empty-grocery-shelves

Written by Christophe Cieters.

Of course, nobody would deny that “it is true enough […] that a termination of the State’s current practice of providing public goods would imply some change in the existing social structure and the distribution of wealth. […] However, this fact cannot be accepted as a valid argument demonstrating the supposed failure of markets. If a man has been allowed to hit other people on the head and is now not permitted to continue with this practice, he is certainly hurt” in terms of not having the same amount of options as before, but no one would “accept that as a valid excuse for upholding the old (hitting) rules”. He is “harmed” by not being allowed to hit others any longer in the same way as some people would be harmed by substituting a collectivistic system in which every voter supposedly has “an equal right to determine in what respect other consumers are not allowed to buy voluntarily what they want with the means justly acquired by them and at their disposal” by a capitalist system in which nobody is morally allowed to initiate robbery and aggression against others, either individually or while hiding behind a State and the collective to do the dirty work for them. In spite of all the propaganda from the public goods theorists, “the greater efficiency of markets as compared with the State is increasingly realized with respect to more and more of the alleged public goods” (Hoppe, 1949b). This is evidenced a million times a day, wherever one looks, be it past or present.[1]

The invisible hand – the self-regulating and self-ordering nature of the marketplace – becomes visible to anybody who cares to look. In a free market, when a perceived product shortage occurs, the price of that product automatically – naturally – rises, creating a profit margin that in turn creates an incentive – a self-interested reason and motivation – for investors and entrepreneurs to enter production, eventually curing the shortage. When prices drop below a profit[2], producers drop out of the market; if there is a profit to be made, producers enter the market. When more producers enter the market, the increased competition among manufacturers and increased supply lowers the price of the product. If demand rises, prices rise along and so do the incentives for producers to alleviate the increased demand, and vice versa. This cycle never stops, it goes on continually, over and over through its own natural positive and negative feedback loops as provided by evolving consumer preferences and producer investments. There is no lasting price to anything: the market is a constant flux of supply and demand, hinging on humanity’s subjective valuations toward each existing good separately and combined.[3]

The concept of value and consequently of price in its natural creation of order within chaos is a wonderful thing, simple in its intricate complexity. It is Human Action (Mises, 1949) which forms prices on the market, according to the inherent principles of (human) nature: “it is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages” (Smith, 1767).[4]

Did John Pemberton selflessly found Coca Cola to provide for “the greater good”, or for his own self-interest? Yet undeniably, he “has made the consumer wealthier, because its products were cheaper and of far greater quality than those of its predecessors. The right to private property is the keystone. An entrepreneur will make an investment only if he believes there is a fair chance of reaping the rewards of his efforts. A loss in property rights will be met by a loss in entrepreneurship, because the incentive to invest is removed. Alternatively, full property rights will allow entrepreneurship to flourish to its furthest extent” (Catalan, 2010, emphasis added). But the way in which the market – the network of supply and demand – naturally fine-tunes itself without any need for intervention whatsoever is something which is for some beyond understanding in much the same way that many laymen and eminent scientists alike used to profess that it could only be possible for the sun to revolve around the earth.

Even so, they have no problem in tinkering with and forcefully intervening the economy. But meddling with the market is like throwing stones at a gymnast walking a high line: the natural balancing that occurs now gets distorted by external force and grace gets substituted by flailing arms in order to try and regain balance. Inevitably, as socialism has proven time and time again, at some point even the best gymnast will fall off the line if pushed hard enough, making it anyone’s guess as to when he will be back on top of it.

Focusing so intensely on theory – and only on theory, State-funded “economists too often take on the role of central planners. They identify the ‘right’ prices that companies should charge and the ‘right’ policies they should adopt, without considering why market incentives have not encouraged firms to take these measures on their own” (Lott, 2007, emphasis added). But “a government that sets out to abolish market prices is inevitably driven toward the abolition of private property; it has to recognize that there is no middle way between the system of private property in the means of production combined with free contract, and the system of common ownership of the means of production, or socialism. It is gradually forced toward compulsory production, universal obligation to labor, rationing of consumption, and, finally, official regulation of the whole of production and consumption” (von Mises, 1912). Attempts by the State to correct subjective market failure[5] unfailingly merely substitute it for objective “government failure” (Friedman, 1979).

