Socialism… Still Not Cool
Ben Powell reminds the world how much better life is (and beer) under freedom
It’s the most entertaining libertarian book of the year: Ben Powell’s *Socialism Sucks,* shows how crappy beer may have done more than Milton Friedman to hasten the fall of communism worldwide.
Has anyone else noticed the disturbing trend of politicians and their enablers in popular culture trying to make socialism cool again?
Larry H. White gives it a fitting label — “Murder Chic.”
First came the Che shirts. Next were the “communist party” shirts — featuring a clever-enough cartoon depicting Stalin, Lenin, Marx, Castro, and Mao having a rowdy time. Then those hideous fur hats came into vogue.
But perhaps most unsettling is Kristen Ghodsee’s new book, Why Women Have Better Sex Under Socialism, which has the truly Orwellian subtitle: “And Other Arguments for Economic Independence.”
Let that sink in for a second…
Despite socialism’s popularity among easily-duped Millennials, thinking people are not falling for the propaganda. Ghodsee’s NY Times article with the same title was widely mocked, and her book sales are in the basement (#432,614 in Books and #776 in Communism & Socialism alone).
Meanwhile Socialism Sucks: Two Economists Drink Their Way Through the Unfree World is already ranked #1 among new releases in the “Beers” category. A week before the release of this a hilarious new broadside by the the Independent Institute’s Ben Powell and his co-author Robert Lawson, it’s already 3̵8̵,̵0̵0̵0̵t̵h̵ 9,000th (and climbing) overall.
“In Cuba… the central planners decided they only need two kinds [of beer]… Both taste like Budweiser that’s been left out in the sun.”
Powell and Lawson understand that academic arguments did not cause the fall of the Berlin Wall. Rather, it was the consumer’s desire for goods and services (like beer) available in West Berlin that forced the Soviet tyrants to let their people go… shopping. The book demonstrates this with flair—comparing the swill from former Soviet-bloc countries to the diverse and alluring brews of the free world.
What better way to dismantle the new wave of socialist propaganda than to launch Socialism Sucks to the top of the Amazon best-seller rankings before its launch?
Ben Powell returns to the show to share his journey “drinking his way through the unfree world.”
Click here to purchase from Amazon.com, and pre-order a copy for a beer-loving Bernie-supporting friend.
A good buzz may be the most effective form of persuasion out there.
Want to annoy a commie?
Help keep Ben and Bob’s book to #1 in the “Communism in Socialism” category, and listen live every Sunday — 8–9am PACIFIC — on the show of ideas, not attitude.
Transcript
The publisher originally described the book as the bastard stepchild of Anthony Bourdain and Milton Friedman.
Socialism and Beer: How A Country’s Beer Can Explain Economics
Bob Zadek: Welcome to The Bob Zadek Show. Thanks so much for listening this Sunday morning. I have done many shows on the high cost of higher education and student loans, especially what a rip off it is. We have covered many shows on that topic. This morning’s guest will give us a cure for the cost of higher education, specifically the cost of getting an advanced degree in economics.
That discipline requires an advanced degree — a doctorate degree — and all of that is expensive. However, if you want to learn all you need to know about economics and have fun doing it, as this morning’s guest will teach us, buy yourself a coach ticket on a cheap airline and visit the countries we will enumerate this morning. When you visit these countries drink beer in each one. Have some cheap food. Come back and you will learn all you need to know about economics. You can have the equivalent of a ph.D.
Who better to explain this theory on curing the higher education cost in economics than Ben Powell, who has advanced degrees in economics and has taken the trip that I suggested?
Ben Powell is the director of the free market institute at Texas Tech University. He is a professor of economics at the Rolls College of business and he is the North American editor of the review of Austrian Economics among his many, many other writing and educational credentials.
Bob Zadek: Most relevant to this morning show is Ben’s book, which has been an immediate hit both in beer devotees and economics devotees. Ben’s book, which has just come out, is called Socialism Sucks. Ben, welcome to the show this morning, and tell us whether you support my takeaway from your book, which is nevermind an advanced degree in economics. You can learn virtually all you need to know about economics from drinking North Korean, or Cuban beer. What does beer in third world countries have to do with socialism and economics in general?
