Capitalism or fascism? Which economic system will better resolve the supply shortages?

Image courtesy of Adobe Stock.

How do we get enough of the respirators, personal protective equipment, and medicine we need to get through the COVID-19 pandemic?

Fascinating to watch the press conference Saturday 3/21/20 with various federal officials and members of the coronavirus task force.  Most fascinating feature was looking at the various comments and questions/answers from an economics perspective. Thought about Friday’s briefing as well.

Here is the difference in perspective I perceived: do we rely on capitalism or fascism as our model to get things done?

Underlying the comments from all the federal officials is the idea that the private sector can figure out how to provide everything we need.

The common thread underlying a huge portion of the questions from media is the idea that the federal government should tell which specific companies how much of which specific products to produce, specify they price they will charge, and provide the addresses for where to send each pallet of supplies.

In other words, should we use a capitalist model to provide goods we need or should we use the fascist model?

As a thumbnail description, in the fascist economic model the means of production are owned by the private sector but the central planning authority tells companies how much of which product to produce. In contrast, the next step away from freedom is communism, in which the means of production are owned by the government and a central planning agency decides how much of each specific product to produce.

Capitalism?

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Didn’t ever expect I’d personally experience Soviet Union and Venezuelan style grocery stores.

Chaika 3 (on redscale film) – Queue by Jaroslav A. Polak is in the public domain (CC0 1.0). Lines like this outside a grocery store were normative in the Soviet Union.

In the Soviet Union and Venezuela, grocery shopping involved/involves listening for rumors of which store got a shipment overnight, standing in line for hours, looking at lots of empty shelves, and going to the store daily to see if what you need might actually be on the shelf today.

If you have been awake the last seven days, you know that is what grocery shopping looks like in the U.S. today.

The difference between the Evil Empire and the worker’s paradise of Venezuela on one hand and the United States on the other hand is that the supply chain in the U.S. is still stocking the shelves and in a week or two or three will have them filled up.

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The 2010’s: best decade in history.

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Matt Ridley explains the best improvement in living standards for us humans over a single decade is the decade that ends today, 12/31/19.

He explained his point from multiple directions on 12/21/19 in Spectator: We’ve just had the best decade in human history. Seriously.

A few of his points that caught my interest:

The rate of extreme poverty in the world has dropped from 60% when he was born to under 10% in this decade. If you ache to seek less people in dirt eating poverty that is a wonderful thing.

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Yet another consequence of central planning: systemic sexism

Empty store shelves. Image courtesy of Adobe Stock.

Central planning is one of the major features of socialism. A major consequence of central planning is shortages. The widespread shortages are even more severe in the purest variation of central planning: communism.

Chelsea Follett points out The Shocking Sexism of Central Planning in Human Progress back on 12/6/17. She reports on a book How We Survived Communism and Even Laughed which explains that central planners in the Soviet Union placed low priority on many products that women needed.

Oh, Frederick Engels considered housework unmanly, so the burden of no washing machine, dryers, or other time saving devices fell on women. Severe shortages of makeup, hair dye, and even sanitary napkins (yes, you read that right, basic hygiene was not a production priority in the worker’s paradise) made for a harsh life for women.

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Life in Europe before the Industrial Revolution was dirty and disease-ridden.

Back in the 1820s, the upper class in San Diego had nice furniture but still used chamber pots which had to be dumped in the morning, Photo by James Ulvog.

There is a myth that rural life in the medieval ages before the industrial revolution was, if not good, then at least okay. In fact life then was a battle for survival.

The romantic idea of a plentiful past is pure fantasy – Marian Tupy at CapX – 2/13/19

This series of posts by Marian Tupy was kicked off as a response to one writer who disagreed with the assertion that the portion of people living in abject poverty has declined radically starting about 200 years ago. That particular author gives away his worldview by using Marxist terms. Thus we know why he refuses to acknowledge the existence and cause of rapid increases in wealth over the last 200 years. What, oh what, could have possibly caused that change?

I won’t dive in the to the responses. I will however provide a few tidbits from this article for insight of the severity of poverty in the past.

Prior to the 19th century, most people wore clothes made of wool, which not only itched but was also hard to clean, which increased disease transmission.

