Socialism is the greatest form of magic and it can work wonders under one small technicality; those in charge must be capable of predicting everything and every need weeks before they occur. There have been some great minds and some not so great minds which have attempted to master this simple little but key problem. They have never succeeded and likely until we have some extremely advanced artificial intelligence (AI) capable of figuring more computations and be inspired and intuitive as well, even AI will not save the day. Unfortunately for Venezuela they were relying on Hugo Chavez’s daughter and the rest of his crony socialists which has led to the riots in the streets because when the government gives everything and its fails, everything fails right along with it. The people are suffering as there is no food, no electricity, nothing, not even toilet paper. Venezuela is on the fast track to join that other socialist utopia, North Korea as that was the system they were emulating. What were they thinking? Anyone looking at North Korea and thinking, ‘hey, maybe we should try that total socialist thing and see how it works for us geniuses,’ is asking for ruin for their people. But what they saw in North Korea was the ruling elite who were living large and eating good and they looked no further than the feast served in the palatial grounds of the Kim family and thought, we can live large too. They didn’t look at the people who have been eating grass and the bark off of trees. North Koreans have it so good that they are trying to sneak into China where they see a world of plenty. Maybe China has found a secret to make socialism work as China is socialist, right?
So, since China might have found a secret, perhaps looking back at the socialist history and see what their magic bullet turned to be. Back when Mao Tse-tung initiated his socialist communist utopia of a planned production and state run farms and factories, they had such a failure that it is still unknown how many Chinese paid with their lives as a result of that first famine produced by crop and other farm failures. Estimates run from hundreds of thousands to tens of millions to hundreds of millions to unimaginable millions. The only Chinese who were safe from father Mao’s wonderful central planning were the peasants living in the furthest reaches of China in the remote farmlands who raised their own crops and were self-sufficient. Mao Tse-tung and his central planners then came up with a brilliant idea based on those remote peasants and allowed the farmers to work and plant as they saw fit and permitted them to keep sufficient food to feed their communities. But the factories still were under central planning because the communists understood the needs of the people. There were often shortages of particular items and sometimes unforeseen demands which were completely unexpected and there would be a lag time and waiting lists grew for such things as cars, televisions and other thought of luxury items. Housing became more sterile and stark as central planners placed a higher emphasis on quantity over quality and function and basics over appearance and luxury or even comfort. The people wanted more and knew about the rest of the world despite the attempt to control their news from the outside world. Mao Tse-tung gave in areas to the better minds but still retained much of the control centrally and thus restricting reactive production which led to continued waiting lists and production lagging demand sometimes by years. Mao died and the communists with time made a fateful decision as their economies could not meet their directive goals. They let loose of a degree of control and allowed for a select group of entrepreneurs, some free enterprise where industry owners were permitted to keep some of their profits providing they met the expectations and projections. This stimulated their economy and this led to meeting projections and industrial and economic growth beyond anything they had previously attempted. This led to economic growth rates sometimes surpassing 9% annual gains and brought the Chinese economy into the modern age and spawned the rise of a middle class, a new concept in socialist governance. But China was no longer a purely socialist system and it was the free enterprise which was permitted economic freedom which spawned the growth rates.
I can hear the questions asking what would happen if the growth rate slowed or even, heaven forbid, hit a recessive downturn. Well, that would be an easy one to answer with only one problem, the Chinese economy had been so repressive that the last decade plus, as they liberalized their economy and allowed more and more of the economy to be a semi-free demand economy with free enterprise, that they only recently finally reached a point where their gains slowed and failed to meet expectation and fell below their desired, if unreasonable, 9% per year and the initial signs are what some might call ominous. The central planners are showing signs of throwing out the baby with the bathwater as they are showing indications of returning to form and taking back the control over production planning thinking they can plan better than the profiteers as their decisions are empirical and not driven by guessing and risk taking. There is a positive side to this and that is we will see if after having witnessed the methods of for profit manufacturing and investment that the central planners might have an improved ability at decision making. Even if the central planning takes back sufficient control that the wait lists return and they end up where they were before their first experiment in free market economy, then their second experiment in free market economy will be the same inevitable success that they had the first time. The reason a free market economy works is that it is driven by greed, a vice which has never been vanquished from the human spirit and as long as there is greed, then profit based economy will work the best in satisfying the greed of the proletariat and the bourgeoisie as all gain from such a driven system. This could lead to a cyclical Chinese economy with it going in spits and starts as the free market produces growth until the inevitable recession. The central planners then clamp their control back over the economy and as that fails they resort to free market until it slows and back and forth and back and forth and eventually one will prevail. The likely winner, for the benefit of the Chinese people, will hopefully be free market and the central planners simply resort to governing wisely as we have always been taught the ancient Chinese rulers had managed when they were not fighting against one another in order to consolidate their control. The one thing that can be learned from the Chinese who found their way to allow for free market economy when central planning failed to meet the people’s demands is that even central planners can sometimes know when they have failed before it is too late.
That is the problem with too many socialist governments, even those which are based on a free market economy but use socialist programs to redistribute wealth more evenly and to provide retirement income so nobody gets left out in the cold. When these programs reach a point where they outstrip the resources then either taxes need to be increased or other means of making the programs affordable even if they must cut back on their benefits. When the taxes are too high in order to presumably pay out welfare and retirement benefits the economy can still collapse into freefall such as was the case resulting from the 2008 economic downturn, bust if you insist, and Greece, Spain and others found themselves so deep in the hole that the economy was unable to recover. This was further exacerbated by the fact that they are on the Euro which receives much of its value based on the combined economies of the European Union which include Britain, Germany and other nations whose economic output is far greater than Greece thus Greece could also not support the value of the Euro which furthered their problem. The single currency may result in the end of the European Union if the nations being damaged by the single currency decide to leave so they can manage their own currency. Add into this the Brussels Eurocrats dictating immigration policies and forcing refugees into countries which feel threatened by the refugee situation. This will be a further demand on the economies of the nations taking in the refugees and you have another stress that will force more nations into economic difficulties. There is much to look at going forward and Europe is on the leading edge of the coming problems many which will result from the many and varied conflicts and other problems ongoing in the Middle East and North Africa, things we will most certainly cover here along with the other items of particular interest around the globe. In the meantime, let us hope that Venezuela figures out where they went wrong and change their economic means and systems to something which at least can feed and provide a few other necessities and even the luxury of toilet paper soon and the people can stop rioting and work and produce for their own enrichment and not just the enrichment of the central planners who apparently decided their wealth mattered more than the people and are now facing an ugly truth, they were wrong. We could hope for the people of North Korea as well, as their new leader, Kim Jung Un is apparently unbalanced and seems to believe if he is doing well the people should be happy enough by that knowledge even if they lack for virtually everything including decent food.
Beyond the Cusp