Paradise lost, but a pocket of America found

Paul Toohey says:

08:19am | 05/02/12

Sorry. I should have said Spain was anti-communist but had an understanding with Cuba…

Kika says:

10:41am | 06/02/12

Agreed. Facism is the polar opposite of communism.

marley says:

08:14am | 05/02/12

@Neslihan -I think you’re wrong about Cuban cigars.  The only place you can’t get them is in the States: they’re available in many other countries, though..  You can certainly get them in Canada because my brother in law smokes them occasionally.  They’re perfectly legal there, BTW.  And yes, they’re genuine Cuban cigars.

NESLIHAN KUROSAWA says:

08:42pm | 05/02/12

Hi Marley,

Thanks & good point!  But I was actually talking about the tobacco plantations needed to produce Cuban cigars.  Also when we talk about genuine Cuban cigars it just happens to be a way of life as well as the means of making a decent living for the ordinary people of Cuba. Luckily you do not have to travel all the way to Cuba to get the genuine cigars just like your brother in law.

I am just curious if it was not for the sheer hard work of Cubans, who would have come up with this very idea of finer things in life?  Which is actually exported all over the world exclusively for all connoisseurs of good food, wine & cigars to finish off a meal.  Kind regards.

Bertrand says:

09:37am | 05/02/12

Anyone who argues in favour of a libertarian laissez-faire economic model is as ignorant and oblivious to history as anyone who argues in favour of a communist economic model.

Bot have been tried and both have been spectacular failures. This is why every developed economy is a mixed economy (ie. capitalist economies with regulatory frameworks that set the rules of the market place, and taxation models that provide social services that are not met by a purely free market model).

Modern western economies generally recognise that pure free markets and pure communist economies are flawed, and that a middle ground must be taken. This is why Australians currently have one of the highest standards of living in the history of the world.

Laissez-faire economic models were tried in America and Britain in the 19th century. They were spectacular failures in which social inequality grew and where a massive underclass led to huge problems with crime, not to mention people literally dropping dead on the street from disease and starvation. Furthermore, the free market proved unable to properly control itself, and the boom and bust cycle was far more pronounced than it has been since the shift towards mixed economies.

The current bust stands out simply because it is the first true downturn in generations. Blame can be laid at governments going too far either way - too much faith in free markets in America, and too much government intervention and socialist economic policies in Europe. They moved away from the middle ground.

Nonetheless, in the 19th century great recessions and full blown depressions were fairly common. They were the inevitable consequences of laissez-faire economic theory put into practice. How people can maintain faith in an economic ideology that is a proven failure is beyond me.

Rose says:

10:18am | 05/02/12

100% correct there Bertrand. Capitalism and socialism must meet in the middle for a society to flourish. There is a balance and for the most part Australia is a fine example of how it can work beautifully.

Shane From Melbourne says:

11:12am | 05/02/12

@Richard- The only way to generate prosperity in a country is to follow laissez faire free market economic policies so we can all get rich buying and selling CDOs. We may have to bail out a few banks out but that’s no biggie….

hawker says:

12:04pm | 05/02/12

Not quite right, Shane. What the real “prosperity generators” do is advise their clients to buy CDOs, whilst desperately selling them off themselves. What could possibly be wrong with that?

Whilst we’re being truly laissez-faire, we must also remember to completely decouple executive performance from remuneration. Very important.

Richard says:

01:50pm | 05/02/12

Not at all, any of you! All three of you are wrong!

Firstly Shane, I’ll answer you. Bank bailouts are expressly contrary to the principles of laissez-faire free market capitalism. Its NOT the government’s place to go about picking winners and propping up insolvent corporations. Such a practice is definitively corrupt, corporato-fascist, and kleptocratic. CDOs are incidental to free market capitalism, not inherent to it, and the only reason they were able to thrive is because the Government got involved and thought they’d do everyone a favour by guaranteeing mortgage securities and bank deposits and so forth and so on. In the absence of these market-warping interventions, CDOs and so forth would have been far less prevalent.

Richard says:

02:09pm | 05/02/12

Now to Bertrand (and his little cheer leader Rose).

I am exceedingly well-versed in history and economics, and I challenge anyone at any time in any way to demonstrate otherwise. It would be impossible, I am simply too knowledgeable in these areas, particularly history.

The only time in history that the libertarian laissez-faire economic model has been given a fair run was in 1800’s America, and the direct result of this was a period of unprecedented economic expansion that laid the foundations for America to become the riches and most powerful country in the world for the entire next century (i.e. the 20th century).

Now its a myth and a fallacy to say that this model was a “spectacular failure”. In fact it was exactly the opposite, a spectacular success. You point to the growing pains of industrialisation and say “look how bad it was”, but you’re only comparing the situation to today, after nearly 200 years of technological advance (driven incidentally by laissez-faire capitalism alone) which have improved living standards out of sight.

But you compare the living standards of 1800’s America to any other contemporaneous society in the world, and its night and day. In Russia, the people were still serfs! There living standards were no better than Roman times. France had been decimated by the Napoleonic wars, and was in decline and eclipse. Elsewhere Europe was ossified and breaking apart with social discontent and inequality. Ireland was in abject poverty and starving! Africa was still tribal, China was addicted to opium under suffering oppression from both the Manchu and European colonisers… etc. etc., literally everywhere in the world was spectacularly failing.

