From Lenin to Lehman — the big lies
Those who want to save capitalism should note echoes of the Russian Revolution
The Global Financial Crisis was not a failure of Capitalism — it was caused by Democrat interference with the Free Market demand and supply signals that make a decentralised marketplace always out-perform any central planning system. Remember Fanny Mae and Freddy Mac? Both were set up by the US Congress to loan money to people who couldn’t afford to pay it back: this was called the “Sub-Prime Lending Market” in a fine example of understatement.
“Fannie Mae and Freddie Mac had a positive influence on the mortgage market by increasing home ownership rates in the United States; however, as history has proved, allowing Fannie Mae and Freddie Mac to function as implied government-backed monopolies had major repercussions that far outweighed the benefits these organizations provided.”
One thing was clear: Fannie Mae and Freddie Mac were given a government-sponsored monopoly on a large part of the U.S. secondary mortgage market. It is this monopoly, combined with the government’s implicit guarantee to keep these firms afloat, that would later contribute to the mortgage market’s collapse. When the Global Financial Crisis hit, it was the collapse of the Subprime market mandated by Congress that caused it. What this proves is not the weakness of the free market, but the dangers of sending counterfeit signals to that market, and why the Government should interfere as little as possible in the market.
“Communism failed because it committed two types of lies. The first was to betray the dream that had originally attracted so many millions to it: a society of equality, solidarity and self-realisation through collective purpose. Belief in this dream lived on longer than could be justified even in communism’s heartland — and longer still in the west. It was eventually ground down by reality.
The second lie was an economic system based on deceit and self-delusion. It is mostly forgotten, but a real debate raged for a good part of the 20th century over whether central planning or decentralised markets would secure the most efficient allocation of resources. The case for state control of the means of production was that only planning could overcome the clear waste of resources involved in capitalism’s mass unemployment and recurrent demand deficiencies causing recessions.”
Close but no cigar: “the dream that had originally attracted so many millions to it: a society of equality, solidarity and self-realisation through collective purpose” was the big lie. Only fools think that people will willingly donate all their possessions to the common good, and then work for nothing, again for the common good. It wasn’t a dream, it was just rhetoric to assist in creating the revolution that would initiate a Socialist Dictatorship. No Socialist State ever cares about equality, solidarity and self-realisation, whatever those are; all they care about is gaining power and retaining it. Who decides what the common good and collective purpose are? The Party, not the people.
Your other point is correct: Central Planning does not and cannot work. “Friedrich von Hayek’s insight that flexible market prices contain more information than any planning mechanism can hope to gather centrally; and that dispersed decision-making therefore acts more efficiently than state authorities can do.” Even with the fastest computer systems in the world, this remains true.
So there are three big lies in Socialism:
- The dictatorship is justified to protect the Revolution: the truth is that the Revolution was carried out entirely to install the Dictatorship. The purpose of taking power is Power itself.
- Central Planning will solve the waste of Capitalism. That’s never going to happen.
- Capitalism is broken, as proved by the GFC. Capitalism is the only system for generating new wealth, and left to itself will lift people out of poverty as it always has. The truth is that Socialism is a virus affecting every Democracy, and corrupting the Capitalist model by wealth redistribution and excessive taxation.
The Government should enforce ethical behaviour in Business, and otherwise leave the market as much as possible in the hands of private enterprise.