Welcome to Finance and fury, the Furious Friday edition. Today’s episode is Stages to Socialism part 2, so if you haven’t listened to last Friday’s episode it might be worthwhile doing so.

To start

I want to talk about oranges. They’re a delicious fruit, they grow on trees, and then mature. Then you can eat them. They have nutrients, that helps you survive.

  1. Have you ever left an orange on the bench too long? It starts getting a small soft soggy area, that slowly expands
  2. Then that mould starts to grow, this starts eating the orange and eventually consumes the whole thing
  3. I always thought of the Government as mould and the orange as the economy/free market/individuals
    • The free market matures and Individuals get wealthy. Then government starts growing, we ignore the orange, and it rots
    • Can’t blame them, just like companies, or bacteria, every organism has one purpose to multiply and survive. This is the best tactic to last.
    • Unfortunately, it is an organism which doesn’t create, it only redistributes. Spending has to come from somewhere, like the population and companies and paying tax
  4. Don’t get me wrong, governments are needed. But the question people disagree on is needed for what?
    • Political Spectrum, it isn’t just left/right, there isn’t a simple way to look at this
    • Think of this political spectrum as an X shaped chart. There are two axis
      • Authoritarian to Libertarian – How much freedom do you have as an individual
        • Government intervention levels/the size of government
        • Rules and regulations that you must follow. On one end you have dictatorships, and the other is anarchy
      • Economic Left (Communism/Socialism) and Economic Right (Capitalism)
        • Control of markets and owning the means of production
        • Property rights for individuals and are there many regulations to follow. Communism is on one end and the free market is on the otherpolitical compass
  5. Government interventions – Authoritarian to Libertarian
    • Power corrupts and absolute power corrupts absolutely
      • Once a government gets 100% control, the system of government doesn’t reverse that quickly
      • Roll the dice every few years/decades, get a new leader. They may be worse and more corruptible than the last guy
        • Leads to a slow decline in civilisations, for example, Rome with emperors, Medieval Kingdoms with monarchies
        • Chop the head off the snake and the thing crumbles
      • Inefficient – Become so heavy that it crushes itself, and doesn’t operate efficiently.
    • Barriers to entry (Regulations) and How much tax you have to pay (Redistribution)
  6. Economic Control and private property
  7. Creates a broad spectrum
    • Economic Freedom to legislated equality
    • Personal Freedom to legislate morality
  8. Examples
    • NAZIs were authoritarian, with traces of economic left but more socialist
    • Fascists like Mussolini who was very authoritarian. Decent amount of capitalism (But corruption and often nepotism that fails it)
    • Stalin and Lenin were communist, with authoritarian regimes. On the economic left with no private property ownership

Our system

Does Democracy Work? A government of the masses.

  1. Authority derived through mass expression – what most people want.
  2. Attitude toward law is that the will of the majority shall regulate
    • Based on deliberation by passion, prejudice, and impulse, without restraint to consequences.
  3. We are a free market, democratic country, with socialist policies
    • Military, Police, Health, Public Education, Roads. These are all publicly funded.
    • Doesn’t make us a socialist country, we are a free market.
  4. This is good – Government is essential in many basic needs. It provides a platform for society to exist
    • How well they do those things is a core component for the success of each country
      • Protection of population
      • Enforcing laws with the judicial system
      • Infrastructure through Planning and contracting.
  5. How much involvement is where people start disagreeing. Either more or less Government?
  6. How much time does anyone have to know what politicians are doing, let alone understanding each individual issue?
  7. George Washington once said “It is one of the evils of democratic governments, that the people, not always seeing and frequently misled, must often feel before they can act right; but then evil of this nature seldom fail to work their own cure.”
    • It isn’t feasible to expect every citizen to be sufficiently informed and to vote on every law
    • Problems they are trying to solve are complicated and takes time to fully comprehend
    • People are busy with their own lives
  8. Democracy can go to Monarchy/Dictator quickly
    • The people tire of their involvement in the mundane processes of legislation and legal administration.
    • Over time they fail to remain properly educated as issues mount and become more complex.
    • The people neglect governmental affairs when times are comfortable and erupt in a firestorm of uncontrolled emotions when times are uncomfortable
      • If you rely on the government and that starts failing you, what do you do? This creates unrest
    • In one of any significant size, dissatisfaction and disorder erupt and the people demand leadership.
    • When this becomes exhausting or dangerous, the people look for a popular, charismatic leader who can bring order and direction to the failing government.
  9. As populations and leaders change, the direction the Government sits can start to change

How does a state start moving along these axes? How we go from here to Economic Left/Authoritarianism?

