INTRODUCTION AND A CRASH COURSE IN MODERN IDEOLOGIES

Thomas James DiLorenzo, an American economics professor, in a concise book of sixteen short chapters, bombs the philosophy of socialism. He shows it as responsible for the worst economic and human liberty disasters. According to him, in a single word, the problem with socialism is ‘everything’. The author says that the book should be compulsory reading for all the impressionable youth entering colleges preyed upon by heavily flawed discourses. These discourses, common in elite universities, go on to formulate national and international policies as the indoctrinated take important positions in academia, media, and politics. The book might appear as a harsh one-sided narrative from a capitalistic viewpoint but the points which he raises have deep relevance to the modern world still in the grip of many welfare state policies. It is especially so for India which adopted a socialist ideology right at independence and is now a permanently etched feature into our polity.  

 

All political ideologies attempt to balance the ‘individual’ and the ‘state’ in terms of its rights. The popular left and the right wings differ while dealing with two policies: individual and economic. The left wants equality between all and a centrally planned economy with collective ownership, and the right believes equality is impossible and the economy best as free-market capitalism. There are any number of intermediate positions. Some represent the political spectrum as a horseshoe because the extremes of communism and fascism become similarly ‘totalitarian’. 

In Socialism, where the collective subsumes the individual, social interaction and membership in collective bodies make cooperation the key to egalitarianism (a society of equals) rather than competition. Each ‘works to the best of the ability, and each gets as per the needs.’ Reformist or democratic socialism (post-independent India) believes in a parliamentary system and basic liberal democratic principles such as constitutionalism. Communism takes a stricter stance against capitalism preferably by a revolution. In the early phases, socialism aimed to socialize production only while communism aimed to socialize both production and consumption.  Following the Bolshevik power, socialism became an intermediate term between capitalism and communism. Russia and China were the traditional socialistic-communistic countries. 

Liberalism comes with constitution and democracy. Conservatism, traditionally on the ‘right side’ of ‘central’ liberals, tries to preserve the traditional order and resist change. Change is not by revolution but by a gradual, organic, and debated evolution. Fascism, a fashionable word to use for many politically powerful people, thankfully remains in the confines of history (between the two world wars) and not contemporary society. The philosophy of fascism would be: ‘everything for the state; nothing against the state; nothing outside the state‘. The definition of fascism has been on what it opposes, a reason for its contemporary broad application to people and parties.

THE SOCIALIST WAY:  EGALITARIANISM-THE WORST RISING TO THE TOP-FASCISM 

In reality, human beings are not equal. Each has a unique capacity to determine the ultimate growth in society. Many socialistic regimes become tyrannical in their egalitarianism as they are more concerned about material equality rather than liberty and personal freedom. A society and economy is a highly intricate and interconnected web of knowledge and specialized labor where each always works as per individual talents and ambition; and will sell that as much as possible for their own interest. The state can never subdue this basic instinct of man. Egalitarianism becomes profoundly inhuman as socialistic envy tries to stamp out all the material differences by coercion. 

Socialism started as ‘government ownership of the means of production’ confiscating all businesses and factories eliminating the dissenters along the way in countries like Russia. Later, the definition evolved into income redistribution in pursuit of equality through the institutions of the ‘welfare state’ and the ‘progressive’ income tax. However, socialism has been the biggest generator of poverty exemplified by Soviet Russia, Chile, Argentina, the democratic ‘Fabian’ socialism of Britain, Argentina, the Nehru-Mahanalobis five-year plans of post-Independent India, and China before they opened up. 

The need for coerced imposition of ‘one plan’ attracts the most immoral people to rise to the top. When central plans inevitably fail a dictatorial power establishes a central order at the expense of individual freedom and liberty. Twentieth-century socialism is adequate proof of this. Even in democracies, the various executive bodies at the personal choice of the leader lead to the forcible application of governmental plans. The worst political demagogues start a negative program of ‘hatred of an enemy or envy for the better off’. The enemies could be the aristocrats, Christians, capitalists in Russia; the Jews in Germany and Austria; the plutocrat in Europe; and the ‘Wall Street’ or the wealthy ‘one percent’ in the USA.  A socialist justifies any action as the ends justify the means (reverse of traditional morality). The only power worth having in socialism is political power. After gaining power, the official ‘Truth’ and propaganda direct everybody’s actions. 