Except America and Britain. Two shining lights of civilisation. Victorian England was the most glorious phase of the entire Empire era. America was in every sense “the land of opportunity”. Laissez-faire free markets had transform them from desolate, wealth-less agrarian societies into vibrant, industrial powerhouses.

You must use the correct context. Now, you’re right, there were a number of short, sharp depressions in the 1800’s, but they were resolved very quickly, within the year usually. Not these drawn out protracted affairs we are suffering from now (and as happened in the 1930’s). This is because government intervention and Keynesian policies, far from helping the problem, only serve to protract in and prolong the suffering.

Recessions are actually a benign, beneficial and necessary phenomenon, to flush out malinvestment and destroy bad debt, so that the economy can be ready and primed to grow again relatively quickly. Notice how this hasn’t happened in this recession? Its because the government has done everything it can to prolong the malinvestment and prevent the bad debt from being destroyed.

And thus we suffer like zombies. We don’t need a middle ground, that’s like saying people need and middle amount of cancer to make them healthy. Socialism is a disease and a cancer on the health of the economy, and must be surgically removed if we are ever to see prosperity again.

Bertrand says:

07:30pm | 05/02/12

Sigh… why do I keep allowing myself to get drawn into arguments with libertarian ideologues?

Richard, as a self-proclaimed historical expert, I am sure you would be happy to acknowledge a number of failings in your information and analysis.

“Now its a myth and a fallacy to say that this model was a “spectacular failure”. In fact it was exactly the opposite, a spectacular success.”

If the only metric you are going to use to judge a system as a success or failure is the rate of growth and innovation, then you could make this same argument about the Soviet Union under Stalin, which stands out as the society which grew its economy and industry at a faster rate than any other in history. In the space of 30 years Stalin took the Soviet Union from the plough to the atomic bomb.

Does this mean Stalinist communism was a good economic model? Of course not, because when measuring the success of an economic system we use a whole range of criteria, rate of growth being only one of them. We also look at how well that system protects people’s freedoms, how well it distributes the wealth to those who participate in it, and how well it provides for the basic needs of its participants.

Libertarian ideologues like to argue that their system puts this protection of freedom above all else, when it clearly doesn’t, as it ignores the coercive power of capital and its ability to attack the liberties of the poor. Instead, it protects the economic freedoms of the wealthy at the expense of other segments of society. Likewise, by its very nature, it limits the ability of wealth to trickle down in the form of fair wages or social services, as the economic prerogative of a libertarian capitalist is to keep as much of the wealth for himself. If the absence of labour laws means he can pay his workers at slave labour rates, he will. Put simply, the economic model cannot allow for the economic gains of the system to benefit everyone who contributes to the system.

The coercive nature of unfettered capital and the excessive inequality built into the system are the reasons why 19th century American laiisez-faire capitalism saw the invention of the term ‘robber baron’ to describe the abuse of capital power by industrialists. This is also why 19th century American capitalism saw the frequent use of the military against striking workers; it was the inevitable extension of an economic theory that believes the only true role of the state is to protect the economic liberties of capitalists. They are the reasons why 19th century America saw an explosion in radical anarchist and communist groups who used terror tactics in their fight against the coercive practices of the industrial elite and their defender, the state. By these metrics, it was a failure. There is a reason America and everywhere else moved away from laissez-faire capitalism… it didn’t work to promote the interests of society as a whole.

“Only comparing the situation to today” - you mean that I’m comparing the vast inequality in laissez-faire economies to the fairer system of today, where we have a mixed economy in which the coercive power of capital is tempered through labour laws, and the economic fruits of capital growth is distributed by taxation and regulation to all who participate in the system? I’m not sure what your point is? That living standards today are fantastic? Yes they are, because we have grown an economy in which regulatory frameworks have ensured that economic growth and technological advancement benefits the many and not just the few.

“200 years of technological advance (driven incidentally by laissez-faire capitalism alone)”

Actually, technological advancements have increased most dramatically since World War Two, a period in which laissez-faire economies have not existed, as capitalist economies have functioned as mixed economies in this time period. Yet rapid innovation and development occurred despite government regulations and taxation.

Also, one of the biggest drivers of technological advancement in this time period was the US government, in the forms of the Department of Defense and NASA. These two government organizations conceived and developed much of the technology our modern economy is built upon. Certainly, they didn’t realize the commercial potential of these technologies, but that was never and never should have been their role. Nonetheless, these two government departments were undoubtedly two of the key drivers of technological advance in the latter half of the 20th century.

You made a good point in your first post, about the inherent similarity between fascism and communism as two models of authoritarianism. I would go one step further and say they are models of absolutism, and that absolutism is something that should be avoided. Libertarian ideology is nothing more than another absolutist ideology that places one value on such a high pedestal that its function invariably comes at the expense of all other values.

Bill says:

07:47pm | 05/02/12

@ Richard - “I am exceedingly well-versed in history and economics, and I challenge anyone at any time in any way to demonstrate otherwise. It would be impossible, I am simply too knowledgeable in these areas, particularly history”.

You forgot to add modest.

Cynicised says:

07:20pm | 07/02/12

Richard., I suggest the Irish between 1845- 1852 might have disagreed with you in regard to the benefits of laisssez-faire economic policy ala Trevelyan.

James says:

06:07am | 07/02/12

I bet he means that it was the “most advanced country in Latin America” for the 5% on the island who owned everything. All of Latin America is changing for the better, Cuba just had a headstart.