Posts tagged mixed economy

Column on Consequences of Mixed Systems

Some Consequences of Mixed Systems

Tibor R. Machan

China is what political economists call a market socialist country, with political socialism at a virtual dictatorial level (as distinct from, say, democratic socialist and liberal democratic countries) and is thus very precarious when it comes to its political stability, kind of like Chile was under General Pinochet. The rulers will keep trying to square the circle, having a largely free, capitalist economy and a one party socialist political regime. But everyone knows this is very vulnerable to upheavals, especially once the economic side of the equation makes enough ordinary people wealthy so they no longer look to the government to sustain their way of life.

When a country is politically socialist, this means that officially what is most important is the well being of society as a whole. Karl Marx referred to a socialist society as an organic whole or body and this implies that the different elements of it, the limbs, organs, cells, etc., are all subordinate to the whole society. This is why such a country is also called collectivist–it is the collection of everything, including people, land, natural resources, culture and achievements, that is important. Certainly the individual citizens are not except as they contribute to the society as a whole. By such an understanding of a society or country, anyone who isn’t fully on board with where the society is headed–as determined by the rulers who are, officially, the head of the organic body–is deemed to be mentally ill. Sometimes so much so that like some tumor in a human individual, such an individual might need to be cut out or otherwise pacified. Any idea that such an individual might simply be a legitimate dissident is officially alien in a bona fide socialist country.

Of course, there has never been a fully functioning socialist country–even in contemporary North Korea, which comes the closest to the idea, small segments of the population manage to function outside of the system. In the economy there is a sizable black market that operates without the full involvement of the government (which is the official policy). Indeed, in all the political economies around the globe referred to as “capitalist,” “socialist,” “fascist,” “communist,” or “welfare statist” the correspondence between what the theory requires and what exists in reality is rather loose.

Still, it is undeniable that when the legal system conforms mainly to socialist tenets–when the public sector is deemed to be far more important than the private sector–this will have practical consequences. In the official rhetoric of the rulers and their supporters there will be routine endorsements of the superior significance of the public versus the private interest in society. Non-profit endeavors will be favored, at least in official discussions. The idea that people are all a tiny part of the country–and that, for example, they ought not to ask what the country can do for them but ask what they can do for the country–will be embraced and seeking to advance one’s own agenda will be deemed objectionable, greedy, selfish, and narrowly individualist.

The welfare state, in turn, is indeed an explicit attempt to combine certain socialist and some capitalist political economic features. A more complicated mixed economy will have elements of most political economic systems combined in it, a kind of smorgasbord in which some of the items may not co-exist well with others and where if troubles arise it is difficult to tell which element made the greatest contribution to it. Nor will the successes be easily traced to their causes.

For example, the recent financial fiasco–some call it a meltdown–comes from a mixed system and not from the policies of one political economic arrangement and so to tell which of the various elements that have been in place for decades on end–or which combination of them–is responsible is very difficult to determine. This is one clear reason why when the likes of Paul Krugman point fingers at the free market elements, such as a bit of economic deregulation, as responsible for the mess, their claims can be seen as purely ideological, meaning indicative of their prior, unexamined commitment to anti-market economic policies. No one who is honest could tell from a quick examination that the meltdown or whatever one calls it was caused by one or another type of economic ingredient of the mixture that has been in operation for a very long time. It is possible to figure that out but it would take meticulous study since the different elements of the mixture do not operate in isolation from each other. It is as if one tried to determine why one caught food poisoning after a sumptuous smorgasbord. Any one or some combination of the items on the menu could have been responsible.

A statist will tend to blame the free market elements whereas a free market champion will look to statist elements to explain the mess. And this is not without good reason, since both have gained confidence in their ideas over time and do not consider it plausible that elements they champion would have produced havoc.

That is just one of the consequences of a mixed economic system.

Column on Big Lie Theory Flourishes

Big Lie Theory Flourishes

Tibor R. Machan

The theory of the big (but good) lie goes back to a certain reading of Plato’s most famous dialogue, the Republic. There are more or less crude versions of it but the gist of the theory is that for reasons of state–that is, so as to secure the chance of the ruler to rule smoothly–telling lies can be justified and may even be necessary. Indeed, the big lie could well have been the very idea of the perfect political system itself that Socrates sketched in that dialogue, one that really amounts to a utopia, an impossible blueprint for a human community and its basic principles. Some have concluded from this that Plato (Socrates) never meant to advocate what the dialogue depicts as the perfect regime but merely presented it as a kind of model, the way that the gorgeous women on the covers of Vogue or other fashion magazines function, just reminders of what to pay attention to as women dress up.

But ever since Plato appeared to make the big lie respectable in politics, quite a few regimes have made use of it. And in our era no less seems to be the tactic, at least for the cheerleaders of more government planning who routinely appear on the Op-Ed pages of The New York Times. As a case in point, check out the article by Alan Tonelson and Kevin L. Kearns “Trading Away Productivity” (March 6, 2010). The gist of the piece is nothing less than the defense of international economic protectionism, a policy thoroughly discredited by now except for diehards desperate to keep their establishment and industry intact at the expense of domestic consumers and foreign competitors. Nothing new here–every politician is tempted to offer to square the circle; just watch how in Washington nearly everyone believes that one can indeed get blood out of a turnip and pay for goodies with, well, nothing.

What is far more egregious than the advocacy of defunct theories, defunct at least since the time of Adam Smith, is the premise with which these authors begin their discussion. What they say is, well, a big lie, although for The Times it is routine by now, what with the leadership of hyper-Keynesian Paul Krugman on their pages when it comes to political economy. They state, clearly without any hesitation, that “For a quarter-century, American economic policy has assumed that the keys to durable national prosperity are deregulation, free trade and a swift transition to a post-industrial, services-dominated future.” There is no truth to this claim at all.

