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Why Rothbard was wrong on the Soviet Union, and why it matters now

August 15, 2011 2 comments

Vladimir Vladimirovich Putin

I am spurred to write this because, thanks to tweep @jdenigma, I was introduced to Murray Rothbard’s “plan for desocialization” of the Russian economy following the collapse of the Soviet Union. Rothbard’s plan was first published in 1992, in the Review of Austrian Economics, and can be found at the Mises Institute website.

In the conclusion of his article Rothbard lays out a summary of his proposal:

The dimensions of the proffered Rothbard Plan for desocialization should now be clear:

  1. Enormous and drastic reductions in taxes, government employment, and government spending.
  2. Complete privatization of government assets: where possible to return them to the original expropriated owners or their heirs; failing that, granting shares to productive workers and peasants who had worked on these assets.
  3. Honoring complete and secure property rights for all owners of private property. Since full property rights imply the complete freedom to make exchanges and transfer property, there must be no government interference in such exchanges.
  4. Depriving the government of the power to create new money, best done by a fundamental reform that at one and the same time liquidates the central bank and uses its gold to redeem its notes and deposits at a newly defined unit of gold weight of existing currencies.

All this could and should be done in one day, although the monetary reform could be done in steps taking a few days.

The terms and  timescale of this proposal are rather breathtaking, considering we are speaking of a major industrial power encompassing a population then numbering about 150 million people, with the world’s largest accumulation of nuclear weapons. Moreover, this was not by any means a typical Western economy: it was heavily centralized, and effectively consisted of a collection of large industrial monopolies created from scratch by an extremely powerful central authority employing the labor of several generations.

For all intents and purposes, the Soviet Union was one giant interlocking company, masquerading as a nation-state — a company town with its own military, police force, courts, diplomatic staff and government.

At the bottom of this immense, complex structure were the women and men who were held as virtual prisoners of a rather brutal and arbitrary party-state management apparatus, which extended its control to every sphere of public and private life. For the most part, they lived at its mercy, although it may be true the grip on their activities was nowhere near as tight as in the days of Stalin.

As might be expected, Rothbard’s plan went nowhere, and mainly comes down to us as the musings of a thinker who boldly conceived on a grand scale about dismantling the existing state.

I made just such an attempt several years before Rothbard along the same lines as part of my honors thesis for my degree in Economics. My ideas, however, began with the assumptions I made above: that the Soviet Union was a company town, and addressing the chronic problems of its final years was not likely something to be undertaken without focusing on the masses of working people trapped under the weight of an oppressive totalitarian monstrosity.

Like Rothbard, I thought a plan of action should be undertaken quickly; but unlike Rothbard, I proposed to start at the bottom of society, not the top. I was not interested in markets, or property right, or laws, or money — I was concerned with the folks who would be threatened by the attempts to establish these.

So, I proposed a simple reform:

Reduce hours of labor by forty percent.

That was my entire proposal.

The problem of the late Soviet Union was not the lack of markets, money or property rights; it was the vast accumulation of superfluous working time embedded in the economy by a rather startling increase in the productivity of labor in the decades following Stalin’s rise to power.

The quickest way to fix this problem was simply to give people more time away from work — to essentially starve the gigantic machinery of production of its supply of human labor power, and force it to restructure and become more efficient. What people did with their newly acquired free time, was not a concern of government.

Not surprising, the Yeltsin government ignored not only Rothbard’s plan, but my own plan as well. Actually, in both cases our effort was not intended to influence events in the former Soviet Union, but to think seriously about what dismantling the state looks like using a real life case study.

Events brought Jefferey Sachs, then at Harvard University, to “advise” Boris Yeltsin on the economic policy of the new Russian government. While differing significantly from either Rothbard’s approach, and my own, I think it is fair to say, Sachs proposed a solution a magnitude closer to Rothbard’s than my own. In place of the then existing centrally planned economy, Sachs’ plan sought to establish a working market economy in one bold move.

It was a fucking disaster! — a cruel and unmitigated catastrophe for a nation of honest working people who had no inkling what was about to hit them. A crippling generational cataclysm, from which Jefferey Sachs emerged with his reputation intact, while women were reduced to prostituting themselves for food. Almost immediately the entire wealth of the nation fell into the hands of a tiny oligarchy of former managers of the old state-run economy.