Death counts, in peace and not war, have been the highest under socialist regimes the world over. ‘The Black Book of Communism’ meticulously catalogs these deaths: USSR (20 million) and China (60 million) are some examples. Socialistic regimes killed one hundred million people in the 20th century by all forms conceivable.  Ironically, an ideology associated with the worst crimes, the greatest mass slaughters, and the most totalitarian regimes ever, is allegedly more compassionate and humane than any other system in the world ever. 

All the fascists (Hitler, Stalin, Mussolini) were national or international socialists to begin with. The intolerance to all opposition; the continuous war with individuals, families, and church to bring a great reordering of society; the abolition of private property; the sacrifice of individual freedom for the greater good; unity in violence against any defined enemy; heavy regulation of private business; centralized governance; and education as a free commodity were great fascistic themes with roots in socialism. Stalinist propaganda repeatedly claimed that the only alternative to Russian socialism was fascism, and thus the latter became extreme right. Fascism now abusively refers to any government or an individual in power trying to impose its views on non-consenting citizens. 

Science and technology as a prime mover in the scheme of things; the ends justifying the means; and attitudes against religion have striking similarity between fascistic and liberal left-wing ideology. In abortion too, the left-liberal support of pro-choice resonates more with the fascistic theme ideology of sacrificing the individual for the collective good. ‘Green fascism’ (carbon footprints, global warming, humans as a source of all problems, redemption of collective guilt by individual efforts, the individual for the whole) creates environmental scares today like the Nazis obsessed previously with air pollution, nature reserves, and sustainable forestry.

AN ECONOMIC DISASTER 

Britain, India, Latin America, Africa, Zimbabwe, Soviet Union, China, North Korea, and Cambodia are examples of failed socialistic models apart from the brutal tyranny of some regimes. There are three reasons for the disaster of a socialistic economy: an absence of incentive to work as socialism inherently rewards sloth and penalizes hard work; a centralised economic planning descending to chaos which fails to consider the intimate knowledge of the local conditions at a time and place; and an irrational economic calculation thinking only in terms of plans rather than any issue of supply, demand, and quality deliverance.   

Every capitalistic and democratic society has some government-owned monopolies like the post office, schools, railways, and so on. They are always running in a loss. The ‘Bureaucratic Rule of Two’ holds that the unit cost of government service will be on average twice as high as a comparable service offered in the competitive private sector. No pressure of profit, loss, or quality deliverance exists for the government agencies with shoddy services at a spiraling cost working solely on budgets and taxation. Ironically, the government employees, never on the firing line, always have a higher salary on average than their private counterparts despite the poorer services as the government has an access to the ‘taxpayer’s purse and the money printing machines.’  

Abolition of private property and ‘progressive or a graduated income tax’ are two important planks of the ten-plank policy of ‘The Communist Manifesto’. The philosophy, ‘from each per his ability, to each per his need’, squeezes the middle-class taxpayers more than anybody else. Free education, free healthcare, free houses, and such are attractive but someone must pay for them. Taxes do this financing; they only hide but do not eliminate the cost of the programs. Tax confiscation becomes heavier as the ability of the person becomes more. Thus, the tax-payers are slaves of the state for a portion of the year; while the beneficiaries are wards of the state all year long and may choose not to work at all. Capitalism, by rewarding talent and productivity, encourages upward mobility. Socialism, in contrast, helps in impoverishing the working class by always keeping them dependent on subsistence and benefits. 

