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Archive for the ‘Communism’ Category

I’m in Shenyang, China, as part of the faculty for Northeastern University’s International Economics and Management program.

My primary role is to talk about the economics of fiscal policy, explaining the impact of both taxes and spending.

But regular readers already know my views on those issues, so let’s look instead at the vaunted Chinese Miracle.

And I don’t use “vaunted” in a sarcastic sense. Ever since China began to liberalize its economy in the late 1970s, economic growth has been very impressive. I don’t necessarily believe the statistics coming from the Chinese government, but it’s unquestionably true that there’s been spectacular progress.

The great mystery, though, is whether China will continue to enjoy rapid growth. In other words, will it actually converge with the United States (right now per-capita economic output in America is more than five times higher than it is in China)? Or will China, like many other developing/transition economies, hit a ceiling and then begin to stagnate.

I don’t pretend to know the future, but I can say with great confidence that the answer depends on the actions of the Chinese government.

The good news is that economic freedom jumped dramatically starting in 1980 according to Economic Freedom of the World. Thanks to good reforms, China’s score rose by more than 50 percent, climbing from 4.0 in 1980 to more than 6.0 in just a bit over two decades.

That’s a huge improvement, and it largely explains why prosperity has expanded and there’s been a record reduction in the grinding poverty and material deprivation that characterized the country.

But the bad news is that there hasn’t been much reform in the past 15 years. China’s economic freedom score has oscillated between 6.0 and 6.4 during that period.

Indeed, there have been financial bailouts and Keynesian-style “stimulus” schemes, so it’s possible that China is now going in the wrong direction.

Before digging into the details, let’s consider the economics of growth. I’ve written before that labor and capital are the two factors of production and that economic growth is a function of more labor, more capital, or learning to use existing labor and/or capital more productively.

One way to visualize this is with a production possibility curve. This is a tool in economics that often is used to illustrate tradeoffs and opportunity costs. If Robinson Crusoe is on a deserted island, what the best way for him to allocate his time to maximize the amount of fish he can catch and the number of coconuts he can collect? Or, for an entire society, what’s the “guns-vs-butter” tradeoff?

Here’s a chart I found online that illustrates the role of capital and labor and producing output. It’s a three-dimensional chart, which is helpful since it not only shows that there’s no output in the absence of capital and labor, but it also shows that an economy with just labor or just capital also won’t have much if any output. You produce a lot, by contrast, with labor and capital are mixed together.

But that’s just the beginning.

The above chart shows the amount of output that theoretically can be produced with given amounts of labor and capital. But what if there’s bad policy in a nation? Consider the difference, for example, between China’s plateaued economic freedom score and decent economic performance compared to Hong Kong’s great economic freedom score and great economic performance.

With that in mind, contemplate this two-dimensional image. With bad policy, either the economy only produces A when it can produce B (i.e., by using existing labor and capital more productively) or it produces B when it can produce C (i.e., by expanding the amount of labor and capital).

I suspect that China’s problem is mostly that bad policy interferes with the efficient allocation of labor and capital. In other words, there’s already a lot of labor and capital being deployed, but a significant amount is misallocated because of cronyism and other forms of intervention.

Now let’s move from theory to empirical details.

Here’s a close look at China’s reforms from Professor Li Yang, Vice President of the Chinese Academy of Social Sciences.

Over the past 35 years, China has achieved extraordinary economic performance thanks to the market-oriented reforms and opening-up….The GDP per capita also reached to $6075 in 2012, up from $205 in 1980… China’s economy experiences impressive changes in favor of marketization. In fact, as far back as 1996, 81% of the production materials, and 93% of retail sales, had already been traded according to the market pricing mechanism.

And here’s a chart showing the gradual expansion of market forces in China, presumably based on whether prices are determined by markets or by central planning.

We also have two charts showing the decline in genuine socialism (i.e., government ownership of the means of production).

The first chart shows that state-owned companies are becoming an ever-smaller share of the economy.

Even more impressive, there’s been a huge decline in the share of the population employed by state-owned firms.

This is good news, and it helps to explain why China is much richer today than it was 30 years ago.

But the great unknown is whether China will experience similar strong growth for the next 30 years.

Here’s more of Professor Yang’s optimistic analysis.