Keep in mind that concept of germs did not exist and most people lived under the same roof with their livestock, both to prevent theft and for mutual warmth. The animal droppings were used for fertilizer. All of that shot mortality rates skyhigh.

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What could possibly have caused the increase of income per person over last 200 years?

(Article cross-posted from Outrun Change because a few of the factors necessary for these changes to happen are property rights, economic freedom, and political freedom. In addition, it is capitalism, not socialism or communism that made these changes happen.)

Here is an approximation of annual per capita GDP from 1 AD through 1913:

I’ve long been amazed at the radical growth in per capita wealth over the last 200 years. That means since the Industrial Revolution.

Living in dirt-eating poverty as the normal way of life for essentially every person on the planet changed about 200 years ago, give or take.

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Who picked up the bill for our freedom?

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For our freedom, I offer up a humble thank you to all who have gone before standing endless watch, slogging through the jungle mud, freezing in a foxhole, shooting Nazis with a machine gun at 30,000 feet, doing yet another round of dreary maintenance, brought home a life-long injury, or paying the ultimate price fighting to defeat the Confederacy.

Because of millions who did what had to be done, I can say what I wish without fear of being thrown in jail.

It seems so insufficient, but I’ll say it anyway – – Thanks.

 

“It is the soldier, not the reporter,

who has given us freedom of the press.

 

It is the soldier, not the poet,

who has given us freedom of speech.

 

It is the soldier, not the campus organizer,

who has given us the freedom to demonstrate.

 

It is the soldier, who salutes the flag, who serves beneath the flag and whose coffin is draped by the flag,

who allows the protester to burn the flag.”

Jeremiah A. Denton Jr.

 

Default watch on Venezuelan bonds

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Venezuela is in danger of defaulting on bond payments in the next few weeks.

10/17/17 – Miami Herald – Maduro faces financial nightmare in Venezuela – just in time for Halloween – The government has bond payments of $1B due on 10/27 and $1.2B due on 11/2.  Total due in next six weeks, which would be the end of November, is a total of $3.53B. Both S&P and Fitch are rating Venezuela as having a high probability to default within 6 months.

Here some more of the detailed numbers:

10/20/17 – CNBC – Venezuela is blowing debt payments ahead of a huge, make-or-break bill – Here is a schedule of upcoming required bond payments:

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Venezuela continues to collapse

Oil platform in Venezuela. A view of what used to be and could have been now. Image courtesy of Adobe Stock.

The bad news from Venezuela just doesn’t stop:

  • Protests have stopped because of lost hope
  • Professionals become prostitutes just to get enough food to keep the family life
  • Elections for state governors finally to be held on Sunday
  • Former executive of Brazilian construction company admits to paying $35 million to Venezuelan president’s election campaign
  • Guess on inflation rate for 2018 is over 2,300%

(Cross post from Outrun Change.)

8/31/17 – Wall Street Journal – “Hope Is Gone” as Venezuelan Protesters Vanish From Streets – The protests have faded away. The ongoing massive arrests, torture of detainees, widespread human-rights abuses, and frequent shootings seem to have broken the protest movement. A number of senior leaders of the opposition have fled the country in fear for their life. Reports indicate 125 people have been killed and somewhere around 2000 have been wounded, with many of those people with permanent injuries.

One outside observer, who is safe because he is an American living in the United States, observers the president has gained effective control of the entire government. I think if we look at the typical definitions that makes him a dictator.

In the meantime the oppressed people of the country continue to scramble for food, trying to find enough so they don’t starve to death.

9/22/17 – Miami Herald – In Venezuela, they were teachers and doctors. To buy food, they became prostitutes. – A large portion of the prostitutes in Columbia are women who escaped Venezuela. Before transitioning to the world’s oldest profession, many of them were teachers, doctors, professional women. One brothel even has a petroleum engineer.

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Venezuela continues to spiral downward

Venezuelan flag. Image courtesy of Adobe Stock.

News out of Venezuela keeps getting worse.

8/18/17 – Wall Street Journal – Venezuela’s Former Attorney General Flees to Columbia – The constituent assembly removed the Attorney General earlier in the month and last week took over all legislative powers from the Congress. When the government leveled corruption accusations against the now-deposed Attorney General, she and her husband fled for their lives to Columbia.

