Theory and Practice are two things many intelligent people seem to have a hard time understanding, which is quite remarkable; they’re highly intellectual with Mathematics, Chemistry, Biology, Physics and various other subjects, but as soon as it comes to something basic that is common sense, they lack understanding. As a friend kindly put it “Intelligence is not necessarily a recipe for wisdom.” This is sadly the truth, there are a lot of intelligent people out there who lack wisdom; simply meaning they lack the knowledge, experience which when it comes to economics they prove this by placing their theories above what the real world of economics has proven.
The history of economics has been crystal clear, one only needs to look at the wealthiest and freest countries in the world, who coincidentally also have the highest levels of equality compared to the repressed, impoverished countries of the world. The stark contrasting difference between Hong Kong to that of Venezuela is a prime example of this; Hong Kong with no natural resources and no national minimum wage thrived and prospered under a Capitalist free market economy, closed the wealth gap between the rich and poor between 1961 to 1997, yet despite the clear evidence, Socialist apologists seem immune to the stark contrasting difference and evidence to that of a country like Venezuela. If there’s one thing I have noticed since I started studying the historical and economic basics, the reason they deny such evidence is because their heart rules their head, meaning their feelings prevent them from such rational thought.
Red Scare TV is a prime example of this, he’s a wee boy with such a dream where he talks about the ‘IDEA’ of Communism, but that’s just it, “the IDEA!” It’s all well speaking about the idea of Communism, but the question is, how does that turn out when put into practice? It is for this reason so many people, even many intelligent people have a hard time understanding that you can define Socialism and Communism by theory as much as you want, but you CANNOT place theory above practice. It’s a bit like if I wrote a book called ‘The Theories of How Pigs Can Fly’, just because I write a book on such theories, doesn’t mean to say it will turn out the same when I put that into practice and this is because the laws of gravity will defy me. Anyone with common sense who understands something as simple as that can understand why practice must come first before theory.
The same thing applies to economics and politics, these people fail to understand that just because Socialism is defined by community ownership of the means of production, doesn’t mean to say that it turns out that way in the REAL world, yet the common response you will get from Socialist apologists is: “but that wasn’t real Socialism, Socialism is…” and from there they go onto define Socialism as workers control over the means of production, despite this having never existed; we’ve seen the Soviet Union, North Korea, Cambodia, Cuba, Venezuela, Bolivia, Greece, Cyprus, Italy, Spain, the European Union and countless other examples like China, India, the African continent; you get the point. Idealist Socialists, who are Socialist apologists tend to live in this dream world and they have a difficult time understanding that you cannot place the definition of Socialism theoretically above the definition of Socialism the world has seen.
I have pointed out several times already the definitions of Socialism, here is a prime example of what I’m talking about, first a definition that relates to their theoretical meaning of the word Socialism:
So as we can see from this first definition, it does mention of course ‘owned or regulated by the community as a whole.’ We understand that this is what Socialism is defined by theoretically, but we must look deeper to understand that, sure, it looks great on paper, but is that the Socialism the world has seen plastered all over history? No. So what about this definition:
Socialism: a way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies
- a system or condition of society in which the means of production are owned and controlled by the state
Anyone with common sense can see that both the previous definition I gave you from the theoretical meaning of Socialism to this definition come from two different dictionaries; so how can you tell which one to trust? Simple, which Socialism have you seen the world over in the REAL world? You see, it’s all well speaking about community ownership of production, but when put into practice Socialism time, and time again has proven otherwise.
The argument between whether an economy should be PLANNED or UNPLANNED dates way back even to the period of Ancient Greece, to the likes of Plato and Aristotle; one argued that things are best left for people to decide their own fate in life, strong supporter of Individualism to that of the other defending the PLANNED economy, where the view was to organise society; this has been the argument for centuries; the argument for an UNPLANNED economy was in defence of what was once known as Meritocracy which later in history was to be coined ‘Capitalism’, and the PLANNED economy referring to Collectivism would soon become ‘Socialism’.