It should be clear that the central point here is that incentives are what drive people. Incentives and their interactions and relative valuations are what the market is all about, and in trying to put counterfeit incentives in place of the naturally arising ones in order to go against the natural market equilibrium, all one can do is hope nobody gets killed, both figuratively and literally speaking.

But such perverse incentives are what States are best at. If there is a meaningful reward for some type of behaviour,[6] peo­ple will do it, even when they supposedly “should not” according to the paternalistic meddling of the coercive central planners who set out to unilaterally dictate and “improve” human behaviour.

Examples abound. A classic case, eerily reminiscent of the fictional novel Catch-22,[7] is the study of a specific type of fraud by air traffic controllers (Staten et al., 1982). “To receive disability benefits due to job-related stress, air traffic controllers must present a well-documented stressful incident – a collision or close call – that has caused a deterioration in their performance. Unsurprisingly, when it became easier to file for disability, flights suddenly started experiencing more ‘close calls’. And these were not cases that the air traffic con­trollers could simply make up; they were reported by a sophisticated performance evaluation called the Operation Error Severity Index” (Bailey et al., 2005) (Lott, 2007). In short, in “proving” their supposed disability, they were actually proving that they could create close calls and still not have accidents ensue, because they were not actually disabled at all.

In similar fashion, during 2009 the South African government started giving medical grants (1.000 South African Rand per month) – paid for with forcibly expropriated taxpayer money – to patients with tuberculosis when they came in for treatment. The result was a widespread scam and a vibrant trade in TB-infected saliva. “A 54-year-old [infected] man told a reporter that he makes an average of R500 per month from selling his saliva to people seeking to trick their way into the benefits system. But he said business was ‘not good’ because so many people were infected with TB in the township that he had a lot of competition” (Smith, 2009). Not only was the State wasting the monetary subsidies, in many cases they were wasting expensive taxpayer-paid medicine on uninfected “patients” on top of it. But the program kept a lot of bureaucrats employed, made for some nice headlines of politicians helping the sick and poor, and a captured voting audience that was bought and paid for with their own expropriated funds.

Speaking of which, it at first glance appears that in Sweden, the welfare State itself mysteriously causes people to get sick: “Swedes are among the healthiest people in the world according to the World Health Organization. And yet, 13% of working-age Swedes live on some type of disability benefit – the highest proportion on the globe.[8] To explain this, many Swedish policy makers, doctors and economists blame the welfare system. […] Sweden’s bloated sick bay, which includes roughly 744.000 people on extended leave, has caused soul-searching about whether the system coddles Swedes and encourages them to feel sick. […] During the 2002 month long World Cup soccer finals, short-term sick leave among Swedish men suspiciously rose by 55%. Earlier, police in Sweden’s capital city Stockholm investigated the local chapter of the Hell’s Angels biker gang for suspected benefit fraud, because 70% of the gang were on extended sickness benefits. The same doctor had certified them all as suffering from depression”. But the Swedes are not alone: “in Europe, roughly 20% of the working-age population – 60 million people – depend on various government benefits as their sole or main income, compared with 13% in the US. […] the welfare State has changed the region over the past generation. In place of the old work ethic, it seems that it has become acceptable to feel unable to work and to live on benefits” (Mitchell, 2007). This is of course not even counting those who indirectly have been taught to “depend” on these benefits.

In the above examples one can try and excuse policy makers for “at least having good intentions”, in spite of the disastrous actual results of their actions. But other cases present themselves as well.

In 2004, the Nigerian government offered amnesty to militant rebels. In order to diffuse the tensions, or so it was claimed, the federal and local governments used taxpayer money and foreign aid (which of course de facto also included coercively collected foreign taxpayer money) “to pay militants $2.800 for each surrendered weapon, regardless of quality or condition. At the time, a relatively new AK-47 cost about $350 [in Nigeria]. Selling your old weapon for enough cash to buy eight new ones makes good economic (and military) sense”, and that is exactly what people did. But “the pricing equation was no accident. Several local governors wanted to buy a little near-term peace and quiet in the run-up to the 2007 elections” on the backs of domestic and foreign taxpayers. “Once the votes were cast, some of these governors then cut deals with the most influential and cash-rich of the militant groups to use them for political purposes of their own” (Horner, 2009).[9]

As with anything, and prices in particular – whenever the State meddles with it, natural free market order is destroyed and artificially enforced chaos ensues. What permeates throughout the entirety of the socialist economic critique of the free market “is their failure to grasp the sovereignty of the consumers in the market economy. They see only hierarchical organization of the various enterprises and plans, and are at a loss to realize that the profit system forces business to serve the consumers. If any of the socialist chiefs had tried to earn his living by selling hot dogs, he would have learned something about the sovereignty of the consumers” (Mises, 1958).