Another indispensable factor explaining China’s growth miracle is constant opening-up, which is equally guided by the principle of gradualism. Regarding the space structure, the markets successively opened up from the special economic zones, economic and technological development zones, coastal economic development zones, riparian regions, inland regions, and finally the whole China; regarding the industrial structure, from the advantaged manufacturing industry, to the less advantaged agriculture and service industries. In 2001, China’s entry into the WTO can be regarded as a milestone: China’s opening up transformed from selective policy measures to widespread and deep institutional arrangements.

The liberalization of trade is particularly impressive, as shown by the following chart from the study.

Makes me wonder what Donald Trump would adjust his protectionist China-bashing if he saw (and understood) this chart.

Anyhow, here are some passages from Professor Yang’s conclusion.

…market-oriented reforms constitute the most crucial factor to support China’s growth in the future. The key here is to properly deal with the relationship between government and markets. The latter will be expected to play the fundamental role in the allocation of economic resources. …China should make more effort to improve the efficiency of investment. …the government needs to reduce its intervention in the micro-level economic activities, promote deregulation and administrative decentralization, break up monopolies, and improve the efficiency of functioning.

I agree, particularly the part about boosting the efficiency of investment.

And that can only happen if China ends cronyism by letting capital be allocated by market forces rather than political connections.

Let’s close with two items.

First, one of the other faculty with me at the University in Shenyang is Ken Schoolland. In his presentation, he noted that there’s some real federalism in China. Provinces have considerable flexibility to engage in reform.

And it shouldn’t come as any surprise that the rapid growth in China has been concentrated in the areas that have moved the fastest and farthest in the direction of free markets.

Second, some experienced observers are a bit pessimistic about future Chinese economic developments. Derek Scissors of the American Enterprise Institute explains what needs to happen to boost future prosperity.

…the economy is in the process of stagnating. The only solution is a return to market-driven, politically difficult reform. Such reform must be focused primarily on rolling back the state sector. …Expanded individual or household land ownership in rural areas would be…helpful. …More individual land rights shrink the rural state. The critical step in revitalizing the economy is to shrink the urban state, and by a considerable amount. Such changes will of course be phased in over time but the sooner they start, the sooner economic performance improves. Shrinking the urban state sector would (i) finally address excess capacity; (ii) enable capital to be much more efficiently allocated; (iii) thereby slow or halt unproductive debt accumulation; and (iv)encourage innovation by enabling more competition. …In terms of capital allocation, formal interest rate liberalization was said to be a vital step. But it cannot be while the state controls most financial assets – the incentives for collusion among sister state financials are overwhelming.

Here’s Derek’s bottom line.

Want to know when China is going to thrive again – just check if the state sector is actually shrinking.

Amen.

What he’s basically describing are the policies that would dramatically improve China’s score from Economic Freedom of the World. And if China can ever climb as high as Hong Kong, then the sky’s the limit for growth and prosperity.

P.S. There are some signs that China’s leadership recognizes that a Reagan-style agenda is needed.

P.P.S. On the other hand, if China’s government takes the IMF’s advice, then prepare for economic decline and stagnation.

P.P.P.S. The most amusing economic news in recent years was when a senior Chinese official basically explained that the welfare state in Europe makes people lazy.

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Communism is an evil system. Freedom is squashed and people are merely cogs in a system where government exercises total control over the economy and destroys the lives of ordinary people.

It also erodes the social capital of a people, telling them that individual initiative and success are somehow exploitative and evil.

So when such a system ultimately collapses after being in place for decades, one would not expect a fast rebound. After all, it’s presumably difficult to restore the characteristics of a free society such as a work ethic, personal responsibility, and a spirit of entrepreneurship.

This is why Estonia is such an improbable success. It was under the heel of Soviet communism from World War II until the early 1990s.

Yet as illustrated by this television program about Estonia, which recently aired across the country, there’s been a remarkable recovery and renaissance in this small Baltic republic.

The program mostly focuses on the entrepreneurial success of Estonia, so I want to augment the policy discussion.

There are five big reasons why Estonia is a role model for post-communist societies.

First, Estonia is a leader in the global flat tax revolution. It has a simple and fair system with a relatively reasonable rate of 20 percent.

Second, the flat tax rate has been continuously lowered from the original 26 percent rate when the system was adopted in the early 1990s.

Third, the business tax system is remarkably benign with a rate of 20 percent that is imposed only on dividends.