The two beneficiaries of the taxes are the people who receive more than they contribute and the bureaucrats who distribute the money collected. The spending is inherently inequitable as the middle-class tax-payers end up paying for the government subsidies to middle-class farmers, college students, school teachers, government employees, and even the rich (like the bailouts of Wall Street banks, farm subsidies to agricultural corporations, and corporate welfare). 

Strangely, progressive income tax encourages many productive and creative people in society not to work. Many professional couples in the 1970s in the USA dropped to single-person working status because it made more economic sense with the high taxation (up to 70%) when the income combined. High earners also devise methods to move themselves or their money to lower-tax havens ultimately to the detriment of the society.

MONOPOLY GOVERNMENTS: ECONOMY DESTRUCTION BY SOCIALIZING CAPITAL AND REGULATIONS 

Socialist economies are invariably irrational, bankrupt, and corrupt. The Communist Manifesto’s another plank is, ‘Centralization of Credit in the banks of the state by means of a national bank with state capital and an exclusive monopoly.’  Some centralization happens in democracies and capitalist economies too. The finance of every federal government program is through taxes, borrowing, or the creation of money. Borrowing defers the cost of the spending programs to the future while creating money by more printing through the central bank creates the impression that the programs are free. 

At the beginning of the 21st century, the Fed in the USA flooded the market with currency to drive interest rates very low. This inevitably encouraged investment in houses, the stock market, and industries not justified by the market or consumer demand. A short-term vision to inflate economic growth leads to a huge misallocation of resources. When supply far outstrips demand, the bubble inevitably bursts. The stock market crash (1929 and 2000) and the housing bubble crash (2008) are examples of such expansionary monetary policies.

Centralized banks run by the government generally end up subsidizing a wealthy, politically connected class and destabilizing the economy. Lending at a subsidized rate, loan guarantees, and other subsidies to politically influential industries overwhelmingly distorts the markets. Politics, in seeking campaign contribution tools, replace economics. As an example, Obama guaranteed 100 billion dollars in two years to a pet green energy business and one of which, called Solyandra, went bankrupt in 2011. The hallmark of such economies is that only a political connection ensures success in business. 

A central authority implementing a single plan always clashes with federalism or power to smaller states. The latter achieves growth through competition and respects local culture, traditions, and environments. In socialism, heavy regulation is just as effective in controlling an economy but without the ordeal of confiscating and figuring out how to manage them. Business owners become subservient to bureaucrats with many rules to comply with. 

However, regulation is mostly the result of lobbying by the industry to stifle competition. The government, in fact, becomes a cartel enforcer for the best lobbyists. The monopolies of gas companies, airline industries, and public utility industries were more because of regulation rather than free market philosophy. The corporations, striking a deal with the government by sharing their monopoly profits, give their consumers low-quality services at a higher cost. Low-cost airlines blossomed when the governments withdrew their monopolies. As an example of regulation benefitting the regulated, corporations wanted the Food and Drug Act because the heavy regulations would deter the smaller businesses from competing. Socialists may claim to hate the big business but are its greatest defenders.

MINIMUM WAGES AND WELFARE POLICIES: HARMING THE POOR 

Minimum wage laws, corporation taxes, and nationalization are the methods to achieve a democratic ‘social justice’ in socialism. The important minimum wage laws ironically discriminate against relatively unskilled, entry-level workers just starting in the job market. In a free market, an employer might choose a lower-priced worker and train them. Minimum wages make that unaffordable to many employers. Historically (Greece, Spain, and Puerto Rico) and in surveys, minimum wages have harmed the low-skilled workers who are unable to get adequate job training, develop careers, and save for the future. 

Unions support increased minimum wages because they understand that low-skilled, non-union labor is often a better substitute, in the eyes of the employers, for more experienced unionized labor. It also takes away the competitive advantage of the less expensive, often ethnic minority, workers. Even companies conspiring with labor unions employ this tactic to protect themselves from competition from other companies with less expensive labor. The author says that it is difficult to think of a quicker means of increasing poverty than adopting minimum wage laws. 