It is clear that “central planning has its appeal. After all, it is hard for many people to comprehend how the seeming chaos of markets, with millions of separate decision makers,” and billions upon billions of freely interacting variables “can somehow translate into economic efficiency”. The key is that market mechanisms “allow firms to set prices that accurately reflect all their costs and their customers’ preferences. Analysts and politicians can study trends for years without being able to account for all the factors that go into a single price. Planning accurate prices is impossible, and when the State gets them wrong, the results are shortages [and] other harmful market distortions. Simply put, freedom ensures that people get what they want. […] Prices create incentives for people to meet the needs of others.[10] Despite all the various guises under which central planning has been attempted, it is no surprise that free economies work best” (Lott, 2007, emphasis added) and non-free economies fail miserably; the speed of their failure being dependent only on the extent of the restrictions and previous capital built up by the productive before they were wiped out, but inevitable in the long run (Heckelman, 2000). It is similarly clear that in a democracy, “those who provide little of the government’s income have more of a say – in the form of their combined votes – over how to spend State funds than those who provide most of the money. […] Those who actually pay for most government services are not the ones who determine how the money is spent” (Lott, 2007).[11] This enormous perverse incentive and moral hazard helps to explain why States as a general rule are as inefficient as they are (Kalt, 1981). Simply put: no matter how much reality is wished out of existence by laws and regulations that try to harness market forces, such legislation is as useful as it would be when declaring gravity to be illegal because it makes it hard for pigs to fly. At most, it can get some pigs killed when they are thrown off a cliff to “enjoy” their newly legislated powers.

The mechanics of nature do not care about (democratic) dictators or majority votes.

Keeping all of the above in mind, one would think that the entirety of recorded human history would suffice to settle any debate about the viability of socialism. Alas, even to this day it does not.[12]

A point in case in this regard is to be found in the agricultural reforms in Zimbabwe as implemented by (democratically elected and instated) President Robert Mugabe and his supporters. “In 2000, in an attempt to destroy the opposition which derived much support from the commercial farmers and their employees, the government began what it eventually called the Fast Track Land Reform” and started to negate landownership by expropriating private property farms and then “redistributing” them among “the people”. The land reform “ignored the prevailing legal situation with respect to farm ownership. […] The government changed the law every time a farmer or a group of farmers secured legal judgments in their favour. Eventually a group of Zimbabwean farmers took their case to the Southern African Development Community’s (SADC) Legal Tribunal in Windhoek, Namibia. In 2008, those farmers obtained a decision instructing the government of Zimbabwe to protect the farmers’ legal rights. The government, in spite of being a signatory to the treaty creating the SADC Legal Tribunal, ignored the ruling. […] The attitude of the members of the Zimbabwean regime toward the farm acquisitions was straightforward – they were taking the farms from their legitimate owners. No police protection was afforded to the farmers or their staff, and no interference with expropriation was permitted. In the majority of cases, force was used – [by the State police and] by groups of young, politically motivated thugs. Those thugs acted on behalf of the future ‘beneficiaries’ of farm expropriations – mostly members of President Mugabe’s ZANU-PF party. Once the owners and their senior staff had been evicted, the new ‘owners’ occupied the land and took advantage of the assets, including crops and livestock. […] Many farmers lost their lives as a result of these expropriations” (Cross, 2009, emphasis added).

The aftermath of this denial of private property and State-enforced thievery (which in this case at least had the decency to be carried out in the open, in plain view for all to see) had the only result it could have had – the same result it has had in the Soviet Union, Communist China and every other collectivist mirage before and since it: it destroyed everything it touched.