Fourth, the combination of these factors helps give Estonia the most attractive tax system of all OECD nations according to the Tax Foundation.

Estonia currently has the most competitive tax code in the OECD. Its top score is driven by…positive features of its tax code. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income.

Fifth, there are other pro-market policies. Estonia is ranked #22 in Economic Freedom of the World, putting it in the “most free” category. That’s only six spots behind the United States.

But good policy is not the same as perfect policy.

So while there’s much to admire about Estonia, here are five things about the country that could be improved.

First, the burden of government spending is excessive in Estonia. According to the most recent OECD figures (see annex table 25), 38.5 percent of economic output is diverted to the state, leading to substantial misallocation of labor and capital.

Second, like other nations in the former Soviet Bloc, there’s a demographic challenge. The welfare state may be modest by European standards, but in the long run it is very unaffordable in part because of a fertility rate of 1.59, which ranks 183 out of 224 jurisdictions.

Third, there was a very impressive burst of liberalization after escaping Soviet tyranny, but the commitment to economic reform has since stagnated. Estonia’s EFW score peaked at 7.90 in 2005, 9th-highest in the world, and is now down to 7.61, which puts Estonia in 22nd place.

Though it’s worth noting some of the erosion in economic liberty is the result of European Union rules that require trade barriers on non-EU products (which is the same reason why the UK may enjoy higher trade over time if it votes to leave the EU).

Fourth, the social insurance tax rate is a stifling 33 percent, driving a significant wedge between what an employer must pay and what an employee actually receives. The only mitigating factor is that a small portion of that money goes to a funded pension system (i.e., a partially privatized Social Security system).

Fifth, it is too cold and dark for much of the year. To be sure, that’s not a complaint about policy. But it’s one of the reasons why I recommend Australia for people seeking a haven from bad U.S. policy.

All things considered, Estonia deserves a lot of praise. The problems that remain are modest compared to the nation’s major achievements.

P.S. Lest I forget, one of the admirable things about Estonia was the way the government cut spending in response to the economic crisis at the end of last decade. And I’m talking genuine reductions in spending, not the make-believe we-didn’t-increase-spending-as-fast-as-we-planned “cuts” that often take place in Washington.

P.P.S. In a shocking display of either sloppiness or malice, Paul Krugman blamed Estonia’s 2008 recession on the spending cuts that took place in 2009.

In reality, Estonia’s relative spending discipline has paid dividends. The economy quickly recovered and is out-performing other European nations that chose either tax increases or Keynesian spending binges.

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Over the years, Barack Obama has made some statements that indicate a very statist worldview.

Now he may have added to that list. Check out this excerpt from a report in the Daily Caller.

President Barack Obama downplayed the differences between capitalism and communism, claiming that they are just “intellectual arguments.” …Obama said…”I think for your generation, you should be practical and just choose from what works.”

It’s hard to object to the notion that people should choose “what works,” so perhaps there’s not a specific quote that I can add to my collection. However, the President’s implication that there’s some kind of equivalence between capitalism and communism, which both systems having desirable features, is morally offensive. Sort of like saying that we should “choose from what works” in Hitler’s national socialism.

Communism is a disgusting system that butchered more than 100,000,000 people.

It is a system that leads to starvation and suffering.

Communism produces Nazi-level horrors of brutality.

So what exactly “works” in that system, Mr. President? If you watch Obama’s speech, you’ll notice there’s not a lot of substance. There is a bit of praise for Cuba’s decrepit government-run healthcare system (you can click here, here, and here if you want to learn why the system is horrifying and terrible for ordinary citizens). And he also seems to think it’s some sort of achievement that Cuba has schools.

So let’s take a closer look at what Cuba actually has to offer. Natalie Morales is a Cuban-American actor, writer, and filmmaker. Here’s some of what she wrote about her country and her relatives still trapped on the island.

…we send money, medicine or syringes for the diabetic aunt (since the hospital doesn’t have any unused disposable ones), baby clothes, adult clothes, shoes, or food… a doctor, a lawyer, or another similar profession that is considered to be high-earning everywhere else in the world will make about twenty to thirty dollars per month in Cuba. Yet shampoo at the store still costs three dollars. This is because everything is supposed to be rationed out to you, but the reality is that they’re always out of most things, and your designated ration is always meager. …if you’re a farmer and you’ve raised a cow, and you’re starving, and your family is also starving, and you decide to kill that cow and eat it? You’ll be put in jail for life. Because it’s not “your” cow, it’s everyone’s cow. That’s good ol’ Communism in practice.