American economic policy–and it pains me to even refer to such a thing, since a government isn’t supposed to mess with its citizen’s economic (any more than their religious) lives, not to mention make policy for them all–has been protectionist in nearly every age. Indeed, such protectionism is often held to explain some of the anger of the Japanese at America that precipitated the invasion at Pearl Harbor and the ensuing bloody war in the Pacific. Administration after administration has tried to boost the fortunes of American businesses and labor by way of imposing duties on foreign imports, be this is steel, cars, shoes, textiles, and innumerable other goods. The means by which obstacles to honest trade were implemented are various–sometimes outright tariffs or duties, sometimes phony requirements that manufacturers needed to meet before their product would qualify for importation, thus making it very expensive to import and to buy the products.

I recall that back in the 1980s I was teaching for a while in Switzerland and I ran across the nifty used vehicle I naively considered purchasing and bringing back with me to drive in the US. When I inquired about how to do this, it was made clear to me that no such deal was possible since cars built for European roads by European manufacturers lack the kind of “safety” features the US government insists cars built in the US must include. Why? No reason except that this makes it simple to kept those European cars out of the American market and gave Detroit a leg up in the effort to stay in business, never mind the demand for its products by American consumers. (You can see now how well this worked in the long run!)

This same story could be repeated several thousand times. They all put the lie to the claim made by Tonalson and Kearns about American economic policy having favored free trade. But there is more.

As to government regulations, the increase of these for American businesses over the years as been stupendous. This and many of the claims of these authors can be seen as big lies in a very informative essay written a while back by David Boaz of the Cato Institute, titled “The Truth of Milton Friedman” ( The essay exposes Tonalson and Kearns’ lies and the many others circulating these days about how America has been in the grips of market fundamentalism, of an economic policy of laissez-faire and free trade, successfully promoted by the late Dr. Friedman. What bunk.

America has always, from its beginning, been a mixed economy and the mixture is now markedly lopsided toward government interference, including thousands and thousands of pages of government regulations which keep increasing year by year. (And, no, Ronald Reagan didn’t reverse this trend!) But the big lie and the big liars will not hear of any of this and keep cheering on as the American government moves farther and farther away from even a semblance of a free market system.

Column on them Philosophical Differences

How about them Philosophical Differences?

Tibor R. Machan

President Obama and others at the summit Thursday (2/25/10) kept talking about philosophical difference between his team and the Republicans but what did they have in mind?

By “philosophical” most mean “basic,” or “fundamental.” Possibly “systemic” could also be meant. Bottom line is that believing in an extensive role of the federal government in determining the health care requirements of American citizens differs from believing in an extensive role by individuals and their providers doing so. The president is right, however, to point out that it is now too late for any Republican to beef about heavy federal involvement in medical care and insurance, given that the Food and Drug Administration has been around for many decades and Medicare is also a near fixture on the American scene, not to mention the vast amount of government regulations, federal, state, municipal, we have in our mixed economy. So any Republican who complains about extensive federal involvement is way too late–we already have it in place, now it is just about how much more of such involvement should be accepted.

There is another philosophical issue that’s hovering around the debates and that is about whether everyone in American must have nearly equal coverage and care. Republicans keep trying to resist this objective for a variety of reasons, including the enormous expense it is projected to involve; the huge differences between different (groups of) American citizens for whom no one-size-fits-all health care and insurance approach will work; the differential burdens such a system will create for Americans, with the young carrying the bulk of it and the old the benefits, and so forth. So it doesn’t look like Obama’s full egalitarian agenda has a chance, not if practical considerations matter in the decisions that will be reached.

On the other hand, the rhetoric of equal provisions for everyone–whether with or without pre-existing conditions, whether prudent or imprudent in their health management, whether fortunate or not as to vulnerability to ailments–is difficult if not impossible for Republicans to rebut. They have no philosophical equipment with which to respond to this egalitarian pitch, so they just have to swallow when the president’s team brings up how unacceptable it is when an insurance company considers pre-existing conditions as disqualifying someone for insurance. Of course any responsible insurance company management would take that into consideration! It may be lamentable but there is nothing unjust or morally objectionable about this. To maintain otherwise is to deny the insurers their basic right to choose with whom they want to do business and to pursue a profitable enterprise rather than a losing one, etc.

But in order to present this kind of point, one must drop all the hand wringing about what is admittedly lamentable but cannot be helped. People who have been sick, especially with chronic ailments, are not a good risk to insure and those who want to make a living by selling insurance will tend to avoid doing business with them. And that is, really, their basic right in a free society unless they present themselves in the market place as not concerned with the issue, as open for anyone’s business regardless of pre-existing conditions. But to force the insurers to do business with anyone, never mind their own terms of prudence, is wrong and should not be proposed in a free country however nice it would be to help everyone.

But Republicans are philosophically disarmed from making this point, especially from making it insistently, emphatically, because the Obama team is ready to pounce on them as being mean and nasty if they do. And Republicans are ill equipped, philosophically–that is to way, when it comes to their basic principles–to keep insisting. For them to do so they would have to return to the founding principles of the American republic, to mentioning individual rights and so forth. But then, of course, Obama and his team could point fingers at them for being inconsistent, for lacking integrity, seeing how they have accepted a great many egalitarian government edicts, regulations, policies over the the decades.

The little commitment to individual liberty and free market transactions left within the ranks of Republicans just isn’t going to give them intellectual–philosophical–leverage against a clever bunch of egalitarians.