Similarly, a welfare state crowds out private charity making the poor solely dependent on the government. Private charity typically helps people to become independent by helping themselves in contrast to welfare schemes which make people increasingly dependent sometimes for generations.  Welfare programs have the defining moral hazard where the benefits destroy the incentive to find a job and become financially independent. In the USA, welfare programs since the late 1960s increased the levels of poverty instead of alleviating it! From 1968 to 1980, poverty increased by an amazing 22% despite a huge increase in the welfare programs to more than 4 trillion dollars. A study revealed that only 18% of the welfare recipients moved out of poverty as compared to 45% of the poor not receiving welfare.  

Welfare state policies destroy the family too as a natural consequence. The attractive welfare programs remove the stigma attached to remaining out of work and by replacing the role of an earning father to produce children out of wedlock. Almost half the children in the USA (blacks more than whites) are born in a single-mother family.  Children in single-parent families are three times more likely to develop emotional problems; girls are twice likely to have children out of wedlock, and boys are twice as high to get involved in crime. This has been the story of welfare schemes in the USA.

SOCIALIZED MEDICINE AND EDUCATION 

Socialized medicine, a great political tool to supply free medical care because ‘everyone has a right to health’, in Canada, New Zealand, Britain, Europe, and even India generally leads to huge waiting lists, inefficiency, and corruption in delivering health services. The government typically responds by capping the doctor’s salaries and becomes tardy in implementing new technology. The best doctors choose to migrate to other countries as the salary cap would be grossly disproportionate to their training and competence. Capping on the rates of other medical equipment would generally mean that poorer quality material will make its way into the market and the hospitals which would be eager to cut corners. Russia was a typical example of all these consequences. However, the rich and the politically influential have access to the best medical care. The ‘cradle to grave’ socialized medicine started by Russia ironically reduced the quality of healthcare.  

Educational standards grossly reduce in government schools since the teachers neither have any incentive to work better nor can lose their jobs. The children in government schools are rarely able to compete with private schools. Private schools have a stake in keeping the quality because profits and losses are important, and hence, the parents have a say in the education of their children. In the US, the only public schools which do well are those in affluent neighborhoods where the competition is severe from private schools. Most government spending programs on improving ‘education’ end up paying for the infrastructure and rewarding failing teachers. A study in the US found that after a near tripling of per-student spending on public schools and more than a doubling of public-school employees over forty years, student ability in maths and verbal schools declined. Most public schools in socialist regimes end up as propaganda machines for the government to brainwash impressionable children from an early age. The free education plank of ‘The Communist Manifesto’ has the major purpose to indoctrinate rather than nurture free thinking. 

ENVIRONMENTAL DEGRADATION IN SOCIALISM

It is a myth that centralized social planning is more benevolent to the environment than private enterprises focussing blindly on profits. A private enterprise makes an owner more responsible towards the environment if the legal clauses are clear in protecting people’s rights. When the companies are not responsible because of the stance of the ‘community prosperity’, pollution in fact increases to grotesque levels as was the case in Russia- an ‘ecocide’.  Property as a free resource owned communally or by the government leads to an inevitable abuse as there is neither motivation for profit nor a simple pride of ownership. 

Black Sea destruction whose coastline shrunk by half and sometimes buildings collapsed due sand extraction; extreme water pollution killing all the fish of Oka River in 1965; fish kills of Volga, Ob, Yenesi, Ural, Northern Divina Rivers; the killing of animal life, destruction of shoreline, and deforestation around Lake Baikal (one of the largest freshwater lakes in the world); and the destruction of the Aral and the Caspian seas due to sewage exemplify the dangers caused by unbridled socialism to the environment. 90% of the trees in Sichuan province of Communist China died from air pollution by the early 1990s. In Chungking, a 4500-acre forest was reduced by half by acid rains causing huge crop destruction. In 2007, sixteen of the world’s twenty most polluted cities were in China. Such environmental horrors damaging air, water, forests, and humans were common in communist Poland, Czechoslovakia, and East Germany.   