According to the Commercial Farmers Union (CFU), “the total output of the agricultural industry in Zimbabwe in 2000 was 4,3 million tons of agricultural products, worth, at today’s prices, some US$ 3,347 billion. This output has declined to just over 1,3 million tons of products in 2009, worth some US$ 1 billion – a decline of 69 percent in volume and a decline of 70 percent in value. […] In spite of those stunning figures, the farm invasions have continued […]. According to the CFU, even those farms that were granted legal protection by the SADC Tribunal were targeted – presumably as a punitive measure. […] It is clear that the land reform has been a costly failure. In 2008, according to CFU estimates, over 90 percent of all production from commercial farms came from the remaining large scale farmers – the same farmers who are now being targeted for the next round of expropriations. […] More than half of all the farms taken over by the State are now derelict and abandoned. Many of the individuals who are now ‘taking’ farms are doing so for the third or fourth time. The combined costs of the land reform are staggering – they include US$ 2,8 billion in international food aid on an emergency basis and nearly US$ 12 billion in lost agricultural production”, totalling some US$ 15 billion along the most cautious estimates (Cross, 2009).[13]

Moving away from Africa, we can see the same story unfolding in South American Venezuela where, since 2003, democratically elected President Hugo Chavez – in a superb demonstration of his immensely popular and much lauded “21st century socialism” – put a maximum price on milk, rice, wheat, meat, and other so-called “crucial products” like cement and toilet paper. The Venezuelan State, aside from the price restrictions, also imposed tailor-made regulations which forced “producers to devote at least 70% of their production to price-regulated products […]. This intervention was aimed at keeping companies from finding ways around the price controls, for example by switching to value-added variations of goods such as low-fat milk or flavoured rice, which were not covered by the controls. For example, for Venezuelan rice producers this means that 90% of their production must be price-controlled white rice” (Gallegos, 2009). Because of these price controls and accompanying regulations – which were applauded by most Venezuelans who were certain that they would not be the ones who had to pay the price for it; they would be the ones getting goods and services at cheaper prices – Chavez and his supporters seemed certain that Utopia was just around the corner.

The actual result, in line with every single historic example before it (Bartlett, 2010), was nothing less than massive food shortages and in many cases only the deplored black market – the manifestation of the invisible hand and the embodiment of the futility of regulating consumer demand – standing between Venezuelans and starvation (Morsbach, 2006).

The price regulations, in being set by the State, were detached from the objective reality of the market and left farmers without a profit, forcing many into bankruptcy. Instead of magically conjuring up food ex nihilo, the price controls dragged down the previously thriving Venezuelan agricultural sector, the basis of the Venezuelan non-oil economy. Food supplies dwindled and shortages became rampant to the point that “milk has all but vanished from shops. Distraught mothers ask how they are supposed to feed their infants, many cafés and restaurants serve only black coffee, […] eggs and sugar are a memory”. The State had to start using its short term nationalized oil dollars to actually import powdered milk from Russia and China because of the mysteriously crashed domestic agricultural sector (Carroll, 2007). Amidst rampant inflation brought on by all kinds of governments programs, the Venezuelan State tried to cure its poisoned economy by making it drink more of the same poison. It repeatedly and increasingly tightened its control over the Venezuelan food supply, which slid further down the drain (McDermott, 2009). Facing publicly stated threats of “nationalization” – following other branches of Venezuelan industry like the petrochemical sector – food and consumer goods companies halted or reduced their Venezuelan operations. Individual farmers who sold milk abroad or on the so-called black market (Sanchez, 2008) for real market prices were threatened with similar expropriation of their farms (AP, 2008).

By that time, identical situations were developing in the Venezuelan construction industry. Around April 2008, Chavez ordered the nationalization of the cement industry, in response to the fact that – as was happening with agriculture – the industry was exporting its products in order to receive realistic prices above those which it was allowed to obtain within the country. The State in other words created domestic shortages and pushed yet another Venezuelan industry to the verge of total collapse (AP, 2008A). On the 28th of February 2009, Chavez ordered the Venezuelan military to “temporarily seize control” of all the rice processing plants in the country in order to force them to produce at full capacity, which he himself alleged they had been avoiding in response to the price caps – which would have had them produce at a loss. He therefore saw a need (and thereby the supposed justification) of “the immediate intervention in all those sectors of agro-industry; intervention by the revolutionary government” (BBC News, 2009). Many Venezuelans still rabidly agreed and called for more blood to flow, not realizing they were holding the loaded gun of the State not only against their fellow human beings’ heads, but also against their own.

