simple as a tree with just three branches. Socialists constantly underestimate the complexity of the market process that awe inspires. They think they can replicate these feats from the halls of congress or, in your case, Parliament Hill.
They fail to understand the knowledge problem (this is the realm of the entrepreneur) and appreciate the complexities that work on a voluntary basis to organize resources in a way that benefits society the most. They take shots at what they define as capitalism (which they usually confuse with corporatism) and charge that it is imperfect, and that they can better organize society from a central planning body.
Of course it is imperfect. The free market isn’t a perfect system despite all the wonders as you point out it is responsible for. But just because it isn’t perfect does not mean we can improve it, especially with government –which is just a coercive apparatus used by a minority of people to exploit an otherwise voluntary society under the pretense of the ideals that socialists subscribe to and hold dear.
Anyway, the doctrine of socialism has been exploded.
It has been shown that a socialist commonwealth cannot plan rationally. Ludwig von Mises showed this back in the 1930’s. He single-handedly wiped communism out ideologically. He showed that socialism was theoretically impossible. Not just improbable but impossible – because in the absence of a price system the central state had no way to calculate the needs of individuals in society and no way to calculate the cost of providing for those needs it could anticipate (i.e. the cost in terms of what is being given up to produce for society).
So anyone who says they are a socialist is in denial, really.
Murray Rothbard, the dean of the Austrian School after Mises, tried to make an appeal to the socialists that remained back in the 1950’s. In his “left and right” journal he tried to reinvigorate the libertarian movement as a reaction to the statism of the right (i.e. corporatism). The socialists on the left, he thought, were confused, broken apart. Many became anti-state, as you appear to be on some level.
Rothbard argued that the left did not belong to socialism but rather that it belonged to the free market (classical) liberal…the left was the place of radicals. Socialism, even though it was discredited, took over on the political right…it became establishmentarian, and libertarianism became the radical view.
But not all socialists went to the right. A lot of them remained on the left.
They were the antiwar crowd. This was going to be where Rothbard thought he’d pick cherries.
People who were against violence fundamentally would have to be against the idea of the state since it was an instrument of force for whatever world improver to use as he could rationalize.
Where you said:
>> “I can be a Socialist without believing in big government."
Absolutely not. I question whether we are even talking about the same things if you believe that it is possible to have small-government socialism. The definition of socialism is that the state controls the means of production. You cannot be a socialist without big government. And the idea of socialism has been proven impossible on both a theoretical and practical level now. The big government problems we face today are the vestiges (the legacy) of the last epoch…of ideas that have been discredited but, like with religion, it always finds new subscribers…usually those who have never heard the discrediting arguments.
So read these words, and I implore you if you have an open mind further to read the following:
http://mises.org/store/Socialist-Tradition-Moses-to-Lenin-The-P1599.aspx
http://mises.org/store/Man-Economy-and-State-with-Power-and-Market-The-Scholars-Edition-P177.aspx
I have read the socialist theories. I was inundated with them in schools here in Canada. You will never find these books in a government funded university and after reading them you will know why.
You will gain a better understanding of the world than most economists have today.
Phew, thanks Ed. That was a long response but I think well worth the ride.
As a sidenote, one of the reasons I love working with Ed is that both he and I come at these arguments from completely different angles. Ed is more of an Austrian scholar who understands all the theoretical frameworks and the entire history of all these movements whereas I come from a much more simple angle: I am against the use of violence/coercion, period - for what should be obvious reasons. Yet, we both always end up in the same place.
The state is, by its nature, violent/coercive and no level of government involvement in anything can surpass the capabilities of the free market.
And so, to answer Roy, yes, I do have a great social conscience in that I am a human being and I love the human race and the experience that is life and I am against all violence/coercion used against humans by anyone. Moreso, it pains me to see the destruction and loss created by all these government acts of violence and I wish to see the day that humanity is set free to really explore its true potential - something that I believe will easily take us to the stars and beyond in peace and prosperity.
The biggest threat to this potential is government/socialism.
But until all the livestock in the tax-farms (as Stefan Molyneux puts it) awaken and see the cage they are in, we will continue here at The Dollar Vigilante to look at ways to open their eyes, escape from tax-slavery, live life happily, protect the assets we have and profit from the continuing non-free market manipulations of central banks, bureaucrats and politicians.
Reader Comments (6)
As a Canadian myself I thought I should offer my two cents. I still live here and Canada is exactly like Jeff describes it. The 'socialist mentality' in the majority seems to be more prevalent in the East as opposed to the West, same as the US and Australia. The police force in Ontario is increasingly becoming more tyrannical, I'm assuming this is partly because the government is trying to raise revenues to meet excessive expenses.
However, I feel it is oppressive enough in all of Canada that I am considering a move abroad to countries such as Chile, Mexico, etc that have less intrusivel governments. I am increasingly finding that there are regions within a country that may be relatively free even if a country as a whole may not appear so.
I don't know how the rest of the people here justify government. You have to either be completely for government or completely against. None of this limited/small government crap. You're only deluding yourselves. All governments were once small and became big, just like they will all destroy themselves eventually. But Canada this, and democracy that..it's all government. And it's all coercive and it's all socialism. Might as well accept the truth and deal with it as opposed to living in denial and then waking up in surprise when the bust finally arrives.
It's too bad this comments section isn't picking up at all. Would be nice to argue with some of the Canadian free-market socialist or whatever they call themselves. I lived with a couple Enviro Sci majors in University and that was interesting. They either laughed at my arguments when they thought I was crazy, or got angry at me when I rebutted their silly arguments.
Hi Tom,
Thanks very much for all your input! It's good to hear there are more like us up there! :) As for why there aren't more comments, many people read these blog entries through various formats (via email or RSS reader) and therefore they don't have access to the comment feature unfortunately. But we do receive a lot of email feedback. Here is one in particular I'd like to share (below)
Cheers,
Jeff
---
Canadians are defensive. I have found. that personally, if I ever try to be critical of things Canadian. So, being somewhat of a wimp, I, excepting the closest of aquaintances, just keep my mouth zipped.
Why are they defensive? Because they stll, living next to a powerhouse, have a somewhat hidden, but pretty effective, inferiority complex.
If you criticize Canadians or their ways, expect to be lambasted by a few, but quietly and privately, but forever shunned by the rest.. I have learned that personally.
Dave C.
This was a great quote Tom L: "All governments were once small and became big."
Thanks for posting.
Cheers!
Ed Bugos
It's nice to engage in critical discussion, especially with people of similar walks of life. It's hard to find up here that's for sure. Thanks for posting that last email comment. It more or less describes how I interact with others. Mostly I keep my mouth shut, except for the odd time that I come across someone a bit more open-minded and receptive to other opinions. Thanks for the great commentary, and that goes to both of you, Jeff and Ed. I look forward to reading your future newsletters.
A basic error of the socialists is the assumption that wealth is a constant and that the only task is to ensure an equal distribution of it. But isn't it obvious that the amount of wealth created depends on the degree of motivation of men to utilize their abilities and the willingness to max out their potential? Any system that forces the willing to cede the fruit of their labor to the unwilling will reduce the motivation and therefore reduce the wealth created. Socialism is the reason for the increasing number of men hovering at subsistence levels.
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