Tag Archives: Planned economy

Government, Israel

On systemic problems (a response to Mattan)

In his guest post, Mattan Mamane argued that any form of central planning of the economy should be avoided, and only turned to when necessary. I have to say, I tend to agree with this approach. But first of all, I think there’s a case to be made for placing severe limitations on freedom when it comes to economics, because such limitations are already – actually, always – necessary. And second of all, there is planning and there is planning – not all planning is the same.

Now, I feel I lack some of the historical background knowledge that Mattan brings along. I can be ignorant sometimes, as I form my opinion in discussions more often than in deep reading. But if I’m not mistaken, the important insight of socialism is that there are certain dynamics in an unrestricted market which severely, systemically, and systematically limit the freedom of vast swathes of the population.

The idea of basing the economy on central planning is not a good one, that’s for sure. It depends on the planners being very smart, very well-informed, very quick, and very moral. With any of those missing, people will suffer. But obviously there are many economies, most economies really, which are based on many individuals making individual decisions without central planning, but within a set of rules and systems designed to protect societies from some of the ills of unlimited capitalism. I said “most economies” but it’s really all modern states, as modern states have laws and modern governments manipulate the economy in all kinds of ways. It’s really a question of how.

Mattan brought up a good example: privatization. Privatization of public institutions can be good, but the calls in the #J14 movement to end privatization in Israel are justified: the kind of privatization pushed there by Netanyahu and others is not the right kind; calls for tenders are tailored towards single corporations or individuals with large sums of money. As a result, privatization is used to drive more economic centralization and harms the competition needed for a free market; instead of a single government carrier for public services, we get a single private carrier, without the checks and balances of public oversight nor those of multiple private shareholders.

So it’s not privatization itself that is good/bad, it’s how you privatize that can be a great thing or a really bad thing. In the same way, combatting economic centralization or poverty can be done in good ways and in bad ways, and I think Mattan’s suggestion of focussing on freedom is a very good one.

However, I would caution Mattan and others from believing the oft-repeated claim that everyone is better off in a USA-style capitalistic society. Perhaps they are when compared to economies based on central planning, but the modern state is a very new thing as far as history is concerned, and we probably have all kinds of economies to try out. I think it is key to recognize systemic problems with existing systems, and try to figure out how these can be overcome.

One systemic problem of capitalistic societies is poverty. Here I mean relative poverty: being poor compared to the people in your society – not some absolute idea of poverty compared to the whole planet. We are all encouraged implicitly or explicitly to be innovative, take charge of our future, and be the very best we can be. Poverty, as I understand it, is a feature of the system of modern society: the existence of a category of person who, from birth, is not so likely to achieve those things which we should all aspire to. Perhaps some people are poor because they somehow have less potential, by nature, but this is not what I mean.There are many brilliant people born into poverty, who simply have the odds stacked starkly against them from the start. ((I believe that people’s ability is affected very much by their schooling and upbringing; specifically, I think that a traumatic childhood – such as that experience by most of us in unjust factory-like child-correction institutions mockingly called “schools” – is key to limiting people’s ability in most areas. But that’s a topic to be tackled separately.))

The measures taken against poverty are many and varied, and some are better than others. Welfare, at least as I know it in Germany, is not a very good one, in my opinion. Under this system, people have access to a living stipend if they meet certain criteria, the main type of welfare being available to people who are unemployed. Even assuming the stipend is enough to keep them from being poor, this system still limits their freedom: they have to go through embarrassing, even humiliating bureaucratic procedures on a regular basis and are forced to take a job, any job, even one they would hate. Such a system makes poverty slightly less awful without making it go away, and diminishes people’s freedom in the process.

Does this mean that welfare as a whole is a bad idea? I don’t think so. The German system just isn’t a good way of doing it. Perhaps all welfare systems ever tried aren’t good, but that doesn’t mean a good one can’t be created.

What I beg you to realize is that systemic problems in an economic system are never “somebody else’s problem”. They belong to everyone in that system, whether you happen to mainly benefit from it or mainly suffer. Like me, you probably have that image in your mind of a self-made man insisting that he made every single cent by his own hard work and wits, insisting that nobody ever helped him, outright raging that he doesn’t owe anybody anything. I’m sure many wealthy and successful people feel this way; if they didn’t personally make the fortune but rather inherited, they might feel this way on behalf of whatever ancestor did. But those who feel this way are deluding themselves. We live within complex social systems which can empower us to do great things or condemn us to lives of hardship. Sure, some measure of luck and some measure of ability are involved – but they do not exist in a vacuum. If you benefit from a system and that same system makes others suffer, their suffering is your problem, and you are benefitting from it whether you like it or not. I don’t mean to say the wealthy or successful are evil or something – just that no matter what they think, they bear a responsibility for the poor and the failures.

I think we have to take responsibility over the systems we live in and be brutally honest with ourselves about what they do right and what they do wrong. And when we recognize a wrong, we have to be creative and find a way to fix it while doing as little wrong as possible. It’s not easy, but it seems to me like an interesting challenge, and I believe it is the right thing to do.