Even government-run enterprises in democratic countries are equally inept in caring for the environment. Venezuela, with a nationalized oil industry, suffers from massive deforestation. Lake Maracaibo receives 10,000 gallons of sewage per second from two million people living around the lake; more than 800 companies can dump sewage into the lake, and there are frequent oil spills in that lake. It is the hallmark of socialist governments to nationalize heavy industries like petroleum and convert them in this process to unaccountable environmental criminals. 

SOCIALIST MYTHS ABOUT CAPITALISM AND THE ‘SUCCESSFUL’ SCANDIVANIAN STORY 

Socialists repeat a lie many time to make it a truth. Capitalism being anti-poor and pro-rich whereas socialism is for the people is one such. A free-market economy tends to serve the maximum number of people at the most competitive prices. For a hundred years, socialists smeared successful American entrepreneurs as ‘robber barons.’ Cornelius Vanderbilt, James Hill, Rockefeller, and many other free market capitalists of the nineteenth century started out of nothing, built their businesses without any subsidies, offered better services at cheaper prices, were extremely generous to their employees, and were great philanthropists. The crony capitalists, in contrast, indulged in wasteful expenditure, corruption, and unprofitable ventures catering to the vote bank policies. 

Contrary to the oldest myth that capitalism ‘exploits labor’ and dooms the worker to subsistence level wages, capitalism has been the main reason for increases in wages, improved working conditions, and prosperity of all classes. A study in the USA tracked 50,000 Americans for three decades to discern the extent of mobility on the economic scale. They found that less than 1% stayed at the bottom 20%. More than three-fourths of families in the bottom fifth made to the highest two income quintiles. The poorest made the largest gains. Socialism however has a clear history of economic stagnation and failure.

Socialist propagandists compare factory conditions in the nineteenth century unfairly with the present-day working conditions. The proper comparison should be with the far more brutal conditions and the irregular payments the workers left behind as farm workers when they came to join the industries. Child labor laws were also a result of capitalistic economic progress says the author. Socialists charge the capitalists with predatory pricing to drive out the competition but this is non-existent since no business leader would intentionally lose money for years in the uncertain hope that it might bankrupt the competitors. 

A socialist lie propagated is that capitalistic economies produce too much for consumption and they need to invade countries to dump their products. However, capitalism, free trade, and the free exchange of ideas always encourage peaceful cooperation. Capitalism is almost never the reason for wars. ‘Autarky’ was economic socialism practiced in Nazi Germany where there is an attempt to produce everything a population needs from domestic sources. Since there was a limitation of resources, Germany invaded other countries. Wars of economic conquest are invariably the result of some variant of mercantilism, socialism, or autarky. 

The Scandinavian countries are apparently successful models of the socialistic economy but this is a myth too. Sweden, avoiding the world wars, had an economy that was one of the freest, least regulated, and least taxed. Sweden had the highest per capita income growth in the world from 1870 to 1950. However, from the 1930s, passionate welfare state spending increased (from 20% of GDP in 1950 to more than 50% in 1975). Taxes, public debt, and government employees went on expanding. By 1980s an economic collapse combined with real estate and stock market bubble burst spelled near disaster. By 1990, Sweden fell from fourth to twentieth place in international economic comparisons. Free market reforms as a revolt started reversing this trend. Swedish socialism created a new ‘socialist man’-an immature, irresponsible, dependent, citizen, who expects everything completely free. Similarly, in Denmark, out of 5.5 million citizens, 1.5 million live full-time on taxpayer-funded welfare handouts. The total tax level in Denmark approached almost 70% counting all taxes on income, national sales tax, automobile purchases, and green taxes (on gas, water, heating, electricity, petrol, and so on). Starting in 2011, elected conservative governments are now trying for a reversal.