Ben Powell: Hey Bob, it’s great to be back with you.
You’re exactly right. The subtitle of this book is “Two Economists Drink Their Way Through the Unfree World.” Myself and my co-author, Bob Lawson, a professor at SMU, took a trip around the world to socialist countries, not socialist countries, formerly socialist countries, etc. We drank a lot of beer because that is what we do when we travel. We learned about their economies. The writing of this book is based on serious economics, but it is written in a very fun, Anthony Bourdain-type style of distilling economic knowledge for normal people to understand and to have fun drinking beer while doing it. You’re right, the beer can serve as a metaphor for how these different economies function.
What Exactly is Socialism?
Bob Zadek: The subject of socialism is very much in the news because it is a part of the conversation in the battle for the Democratic presidential nomination. We have the poster children of socialism such as Bernie Sanders and Elizabeth Warren, who does not use the term socialism by the way. We have AOC, not a presidential candidate but who is very much in the news, and Bernie Sanders, who frequently refers to the term “socialism” or “democratic socialism,” but they use the word “socialist” as a place-holder for “doing nice things,” not as an economic concept.
To them it means giving away lots of stuff without any concept to how you are going to get the stuff you are going to give away. So our friends out there can follow the conversation in the media and on the presidential trail, help us understand just briefly how you are using the term socialism? You are using it as it is actually practiced in the countries you visited. We will go into some detail in those countries and what socialism means on the ground there. When the democrats talk about socialism, how much are they not talking about socialism?
“Socialism, of all of its varieties, means abolishing private property and the major factors of production and replacing it with some form of collective ownership. Usually in practice for any large society like a country that means state ownership and control of the means of production.”
Ben Powell: They’re not talking about socialism in its real functional definition. Regarding Bernie Sanders, when he calls out socialist countries, he mentions Denmark, Sweden, and Norway. But none of those countries are socialist. So let’s clear this up. We’ll say it loud for the people in the back row.
Socialism, of all of its varieties, means abolishing private property and the major factors of production and replacing it with some form of collective ownership. Usually in practice for any large society like a country that means state ownership and control of the means of production. This is when your government has to plan the economy. It owns all of the major businesses in the economy. That is socialism. That’s what it meant under Lenin and that’s what it meant under Stalin, and that’s what it means today.
So, Bernie Sanders has affinities with real socialists and a history of liking things like that. But in terms of policy today, he is not suggesting that government should own Walmart. That said, if we think of capitalism and socialism, it is two poles of a spectrum. There is no country in the world that is purely capitalist and entirely free market. While the world came pretty close to pure socialism during the period of communism in the Soviet Union in the 1920s, or the Great Leap Forward under Mao, each socialist regime still has varying degrees of private property and various factors of production at least de facto.
A Look at Sweden’s Economics and the Social Welfare Parasite
Ben Powell: However, we can group countries and think about the ones that are pretty close to that socialist pole of being really socialist. The first chapter of the book is called Sweden: Not Socialism, because Sweden is predominantly organized on market forces with private property and private means of production. In fact, my coauthor on this book does the Economic Freedom of the World annual report that basically ranks how economically free, or how capitalist or socialist a country is. Sweden comes in at number 27 in the world in terms of economic freedom. It is near the top of the pile.
“[In the] Economic Freedom of the World annual report that basically ranks how economically free, or how capitalist or socialist a country is, Sweden comes in at number 27 in the world in terms of economic freedom. It is near the top of the pile.”
Bob Zadek: What Sweden has discovered, and part of its success in terms of quality of life of the citizens of Sweden, is that Sweden has private ownership and relatively free markets freedom in their marketplace. The reason Sweden needs it while maintaining a higher level of a welfare state, than the U.S., does so by funding the welfare system with higher taxes. The taxes are for the most part on income. You cannot fund a welfare system by taxing income if you don’t have any income. So, the free market part of the Swedish economy is essential because that provides the money in order to fund the welfare system. In other words, you cannot have one without the other.
