Only a Moron Would Allow Economists to Make Decisions for Him

So, this week, we give thanks to morons. We’re referring to the dumbbells who took part in the largest and longest and most complete test in economic history. Two generations and 20 million of them. The poor lumpen of Mitteldeutschland proved that capitalism – even with heavy state interference – delivers the goods better than a planned economy.

Readers may know Mikhail Gorbachev as a fellow who advertises Louis Vuitton luggage. But before he made it big as a mannequin, he was the top man in the Soviet Union. It was not an easy job. The empire was falling apart. So, in a rare act for a public official, Gorbachev told the Soviet people the truth: “We can’t go on like this,” he said in 1986. Three years later, on November 9th, 1989, the test was over.

What they were going on with was a system of compulsory economics – in which bureaucrats made the key decisions. They decided how much capital to allocate to what sector…how many people to employ…how much to charge for the output, and so forth. Of course, in order to make these decisions, Soviet economists had already discovered that they needed to make a lot of other decisions too – such as where people would live, how much they would earn, what they would do, and which of them would be starved to death. So, it was a very controlled experiment. Conditions were so miserable in the East that the government needed a vast network of spies and gulags to keep the malcontents from ruining the test. Still, 5,000 people fled to the West. 136 were killed trying to get over the wall that separated West Berlin from the East.

The results were obvious even before the test began. Ordinary people, looking out for themselves, always make better decisions than economists working for the government. Taxi drivers are better at getting people from place to place. Automobile manufacturers are better at making cars. Bakers bake better bread. Consumers buy what they really want. And capitalists make better investments. But just because a thing is absurd doesn’t mean it is unpopular. There are people who get upset when they discover that there is H2O in their drinking water. There are also people who want aparatchiks to make their decisions for them. And recently, there are more of them. Many Germans in the East long for good old days when things were under control. They call it ‘ostalgie.’

After a bit of food and a roof over his head, a man becomes more concerned with status than with survival. It is not how rich he is that matters; it’s how rich he is compared to those around him. Status brings reproductive advantages, say the socio-biologists. But it brings disappointments too. And envy. So wicked and destructive is the urge to envy that the Catholic Church banned it as a cardinal sin. Societies suppress envy in a variety of ways. Some tax the rich. Some force everyone to wear the same dreary clothes. Most level the population by sticking everyone into the same education, retirement and healthcare systems.

Capitalism doesn’t make anyone rich. It only allows people to compete for wealth on more or less equal terms. Naturally, some are better at it than others. Most people prefer alcohol, television or jobs on Wall Street to the rough and tumble of real enterprise. And almost everyone is prey to bubble delusions, hoping to get something for nothing from the latest fad investment. And then, when capitalism corrects their mistakes, they turn ostalgic, longing for the state to intervene and rig the game in their favor.

“After the wall fell: capitalism is a disappointment” says a headline in yesterday’s Montevideo paper, La Republic. A poll showed that of people asked in 27 countries only 11% thought capitalism was working properly now. We’re surprised that anyone thought so. With so much finagling by the feds, it’s a wonder that it works at all.

But even among the complainers, few suggest a return to the policies that wrecked East Germany between 1949 and 1989. Instead, what they want is a kinder, gentler form of capitalism with the state as a benevolent partner. Full employment, with Audis. Guaranteed health and retirement benefits, with wifi and cappuccinos. Unlimited government bailouts, but without state bankruptcy.

Alas, the lumpen are worse at rigging the game than they are at playing it. The elites are better; that’s why they’re the elite. They use corrections the way a general uses a cease fire – to strengthen their positions. They connive with the government for more regulations to keep out competitors, bailouts to protect them from their mistakes, and handouts to enhance their status. That’s why, scarcely a year after they were all on the edge of insolvency, the world’s big financial firms are paying the biggest bonuses ever.

