Create the belief structure and the government can justify any action. Leadership becomes more effective when it is based on prevailing doctrines, with minds firmly closed to all evidence to the contrary. All types of socialism demonstrate opinions insulated from inconvenient contradictions. A socialising government can then appear independent and fair-minded, serving the people when it actually serves itself.
New dogmas become entrenched. The government and also the public, like our hunter-gatherer forebears in their communal caves, huddle round the mutual safety of the new consensus. Concerning the government’s contradictions, comfort is sought by the public from the government itself. It becomes an iterative process that allows the state to drift remorselessly away from free markets, not only with public consent, but public encouragement. It is the basis of groupthink, the enemy of reason.
To the building self-ignorance is added an overestimation of understanding complex issues: an understanding-bias that is reinforced by debate on terms set by society itself, represented by the media. Editors select complex issues which they reduce to simplified choices, that are then discussed by invited participants. The debate always proceeds on the basis of which government intervention or regulation is most likely to achieve a given objective. Spoil the party by insisting that personal freedom is preferable to any government intervention, you damage the media ratings and you will be deemed a maverick, never to be invited back.
Contradiction becomes too difficult to take. A form of naïve realism develops, whereby talking heads promote themselves as supporting the assimilation of a consensus. Furthermore, they believe that those that do not subscribe to the consensus are irrational, biased, uneducated and ignorant. By these means, the benefits of free markets and individualism are increasingly suppressed. Economists are paid to promote policies in favour of the state’s control of money. The universities develop an anti-market bias, and free-market economists are unable to secure paid professorships.
The position these toadying experts occupy was summed up by John Ioannidis, a professor of medicine at Stamford University:
“Scientists in a given field may be prejudiced purely because of their belief in a scientific theory or commitment to their own findings… Prestigious investigators may suppress via the peer review process the appearance and dissemination of findings that refute their findings, thus condemning their field to perpetuate false dogma. Empirical evidence on expert opinion shows it is extremely unreliable.”[ii]
Disappointingly, we all assume scientists are disciplined in their specialisations and unbiased. Not so. In economics, there is the extra problem of human unpredictability, to which is added a total lack of precise definition. Soundly-reasoned theory is swept aside by the introduction of unreliable, and often extraneous statistics as the feedstock for mathematical equations. Reason, freedom and free markets are the casualties.
Instead of reasoning for ourselves and recognising the flaws in debate, we trust an elite to guide our thoughts with their knowledge. Alongside the elite there is a cadre of self-anointing experts consulted by the media. We place value on their independence. We see them as informed insiders, but we forget their privileged access depends solely on supporting the party line. It is a profitable after-life for those who had power, a self-congratulatory basis for the concealed promotion of social policy.
When it gets left behind by progress, the static socialist state eventually becomes the author of its own destruction. Only then might the psychological consensus of denying free markets be broken. If we are lucky, out of the ensuing chaos a new commitment to free markets rapidly emerges. More likely, it becomes the opportunity for extremism, as Germany showed in the aftermath of its inflation collapse of 1923.
Contemporary socialist evolutions
As economic historians, we observe the faults of others usually without recognising them in ourselves, mainly for the psychological reasons noted above. Most economic historians selectively approach the subject with the bias of their culture and generation. The story of Bismarck’s Germany is hardly known in English literature and the lessons are lost in an English-speaking world. The fall of communism in the USSR is fresh in our minds, but the struggles of the state under Yeltsin to replace it with a market-based economy and the ensuing corruption is more topical.
In Britain, many have forgotten the appalling services and products of nationalised monopolies: British Railways, British Telecom, British Leyland, to name just a few. Consequently, the Brits as well as other socialists in the West are never adequately deterred in their antagonism against free markets to change their minds. Bernie Sanders’ desire to run again for President and the Marxism of Jeremy Corbin are testament to the short-mindedness of the voting public. It is a wilful ignorance that defends socialism and never defends free markets.
In America, socialism is being challenged by President Trump. Without us examining his beliefs too closely, he obviously knows that the government establishment has been strangling the US economy. His dislike of the Democrats and their policies under Obama identifies him as an enemy of socialism. But as a free-marketeer, Trump does not defend free markets. Instead, he ends up defending crony-capitalism, military spending and monetary inflation. His trade protectionism, strongly echoing Bismarck’s policies in the late nineteenth century, is similarly socialism under the banner of nationalism. Far from rescinding the socialist tide, Donald Trump is swimming in it.
Trump’s trade policies, as I’ve argued in another article[iii], are driving America and therefore the world into a deep recession. Under current monetary policies the result will be a spectacular increase in monetary inflation, which could lead to the destruction of the dollar. If this happens, Trump almost certainly will be blamed, not socialism. That being the case, the destruction of the American economy and perhaps the dollar with it will not be the end of socialism and the return to free markets. By not properly understanding free markets, President Trump risks condemning his nation and his legacy to a more intense post-crisis socialism similar to that which fuelled fascism in 1920s Germany.
If so, we can only hope the period will be brief. Economists in the free-market tradition can only forecast the likely economic and monetary consequences of current policies. The laissez-faire tradition tells us a failing government should stop intervening and restrict itself to ensuring basic criminal and contract law is enforced. It should stop monetary inflation. As Ludwig Erhard demonstrated in 1948, free markets left alone rapidly restore economic order. But that is not the socialising instinct. As long as there is breath in socialism free markets will continue to be supressed.
The foundation of the European Union echoes the tactical approach of Bismarck: corral a group of nations into a Zollverein customs union, then steer them towards political integration. As the German Historical School was for Bismarck, Marxist-socialism becomes the driving force for the EU, innocuously at first by encouraging free trade within the union. Free trade is then hampered by bureaucratic regulation in the names of common standards, fairness and further integration. Already planned are the imposition of new federal taxes to extend the power of the Brussels government, and the building of a new pan-European military force. Pure Bismarck, and pure Brussels.
Witness the struggle with Brexit, where it turns out the Westminster Parliament is comprised of an overwhelming majority of members who are committed to the EU’s socialising masterplan to the exclusion of democracy. Even a majority of Tory MPs, the party of free enterprise, prefers a federal socialist system to free markets.
It is the stuff of late-stage socialism. The whole world is in its grip, rather than just Germany, just the USSR, just America, just the EU, or just Britain. And these are only some among the traditionally advanced nations. Being cyclical, the bankruptcy of it all in time is for sure. It is set to throw up greater challenges than ever seen before because of its ubiquity. Assuming it does not end in a nuclear destruction of the human race, we will eventually turn our backs on the follies of socialising governments and go back to free markets. Then the cycle of humanity’s socialising madness will start all over again.
- Source, Alasdair Macleod via James Turk Goldmoney