“You cannot fund a welfare system by taxing income if you don’t have any income.”
Ben Powell: The big gap here is that Sanders is doing the welfare part of the freedom of Sweden, the welfare part, the giving away of the income transfers, but he is not focusing on where the money’s going to come from as Sweden has. So let, let’s discuss the system of how the wealth gets created in a socialist system in order to fund the welfare part of a Bernie Sanders type program.
In the 19th century Sweden had a very poor and backward economy. They went on radical free market law reforms in the mid-19th century. It was a very free market economy up until about the 1950s where that started changing, but it rocketed up in terms of wealth and at one point became the wealthiest nation in the world. By the 1970s they had become wealthy and they put this big welfare state with high taxes in place.
We should say that there are a lot of labor market regulations too. Those are the big areas where Sweden messes with freedom in terms of economic freedoms. What happened is that it wasn’t socialism, in that it didn’t instantly turn the country backwards and become poor. But it created stagnation. The welfare state and high income taxes and labor market regulations prevented the economic growth from happening at the rate that was before.
Now, Sweden is in the bottom half of OECD countries in terms of its per capita incomes but it is still a really nice place because of the parasite of the welfare state that’s living off their market economy. The parasite doesn’t kill its house, but it does stop you from racing forward as fast as you otherwise would. What Bernie and other Democratic Socialists in the United States, at least in terms of mainstream politicians would do, is the same. They would grow the parasite bigger here in the United States and drag us down and push us on that road to serfdom a little bit further. But they are not advocating nationalizing the means of production yet.
Bob Zadek: Bernie Sanders knows full well that you cannot take over the means of production. He wants to keep the means of production in private hands so we can continue to feed the beast, to provide the income necessary to allow for a more generous welfare system.
Ben Powell: Really what Bernie is advocating is some form of European Social Democracy. There is a big chunk of the socialists in the United States today who call themselves “Democratic Socialists.” They do mean, unlike Bernie, nationalizing the means of production, but they think putting this magic word “democratic” in front of socialism somehow changes the nature of a socialist economic system. They talk about socialism from below, where workers get to plan what they do and they democratically decide.
However, the necessity of economic coordination needs to exist if you want to have an advanced material production. A hippie commune is not going to produce an iphone. If you’re going to have advanced material production, you have to have a plan. That plan centralizes power.
What they miss is what Milton Friedman and Hayek understood, the relationship between economic freedoms and political freedoms — that the democratic part of that is going to cease to exist and is going to become mere socialism. But there are a number of them, unlike Bernie, who do mean nationalizing the means of production. Then they say, “because we have this word democratic in front of it, our socialism will be different than any of the socialisms that you’re going to talk about in this book.”
Why Beer?
Bob Zadek: The reason you chose beer for your book is because beer is relatively simple and easy to produce. If an economy is going to produce any product, it is going to produce a product which uses natural processes of fermentation and grain and water. These have been around forever. If you can’t produce beer, how can you produce anything even slightly more complex? So, beer is a wonderful way to explain in ways that everybody can understand, the failure of socialism as an economic model.
When you traveled in the countries you visited, each country presents its own wonderful lesson about what a beer tells us about the economy. Each chapter in your book, which discusses a different country, has a different lesson. So give us a little romp through the countries you visited and what you learned about, sitting around with Bob drinking beer and taking notes for your book. What did you learn from each country and its beer?
Ben Powell: We will just do a brief alcoholic romp from country to country here. We can go into detail about the countries and their economies afterwards if you want. If you have beer in Sweden, there is a wonderful wide variety, except they tax the bejesus out of it to fund the welfare state. A Belgian beer that is produced just across the water, which is delicious, it costs more there, and it costs more in Sweden even than in the United States or for that matter on the opposite side of the world, in South Korea.
That’s the Swedish welfare state and the high taxes, but it’s still private property. The variety is there.