 

I have one or two more guest posts lined up to continue this discussion. In the meantime, comments are open. What do you think about all of this? Are there good ways to improve capitalism? If so, what are they?

Government, Israel

Guest post: Give freedom a chance (Mattan Mamane)

1 Comment

As part of my trying to figure out the whole economics thing, I’ll be asking some friends (of different ideological persuasions) to guest-post on the subject, and I’ll try to follow up with some kind of thoughtful response that doesn’t reveal quite how little I know about these things. First up is Mattan Mamane (who has a new blog in Hebrew), whom some may call a libertarian. Your thoughtful responses are most welcome, of course.

While writing this guest post, I tried to summarize for myself what stood behind my political ideology, what holds it all together. It wasn’t hard to come to the conclusion that the single foundation for almost everything I believe in is my freedom. Living through my own resolve and conviction is the thing I hold dearest and is actually the only thing I care about in the political field.  As long as I don’t cause harm to others, no one should care who I have sex with or how, no one should be able to control what I think or read – as no one makes better choices for me than myself. This is the liberal creed, and I believe most people today agree with it, most political beliefs just claim different ways to achieve this. We all realize, though, that freedom can fail; one’s freedom may conflict with another, and most of us agree that some safeguards are needed for everyone to receive the most freedom. Some of us think freedom fails at more places (for example, some will argue that saying certain words hurts people or causes people to hurt other people, depriving them of their freedom) and as a result support more control over people and actions (like taking away someone’s freedom of speech). Others are more permissive and agree to give freedom more of the benefit of the doubt: they first see where freedom fails, and only then see where we should limit it. Today, most people associate the right with the former, as they’re more skeptical towards where freedom works and think a more organized society is better suited to give everyone the most of their freedom, while the left is associated with the latter.

Socialism is seen by many on the left today to be inspiring as a way to achieve better personal freedom and liberty.  Socialist ideas first began appearing around the 18th century in reaction to “liberal” thinkers of the French Revolution. Early socialist thinkers such as Henri de Saint-Simon argued for a controlled society to combat the destructive ideas of the revolutionary “Liberals”, but instead of an aristocratically ruled society he argued for a meritocratic rule. Before the Second World War, Socialism was adopted by the liberal-minded in countries such as England and Germany, who contended that a more organized economy will result in more liberty, with parties such as Labour suggesting reformist adaptation of Socialism, in contrast to the revolutionist adaptation that occurred in Russia.

There is something alluring about a Socialist economy: with so many people acting against each other as they please for no clear goal, how much must go to waste! How much more efficient and productive could we be if we organized the economy under one central plan for the benefit of all of us?

But I would like to refute the claim that Socialism leads to more personal liberty. Actually, I would even go further to suggest that Socialism in its very essence must lead to an authoritarian society.

An economy is always changing; it depends on many factors. It’s the combined preferences, needs and wants of millions of people and their ways of interaction. A planned economy must always look all around in order to receive these inputs and output appropriate measures. The problem is that there is no “right” plan to direct the economy; each field will probably see its own plan as the best – I’m sure the scientists would love to see the bulk of the money going toward scientific achievement, but how much should be given to the farmers, who argue that the bulk of the money should go to them, as they produce the food? Each member of the society has his own plan that is based on his own skills, needs and wants.

It’s clear no democratic institution could establish such a plan by voting, it would take years and by the time any choice is made the economy would crumble through lack of action – so they must outsource the economy to “committees” and “experts”. Like a military operation, leading an economy requires efficiency, quick action and quick decisions – privileges only available to someone who is not under the restrictions of democracy. Each person must have his plan overridden by the central planner. This is the reason every Communist and Socialist regime fell into authoritarian rule: a centrally planned economy is the enemy of liberty and freedom, and history has proven this again and again.

Of course I realize that today most people, even the ones on the further reaches of the left, do not want a Socialist republic or a Communist rule; all talk of economics today stays within the realms of a liberal economy. We are all capitalists: we all agree that where the market works, it should remain, because we realize that free enterprise is a necessity for our freedom and that the free market, where it works, is the only moral way for people to interact in their skills, abilities, time, needs and wants.

But some people are more skeptical of economic freedom, and thus are usually more easily persuaded into giving up this freedom to the controlled alternative: such features of planned economies like welfare, nationalization of companies or assets, etc. I find it curious that they seem to see fighting against privatization and the free market, and for welfare and regulations as the means in themselves. Shouldn’t we let freedom work? We should see how permissive we can get, how much we can let people run their own life – and then see where and if it fails and how can we fix it in the least disruptive way.

Regulations, welfare, nationalization and such are tools to be used where freedom fails, they are used when we must control people for what we assume is the benefit of all of us. This should be the very last resort, the extreme alternative – like taking someone’s freedom of speech.

I think we should always look for the option that involves more freedom and more liberty, and I always try to give freedom the benefit of the doubt as much as I can. Whenever I’m dealing with a problem – like Israel’s housing prices, so high that they resulted in mass demonstration across the country – I try and look for the way to fix it that involves the most freedom, only when I can’t find it I consider the alternatives.

I will leave with a plea: Please, try and give freedom the benefit of the doubt.