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20130824 Two men of Political Economy – Bastiat and Marks

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Two men were born early in XIX century – one in France and another in Germany with difference of 17 years. Both were lucky because they had opportunity to avoid working for living and had time to develop and express their views on political economy, society and how it should be organized. The older one – Frederic Bastiat had extensive experience in business early in his life while the younger one – Karl Marx had never been in business and was fully immerged in theoretical world of intelligentsia.

It is hard to imagine two more polar ways of thinking and expressing ideas then these two men did. One – Bastiat had clear views of economic world, expressed it in crystal clear and logical way in a number of short essays with great examples, which could be easily multiplied by anybody with any ability for logical thinking whatsoever. Another one – Marx wrote huge volumes of extremely muddled text that was progressively deteriorating with age of author.

It would be puzzling why the smart one – Bastiat was mainly unknown while semi crazy blabber – Marx become a great founder of mass movement that caused and still causes innumerable suffering for millions of people if not the simple fact that Marx’s ideal promised a paradise in the near future, while Bastiat just explained how economy works and correctly predicted the sad consequences of meddling with the free market.

This volume was compiled from Bastiat’s works in 1995 contains key components of his ideas. These are:

• Capital deserves to be paid for with interests because it is a necessary component of production. Without interest individuals in possession of capital would not agree to provide it and therefore no production could possibly occur. The private owner of capital is also a necessary player because only private owner who gets not only gains, but also losses would be interested enough to allocate all his abilities to finding the best application of capital as defined by highest amount people who would agree to pay for it in interest. The very sad history of real socialism abundantly demonstrated that huge price is paid for removing capitalists and substituting them with bureaucrats who do not take losses and whose gains are not related to performance of capital they manage.

• Another set of ideas relates to the notion of seen and unseen consequences of decisions. Bastiat provides a number of examples:
o Broken window – job for repair is seen, while alternative use of resources is not
o Military expenses – well paid troops and supporting businesses are seen while much better use of manpower and resources for producing goods and services is not seen
o Taxes used to provide something useful for everybody are seen, but use of money by original owners that would be much more efficient is not seen
o This list goes on and on and each example well thought through, clear and convincing

• Finally the discussion of government as violent way for elite to enjoy the fruits of other people’s labor is just wonderful. I love his definition of government as “the great fiction, through which everybody endeavors to live at the expense of everybody else”. Probably this is the key to popularity of Marx after all. His muddled works seems to provide foundation for people to believe that they all will be able happily live at the expense of others. Too bad that chances to achieve it are somewhere out there next to the ability to build perpetuum mobile, while price is very real – miserable lives for just about everybody.

20130817 Culprits and Blitzkrieg

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I grew up in the shadow of WWII and I probably will never be able to completely rid off it until the end of my life. Every time when I read another book I hope that it is the last one and I will finally loose interest in this war since I do not expect to learn anything new that I did not learn from previous hundreds if not thousands of books, documentaries and interviews. However again and again some new book or documentary attracts me and I wind up spending time only to find out that I did not find out anything new.

This book is somewhat unusual because it is not so much about new information as about new view at existing information about this war which, in my opinion, is much more consistent with data then traditional view. The traditional view is that Hitler’s Germany after failing in air war against Britain just switched its aggression from West to East and invaded Soviet Union which, while preparing for the war, nevertheless was not ready and therefore was badly bitten during the first two years of war. The reasons for this beating in traditional view was decimation of Soviet officer corps by Stalin’s purges, Stalin’s incompetence, and technological obsolesce of Soviet weapons.

This book makes a pretty convincing argument that Soviet officer corps despite purges was not completely destroyed and by the time of invasion was pretty much back in their previous positions and ready to fight. There are quite a few big names of Soviet military leaders who made a great career by mid 30s, found themselves in prison in the late 30s, and then were back in command by the time of German invasions on June 22d 1941. For anyone familiar with the logic of Soviet system it sounds quite plausible. One fascinated example of this was a chief of gulag who was intermediately prisoner and then back in his position as chief more then once. An individual was nothing so at one point Stalin decided that engineers would work more diligently if not distracted by families and freedom and whole design bureaus were denounced as enemies and imprisoned while keep working on the newest military equipment.

Also book’s argument that Soviet military equipment was superior then Germany’s is also very convincing. Due to results of WWI German military industry was paralyzed until 1933 and American superior technology designs had no military use in demilitarized, pacifistic, and isolationist democracies, but were easily available for Soviets to buy and use. Few people know for instance that the best tank design of WWII – soviet T-34 was based on American’s designed transmission. The impressive comparative data for military equipment provided in the book supports this argument pretty well.