CONCLUDING REMARKS 

Indians get confused with the hard right-left divide of the West as our longstanding traditions are a mix of both. The West searches for the ideal of maximal individual liberty under the umbrella of minimal state interference and maximal state security. However, a single philosophy as a solution to all economic and human issues without considering the complexity of human behavior, societies, economies, traditions, religions, and law is futile. Angus Maddison (World Economic History: A Millennial Perspectives) showed that India was the leading economic power of the world (25% to 32% share of the world’s GDP) from the 1st year of the first millennium till 1700. The slump started with the colonial invasions and could only make a reversal in the second half of the 20th century. There surely must have been an Indian way.     

Indian traditions had evolved an enlightened monarchy and free citizens ages back. Though large empires existed, decentralized administration remained the key. Texts of ancient and medieval India focussed on the qualities and duties at all levels from the king to the ordinary citizen, unlike western rights-based traditions. Indian civilization, at least five thousand years old, apart from a high quotient of personal happiness, had a thriving economy with highly-evolved trade, agriculture, arts, literature, education, sciences, spirituality, architecture, and so on. Our indigenous systems had some worth as its outcomes did attract thousands of plunderers from Central Asia, the Middle East, and Europe. India is still a rich country that the world needs. And yet we hold on dearly to the western political philosophies persistently ill-fitting with our experiences.

Indian thinkers dealt with political administration wth principles both conservative and liberal in its framework. Our foundational texts emphasized on the four core human values: Dharma (right living), Artha, Kama, and Moksha diverging from the western rights-based individualistic philosophy. The pursuits of Kama (desires) and Artha (economic wellness) are always acceptable if based on dharmic values of harmony of the individual with the society. As Jaithirth Rao (The Indian Conservative) explicates, Indian texts spoke about different types of Dharma of which two were important. Charitra Dharma- the character of individuals and groups, focuses on peace, harmony, and mutual trust; Raja Dharma (appropriate royal conduct), predating Magna Carta by centuries in suggesting that the sovereign is not above the law, promotes the happiness of the subjects as a protecting and non-predatory state. 

Atharva Veda and the Isavasya Upanishad want us as trustees responsible for our possessions- the inherited land, ideas, culture, arts, thoughts, and philosophies, to pass on in an intact or better state to our descendants. In the economic field, texts like Tirukkural and persistent Indian institutions (the mandi and the bazaar) favored free markets, says Jaithirth Rao. In traditional Hindu kingdoms, the polity and the social order were inseparable. The king’s dharma consisted in preserving and enforcing the varna and jati-based social structures. The king’s belief systems could be independent to that of its citizens- an impossibility in western monarchies.  

Sanatana (Eternal) Dharma is harmony starting from the individual self to encompass wider areas of family, society, and the state. Dharma ultimately talks of balance and harmony with not only fellow humans but animals, non-living objects, and the environment around. The principles of feminism, ecologism, humanity, and acceptance of diversity ingrain deeply into our best philosophical traditions. The best of conservative and liberal ideals evolved over centuries into a unique Indic thought and the tragedy came with independence when we completely rejected our past. 

Post-independence, as Gurcharan Das says that uniquely India had democracy first (1950) and capitalism afterward (1991), a reverse situation of the west. Thus, ‘welfare’ began before there were welfare-generating jobs. Democracy before capitalism led to the throttling of free enterprise, decreasing productivity, and slowing of growth. After the 1991 reforms, India again grew now reaching the top five economies of the world. Gurumurthy argues that India’s economic strength comes from household savings, the informal sector, and Public Sector Banks. The household sector is the strongest and the most stable component of the Indian economy and a result of a relation-based cultural life. The jati-based Indian communities unite families and communities, improve the economic status, and give upward mobility. As Vaidyanathan sums up, caste (or jatis) as a social capital brings unity in economics but it brings division in politics.      

The criticism of capitalism and communism from opposite viewpoints can be equally harsh and emphatic. However, our experience of post-independent democratic socialism generally connects well to the themes highlighted in the book. Thus, this book is important to the citizens (especially the youth) of India who have a fascination for socialistic preaching. Many of the dangers described in the book give us important lessons to deal with our future much better.