What defines Socialism therefore is ‘THE PLAN’ and in order to achieve ‘THE PLAN’ it requires ‘THE PLANNERS’. So who are THE PLANNERS? They are the very people who conduct, organise, manage and govern society, in other words, the government. The goal of Socialism is to achieve THE PLAN, but this is what Socialists fail to understand, they can’t grasp the fact that when THE PLAN is put into practice, it fails miserably, why? Well since CENTRAL PLANNING is a big part of what defines Socialism, this alone the government finds impossible to achieve, why? Because there is no way a government could possibly know the needs and wants of every single human being in such a complex society. Suppose the government was to plan for the 70 million people living in Great Britain, you have to take into consideration that EVERY human being all have different needs and wants, and their needs and wants would have to be met with not one or two products, but a whole VARIETY of products!
There is an information overload, you think of how many products there are out there on the market through EVERY single store you can possibly think of; add up all the produce, even clothes, brands, designs, there’s BILLIONS out there; how can you then expect a government to plan out production for every living human being of the 70 million population where EVERY individual all have different tastes, needs and wants? You can’t, any politician who says they can are lying to you! It is mission impossible. However that is NOT the major issue as to why CENTRAL PLANNING fails; the biggest issue is actually to do with the Economic Calculation Debate, what do I mean by this?
Under Socialism you have PRICE CONTROLS where THE PLANNER tries to dictate prices in the market by setting PRICE FLOORS and PRICE CEILINGS, the problem with that is, once you start manipulating the price mechanism above or below the market value (referring to the consumers value), you destroy the valuable information prices give to the market to indicate many things such as:
- what consumers want.
- what consumers don’t want.
- what resources are scarce.
- what there is an abundance of.
- what to stop producing.
- what to produce more of.
- where to stop putting resources.
- where to put resources.
- what to stop investing in.
- where to invest in.
As I explained in my blog on Prices, prices aren’t a barrier to getting what you want, they are signals in the market that give important information on PROFITS and LOSSES. Once you destroy the important information on profits and losses, you can no longer efficiently provide for the market (consumers). A prime example; if a business mass produces certain produce and let’s say the products aren’t selling, the information from supply and demand incentivises the company to lower their costs to try and sell off what consumers are not buying; also it tells the producer “Okay, we’re not selling this, so we’re not going to produce more of this product, it would be a waste of our own money producing and the consumers don’t want it.”
THAT! is what losses tell the market; losses may also tell the market what to stop investing in and where to stop putting valuable resources. Remember, resources are scarce and with scarce resources on the planet, if you destroy the information of profits and losses, you no longer have the available information to tell you where to stop putting resources.
This is why the Soviet Union ended up mass producing pelts, even shoes that consumers did not want and because of PRICE FIXING, the cost of the pelts stayed high, not only causing massive losses but a vast waste of valuable scarce resources. When you misallocate resources in this manner, you have to remember, those scarce resources could have went to other areas in the economy where there is demand, thus bettering peoples living standards.
So you have a brief idea of the problem with Socialism and CENTRAL PLANNING, let’s not forget that you can’t FIX pricing because produce isn’t a fixed value, consumers tastes change all the time, just because consumers want something now, doesn’t mean to say they’ll want the same thing six months from now and how do we know how much to produce for something planned six months on from now? How do we know how many people will show up at the event a year from now?
So we move back to the point, that just because it says on paper that it is workers control over production, doesn’t mean to say it turns out that way in practice. In every given attempt we see the disasters of CENTRAL PLANNING by the likes of Venezuela, Greece, France, China and countless other examples, the strong difference is, something on paper may seem nice, may look nice, it may sound good, but that does NOT mean to say it turns out that way in practice and if there is something that defies the theory of his Communism is the fact that he protests for a ‘moneyless’ society and what is the problem with that? Look around you to the number of people demanding higher paid wages, BANG! there you have it folks, the REAL world destroys their fantasies.