Does rigging the system like this make people better off? Many thanks to those teuton guinea pigs again! They conducted another test. After the wall came down, the Federal Republic in Bonn decided to intervene in the Eastern states in order to lift the ossies out of poverty and put them on a level playing field with the West. Beginning in 1991, the West transferred an amount equal to 4% of GDP each year to the East. Public works. Public health. Public education. Welfare! Handouts! Bailouts!

Unwittingly, which is the only way to do this sort of thing, they were merely adding to the test data. For next door was the Czech Republic, which also suffered under the Soviet boot, also engaged in absurd and counterproductive policies, and also flew the coop as soon as the Soviets dropped their guard. The Czechs had no rich relatives. They had no source of free money. They had no booming economy that they could join. No money. No port. Not even a language anyone else could speak.

Well, guess who won that race? The Czechs, of course. GDP growth rates in the Czech Republic pulled ahead of those in East Germany in the early ‘90s; since then, they’ve been pulling farther and farther ahead each year.

About Bill Bonner 144 Articles

Affiliation: Agora Financial

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.

Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning.

Visit: The Daily Reckoning

1 Comment on Only a Moron Would Allow Economists to Make Decisions for Him

  1. Ahh, Bill Bonner with yet another “yay racing” propagation. I hope you come over to the “good’n’right” side of the fence, pretty soon.

    Lets talk about capitalism for a moment, here, ok? Readers… you DO see the pyramid scheme symbol on the back of the USA one dollar bill, right? You DO see the widespread servitude infestation in capitalism, yes? And do you see the “pay up or lose your wellbeing” Chicago mob-like felony extortion… commonly happening within capitalism? Do you see the “join or starve” felony extortion done to the 18 year olds… by this ugly competer’s church called capitalism? Do you see how forcing competer’s religions onto 18 year olds… kills membership in the cooperator’s church (Christianity/socialism)? Do you see how AmWay (American Way) (New World Order) got “the exclusive” (legal tender) on the TYPE of survival coupons (money) accepted in supply depots (stores) and leverages 18 years olds into the organization via that felony activity? (It puts AmWay-coupon slaving requirements called price tags… on all the survival goods).

    Do you understand how farmyard pyramids work… from your childhood? Remember? Upper 1/3 are “heads in the clouds” while the kids on the bottom ALWAYS GET CRUSHED from having the weight of the world’s knees in their backs? Do you see anything illegal, immoral, or just plain sick… in pyramid scheme activities?

    Us American Christian socialists are still patiently awaiting the natural fall of the pyramid-o-servitude, or the busting of the free marketeers felony pyramid… by the USA Dept of Justice. Us Christians are VERY CLOSE to issuing a cease and desist order until the servitude and inequality goes away… which means it turns into a commune. Commune is a word we LOVE when used in the word “community”… but its one the caps HATE when used in the term “commune-ism”. Go fig. PROGRAMMED!!

    Economies cause rat-racing (to set-for-life land). Rat-racing causes pyramid schemes of inequality (do a Google IMAGE search for ‘pyramid of capitalist’). Pyramid schemes always get top-heavy, and soon can no longer be supported by the weight-of-the-world’s-knees-in-their-backs lower layers (labor). Why are we using a pyramid scheme for our survival/supply system? Lets use flat things instead… like the architecture heights in a military tribunal. Nice and flat. And how’s the flatness of civilian courts and churches? Pyramid. “Ordered”. Demented. Civilian courts and churches seem to be designed and built for use in a herd-control system, eh? hmmm.

    Time to level the felony pyramid scheme called capitalism. Abolish economies and ownershipism worldwide, and hurry. Use supply/luxury repositories and requisition forms instead, like the USA military and the USA public library (socialisms). Economies just cause rat-racing, and rat-racing causes felony pyramiding. BUST IT, America! Quit doing monetary discrimination immediately, and make it illegal. Make working FOR instead of WITH… illegal, as well. Servitude (slavery) was supposed to be illegal long ago.

    Larry “Wingnut” Wendlandt
    MaStars – Mothers Against Stuff That Ain’t Right
    (anti-capitalism-ists)
    Bessemer MI USA

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