In part 1, I covered the criticism that capitalism is a
flawed system because it creates economic inequality within the society. But the analogy that the capitalist “tide
does not raise all boats equally” actually has two parts; one expressed and the
other implied. By not going beyond the
initial critique of capitalism, the opponent of the system is silently implying
that the alternative he is proposing will address this flaw. In this article, I will examine the past
performance of the alternative systems to determine if they can produce the
implied result of creating wealth for all.
To do this, we need to understand that all the alternative
economic systems that are being pursued have their roots in Marxism. This in itself does not make it good or
bad. It only means that we have about a
150 year track record to assess. To some
it may seem unfair to make a determination on the effectiveness of these
alternatives, much less compare them to a system that has had 700 years to develop,
but in those 150 years, the Marxist-based philosophies of communism, fascism,
Nazism, and socialism have left an indelible mark. Furthermore, that mark has been extraordinarily
consistent in the results that are produced.
Last century marked the high point of the experiment with
Marxism. By the early 1900s,
progressives around the world were aggressively promoting their versions of the
Marxist dream. Russia was their first
success and after the Revolution of 1917 full-blown communism was established. This was followed by success in Italy, which
established the fascist version in 1922.
The depression of the 1930s offered the critics of capitalism a crisis
to exploit and a chance to spread the Marxist philosophy to other countries. They successfully convinced the people of
many countries that capitalism was flawed and that their system was better by
being more scientific, more enlightened, more perfect. Although their greatest success was in
Germany, with its own version called Nazism, many other countries of the world
fell for the claims and embraced or adapted Marxist alternatives, including
France which adopted the milder socialism.
These Marxist-based, big government systems initially had some
extremely remarkable success. This was
especially true of Nazism, which created what was hailed as the “German
Miracle.” At the height of the
depression, Germany had almost 11 million unemployed; by 1938, unemployment was
almost nonexistent. Similar, though less
dramatic, results were being achieved in Communist Russia (renamed the Soviet
Union) and Fascist Italy. This brought
worldwide acclaim, especially from celebrities, academics, and media elites. Many, jumping onto the Marxist bandwagon, flocked
to view for themselves the new “workers’ paradise and utopias.” They eagerly claimed that man had created the
ideal economic system and that the antiquated, flawed, and cold-hearted
Capitalism was dead. The enthusiasm was
so widespread that even the stalwarts of free-market economics, Britain and the
Unites States, incorporated aspects of Marxism into their economies.
The fact is that the admirers of Mussolini, Stalin and
Hitler had been thoroughly duped. These
ruthless leaders understood that their admirers (or “useful idiots” as Lenin
would call them) would see only what they wanted to see. This voluntary
blindness meant that those praising these dictators refused to recognize that the
immense economic achievements of communism, fascism, and Nazism had more to do
with the tyrannical practices of the government than it did with their economic
systems. In Germany, for example, women
and Jews were excluded from employment and were replaced by male, non-Jewish
workers. Furthermore, since they were prevented
from working, women and Jews were excluded from the unemployment count. Soviet Russia’s success relied heavily on the
slave labor of its Gulag system, and Stalin’s collectivization and
industrialization programs resulted in the death of tens of millions of people. Although it did result in a better standard
of living for those who survived the “Great Terror,” that prosperity was paid
for with the blood of its victims.
Winston Churchill was one of the few who were not blinded by
the charade. From the very beginning, he
wailed against and warned of the dangers these systems posed to the world. He recognized what insiders, such as the
architect of the Nazi economic plan, Dr. Hjalmer Schacht, knew; that the Marxist
economies could not be sustained since they could not generate the required
wealth. Once all the current wealth had
been redistributed the society would begin to descend economically. The only way to stave off such an outcome was
to find new sources of wealth. This set
these three countries, plus fascist Japan, upon a course of imperialism and
exploitation that makes capitalist imperialism look benign. Within a decade, Marxist-based imperialism would
kill, enslave, exploit, and pillage more people than the British Empire ever
did in its almost 400 year history. By
the end of fascist Italy in 1944, Nazi Germany and fascist Japan in 1945, and
Soviet Russia in 1989 over 100 million individuals would lose their lives to
the wars, starvation, deprivation, and genocide these economic-political
philosophies caused.