The farmers and workers in the rice plants were effectively enslaved to work at a loss under threat by the Venezuelan State and its army, a dubious honor which many refused by shutting down what little that remained of their production, adding to the woes of the populace. In bringing Chavez to power, those who voted for him brought it on themselves and got exactly what they deserved.[14] But the absurdity of democracy also brought it onto the many individuals who actively opposed such collectivistic State interference in the first place.

By September 2013, the chronic shortage of price-controlled toilet paper escalated. After the State had imported millions of rolls of toilet paper in the months before, paid for by nationalized industries, taxes and debt unilaterally taken out in the name of all citizens, Venezuelans still were not able to buy toilet paper in sufficient quantities through the official channels. No doubt the people of Venezuala took great comfort in the fact that official toilet paper prices remained very low, even though they could not find any in the shops. Blaming hoarders, black market traders, smugglers, speculators, and other such “traitors” for the shortages[15], President Nicolas Maduro, Chavez’s successor, announced that in order to rectify the situation, the Venezuelan National Guard had taken control of a large toilet paper plant. Army officers would now “monitor production and distribution” of the toilet paper it was to produce. The Minister of Trade, Alexander Fleming, assured world that “the factory occupation complied with Venezuelan law” (BBC News, 2013). I suppose my dear readers can figure it out for themselves how beneficial this endeavour has turned out to be for the people of Venezuela.[16]

As was tragically noted by a spokesman of a Venezuelan rice company, “forcing companies to produce rice at a loss will not resolve the situation, [it will] simply make it worse”; an observation which, in light of humanity’s entire history, would require nothing less than the kind of blind and economically ignorant dogmatism of the socialist variety to deny (McDermott, 2009).

As the people of Venezuela were getting more and more agitated, the State was keenly aware of how to best distribute the limited supplies in order to ensure the pacification of the population: “Venezuela’s national parade ground at the Fort Tiuna military base presents a scene that local civilians can only dream of – stalls laden with goods and no waiting lines. The market with everything from subsidized meat to baby strollers, along with loans, new cars and apartments, are perks provided to the armed forces as the economy contracts, poverty rises and President Nicolas Maduro’s popularity sinks to a record low. The benefits help ensure the loyalty of the military, while siphoning reserves away from the poor who have seen wage growth fall behind inflation […]. Military personnel don’t have to contend with the economic chaos in the rest of the country. The […] trucks and tents at the market in the military base […] were loaded with subsidized milk, cooking oil and detergents – goods that are out of stock in most shops. […] ‘These armed forces are Chavista,’ the commander of the military, General Vladimir Padrino, said […], referring to Chavez supporters. Maduro can ‘count on our loyalty’. As the military retains its loyalty, the benefits continue. The government has given out 2.821 apartments to soldiers and officers in the year through May, Planning Vice Minister Paul Grillet, a major general, said in a televised address that month.” (Bloomberg, 2014, emphasis added). As one would expect, Venezuela’s “21st Century Socialism” turned out to be remarkably similar to its 20th century predecessors indeed.

By January 2015, amidst pictures of empty shelves flooding social media, one unfortunate Venezuelan reported: “We couldn’t find shampoo, so we washed our hair with soap. Now there’s not even soap” (ZH, 2015). By February 2015, the condom shortage was “altering young people’s sex lives in Venezuela” (Hernández, 2015). “In a move that will no doubt help further the Venezuelan government’s aim of establishing a socialist utopian republic, […] grocery stores [began] the mandatory fingerprinting of customers. The peculiar initiative […] is meant to help combat the hoarding and smuggling of government-subsidized goods” (Connoly, 2014) (Gupta, 2014).

The longer it continues, the more likely a confrontation between the disarmed population[17] and the State with its paid off military becomes – the end game of every socialist cycle.

As these examples and various others show, a State that sets out to abolish market prices by controlling them “is inevitably driven toward the abolition of private property; it has to recognize that there is no middle way between the system of private property in the means of production combined with free contract, and the system of common ownership of the means of production, i.e. socialism. It is gradually forced toward compulsory production, universal obligation to labour, rationing of consumption, and, finally, official regulation of the whole of production and consumption” (Mises, 1912).

