Furious Friday

The Devil giveth and the Devil taketh away

Welcome to Finance and Fury! If you haven’t listened to last Friday’s episode go check it out, it’s a prelude to this episode. Today we are going to discuss the founder of Communism – Karl Marx, along with his ideas.   1848 – Karl Marx, along with Friedrich Engels, brought the philosophy of Communism to the masses. We’ll start with a brief outline of his life. Whilst we could go on for a while about him, I’m more interested in looking at his ideas, which are more important. We will talk more about he and Engels’ character, too, to form a good understanding about their ideologies.   Why is this important to cover?
  1. The Communist Manifesto is one of the most read books – still today. Research conducted by the Open Syllabus Project – 15 years of over 1m course curricula in Colleges and Universities
    • The Communist Manifesto is number 3 in most assigned, 2nd in History, Number 1 in Sociology
  2. The top 10 Economics books are written by New Keynesian Economics
    • Assumes rationality and economic efficiencies – Wants to achieve macroeconomic stabilisation through;
      • Fiscal policy – Taxation and redistribution – GPD from government spending
      • Monetary policy – Printing money to stimulate economic growth
    • This is a problem that there is only one way of economic thought being taught
      • I know – I went through it. I didn’t learn anything about the Austrian school of economics which focuses more on individuals rather than the state as a solution
      • Used to be more socialist and thought that printing money for economic stimulus was good
      • Especially reading articles by Economic Writers
  3. We need to try to get the complete picture out there though
    • There is no perfect theory or method, but only seeing one may lead people to think that
  Who was Karl Marx? Either the saviour or the devil depending on what side of the political compass you lie.  
  1. Born 5 May 1818 – Trier, Germany – father was a la He lived a relatively wealthy existence, growing up in a 10-room property, with his family owning a number of vineyards. His mother was from a wealthy Jewish family of businessmen. They later founded Phillips Electric. His sister-in-law married Lion Philips, a Dutch tobacco industrialist
  2. Why is this important
    • Karl wrote that the working class needs to revolt
    • He never worked a day in a factory
  Education years
  1. 1830 – Trier High School – police raided the school in 1832 – discovered that literature espousing political liberalism was being distributed and taught to the students. This is another important point.
    • The authorities instituted reforms and replaced several staff during Marx’s attendance.
    • Early education revolved around one ideology of liberalism
  2. 1835 – at the age of 17 Karl attended the University of Bonn. He wanted to study philosophy and literature but his father insisted on law as a more practical field.
  3. Karl was excused from military duty when he turned 18, due to a condition referred to as ‘weak chest’.
  4. While at the University at Bonn, Marx joined;
    • The Poets’ Club, a group containing political radicals that were monitored by the police.
    • The Trier Tavern Club drinking society
    • In August 1836 he took part in a duel with a member of the University’s Borussian Korps.
    • His father forced him to transfer to the more serious and academic University of Berlin.
  Marriage
  • 1836 – Married Jenny von Westphalen – An educated Baroness of the Prussian ruling class
Work
  • 1837 – 1845 – Between Cologne and Paris writing for socialist newspapers by German and French radicals
Engels
  1. 1844 – Met German Socialist Fredrich Engels whose father was the owner of a large textile factory. Do you see a trend here?
  2. 1848 – Co-authored Communist Manifesto
  3. The ideology
    • Marx’s quote – ‘The history of all hitherto existing society is the history of class struggles’
    • The class you belong to is determined by; If you own the means of production and control labour power, or, if you are the labour power – the workers
  4. Sees everything as either “Oppressor” or “Oppressed” with all business owners exploiting workers
    • Oppressors – The Bourgeoisie (capitalists) who are the owners of production and always working in self-interest, exploiting the working class.
    • Oppressed – Proletariat – the working class. They are the ones selling their labour power – remember: voluntarily – awful conditions but thanks to the free market this improved.
    • Class is solely determined by property ownership – not by income or status
  What the Manifesto contained: Ten major points in total, almost like the “10 Commandments of Socialism”
  1. Abolishing ownership of all private property – i.e. the people now own everything collectively and nothing privately
    • Businesses: Assumes that capital just appears. Marx theory is that the labourers are the one that produce everything, so they should own it as well
