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Bankruptcy and Revolution

Written by Gary North on January 23, 2016

I wrote this after my trip to New Zealand in 1986. While I was there, the Chernobyl disaster took place in the USSR.

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The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth (Ps. 37:21).

All over the Western world there are signs that people’s confidence in the promises of the welfare State is fading. Political leaders who once staked their reputations on the long-term expansion of government-provided benefits are now talking about “the new austerity” and a “new era of private responsibility.” It is not their new-found commitment to the principles of economic freedom that underlies this transformation of their rhetoric; it is the looming bankruptcy of the welfare system. The costs keep rising, while tax revenues do not keep pace. A massive default is coming, and the politicians do not want to be left holding the empty bag.

The shift in thinking is also in part ideological. We are a civilization based on pragmatism. “If it works, do it” has been the motto of this century, at least outside of Communist nations. (Even in Communist China and Russia, the governments have been forced to reduce many of the older Marxist controls, especially in the area of agriculture, just to feed their populations.) But now everyone knows that socialism is not working. Thus, the opinion makers are desperately searching for some alternative–an alternative that will preserve their influence over events, however.

Visible Failure

The defenders of free market capitalism for over a century have warned against the inescapable effects of socialism: reduced economic incentives, non-cooperation by the average worker, black market activity, lethargy on the job, reduced quality, reduced ability to compete in world markets, reduced output per capita, and most of all, a vast expansion of the dead hand of bureaucracy. All of this has taken place in every society that has adopted socialism. There may be a few examples of high quality production–the Swedish automobile industry, for example–but these examples will normally be those industries that face international competition. in the case of the English automobile industry, even international competition did not save it.

The debate over the efficiency of capitalism vs. socialism went on until the 1960’s. After that, the defenders of socialism began to shift the argument. Instead of continuing to promise that socialist economies would at last outproduce capitalist economies, the socialists began to discuss the immorality of the initial (and subsequent) distribution of wealth, and therefore the illegitimacy of capitalist output, despite its unquestioned superiority of volume of goods and services. The socialists began taking refuge in slogans such as “the reduced quality of life under capitalism” and “the injustice of the existing distribution of wealth.” The philosophical materialists started talking about the unmeasurable quality of life and equally unmeasurable morality when it became clear to everyone that all the statistics concerning increased output favored capitalism.

The socialists have now adopted a new tactic: the attempt to fuse together the economic incentives of capitalism with the central planning of socialism. They have been willing to give up some degree of centralized control in order to increase the size of the national economic pie. Even in cases that have involved alienating certain segments of the voting population that created the democratic socialist parties, socialist leaders have been willing to scrap some of the older ideology, as well as the promises of government protection, if the economic (and therefore political) pay-off has seemed high enough.
(For the rest of my article, click the link.)

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