Preamble:

There are stages to socialism. The first is capitalism and the last is communism.

Stages:

  1. Stage One — Capitalism: Before any economic or political transformation to socialism there must be capitalism
    • Capitalism is necessary for the transformation into socialism, as only capitalism can produce the necessary vast amounts of wealth as a promise of redistribution
      • Quote from Manifesto of the Communist Party – The bourgeoisie, during its rule of scarce 100 years, has created more massive and more colossal productive forces than have all preceding generations together.
    • Capitalism comes with Freedom and only freedom can create the ‘classes’ of wealth. The proletariat and bourgeoisie
      • Due to freedom of choice, capitalism creates income and economic disparity (inequality)
      • This is the tool that the Fabians use, class warfare and misinformation. The only reason a person is poor is from someone stealing it from them. Giving people no education on how to succeed is the problem.
      • A necessary relationship for the emergence of support for socialism. Marx and Lenin all knew this.
      • Without capitalism, there is insufficient wealth for redistribution = Economies will stagnate and socialism will become unaffordable. Just like in Venezuela.
  1. Four Laws of Economic Freedom Prosperity – the climate of wholesome stimulation protected by law. There are four laws of economic freedom which a nation must maintain if its people are to prosper at the maximum level, there are:
    • The Freedom to try. – Equal opportunity
    • The Freedom to buy.
    • The Freedom to sell.
    • The Freedom to fail – Incentive reduction
  2. This creates large inequalities, however, there are higher standards of living for everyone
    • People who are considered ‘poor’ would be well off in most of the rest of the world
  3. James Madison – “Where a majority are united by a common sentiment and have an opportunity, the rights of the minor party become insecure.”
  1. Stage Two — Transition to Socialism: Getting the power to change the rules
    • “dictatorship of the proletariat” – This is Mob Rule or a government where decisions are made by democratically elected representatives of the working class. However, once elected, the population has little say in policies made
      • Side with the most votes wins. How do you win votes? Carrot, no carrot or Stick approach
      • Once a Government is elected (or form majority) They can put a few policies in place, through the normal channels
  2. Stage Three — Primary & Secondary Socialism: What to do with legislative ability?
    • Increase control and power of government. This includes educational, medical, or similar services. Until controlling every area of life
      • Completed through legislative powers: The government will have powers to give it a necessary control over the populace through judicial processes
    • Private ownership of property still exists only as long as unjust and excessive ownership is abolished.
      • Progressive taxation policy: Taxation of 47% of income, total taxes of 60% (GST, FBT, rates, land taxes)
        • Disincentivise those who work
      • “discrimination is employed against the bourgeoisie” – Create the vanishing of upper and middle classes
      • “important element of a democratic precedent” – Create policies to reduce the ability of prosperity
    • Need to create more people in poverty (or disenfranchised) to increase voting base
      • Done by reduction of employment conditions, taxing companies (payroll tax), make it hard to operate
      • While operating as a competitor for employment
    • Establish security, Through redistribution via force (law and penalty)
    • The goal is to centralise the means of production under the state
      • Slowly reduce the productivity of the private sector, making the government and private sector competitors
      • The quality of citizen’s life should have been improved, through redistribution to the majority, so the public opinion remains warm towards socialism and supports its continued development
      • Done through welfare and free handouts. A short-term improvement for long-term consequences
    • Play this out – Top 10% pay 52% of the tax (working age), how easy for the bottom 90% to get them to pay double?
      • 80% of people to get 20% to pay double – Top 20% pay 71% of income tax collected
      • 5 Quintiles or 5 Groups: The bottom 20% to 20%: Bottom 2, 40% = 0%, 3rd = 7%, 4th  = 21%, 5th  = 71%
      • Bottom quintile benefits worth more than 320 times what they paid in tax and the second-lowest quintile achieves 10 times what they paid in tax

Summary:

Freedom is better: Paying attention to the mold growing, the social spending, government regulations, and areas of service

  1. Smaller increases in spending over time aren’t noticeable. All this spending has to come from somewhere. This will be taxes or borrowing
  2. What works is trying to increase people’s freedom
    • Freedom to try and freedom to fail, A merit-based system
      • In ancient times survival was hard and those more capable tended to survive slightly better
      • When we lose challenge we start to devolve and have atrophy of the skills to survive. The bar of merit to survive drops significantly
  3. Where does it cross the line for you?
    • Having 1/3rd of your money taken away from you?
    • Who you can marry? – Big thing recently – but why does the government need to be involved?
    • What you can say? – Increasing regulation on speech
    • Where your money is spent?
    • What changes do you want to be made?

Thanks for listening today, and let me know what you think over at the Finance and Fury website here.

 

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