Now Venezuela is the polar opposite. The country ran out of beer. I don’t know about you, but if I were a socialistic dictator, I don’t know about you, but toilet paper and beer are the two things I wouldn’t let the thing place run out of.
What happened in Venezuela is that the government was planning the economy and did not allocate enough foreign exchange for the beer company to import barley. As a result, Polar, the company with the monopoly on beer could not produce any and the country ran out of beer.
If we call Venezuela “Starving socialism,” we call Cuba “Subsistence socialism.” It’s kind of chugging along. They have beer there. There are two types, Cristal and Bucanero. They’re both about 4.5 to 5% alcohol. There is about a half percent difference in alcohol. Both of them taste like a Budweiser that has been left out in the sun too long. That’s product variety that you get in Cuba. Even when it’s functioning and they can give you quantity, there is no variety in their beer or really anything else. Moving along to North Korea, and that is just god awful swill. Well, I suppose if I lived there, I would drink it to try to forget where I lived, but otherwise think about the worst malt beer you have ever had and then make it worse. That is North Korean swill. Then you get to, to countries that are reforming, like the Soviet republic of Georgia, which made essentially no reforms.
Georgia: A Free Market Success Story
Bob Zadek: By the way, Ben, your discussion of Georgia was fascinating. One can learn a great deal because you think of the former Soviet Union as monolithic, but of course you have Georgia and then we have Estonia, which you didn’t visit, where there are these very interesting pockets of free market capitalism in the remains which used to be part of the Soviet Union. So that is an especially fascinating story.
Ben Powell: Georgia is a wonderful late-success story. They make essentially no reforms for over a dozen years after the fall of the Soviet Union. Then Saakashvili comes to power, who is a Washington-consensus leaning politician. He brought in a guy named Kahabucavich, as his finance minister and this guy is as free market as I am or probably you are Bob.
He radically reformed the economy there. He fired government bureaus entirely, there was privatization of everything, and putting it online and making it transparent so the highest bidder gets the property, and there are no corrupt deals like in the rest of the Soviet Union. He eliminated taxes, lowers the rates, gets a flat tax. They start limiting government debt and debt issue. He fired the entire traffic police force in a day and crime went down so the joke goes there, because they were the most criminal in the country.
The net result of all of these reforms is that they went from being unranked in that economic freedom index, which means way down at the bottom of the barrel, below 150, to being in the top 10 biggest economies in the world. Now, Georgia is still relatively poor, about $8,000 per capita income, but that’s because the reforms have all been since the rose revolution. They’ve been growing very rapidly. They’re going to keep gaining ground as they have done these wonderful reforms there.
They are doing it in an area that’s a tough part of the world. They have a hostile neighbor, Russia to the north and they are just east of the Black Sea and above the Middle East there. The free market reforms are doing wonders and you can see it in their wine too if we want to continue with the alcohol theme. During Soviet times, Georgia was the main producer of wine in the Soviet Union, because the Soviet central planners were commies, not idiots.
They understood that warm Georgia would do wine better than Siberia. But they would mass produce swill on fertile lands that were easy to find that nobody liked. Since becoming economically free, those vineyards have gone fallow, and winemaking has gone back to the hills. Traditional Georgian winemaking is very different — particularly their white grapes because they put the stems, skins, and everything into the vat together so it ends up being more of a golden, orange for a white wine. They do them underground in vats that they age them in. They use innovative new grapes that you haven’t seen at the normal international varietals. The transformation of their wine industry is like the transformation of their economy.
Bob Zadek: How long did it take for this transformation to have really taken hold? One would think that when you start with a society that has no tradition of markets and no tradition of economic freedom, it would take some time to learn. How many years did it take for this massive transformation in Georgia?
Ben Powell: A very short amount of time. It was shock therapy. It was economy-wide slashes in the size and scope of government over the course of just a few years. When you look at their economic indicators, growth picked up immediately. The only blip that would seem to be negative during these reforms, and it is really not, is that unemployment spiked during the reforms, but this is because they fired their government. It was negative value added bureaucrats that were being fired.