As an indicator of why she had to get-outta’-Dodge is that the secret police raided her home last week and the government has now banned 60 other prosecutors from leaving the country.

8/26/17 – Hot air – Girls As Young As 12 Turned To Prostitution To Survive Venezuela’s Socialist Nightmare(more…)

Venezuela continues moving toward dictatorship

Shipwreck standing on the beach with the sea in the background. Margarita Island. Venezuela. Photo courtesy of DollarPhotoClub.com

What little that remained of democracy in Venezuela continues to crumble.

8/4/17 –France 24 – Venezuela’s currency crumbles at dizzying speed – The value of the bolivar is shrinking fast.

On Thursday the bolivar dropped to 17,000 to 1 U.S. dollar.

The official exchange rate is 2,870:1.

The reporter interviewed an executive in a reinsurance business. That would be a professional level position. His salary is 800,000 bolivars a month. A year ago that was worth $200 and now it is worth $47.

Two pounds of rice costs 17,000 bolivars.

8/5/17 – Wall Street Journal – Venezuela’s New Assembly Fires Attorney General – Well, the slow-motion coup continues to roll forward.

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Elections in Venezuela

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An unofficial plebiscite was held to oppose the end of democracy. The vote for a constitutional convention to re-write overthrow the current constitution has been held, with uncertainty as to the actual turnout.

7/15/17 – Reuters – Venezuela opposition hold unofficial plebiscite to defy Maduro – The opposition holds an unofficial vote on 7/16 as a protest against the upcoming official vote which many consider to be the last votes ever in Venezuela as a new constitution will essentially put the legislature under the thumb of the president.

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Continuing devastation in Venezuela – #29

What economic system produces this result? Image courtesy of Adobe Stock.

The political and economic conditions in Venezuela continue to deteriorate.

7/3/17 – Bloomberg – Venezuela’s Poor Rebel, Roiling Maduro’s Socialist Strongholds The power base for the leaders of the socialist country is poor people.

From previous reading I’ve done, massive subsidies to the poor successfully bought their allegiance. The collapse of services including water outages, random outages of electricity, and empty store shelves are rapidly undermining support from the poor. Protests has spread to many of the poor communities in Caracas. There have been nightly protests in a number of communities for several weeks.

7/5/17 – Wall Street Journal – Maduro Supporters Storm Venezuela’s Congress(more…)

While on a long road trip, what economic system provided the goods and services I needed, when and where I wanted them?

How is it that services are available on the interstate highway system when and where I need them? Image courtesy of Adobe Stock.

I took a road trip from the Los Angeles area to Williston last week. My wife and I drove there with our son and his family.

A few questions came to mind on the trip

Questions

1. What economic system provides a gas station within a few miles of the point that we decided we wanted to fill up the tank?

With four drivers in the car,  we were planning to drive on through the night. We were too tired to do that so we decided to stop for the night.

2. What economic system provides multiple hotels and motels half an hour down the road from where we changed our mind?

3. Furthermore, when we wanted to stop, what economic system provided motels at multiple price points so we could pick the one that fit our price range and taste?

4. Why is it that the motel we choose included a full breakfast for all of us in the price?

5. Why did the motel even have two upgraded lamps on the night stands each with 2 USB charging points and two electrical outlets on the base of each lamp?

Answers

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Happy Birthday America!

Silhouette of charging Union soldier. “Happy Birthday America” by Steve Corey is licensed under CC BY-ND 2.0

Two hundred forty-one years ago today marked the start of this wonderful, fantastic, heaven-blessed, messy, delightful, powerful, flawed, and glorious experiment called the United States of America which has delivered unimaginable levels of freedom to hundreds of millions of people here in the US of A and contributed massively to the freedom of hundreds and hundreds of millions more around the world.

Happy birthday America!

If you want a really short description of this day, consider a photo of a sign on a store’s door I saw while browsing the ‘net:

Closed on July 4

in observance of

Brexit 1776

If you are looking for a brief description of the string of events which led to signing the Declaration of Independence and the follow-on events leading to full independence, (more…)