    • But where did the factory come from? Someone took a risk to create these things.
    • A Tragedy of the Commons situation – which turns into social loafing
      • Living: You are taken from your home and put in the lodgings assigned to you by the government.
      • No private property means not owning anything – no car, investments, telephone
  2. Establishing system of heavy taxation (Differs for Socialism and Communism)
    • Communism: The People own everything – You don’t get paid, but you do have a quota to make (form of taxation)
    • Socialism: The State owns everything – You get paid an income but it’s heavily taxed to the point where you don’t actually have much discretionary income left.
    • This removes the want to work. So, when everyone stops working there is less tax to provide resources for everyone. Things work well to begin with by redistributing existing wealth, but then it’s just a race to the bottom.
  3. Abolishing the right to inherit
    • When you die, The State takes all your stuff – because to begin with it owns everything anyway
    • No incentive to save for retirement – you can’t anyway
  4. Centralizing credit and establishment of a State Bank
    • Removes competition and creates a monopoly – a State-run bank who lends and controls all money
    • Removes all financial freedom and will lead to bad behaviour (i.e. 1,000,000% inflation in Venezuela)
    • Central Banks are meant to be independent from Governments or democratic influence
  5. Centralizing communication and transport
    • Now they see and hear everything, and control what you see and hear. They can also control where you go.
  6. Confiscating all emergent and rebel property
    • Start anything new? They now own it – and they punish you for doing it as well
    • This is a race to the bottom – As soon as someone gets slightly ahead they have their stuff taken away
  7. Extending the means of production to The State
    • Once all private property is taken, the state starts running these things. This is their power source – Income and control
    • Hasn’t worked so well – Hard to measure efficiency in controlled economy
    • Russia: Production quota by weight for nails – SO factories produce nails too big to use just because they were heavier.
  8. Equalizing liability to all levels of labour
    • Brings an end to the parasitic situation existing under capitalism where the few who don’t work are supported by the many who do.
    • Everyone works in communism. Those who don’t work, don’t eat (except those unable because of their age).
    • Work is assigned to you
  9. Combining agriculture and manufacturing industries
    • Labour intensive jobs to be spread around when needed. Farmers become factory workers, and vice versa
    • This destroys specialisation
  10. Establishing a free public education system
    • Important to educate good ‘future-communists’
    • How do you think schools in North Korea, or under Mao’s China looked?
Every one of these principles is designed to remove incentives – as it removes all freedoms!
  1. Why do we do anything? – There needs to be some incentive
    • Everyone is incentivised by something different – we are all different.
    • But when freedom and incentives are removed? What happens when these get taken away?
    • There’s a difference between ‘being content’ in a modern ‘minimalistic’ sense, and not having a choice to have anything, or the hope of ever getting anything.
  2. I truly don’t know why people would want this. The only thing I could think of is that they haven’t been taught the other side, or they think that the simple ‘all needs are provided for’ promise is true.
    • In a Democracy this system can actually be slowly be voted in policy by policy
      • Has come from many a Democracy: very possible in a democratic and free market (wealthy) country
      • Under the free market – Some rise, some don’t, but there is mobility of wealth
      • There needs to be something in the first place to take and redistribute
    • The greater the distributions of wealth, the more this can be weaponised
    • Larger distributions in free market and large populations (Such as America) are outliers
  How it plays out in the past and how it would play out here as well. The question to really ask yourself is ‘why’ – Every time this has been implemented, why does it end in genocide and mass starvation? If you can answer that you might have a good idea is wrong with this concept.
  • REMEMBER: Small, homogenous free market societies, like Scandinavian countries, aren’t Socialist (Norway has a lower company tax rate than us at 24%)
  • TIP: A Government big enough to give you everything you want, is a government big enough to take away everything that you have
  Next week to the first time these ideas were properly implemented…in Soviet Russia around the turn of the century   Thanks for listening! If you enjoyed this episode, or if you didn’t, let me know at https://financeandfury.com.au/contact/  

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