Now, after a few years, unemployment was back down to historically low levels because these people got reemployed in the productive sector rather than the predatory government sector that they had. All of these indicators show they are going up and getting better. In terms of income, growth compounds over time. So when you start very, very poor, it takes a while to become very, very rich. But they are doing it rapidly. Incomes are probably about 30% higher than they would be without the reforms right now according to some of the studies done on this.
A Philosophical Aside
Bob Zadek: The reason I asked about the timeline of how short a period of time it takes is because to me, and I am of course not a trained sociologist, what it demonstrates is that freedom is the natural state of affairs. It does not have to be forced upon anybody, nor does it have to be taught. That is the default way humans, if not all species, are wired. The natural condition of man is to operate in freedom and to operate fairly with your counter-parties in a trade. Am I overstating it or is Georgia an example to prove that you don’t have to send an entire country to school to operate under freedom? It is the default rule and people take to it and prosper for the benefit of all.
Ben Powell: Well, Bob, I think you’re right. When you give them the rule of freedom, people naturally find ways to make gains from trade and prosper. What I’m not as sure about is how natural culturally this is.This is a case where there was a lot of luck involved. They had to give a finance minister lots of power who happens to be a rabid libertarian.
It is also the case that when they left office, the last thing they put in place was what they called the “economic freedom amendment.” What that does is it doesn’t allow the government to have a deficit of more than 3% of GDP. It cannot have debt over 60% of GDP. The government cannot put in place a new tax unless they have a popular referendum and get permission from the people to put it in place. This was just renewed a little over a year ago. And, in fact, when we were there we debated a lot of professors on the desirability on this. So this handcuffed the government from being able to undo the free market reforms that were put in place.
Bob Zadek: Ben, your discussion on the tax system in Georgia sounds like a form of crowdfunding. They throw it out there and if enough people support the funding they spend the money and they impose the tax. So it’s a system of voluntary taxation, something like what they imagine for Liberland.
North Korea versus South Korea: The Ideal Case Study
Bob Zadek: You visited North Korea and your experience in North Korea itself makes the book a must-read. Tell us about your visit to North Korea.
Ben Powell: We have to kind of sketch around the borders there because our wives told us we were not allowed to get killed or imprisoned while writing this book, not to mention the North Korean government is probably not going to give a visa to a guy who runs something called the “Free Market Institute.” So what we did is we flew to South Korea first, did some work there toward the DMZ. That is not very informative because you can’t see much in there because it’s demilitarized zone. So we traveled up to the northern border in Dandong China, and went up and down the Yalu River, looking into North Korea and talking to people who had left Korea there, and one of the more striking things that you see with North Korea, is the satellite image of the North Korean peninsula at night.
What you will see is the lights in the south is lit up like a Christmas tree. The north is dark except for a little light at the capitol. And then it is lit up again just across the Yellow River in China. It’s striking to see that firsthand. Flying in there in the evening, go to my hotel room, I look out across the river, can’t see anything. It’s like there is nothing there. Next morning, wake up, open the blinds and woah, there is a city of 300,000 people right across the river. This was the main export city in North Korea to China, their main trading partner, and at night it looks like it doesn’t even exist.
Bob Zadek: It doesn’t exist because there is no electricity because there is no electric power, because that is the result of a socialist economy. This is not a theoretical conversation. The book is written for us street people, not people who are trained economists, and yet it explains as perfectly as an economic text would the contrast between socialism and a free market capitalist society.
Was between those economies and a free market or relatively free market economy. I say relatively free market, because while Bernie Sanders has complained that the United States is an example of “unfettered capitalism.” Of course, would that that would be true. We are totally fettered, if that is a word. So his choice of words is unfortunate. We are a relatively free market economy. We are not unfettered. We are not in the top 5.