So what then cause a dramatic defeat of Soviet armies in the summer of 1941? According to the book it was dedication to the doctrine of blitzkrieg, only contrary to usual history it was not only German, but also Soviet dedication to this doctrine. According to this doctrine the winner of military conflict is the side, which concentrates its resources as close to front line as possible in secret, and then attacks suddenly, decisively, and without hesitation, applies mechanized forces for deep penetration and encircling of enemy forces. The negative side of this strategy is that concentration of resources for attack makes them very vulnerable if enemy attacks first. According to the book this is exactly what happened to the soviets. Both Dictators Stalin and Hitler concentrated their forces on the border for sudden attack. Both completely rejected idea of defensive actions at the beginning of conflict. It just happened that Hitler completed preparation and struck first leading to tremendous losses for the Soviet Union, but eventual defeat for the Hitler.

In addition to pretty detailed analysis of troops and resources concentration and multiple reports from contemporaries, the book provides a very interesting analysis of other 3 blitzkrieg conflicts from 1939 to 1945 with participation of Soviet Union. These were attacks against Japan in 1939 and later in 1945 when in both cases Soviets achieved victory using blitzkrieg methods against another aggressive military which subscribed to the same doctrine. The third was against Finland in 1940 where Soviet blitzkrieg encountered well thought through and well prepared defense by much smaller forces. The soviets won, but only after difficult winter fight and with tremendous losses.

Finally one small detail is that while both Stalin and Hitler obviously were aggressors, the book implies that Hitler’s attack against Soviet Union was prompted by Stalin actions during Molotov’s visit to Berlin in 1940. During this visit the supposedly final division of the world between two totalitarians failed because of extreme demands of Stalin which if met would leave Germany under constant thread to loose access to strategic resources such as oil in Romania and metals in Scandinavia. This failure to agree left Hitler with no better option then preempt soviet first strike with his own despite less then full preparedness of Germany for significant expansion of war and inevitable war on two fronts.

One can only wander how much less losses people in the Soviet Union would suffer if Stalin choose Finish like strategy of absorbing first strike using well prepared deep defensive positions with following up counteroffensive against weakened opponent. Eventually Stalin come to accept this strategy in 1943 in Kursk battle, but only after loosing two summer campaigns in 1941 and 1942. On other hand who knows what losses the world would suffer if the WWII not ended in annihilation of one totalitarian regime and significant weakening of another despite of its victory. If victorious with small losses, Soviet Union would not only dominate all Europe, but quite possible would go on to the world wide conquest especially if America would remained disarmed and isolationist as it was before Pearl Harbor. I do not think that communism would win, but the struggle and losses could be much worse that it had been.

20130817 Markets Not Capitalism

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It is a pretty good collection of 48 essays by historic and currently active anarchists or how they sometimes call themselves left libertarians. The main thrust of these essays is pretty much expressed by the header – these people are fully in support of free markets and fully against capitalism as a system of society’s organization where individuals with capital (capitalists) are in dominant positions.

The ideal society for these people is a society where all transactions are voluntary and therefore the state does not exists. As Libertarians they are in support of property rights and market exchange, but as the Left they are against property rights when these property rights are obtained in unfair way. They believe that property rights should come from mixing one’s labor with nature. However not one of essays provide any reasonable or even unreasonable way to fix the currently existing property rights which by all known accounts obtained mainly unfairly.

Being the Rights (not right) Libertarian, that is person who believes that everybody should have equal, unalienable, and marketable rights to natural resources, I do not see any sense whatsoever in trying to define fairness or unfairness of current wealth and property distribution. I believe that it is just not possible to identify who owns something fairly and who unfairly because just about every piece of, for example, land changed hands many times in history and many times before history and a vast majority of these changes where violent. Therefore in my opinion it is useless to try redistributing property in any “fair” way because it is just impossible. We’d better come up with ideas of how to change property use in such a way that it would be acceptable for everybody so people would be satisfied with pursuing their happiness without demanding violent property redistribution.

Outside of key philosophical differences, it is a very interesting collection from point of few of obtaining a new knowledge. Some of essays are very educational at least for me. For instance I did not know that all progressive movement of the end of XIX century and beginning of XX century was powered not that much by intellectuals, but rather by big business. The history of railroads with multiple failures to organize a stabile cartel, cut throat competition in prices when small start up companies continually undermining big companies with eventual government intervention on behalf of “stability” changed my mind on some details of the process of government growth in the United States.

