Friday, April 19, 2019

Soviet Poverty


Our Trip to Soviet Russia: A Cornucopia of Disaster. By Bill Bonner April 18, 2019

Fix Capitalism? Hedge fund manager Ray Dalio thinks capitalism needs to be fixed. So does The New York Times and the Financial Times.
 Socialism Up Close - We got to see the Soviets’ experiment with socialism up close. We took a trip through Eastern Europe in the mid-1970s. At the time, many people still thought the Soviet Union was a success story. Nobel Memorial Prize winner, Paul Samuelson, thought it would surpass the U.S. by 1984. But it didn’t take long on the ground to see how wrong he was. Cornucopia of Disaster - If wealth is simply the ability to choose what you want to consume, where you want to live, and what you want to do… the Soviets’ socialism was a cornucopia of disaster. Russian Flea Market - This time, we stayed in a large, “business” hotel. The water pressure was so low, nothing came out of the taps on the 12th floor. So, they moved us down to the 8th floor. Still unable to get any water, we were moved again, to the 2nd floor. We wondered: were the rooms above for people who didn’t complain… or who didn’t bathe? Meddles and Bezzles - But wait. France, Denmark, Sweden – all are said to be “socialist” to some degree. How come they don’t go broke? The answer is simple: because they’re not really very “socialist” at all.


Bernie Sanders and AOC want to do away with it for good. Most people – including Donald Trump, the Republicans and the Democrats – just ignore it. And almost nobody likes it. Except us.

Capitalism is a non-system. It is what happens when people are allowed to make win-win deals with each other… while respecting the fundamental codes of civilization – private property, language, money, and cooperative exchanges.

Wall Street, sinking funds, options, IPOs and the whole paraphernalia of modern “capitalism” are simply riffs on the same theme.

But almost everyone wants to get wealth, power, and status without the risk or trouble of working for it. So, they team up with the feds, who offer EZ money, in the form of subsidies, jobs, contracts, tariff protection, “stimulus,” regulation, low-interest loans, fake money, free medical care, and much more. The feds do only one kind of deal – win-lose… backed by guns and ammo. Socialism is just one variety of those win-lose deals.

The roads were pitiful and there were almost no private cars on them. People traveled by train, bus, or plane. And when they arrived in a town, they stayed at the government-run hotel – usually a huge, ugly, run-down place near the train station.

If you wanted a decent place to stay, your best bet was to stand in front of the hotel and wait for someone to come up to you. “Want room?” a burly man would ask, looking around nervously as if he were offering to sell heroin.
“Yes,” “How much?”

For a few dollars, we were offered a room in the man’s house. We dined with the family. We shared a small, rudimentary bathroom. We slept in a bed that had probably served its owner the night before. It wasn’t much, but it was better than the hotel.

There were restaurants only in the main cities. You can imagine what the food tasted like. And there were stores where you could buy food. But it was not easy. There were no aisles in which the bounty was displayed and from which you could pick out the things you wanted.

Instead, you presented yourself at the counter and asked the rude or indifferent clerk for what you wanted. “A can of beans,” for example. No brands. No options. And usually no beans.

There were almost no choices available. Often, even the necessities had to be bought on the black market.

The average person lived in rude poverty in an overcrowded, under-heated apartment that had been assigned to him by the government. Usually, he had to share the apartment with another family.

And the authorities tried to match up families that were as incompatible as possible, so they wouldn’t get along and wouldn’t conspire against the feds.

And there was no way out – except by joining the Communist Party, denouncing your neighbors and rising through the ranks. Private, independent wealth was outlawed.

You could not start your own company. You could not change jobs without permission. You couldn’t buy a car, or a TV, or a telephone, without a long delay and, as always, official approval.

Every deal was win-lose, and every one set the economy back further. The real, street value of its output declined, and people became poorer and poorer.

We went back to Russia 16 or 17 years later. By then, even the elite had given up; the Soviet experiment was over… and we saw what it had wrought. As grim as life had been in the 1970s, it was even grimmer in the early 1990s.

By then, that is, after 70 years of win-lose deals, there was nothing left but the flotsam and jetsam of a wrecked economy floating on the surface. Buildings crumbled (the Soviets had economized by using too little cement and too much waters). Weeds grew up in the parks. Sidewalks cracked. Pipes burst.

But in the early 1990s, markets were making a comeback in Russia. People unloaded their Soviet relics and got back to work.

In one of the markets in Moscow, for example, there were thousands of sellers – each with his own patch of ground and a few pathetic items. It was like a giant flea market, where the most popular merchandise had been pilfered from the military.

You could buy a rifle, or a helmet… or a pair of shoes. One man stood all day in front of a single pair of boots… which he offered for just $1. Which just goes to show what a wreck the Soviet socialist system made when it finally crashed.

The boots were well made, very solid, and heavy. They must have been worth at least $100 in the West. But there, the poor man felt lucky to sell them for a single dollar – and to stand in the cold all day to get it. (As it turned out, the boots fit us perfectly; we still wear them.)

All of the win-lose experiments of the 20th century ended the same way. The more socialist they were, the faster they went broke.

Like the U.S., they interfere heavily in the economy. They spread out generous “welfare” nets to catch the unlucky and the imprudent. But they wisely regard the socialist part of their economies as a cost center, not a profit center.
So, they tend to limit their “socialist” boondoggles to no more than their capitalist industries can afford. 

The Economist magazine described the Scandinavian countries as “stout free-traders who resist the temptation to intervene even to protect iconic companies.”

The Foundation for Economic Education adds: Perhaps this is why Denmark, Norway, and Sweden rank among the most globalized countries in the entire world. These countries all also rank in the top 10 easiest countries to do business in.

In other words, socialism is always a drag on an economy. Successful “socialist” economies limit it to what they can afford.

America has plenty of “socialist” programs, too. Bailouts of banks and big businesses, ownership of the mortgage industry, almost total control of medical industry, heavy regulation of many other industries, and a financial system corrupted by fake money and fake interest rates.

Taken together, these meddles and bezzles may make the U.S. more “socialist” than Norway, Denmark, or Sweden…
…and may cause Americans to weep first.


Norb Leahy, Dunwoody GA Tea Party Leader

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