Ben Powell: Yeah, we fell down to 18 at one point. It has bounced back up to the top 10. Let’s talk about this relative comparison and stick with Korea for a second. This is the rare natural experiment where you have a single peninsula with one people, one language, one history, and one culture, where the only difference between the two of them is that one adopted a socialist economic system and one adopted a relatively capitalist economic system. At a starting point at the end of World War II, if anything the North was more advantaged. It had more electricity, more manufacturing and more mining. The South’s only advantage was that it was a little bit warmer for agricultural. Give them two different economic systems and South Korea explodes, at an income per capita of nearly $40,000 per person now.
Incomes in the north, and in any socialist country it is BS when you calculate income per capita because the normal accounting doesn’t work, but it is somewhere in the ballpark of $2,000 or maybe $3,000 at most per capita incomes in the north. It is the difference between the economic systems. When you’re up on the Yalu River in the North, this is just unnatural. You look at one side of the river and there is poverty, dilapidated buildings, old machinery struggling to till a field, and you turn your head and just a hundred yards in the other direction there are brilliant new skyscrapers going up, a thriving economy, multi-lane roads with tractor trailers whizzing down, and that is China.
Now, China is far from unfettered capitalism, but China is no longer socialist. In fact, we call it “fake socialism” in the book when we tour China because the Communist Party in China has political control. They have made so many economic reforms that they are nowhere near government ownership of most of the major means of production anymore. It is a form of crony-capitalism, but crony capitalism next to the socialist hell of North Korea looks a hell of a lot better.
Bob Zadek: I’m reminded of an experiment where identical twins were separated at birth and lived different lives. North and South Korea is an example of this in economics, because North and South Korea were at one time one people. The DMZ was simply a line on a map that the Western Powers gave North Korea to Joseph Stalin. That was the only distinction. The two countries had the same cultural background and people, but one is given an opportunity under capitalism and the other under socialism. So, we don’t have to theorize about what caused these differences. So, you are right Ben. This is the perfect answer to the difference between socialism and capitalism.
A Look At Cuba: How Socialism Creates Backwards Incentives
Ben Powell: That might be the perfect answer, but we can also look closer to home for some examples too. Just south of us, 90 miles from Florida, we have socialist Cuba.
We traveled all around socialist Cuba. The food is bland, there is no flavor to it. Cubans have a reputation for having great food, but Cuban food in Cuba sucks. They have limited private property rights to establish restaurants. Initially they weren’t allowed to serve meat or seafood and they had severely restricted seating capacities. Now, you are allowed to have 50 tables in a restaurant, and they operate alongside the state-owned restaurants. These are god-awful.
The private ones, what you notice over the course of a week or two, is that they all serve basically the same dozen to 18 items prepared basically the same way, and it’s because they interact with the Cuban supply chain of how they get their ingredients. As a result, there is sameness and blandness. Take a plane to Florida, go into little Havana, and Cuban food is delicious and highly varied. They operate with Cuban cuisine and culture with a capitalist system and produce wonderful things. Take the same Cubans, give them a socialist economic system, and you’ve got a crappy ham and cheese sandwich.
Bob Zadek: The lack of variety, which you mentioned in your book as one of the ways in which a socialist economy does not satisfy the needs and the desires of consumers is a perfect example of the difference between a socialist economy and a capitalist economy. You also talk in your book about how in a socialist system there is an absence of the incentive to give people what they want. There is an entirely different incentive system in a socialist economy, and that is what sucks all the energy out of the economic system and all of the desire to simply be good at what you do. So, tell us a bit about the profound difference in incentives at the individual level between a socialist economy and a capitalist economy.
Ben Powell: Sure. Let’s stick in Cuba. Let’s do it side by side within Cuba, where you have some limited private property rights versus the incentives under socialized property rights and state ownership. The hotels in Cuba suck. The hotels are part of the means of production. Remember, socialism means government ownership of the means of production. So the hotels are government owned. As a result, they don’t make a profit by having you stay there. The managers don’t have an incentive to better serve you. The hotels are rundown and awful, and now we can sandbag it by staying in crappy places. You could go to the Hotel National, which is the diplomat hotel, and that is nice, but in general hotels in Cuba are awful.