Ms. Morales is especially irritated by Americans who fret that capitalism will “ruin” Cuba.

…picture me at any dinner party or Hollywood event or drugstore or press interview or pretty much any situation where someone who considers themselves “cultured” finds out I’m Cuban. I prepare myself for the seemingly unavoidable…“I have to go there before it’s ruined!”…I will say some version of this: “What exactly do you think will ruin Cuba? Running water? Available food? Freedom of speech? Uncontrolled media and Internet? Access to proper healthcare? You want to go to Cuba before the buildings get repaired? Before people can actually live off their wages? Or before the oppressive Communist regime is someday overthrown?”

Here’s more about Cuba’s communist paradise, including her observations of the healthcare system that Obama admires.

The very, very young girls prostituting themselves are not doing it because they can’t get enough of old Canadian men, but because it pays more than being a doctor does. Hospitals for regular Cuban citizens are not what Michael Moore showed you in Sicko. …That was a Communist hospital for members of the Party and for tourists… There are no janitors in the hospitals because it pays more money to steal janitorial supplies and sell them on the street than it does to actually have a job there. Therefore, the halls and rooms are covered in blood, urine, and feces, and you need to bring your own sheets, blankets, pillows, towels, and mattresses when you are admitted. Doctors have to reuse needles on patients. My mom’s aunt had a stroke and the doctor’s course of treatment was to “put her feet up and let the blood rush back to her head.”

She closes with a PG-13 request for idiotic westerners.

…for God’s sake, please don’t wear a fucking Che t-shirt.

Very well said.

By the way, none of this means we shouldn’t normalize relations with Cuba. There’s no longer a Soviet Union, so Cuba doesn’t represent a strategic threat. So, yes, relax restrictions on trade and travel, just like we have for China, Zimbabwe, Vietnam, Russia, Venezuela, and other nations that have unsavory political systems.

But the opening of relations doesn’t mean we should pretend that other systems are somehow good or equivalent to capitalism and classical liberalism.

Let’s close by sharing some news from another garden spot of communism.

If North Korea’s reputation as a place of hunger, hardship and repression was not bad enough, scientists have now discovered that it is too grim even for vultures. …Eurasian black vultures are no longer bothering to stop over in North Korea as they fly from their breeding grounds in Mongolia to their winter homes in South Korea. They concluded that food is so short under the communist regime that even the world’s best-known carrion birds cannot feed themselves. …Lee Han Su, of the institute, said: “This seems to happen because in North Korea the vultures can barely find animal corpses, which are major food resources for them.” Under the draconian regime of Kim Jong Un the country is unable to feed itself. International aid agencies report chronic malnutrition in some regions. …wild animals face the risk of being eaten by people. Defectors describe how victims of the famine were driven to eat dogs, cats, rats, grasshoppers, dragonflies, sparrows and crows. Vultures, for the time being at least, are off the menu.

I’m not sure what American leftists will say we can learn from North Korea. Even PETA presumably won’t be happy that starving North Koreans are eating sparrows and grasshoppers.

The bottom line is that there is zero moral equivalence between communism and capitalism. The former is based on servility to the state and the latter is based on liberty.

But if you’re amoral and simply want to know what works, compare the performance of North Korea and South Korea. Or look at the difference between Cuba and Hong Kong.

Very compelling evidence.

But this isn’t an issue that should be decided on the basis of utilitarian comparisons. What should matter most is that communism is evil.

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I’m in Cambodia, where I just finished a series of speeches to civic groups on some of my usual topics, in this case tax policy, the recipe for growth, and libertarian principles.

All that was par for the course.

What will always stay with me and haunt my thoughts, by contrast, was my visit to the Tuol Sleng camp, which was used as a processing center during the genocide carried out by the Khmer Rouge communist dictatorship in the late 1970s.

The bottom line, as you can see from this sign, is that 14,000-20,000 civilians went through this facility and only about 200 survived.

Here’s a sign showing the English translation of rules governing camp behavior.

The sixth rule, which says prisoners could not make noise while being beaten and tortured, seems especially perverse.

Wow, reads like the rules governing campus anti-free speech tribunals.