But let us turn our attention to the motivations of individual consumers, and along identical lines to the reputed nemesis of humanity – the speculator.[18] When we cut through the righteous indignation which is so eagerly doled out when discussing this subject, it becomes clear that in fact everybody is a speculator in one way or another, and people who object to speculation only do so if and when they are not the ones doing the speculating.[19]

But that does not mean that speculation by others does not benefit them anyway. “If a powerful hurricane is forecast to hit land in a week, and people expect that gas prices are going to rise after the storm hits, then the difference in the price today and the expected post-hurricane price creates the opportunity for consumers to save money today by filling up their tanks when gas is cheaper. Speculators do the same thing. They profit by buying gas when it is cheap and selling it for a higher price after the hurricane. What is more, by doing so, these speculators are performing a valuable economic service – they are removing gas from the market at a time when it is plentiful and adding it at a time of shortage later. Oil company executives reason the same way. By raising gas prices before a hurricane, they reduce the demand for gas and are left with a bigger supply, which they can sell after the hurricane for a higher price. The downside of this action, of course, is that everyone has to pay more for gas before a hurricane hits. But no one talks about the upside – after the hurricane, when gas supplies are severely reduced due to the damage to production and supply lines, oil companies are sitting on increased inventories resulting from the pre-hurricane price hike (Alchian, 1983). These inventories then hit the market right when they are most needed (Fremling, 1989, emphasis added).

In other words, by raising prices before the hurricane hits, oil com­panies keep the post-hurricane price hike much lower than it would otherwise be. If the damage from the storm is worse than anticipated, prices will continue to rise. But in the long term, the higher prices will help accelerate the affected area’s energy recovery. After a hurricane, gas prices rise because the supply shrinks, and prices will begin falling again once the supply improves. In other words, rising free market prices in the short term actually help reduce prices in the long term by increasing supply (Roberts, 1991). They do this in two ways. First, higher prices create a strong profit incentive: the more profit to be made in a given area, the harder and faster people will work to transport more gas or other goods and services over there. Secondly, temporarily high prices reduce demand. They encourage people to carpool, use public transport, and take other unusual steps. Indeed, this kind of economizing was seen [for example] as gas prices rose in the US shortly after the disastrous hurricane Katrina [in 2005] (McGeehan, 2005).

Temporarily higher prices assist energy recovery in other ways as well. The prospect of higher prices after a hurricane gives oil compa­nies an incentive to set aside more gas as a reserve for such a contingency even before a specific hurricane is forecasted. Storing gas is costly, and if we want gas companies to bear those costs,” we cannot blame them for making a profit just like they would on any other investment. The US oil industry “was no more monopolistic when gas prices rose just before Hurricane Katrina than it was two weeks earlier when prices were lower. Neither did the companies suddenly become greedier” and neither were they less so once gas prices went down again afterwards (Lott, 2007). They were simply reacting to the ever-present forces of supply and demand, and prices shifted upwards and downwards accordingly, naturally, without intervention and due to its very nature in the most efficient and effective way humanly possible.

Still, there is more to it. Instead of maximum prices, State officials all too often abuse their supposed authority to forcefully impose minimum prices as well. In modern Western contexts, the best known – and most dangerously misunderstood – case of a minimum price concerns wages.[20] The controversy surrounding them usually only increases when thinking about global competition with emerging economic regions like Brazil, Russia, India and China. Western anti-globalists, protectionists and other types of socialists often claim that competition for jobs with workers in Eastern Europe, India or China is something that is altogether irrelevant and can be legislated away. They simply say: “we do not want to compete with them, we want to keep our labour laws and Welfare State systems as they are”, with the coinciding conviction that that will suffice – like a child that puts its hands over its eyes and thinks that, instead of merely blinding itself, it thereby makes the entire world disappear.