We got in the first one and the balcony glass is shattered, there are tiles missing from the bathroom. It didn’t have hot water one morning. There were holes in the towel. They left the previous guest’s soap there.
The toilet seat wasn’t bolted to the toilet so you could slide right off. Hotels were disgusting, but that is because they don’t have an incentive. They did allow people to rent out their apartments for private profit.
Now, we are doing the same industry in the same place, where one of them is a residual claimant who has a profit incentive to make sure that you come back or that other people want to stay with them and at the cost is at a price the same or lower than the government hotels. They are well kept, the people there are punctual of getting you into them, and they are wonderful places to stay. It is the same service provided side by side, one with private property incentives, one with socialized government incentives. It’s kind of like if you imagine having the DMV in your state run the entire economy, imagine what that would do to customer service.
Socialism and Coercion: A Brief Look at Venezuela
Bob Zadek: A socialist economy must be imposed by force on the people. Nobody instinctively warms to a socialist economy. I am sure that in every socialist country you visited there was the use of military force or paramilitary to force you to take socialism whether you like it or not. And that is to say, socialism has, as an essential ingredient, coercion. It is never voluntary. With freedom, you do not need to force it upon people. Was this force noticeable in the countries you visited?
Ben Powell: You’re absolutely right. Once you have a socialist system, you are a worker are part of the means of production. That means that your labor is owned by the state and needs to be part of the economic plan. Now, the question about adopting a socialist system is little bit more complex. In the long run, I think these systems only continue to last because of coercion, because it is impossible to continue to get the consent of the people to these systems because they are so dysfunctional.
We can trace what has happened in Venezuela as a perfect example of this. Hugo Chavez came to power in 1998 and was democratically elected. So, it wasn’t a military coup. He was popularly elected and international observers said it was a fair election.
He was reelected and he put in a new constitution and pushed his unique brand of Bolivarian Socialism in Venezuela. For a while things looked like it was okay. In fact, Bernie Sanders was saying nice things about Venezuela in the 2000s. What was going on was that the economy, because of the socialist policies being put in place, was getting hollowed out. Food production was dropping, production of lots of things was dropping.
Meanwhile, food imports were increasing into the country to keep them well-fed. But, Venezuela sits on the world’s largest oil reserves and prices were very high for awhile. And in fact, they continued to be high right up until Hugo Chavez’s death in 2013. Since then, once oil prices started going down, and for that matter, by the way, production in Venezuela has been going down because the state nationalized oil company doesn’t have the right incentives to maintain their production.
So production has gone down. Prices have gone down. The government becomes unable to pay for the goodies to import. Remember, this was democratic socialism. You can find your Hollywood celebs, your Oliver Stones, your Sean Penns, who were praising Hugo Chavez saying that this was democratic socialism in action. Except what happened? Once the economic dysfunction was realized and obvious to everybody, people no longer supported the regime, but the regime does not allow it to be democratically thrown out anymore.
Last year, Maduro was reelected in Venezuela, overwhelmingly, in a year where people lost an average of 24 pounds, not because they found Jenny Craig, but because the Venezuelan system could not feed them. You do not win a popular election when your population is starving. What Maduro did, of course, was that he coerced the state employees to vote for him, because otherwise they would lose their jobs. He handed out food aid at the polling places to buy off the votes of the people. As a result, what has happened is they had a scam election.
The parliament declares an interim president in opposition to Maduro as they are constitutionally allowed to do, Maduro doesn’t let him take office and uses the military to crack down. What started as democratic socialism ends up being nearly socialism. This is because of the necessary connection between economic and political freedoms.
Bob Zadek: Once you institute a system of socialism, the byproduct has to be civic unrest. The democratic piece of the phrase disappears. And now the government, to stay in power, says you will keep socialism whether you like it or not, and if you don’t, you will not work and you will not eat and you will not have any freedom.