But I shouldn’t joke because so much of this camp contains horrifying memories of communist barbarity.

Here you see some of the children who were processed through this death facility.

For some reason, this pile of clothes taken from butchered prisoners was very powerful.

Keep in mind that this big pile of clothes is actually a drop in the bucket. During the few years the Khmer Rouge was in power, the communists slaughtered at least 2 million out of a total population of less than 8 million.

But if a mountain of clothes is too abstract, how about this pile of bones at one of the nearby killing fields where Tuol Sleng prisoners were taken for the Cambodian version of the final solution.

As I toured this somber death camp, I couldn’t stop myself from thinking about the jerks who wander around in “Che” t-shirts.

Yes, I realize that butchery by Castro’s regime was minor compared to what happened in Cambodia, but Cuba nonetheless has been a brutal police state. And Che was one of Castro’s murderous enforcers. How can any decent human being wear a t-shirt designed to portray him, or the regime, in a positive fashion?!?

P.S. Let’s shift to a much lighter topic.

Back in 2012, I wrote about being flummoxed by a fancy toilet in Switzerland. It had all sorts of fancy controls, yet I couldn’t get them to work.

Well, I was in Seoul, South Korea, a few days ago for a different speech and something similar happened. I checked into my hotel late in the evening, and went to …err… use the facilities before going to sleep.

Lo and behold, I found a toilet with no flushing mechanism. No handle. No button. No pedal. Nothing.

It was late, so I didn’t give the matter too much thought. I simply went to sleep and pretended I was a water-conserving environmentalist.

The next day, though, I was more determined to figure out how to flush the toilet. My Ph.D. has to be good for something, after all.

And that’s when I noted this set of instructions posted above the toilet paper.

You’ll be happy to know that I eventually figured out the purpose of most of the buttons.

Indeed, later in the day when I …um… well, let’s be delicate and simply say I issued an executive order, I even was able to activate the automatic hands-free wash and dry system for one’s backside.

It’s remarkable what capitalism is capable of producing.

P.P.S. Let’s return to the dour topic of government-imposed genocide.

If you’re curious how the Khmer Rouge in Cambodia rank compared to other evil regimes, they only killed a tiny fraction of the death toll achieved by the Soviet Union and Maoist China.

But if you’re scoring on a per-capita basis, the communist killers in Cambodia arguably might be at the top of the list.

Next time I see some despicable jerk wearing a Che t-shirt, I think I’ll ask whether he has the matching Pol Pot version.

I’m quite sure that the brainless kid won’t even know that Pol Pot was the dictator who presided over the Cambodian genocide, so my snide comment will fall on deaf ears.

But maybe, just maybe, the kid will go online, learn about the profound evil of communism and throw Che in the trash.

Heck, the morons at Mercedes-Benz were shamed out of using Che as a marketing gimmick, so there is hope!

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Whenever I need to explain the difference between socialism and capitalism, I start by noting that socialism technically is different from Obama-style big-government redistributionism and cronyism.

Socialism involves something more pervasive, involving government ownership of the means of production (which, if you read this postscript, is why Jeremy Corbyn in the United Kingdom is far more radical than previous Labour Party leaders).

It also means eviscerating the competitive price system as a means of determining value and allocating resources, relying instead on politicians and bureaucrats to arbitrarily wield that power (some American politicians favor this latter approach in certain circumstances).

Needless to say, socialism has an unmatched track record of failure. It was such a disaster than only a few supposedly high-ranked academics (see this postscript) thought it worked.

But what about high-ranked communists who grew up under socialism. Did they think it worked?

The Houston Chronicle dug into its archives to produce a story about an incident that may have played a big role in history. It’s about a senior communist functionary who was exposed to a slice of capitalism.

Yeltsin visited mission control and a mock-up of a space station. According to Houston Chronicle reporter Stefanie Asin, it wasn’t all the screens, dials, and wonder at NASA that blew up his skirt, it was the unscheduled trip inside a nearby Randall’s location. Yeltsin, then 58, “roamed the aisles of Randall’s nodding his head in amazement,” wrote Asin. He told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, “there would be a revolution.” …In the Chronicle photos, you can see him marveling at the produce section, the fresh fish market, and the checkout counter. He looked especially excited about frozen pudding pops. “Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he said.

This random trip to a typical supermarket may have changed history.