Similarly I found myself missing on a valid point in civil rights fight of 50s and 60s. As many libertarians I do not like government telling business owner who he can or cannot serve so I see demand for restaurant owner to serve people he does not want to serve as violation of property rights. Personally, being Jewish, I have no problem with restaurant owner who would not serve Jews. I would be happy to take my money to another restaurant. By the way being born in Soviet Union were being Jewish meant to be a second class citizen, I was perfectly satisfied with taking myself out and moving to America where I am much happier and I think everybody in America should be much happier at least based on amounts of money I pay in taxes. However the important point that I was missing is that a racist business owner on South in 50s and 60s was artificially isolated from competition by non-racist business owner. This government intervention annuls his right as business owner to deny service. Thinking about it, in actuality this entire civil rights struggle was not for civil rights of individuals, but rather for dominance between state and federal organizations violent and non-violent controlled correspondingly southern and northern establishments (governments state vs. federal, State National Guard vs. Federal Army, KKK vs. Black Panthers, White citizen councils vs. Civil Rights organizations).

The federals won and racial discrimination continues this time in form of affirmative actions and multiple other forms. Much better way would be instead of directing efforts to suppression of racist business owners and forcing them to behave like they are not racists would be promoting and defending non-racist business owners who would happily accept money and provided services to everybody. This would require a much less level of confrontation and violence – just override zoning codes and licensing requirements. Somehow I am pretty sure that as soon as black and decent white population would start taking their money and labor away from racists business owners to non-racists business owners one of two things would happen – either racist business owners stop being racists or they would stop being business owners.

Overall this is a very interesting collection of thoughts and ideas and it clearly demonstrates that anarchism is still alive and kicking.

20130731 The Irony of American History

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Written at the height of cold war this book by Reinhold Niebuhr is an interesting look at irony of two competing systems: Communism and Americanism. Being theologian RN brings to this discussion an awful lot of religious background, but his points are much more secular. The biggest irony of all for him is what seems to be a conflict of two competing messianic views: Communist mainly represented by real life implementation in Russia, Eastern Europe, and China versus American incarnation of liberal democracy.

There are many fine points in this book that are absolutely correct, but the bottom line in my opinion is somewhat off the target. I think RN fully and correctly identified Communism as messianic religious movement, but he is not completely correct about Americanism. He seems to consider it as another much more benign form of messianic movement which nevertheless has something in common with communism – the intention to expand itself to other countries all over the world as alternative to existing unsustainable condition of post feudal world.

He dedicated the whole chapter or about 30% of the book to “The innocent nation in innocent world” notion, that is to analysis of American innocence and how it was lost after reality of two world wars. Actually this view makes sense if one considers country as “collective man”. In reality there is no collective man, but rather millions of real men and women each of which had to deal with real life upon achieving adulthood and there is no place for innocence. The difference between America and whole other world is that individuals in America historically had a lot more freedom including economic freedom which means that their well being depends to much higher extent on their own actions and luck then on anything else. In this situation people tend to care about their local life and consider outside world more as nuisance then anything else as long as outside world does not invade their lives. The democratic form of government made this attitude to influence politicians in government and it made America to consistently attempt to avoid participation in world political game of conquests, balance of power and such.

Unfortunately two parallel developments moved America to the forefront of world politics. The first was internal – end of frontier and with it free land and relative economic independence of individual. This inevitably led to increase of power of government as hierarchical structure of bureaucrats and politicians who for the last 100 years successfully fought and won majority of battles against traditional American individualistic culture taking bigger and bigger share of resources from individual use under its own control and making individuals more and more dependent on handouts from the government. The switch of America from isolationism to highly active political and military role in the world was just one of many side effects of this change.

The second development was the growth of world wide communist movement which represented real and clear danger to American way of life. Paradoxically it was communism that provided justification for growth of American government way beyond limits imposed by constitution. Interestingly the messianic movement of communism attracted wide majority of non-technical and non-business intellectuals who happily embraced the notion of wise philosopher-scientist kings leading clueless population to happiness. Actually they are happy to play role of such kings especially when it comes with very significant wealth redistribution to their benefits.

RN did not live long enough to see it, but here comes the biggest irony of all – after Communism self destruct at the end of XX century due to nearly complete elimination of incentives for individuals to work, the Americanism, as philosophy of self-reliant individuals working independently and hard to achieve happiness, found itself on the death bed in early XXI century cut down by cancer of growth of unlimited government and welfare state.

The prognosis does not look good now, but I am optimistic that old religious tale of resurrection will work out again in the future and Americanism will revive itself in the new much more sophisticate, effective, and efficient form bringing into its embrace whole humanity by demonstrating its usefulness in achieving happiness.