Doesn’t that make us wonder how good can socialism be if every single citizen who lives under socialism has to be forced to live under it, whether they like it or not. In contrast, there is no instance where people have rebelled against freedom. Doesn’t that tell you all you have to know about the relationship between government, coercion and the economic system?
Ben Powell Socialism, by its nature of government ownership of the means of production, creates the bad incentives we discussed but it also doesn’t function like a price system to convey the information of how to plan the economy in the first place. The necessary result is economic stagnation and collapse. The people don’t like economic stagnation and collapse.
We know this in the United States. If unemployment and inflation are high you throw the bums out of office. Socialism guarantees that you are going to have bad economic outcomes, but in order to implement socialism, you must centralize power in order to plan the economy. But once you have centralized power, you have the means available for political repression. When people, after the necessary failure of your economic system oppose you, you can now crack down on them in a way, in a freer economy you cannot. That is why socializing the means of production always leads to political tyranny.
Bob Zadek: Since socialism centralizes economic power in the central authority of the government, once the government controls the economy it has maximum control over the population. Once you have the power to determine who eats, then you have total control and you are darn well never going to give up that power. So socialism is only a tool to transfer power away from ourselves to the government. Socialism is simply a transfer of power from autonomous individuals to government. Who on this planet wants to voluntarily give up their own power?
You know, Ben, when Sanders, and AOC, and Warren say that everyone is entitled to a good paying job, I ask myself, “Okay — I am entitled to a good paying job, but doing what? Who decides what I am going to be doing for that job?”
The answer is, “somebody else.”
If you ever want an example of what the surrender of autonomy means, it is a good paying job you will be assigned. Certainly I’m not entitled to be a surgeon. That’s not my entitlement. I’m entitled to have some good paying job, but I don’t get to decide what it is. So I don’t even know what that phrase means.
Ben Powell: In the socialist context in a place like Cuba, everybody is entitled to a paying job, but everybody is desperately poor there. When you start not using market forces and instead using brute government coercion to determine wage rates, plumbers and musicians make the same money, so everyone wants to be a musician and as a result, you don’t get hot water in your hotels because they are short on plumbers. What we need is a price system that functions and shows people where they can create the greatest value for others. That’s what prices do. And we need the freedom to pursue a good paying job, and you get the good pay by doing good services for others. That’s the nature of the voluntary market system.
“What we need is a price system that functions and shows people where they can create the greatest value for others.”
Bob Zadek: Your book is written for the six-pack buyer and is intensely readable. It is a joyous read. It is a romp through socialism, although you can’t really use the word “romp” and “socialism” In the same sentence. The book covers Cuba, Sweden, Georgia, Venezuela, China, Korea, Russia, Ukraine, and the USA.
Ben Powell: Yeah, and in the USA we talk to young millennials and socialists and try to figure out what the hell is going on in their head. The publisher originally described the book as the bastard stepchild of Anthony Bourdain and Milton Friedman. Its Anthony Bourdain travel and language style while drinking beer, but we replace the food with economics and history of capitalism and socialism.
Links:
- Click here to order “Socialism Sucks” from Amazon.com.
- Cato Institute Event: July 31, 2019 12:00PM to 1:30PM EDT
- [VIDEO] Interview with Matt Kibbe on Free the People — Drinking Your Way Through the Socialist World | Guests: Benjamin Powell and Robert Lawson | Ep 19
- Facebook page: Socialism Sucks: Two Economists Drink Their Way Through The Unfree World
- Socialism makes for bad beer — Orange County Register by Robert Lawson
- Democratic socialism Newspeak, American Thinker, by Ben Powell
Related Shows:
- Sweatshops: Exploitation or Stepping Stone to Prosperity? With Ben Powell
- Hugo Chavez: Failed Messiah with Cliff Ross
- Socialism Reincarnated with Joshua Muravchik
- Yeonmi Park — North Korean Defector: “Juche” Die, Markets Rise
- Inclusive Capitalism: Economic Savior or Socialism in Disguise? With Sean McElwee
- Atlas Shrugged and Creeping Socialism with Ed Hudgins