About a year after the Russian leader left office, a Yeltsin biographer later wrote that on the plane ride to Yeltsin’s next destination, Miami, he was despondent. He couldn’t stop thinking about the plentiful food at the grocery store and what his countrymen had to subsist on in Russia. In Yeltsin’s own autobiography, he wrote about the experience at Randall’s, which shattered his view of communism, according to pundits. Two years later, he left the Communist Party and began making reforms to turn the economic tide in Russia. …“When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people,” Yeltsin wrote. “That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.”

Since the Soviet Union was mired in poverty at the time, Yeltsin presumably was speculating about the potential wealth of his country.

And the good news is that the rigid communism of the Soviet Union is gone. Heck, the Soviet Union doesn’t even exist. Reagan was right when he predicted  the triumph of freedom, with Marxism being relegated to the “ash heap of history.”

But the bad news is that Russia (the most prominent of the 15 nations to emerge after the crackup of the Soviet Union) is a laggard on economic reform. There was a shift away from close-to-pure communism in the 1990s, to be sure, but the country still has a long way to go before it can be considered capitalist.

Here’s a back-of-the-envelope “statism spectrum” that I created. It’s designed to show that there are no pure libertarian paradises, not even Hong Kong. And there are no pure statist dystopias, not even North Korea (though that despotic regime is as close to pure evil as exists in the world).

Russia, I’m guessing, would be somewhere between China and Mexico.

And this gives me a chance to close with an important point.

Perfect economic policy almost surely is an impossible goal. But that’s fine. We can still enjoy good growth so long as we strive to at least move in the right direction. As I explained back in 2012, the private sector is capable of producing impressive results so long as it has sufficient breathing room to operate.

P.S. If you want a simpler and more amusing explanation of different economic systems, here’s the famous “two cows” approach.

P.P.S. The United States isn’t a socialist nation, but we’re not fully immune to that destructive virus. After all, we have a government-run rail company in America, a government-run postal service, a government-run retirement system, and a government-run air traffic control system, all things that would function far more efficiently in the private sector.

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Civil disobedience is a powerful and traditional way for Americans to resist bad government policy.

The most famous example is the way civil rights leaders used disobedience (and armed self defense) to help end the Jim Crow laws imposed by state governments.

It’s also encouraging that gun owners have no intention of obeying bad gun control laws, with evidence of massive resistance to bad laws in states such as Connecticut, Colorado, and New York.

And motorists ended the use of speed (i.e., revenue) cameras in Arizona in part by simply ignoring the fines that arrived in the mail (folks in Houston needed to use a referendum).

These are encouraging stories, but we also need to be realistic about the fact that most Americans meekly comply with lots of other bad laws and regulations imposed by greedy and overbearing governments.

The regulatory burden in the United States has become absurd, for instance, but it’s difficult to envision a successful strategy to resist various bureaucratic impositions.

Until now.

The great scholar Charles Murray has a column in the Wall Street Journal about fighting back against the regulatory state.

He begins with a very depressing assessment.

America is no longer the land of the free. We are still free in the sense that Norwegians, Germans and Italians are free. But that’s not what Americans used to mean by freedom. It was our boast that in America, unlike in any other country, you could live your life as you saw fit as long as you accorded the same liberty to everyone else. …with FDR’s New Deal and the rise of the modern regulatory state, our founding principle was subordinated to other priorities and agendas. What made America unique first blurred, then faded, and today is almost gone.

In some sense, we’ve been buried by red tape.

…consider just the federal government. The number of federal crimes you could commit as of 2007 (the last year they were tallied) was about 4,450, a 50% increase since just 1980. A comparative handful of those crimes are “malum in se”—bad in themselves. The rest are “malum prohibitum”—crimes because the government disapproves.

This is something that we’ve already discussed. I made the distinction just the other day between real crimes (which involve an infringement on someone else’s life, liberty, and property) and innocent behavior that is criminalized by government.

But it’s even worse when folks have no idea how to be compliant.

Everyone knows how to obey the laws against robbery. No individual can know how to “obey” laws such as Sarbanes-Oxley (810 pages), the Affordable Care Act (1,024 pages) or Dodd-Frank (2,300 pages). We submit to them. The laws passed by Congress are just the beginning. In 2013, the Code of Federal Regulations numbered over 175,000 pages.

Especially when constitutional protections are weakened.