This train of thought more often than not ends up with the claims that companies should be forbidden by the State from moving their production plants away, or that tariffs, import quotas, subsidies and various other forms of trade barriers should be enforced to “protect” Western workers. It is sometimes argued that Western wages should not “compete” – i.e. start to be set by the market instead of by the State – but wages in other regions around the world should be controlled through enforced State intervention as well, in order to stop non-Westerners from “stealing” Western jobs.[21]

But low wage workers are following a natural principle of free market competition. Who is stealing whose job exactly when State force gets involved in the equation and keeps vast numbers of people in low wage countries unemployed through artificial nationalistic (or regionalistic) measures? Is company A stealing from company B by offering their service to consumers to build the same house at a lower price than company B?[22] By contrast, is worker A stealing from worker B by offering consumers the same service at a lower price? And in what way does being offered the exact same product at lower costs harm consumers? How can a Chinese person steal a European or American job?[23]

Footnotes

[1] Especially in cases like the 2007 and following financial crises, the power of the market and the unavoidable failure of ignorantly wishing away the consequences of socialist policies and State interventionism through “bail outs” and monetization of debt and debasement of currencies becomes all the more apparent. Tragically, yet insidiously, this is passed off as a failure of capitalism.

[2] Note that a profit is seen in light of more than revenue minus direct costs. Opportunity costs and subjective valuations play an equally important role.

[3] See the example of the water bottle earlier.

[4] See “will to power” in earlier Chapters.

[5] Objective market failure is simply a contradiction. Even when an economy crashes, the market does not “fail” in any objective sense: it is still constantly updating itself and doing its work. As with beauty, failure in this regard is in the eye of the beholder and entirely subjective.

[6] Such a reward might also consist of avoiding a certain cost.

[7] “There was only one catch and that was Catch-22, which specified that a concern for one’s safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he did not, but if he was sane he had to fly them. If he flew them he was crazy and didn’t have to; but if he did not want to he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle” (Heller, 1961).

[8] For more on this, also see (Bergstrom, 2010).

[9] In any such conflict or war, the blood of the resulting casualties is ultimately on the hands of those who funded the States that participated in them – i.e. the (foreign) taxpayers.

[10] Private property of the material factors of production “is not a restriction of the freedom of all other people to choose what suits them best. It is, on the contrary, the means that assigns to the common man, in his capacity as a buyer, supremacy in all economic affairs. It is the means to stimulate a nation’s most enterprising men to exert themselves to the best of their abilities in the service of all of the people, on a voluntary and completely rational, non-emotional and non-conflicting basis of self-interest” (von Mises, 1958).

[11] For example, in the US, “the share of the tax burden borne by the top 1% now exceeds the share paid by the bottom 95% of taxpayers combined” (Hodge, 2009). See also (PA, 2008).

[12] More on this in the final Chapter of this book.

[13] For a follow up on how this ended up in a truly spectacular hyperinflation-fuelled economic bust for Zimbabwe, see (Hanke, 2009).

[14] As the saying goes, be careful what you wish for.

[15] For example, in a 2014 TV interview, Maduro publicly blamed Venezuela’s “scarcities and soaring inflation on an ‘economic war’ waged by business owners, shopkeepers and others allegedly trying to undermine Venezuela’s socialist government by hoarding, price-gouging and sneaking goods across the border for sale in Colombia. ‘These right-wing contraband groups are still at work, with their anti-national and parasitic spirit, riding on the backs of the people and sucking their blood’, Maduro said” (Miroff, 2014).

[16] One can only guess whether President Maduro has ever found himself to be out of toilet paper. Think of the many hours he must have spent waiting in line in front of the shops with his fellow citizens. Imagine how much better that time could have been spent in legislating the economy back on track. Alas, alas!