With such a conclusion, one would think that Marxism would
be discredited and discarded forever.
But its supporters were quick to point out that the problem with
communism, fascism, and Nazism is that they took Marxism too far to the
extreme. What was needed was capitalism
mixed with the perfect amount of Marxism. This hybrid system, called socialism, would
use capitalism to create wealth and Marxism to distribute it. In other words, capitalism would create the
“tide” and Marxism would ensure that the tide “raised all the boats equally.” It was perfect since it incorporated the best
of both systems while eliminating their flaws.
After the deprivations of the Second World War, the
democracies of Western Europe were eager to restart their war-torn economies
and Socialism appeared to be the ideal system.
By the 1950s, every country in non-communist Europe, from Spain to
Sweden and Italy to Britain was socialist to one degree or another. Once again, the new system showed
promise. In quick time, the war savaged
economies rebounded and had growth rates on par with the United States. The prosperity of these countries was
considered proof of what could be accomplished with Socialism.
Unfortunately, once again, the system demonstrated that it was
not the panacea it promised to be. The
main flaw was that if the perfect combination of capitalism and Marxism could
be found it could not be maintained. One
of the by-products of socialism is that the people became dependent on the
government. As that dependency grows the
people feel more and more entitled to government services. This sense of entitlement results in people
placing more demands on the government.
In turn, the government feels compelled to meet the demands of its
citizens, and the perfect balance between capitalism and Marxism is lost. Additionally, the dependency on government
means that once the balance is lost it is almost impossible regain. (This last point is painfully evidenced by
the riots and civil disturbances that have recently rocked Britain, France,
Spain, Italy, Portugal, and, of course, Greece.)
Over time, this results in the decline of prosperity and
societal wealth. At a recent lecture
Nobel Laureate and economist Robert Lucas points out that, for the first 70
years of the 20th century, the economies of Western Europe grew at
nearly the same rate as the United States.
That changed in the 1970s when the negative effects of socialism started
to be felt. During that time, Socialist Europe’s
GDP per person dropped 30 percent, thus resulting in a 20 to 40 percent income
gap between it and the United States.
This coincides with what Daniel Hannan writes in his book, The New Road to Serfdom. In the book, he notes that Western
(Socialist-based) Europe’s share of the World’s GDP shrunk from 36 percent in
1969 to 26 percent in 2009 and is projected to be only 15 percent in 2020. During the same period, the United States
share had remained steady at around 26 percent. Additionally, in 1970 the
unemployment rate of Western Europe was just above 2 percent while in the
United States it was about 5 percent. By
the end of the decade the rates flipped and, for the rest of the century,
Europe’s unemployment rate ranged from 2 to 3 percent higher than that of the
United States. Today, several of the socialist economies of Europe are on the
verge of total economic collapse. Any
attempt dial back the Marxist component of their economies is met with resistance
by their government-dependent populations. This opposition is often expressed with
violent protests, civil disturbances and rioting that threatens to undermine
the society as a whole.
History shows us that the claims of the critics of capitalism
are valid. That capitalism does not benefit
all members of its society equally. But there
is nothing in history that indicates that their Marxist alternatives offer
anything better. The 20th
century experiment with Marxism ended as a complete and catastrophic failure. The death, destruction, and deprivation it
created resulted in the century being the most bloody and brutal in the history
of man. Even the socialist hybrid, by slow
draining of wealth, has proved itself more of a bane than a boon for the
societies that embrace it. So, while the
“tide” from the sea of wealth that capitalism creates does not “raise all boats
equally,” it does raise all boats.
Whereas, the alternatives, rather than being oceans of wealth, create
landlocked seas that, once drained, leave all boats stuck in the mire and muck.