It gets worse. If a regulatory agency comes after you, forget about juries, proof of guilt beyond a reasonable doubt, disinterested judges and other rights that are part of due process in ordinary courts. The “administrative courts” through which the regulatory agencies impose their will are run by the regulatory agencies themselves, much as if the police department could make up its own laws and then employ its own prosecutors, judges and courts of appeals.

And the insult to injury is that many regulations make no sense.

Regulations that waste our time and money are bad enough. Worse are the regulations that prevent us from doing our jobs as well as we could—regulations that impede architects from designing the most functional and beautiful buildings that would fit their clients’ needs, impede physicians from exercising their best judgment about their patients’ treatment, or impede businesses from identifying the best candidates for job openings. …Public-school teachers typically labor under regulatory regimes that prescribe not only the curriculum but minutely spell out how that curriculum must be taught—an infantilization of teachers that drives many of the best ones from the public schools.

So what’s the solution?

You can fight these bureaucrats in their kangaroo courts, or maybe even force the case into a real court.

But Murray acknowledges that this is prohibitively expensive.

…when the targets of the regulatory state say they’ve had enough, that they will fight it in court, the bureaucrats can—and do—say to them, “Try that, and we’ll ruin you.”

Charles has an idea of how to overcome this problem.

…the regulatory state is the Wizard of Oz: fearsome when its booming voice is directed against any single target but, when the curtain is pulled aside, revealed as impotent to enforce its thousands of rules against widespread refusal to comply. And so my modest proposal: Let’s withhold that compliance through systematic civil disobedience. Not for all regulations, but for the pointless, stupid and tyrannical ones.

More specifically.

…it should be OK to ignore the EPA when it uses a nonsensical definition of “wetlands” to forbid you from building a home on a two-thirds-acre lot sandwiched between other houses and a paved road…there’s no reason for the government to second-guess employer and employee choices on issues involving working hours and conditions that don’t rise to meaningful definitions of “exploitation” or “unsafe.” …Let’s just ignore them and go on about our lives as if they didn’t exist.

That’s sounds nice, but how does one overcome the risk of discriminatory and abusive prosecution and persecution by miffed bureaucrats?

Here’s the clever proposal Charles has for the private sector.

Let’s treat government as an insurable hazard, like tornadoes. …let’s buy insurance that reimburses us for any fine that the government levies and that automatically triggers a proactive, tenacious legal defense against the government’s allegation even if—and this is crucial—we are technically guilty. Why litigate an allegation even if we are technically guilty? To create a disincentive for overzealous regulators. The goal is to empower citizens to say, “If you come after me, it’s going to cost your office a lot of time and trouble, and probably some bad publicity.”

People presumably will be willing to fight if they have some free talent coming to their defense.

I propose…a legal foundation functioning much as the Legal Services Corporation does for the poor, except that its money will come from private donors, not the government. It would be an altruistic endeavor, operating exclusively on behalf of the homeowner or small business being harassed by the regulators. The foundation would pick up all the legal costs of the defense and pay the fines when possible.

Here’s the bottom line.

The measures I propose won’t get the regulations off the books, nor will they improve the content of those regulations, but they will push the regulatory agencies, kicking and screaming, toward a “no harm, no foul” regime. They will be forced to let the American people play.

And if you want to see this strategy in the form of a picto-graph, this is a very helpful depiction.

I mentioned yesterday that I was in Poland for a Liberty Fund conference.

After the conference, I had the opportunity to visit the Solidarity Museum, which commemorated the 1980 protests against communism at the Gdansk shipyards.

Here’s an image that warmed my heart. One of the rooms had a tape of Poland’s communist dictator announcing martial law. Here’s a screen capture of him saying there’s no turning back from socialism.

Gee, that didn’t turn out to be the case.

Indeed, Poland is now a reasonably good example of how markets enable higher living standards.

And that speech should be a permanent memorial about the evil of communism. And if you want further reminders, click here, here, and here.

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Is Obama a socialist?

If you’re asking whether he’s a big-spending interventionist, the answer is yes.

But if you’re asking whether the President believes in government ownership of the means of production (which is the defining issue in the socialist economic platform), the answer is no (though the White House surely won’t like how Thomas Sowell describes Obama’s ideology).

But I generally don’t care about these word fights. Big government is bad because it hurts people and relies on coercion, and that’s true whether we’re talking about socialism, communism, Nazism, corporatism, or other forms of statism.