[17] Disarming the populace and arming the State is often a prelude for things to come. In revolutionary Russia for example, “in October 1918, the Council of People’s Commissars (the government) ordered the surrender of all firearms, ammunition, and sabres. As has been the case in almost every nation where firearms registration has been introduced, registration proved a prelude to confiscation. Exempt from the confiscation order, however, were members of the Communist Party” (Simkin et al., 1994, emphasis added). Countless other examples abound in the other former Soviet Republics as well: “‘indeed, the best testimony to the power of an armed populace is the vigor with which the Warsaw Pact dictatorships enforced gun control. When the Communists took over Bulgaria on September 9, 1944, they immediately confiscated every weapon in private possession. In East Germany, private gun ownership was outlawed, although citizens were allowed to rent hunting guns for one-day periods. Immediately after World War II, Hungary was governed by a coalition of democrats and Communists. Preparing the way for a total Communist takeover Laszlo Rajk, the Communist Minister of the Interior, ordered the dissolution of all pistol and hunting clubs, as well as of other organizations which might prove a threat to government power. Rajk claimed he acted ‘in order to more efficiently protect the democratic system of the state’. Poland, on the other hand, did allow limited ownership of registered target guns with a license from the so-called ‘Citizen’s Militia’. In December 1981, Poland’s dictator, General Jaruzelski, decided that Solidarnosc had gone too far. He declared martial law, arrested all the pro-democracy leaders he could find, and ordered all firearms and ammunition be turned over to the government. Nowhere was gun control fiercer than in Rumania. The dictatorship of Nicolai Ceausescu used registration lists to confiscate all firearms in private hands” (Kopel, 1990). On November 11, 1938, the Regulations Against Jews’ Possession of Weapons banned Jews from owning any form of weapons including truncheons, knives, or firearms and ammunition (Halbrook, 2000). In 2012, amidst growing tension over the chronic shortages, the Venezuelan stated moved to disarm the population by banning private gun ownership while granting ever more funds and privileges to the military (BBC News, 2012).

[18] A speculator is “a person who trades (i.e. derivatives, commodities, bonds, equities or currencies) with a higher-than-average risk, in return for a higher-than-average profit potential. Speculators take large risks, especially with respect to anticipating future price movements, in the hopes of making large gains”. This definition was provided by Investopedia.com and will suffice for this discussion.

[19] “The epithet ‘profiteer’ is the expression of an arbitrary judgment of value. There is no other standard available for the distinction between profiteering and earning fair profits than that provided by the censor’s personal envy and resentment” (von Mises, 1952).

[20] “Wages represent the discounted productivity of labour in satisfying consumer demand. Demand for consumer goods translates into demand for workers. Markets enable us to calculate the value of different types of labour, so that we can direct the use of labour to its most highly valued uses. Governmental intervention in labour markets (e.g. minimum wage laws) cause unemployment among less productive workers,” see what follows (MI, 1996).

[21] Just like immigrants throughout history and most production-related technology like machines, computers and robots have all been accused of “stealing” jobs as well. See, among many others, (Gammon, 2009), (Konczal, 2009), (Beucke, 2006) and (BBC News, 2002).

[22] The house in the example can be replaced with any good or service in either case.

[23] Economic growth in developing countries leads to more than just monetary income for the local workforce. Indeed, “it may be said without exaggeration that the great extent and rapid increase in international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race” (Mill, 1848). In a global economy, “we continually see signs of the phenomena Mill described. When Japanese multinationals spread out in the 1980’s, their male executives brought their wives with them to New York, London, and Paris. When these traditional Japanese women saw how women were treated in the West, they absorbed ideas about women’s rights […]. When they returned to Japan, they became agents of social reform. In our own day, television and the Internet have played a huge role in expanding our social and moral consciousness beyond the bounds of our communities and nation-States. Many believed that poor peasants would respond to the greater economic opportunities presented by globalization by taking their children out of school and putting them to work. Thus considered, the extension of the free market would act as a malign force. But I found that the opposite was true. It turned out that in many instances, the higher incomes realized as a result of globalization – the rising earnings of rice growers in Vietnam, for example – spurred parents to keep their children in school. After all, they no longer needed the meagre income that an additional child’s labour could provide. Or consider gender equality. With globalization, industries that produce traded goods and services face intensified international competition. This competition has reduced the yawning gap in many developing countries between the compensation paid to equally qualified male and female workers. Why? Because firms competing globally soon find that they cannot afford to indulge their pro-male prejudices. Under pressure to reduce costs and operate more efficiently, they shift increasingly from more expensive male labour to cheaper female labour, thus increasing female wages” and creating an equilibrium between the two (JTF, 2008, emphasis added).

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Christophe is a guns and gold loving anarchist from the geographical area known as Belgium. He spends his days slaying dragons and rescuing damsels in distress, invigorated by bathing in statist tears on a daily basis. He was put on this world to kick socialist ass and chew bubblegum – and he is all out of bubblegum.

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