But I do care for historical accuracy and honesty.

Writing for the U.K.-based Telegraph, Dan Hannan of the European Parliament explains that the German National Socialists of the Hitler era were….well, socialists.

Goebbels never doubted that he was a socialist. He understood Nazism to be a better and more plausible form of socialism than that propagated by Lenin. Instead of spreading itself across different nations, it would operate within the unit of the Volk. So total is the cultural victory of the modern Left that the merely to recount this fact is jarring.

Anti-capitalist propaganda from the Nazis

Not that today’s leftists should be surprised. Unless, of course, they’re historically illiterate. After all, the Nazi political vehicle was the National Socialist German Workers Party.

Subsequent generations of Leftists have tried to explain away the awkward nomenclature of the National Socialist German Workers’ Party as either a cynical PR stunt or an embarrassing coincidence. In fact, the name meant what it said. Hitler…boasted, adding that “the whole of National Socialism” was “based on Marx”. Marx’s error, Hitler believed, had been to foster class war instead of national unity – to set workers against industrialists instead of conscripting both groups into a corporatist order. His aim, he told his economic adviser, Otto Wagener, was to “convert the German Volk to socialism without simply killing off the old individualists” – by which he meant the bankers and factory owners who could, he thought, serve socialism better by generating revenue for the state. …authoritarianism was the common feature of socialists of both National and Leninist varieties, who rushed to stick each other in prison camps or before firing squads. Each faction loathed the other as heretical, but both scorned free-market individualists as beyond redemption. Their battle was all the fiercer, as Hayek pointed out in 1944, because it was a battle between brothers.

In other words, Soviet-style socialism and Nazi-style socialism were both evil forms of statism, but one attracted people by fomenting class envy and the other sought recruits by demonizing non-Aryans.

Hannan hastens to add that he doesn’t think that modern self-proclaimed socialists are closet Nazis, but he does object to leftists who try to put National Socialists on the right side of the political spectrum.

The idea that Nazism is a more extreme form of conservatism has insinuated its way into popular culture. …What is it based on, this connection? Little beyond a jejune sense that Left-wing means compassionate and Right-wing means nasty and fascists are nasty. When written down like that, the notion sounds idiotic, but think of the groups around the world that the BBC, for example, calls “Right-wing”: the Taliban, who want communal ownership of goods; the Iranian revolutionaries, who…seized industries and destroyed the middle class; Vladimir Zhirinovsky, who pined for Stalinism. The “Nazis-were-far-Right” shtick is a symptom of the wider notion that “Right-wing” is a synonym for “baddie”.

Citing the comprehensive work of Jonah Goldberg, Hannan’s column then makes a key point about government coercion.

Authoritarianism – or, to give it a less loaded name, the belief that state compulsion is justified in pursuit of a higher goal, such as scientific progress or greater equality – was traditionally a characteristic of the social democrats as much as of the revolutionaries. Jonah Goldberg has chronicled the phenomenon at length in his magnum opus, Liberal Fascism. Lots of people take offence at his title, evidently without reading the book since, in the first few pages, Jonah reveals that the phrase is not his own. He is quoting that impeccable progressive H.G. Wells who, in 1932, told the Young Liberals that they must become “liberal fascists” and “enlightened Nazis”.

To be fair, this doesn’t mean Wells was a horrible person, at least in the sense of embracing Hitlerism. In the early 1930s, the fascist policies of Mussolini and Hitler were simply about government intervention. At that point, few people recognized that racism and anti-Semitism were part of the fascist program.

I’m much more likely to be critical of people who make excuses for communism still today. Do they really want to romanticize an ideology that killed tens of millions of innocent people?!?

And it’s disgusting that people wear Che Guevara t-shirts when he was a brutal enforcer of Cuba’s totalitarian regime.

P.S. On a lighter note, here’s the “bread-ish” difference between socialism and capitalism.

P.P.S. Regarding European socialism, we have great (although technically inaccurate) cartoons from Glenn Foden and Michael Ramirez.

P.P.P.S. Here’s socialism for kids, though it’s really class warfare for kids.

P.P.P.P.S. And here’s what happens when you try socialism in the classroom.

P.P.P.P.P.S. Closing on a serious note, John Mackey and Steve Horwitz agree with Thomas Sowell about Obama’s real economic ideology.

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