Sachs now has opinions on how the West should fix its current crisis.

I think there is a lesson in the differences in the approach taken by Rothbard and myself: forget the state-dominated economy and think about people. It is a lesson that should be observed without exception in the present deficit debate.

*****

Yesterday, Mark Thoma offered us an American version of this concern for markets over people in the form of a false menu of options on the deficit debate: we can reduce debt or we can reduce unemployment. This typical Hobbson’s Choice politics, for which the Fascist State excels — offer the sheeple two unpalatable choices:

“Come on Sheeple, do you want to be buried in debt or starve in your freezing houses this winter.”

Since, this is a democracy, the choice between these two options is yours. The menu offered is carefully calibrated for two entirely different audiences: the Tea Party patriot, and the socialist-minded progressive. It is a subtle play on the “Southern strategy”, but with a twist: neither side of this argument is made to change voter’s minds. Which is to say, the aim is not to convert Red states to the blue column, or Blue states to the red column, but to play them off against one another as is.

The argument against deficits is made to both sides on exactly the same terms: more spending will mean more people living on government handouts. If you imagine these folks as the unprecedented numbers of unemployed who have been locked out of the market in labor power — you’re on one side. If you imagine them as lazy niggers who have no wish to work and only want to suck on the teats of producers, you are on the other side.

The “debate” over the deficit requires no more than a fairly adept management and knowledge of The Singular Division in American society — race. This division already exists in ready made form in society — a festering pus-filled wound that is periodically tortured by the Fascist State.

Please, do not tell me I am oversimplifying things — the object of politics is oversimplification. That is why you’re debating the deficit. All this debate comes down to is the deficit on the one hand, and a dysfunctional social stratum of chronic losers on the other. Before you even began debating the deficit you had already formed this simplistic model of the issue in your mind.

For the Tea Party patriot, the deficit comes in the form of everything they are not: smelly brown people speaking in unintelligible tongues. For the socialist minded progressive, it is the unfolding of history: civilization is measured by the degree of the state control of society. The progressive sees society as one giant factory, and wants only for it to be managed according to the principles of Fred Taylor. For the Tea Party patriot, society is a suburb set on the edge of a dangerous crime-ridden ghetto — they want it to be managed by the principles of Bull Connor.

The debate over the deficit does not invent these different views of society, but takes them as its premise. Since, as with all premises of this type, they are self-evident to the participants, we throw no light on the debate by admitting them. All will admit this is a debate on whether society is a prison pen for incorrigibles, or the interior of some gigantic hive of worker bees. Although hesitant to admit to their own views, they well admit that of their opposites — their arguments consists of counter-exposures. So, we only do here for both together what they each do only for the other.

But, anti-statists are not disinterested observers, standing on the sidelines of the great debate. To really grasp the implications of this debate, we must, account for our own presence as well as the contending factions. If we are successful, we won’t end up like Mark Thoma, who imagines himself on the sideline offering value-free advice to the Fascist State.

The first assumption has to be, that we are motivated by the same social process as Tea Party patriot, socialist-minded Progressive and Mark Thoma with his value-free advice to the Fascist State. If we are going to assign the values of Bull Connor to the Tea Party patriot, and the values of Fred Taylor to socialist minded progressives, it is only right to assume Mark Thoma’s value-free advice to the Fascist State is not really free of values.

The values of the Tea Party patriot appears to her as “commonsense thinking”, and this is also true for the socialist minded progressive. So, Mark Thoma’s value-free advice to the Fascist State, like Jeffrey Sachs’ value-free advice to the Yeltsin government in 1992, appears to him as value-free advice, because, for him, it is common sense.

Based on a read of Rothbard’s plan for desocialization of the Russian economy, it would seem anti-statists too are subject to this double fallacy: it is not value-free, but it appears to be sensible to us and without value bias. Rather than trying to argue our view is value-free, we must openly admit our bias, and declare this bias as our starting point.

But, even this is not enough: we must also subject this bias to the same scathing critical treatment we apply to Tea Partiers, progressives, Jeffrey Sachs and Mark Thoma.

No. The world is not a prison pen, nor a factory floor; and our choices are not value-free, and must themselves be the subject of criticism. We must find a place to stand, without for a moment deluding ourselves this place, fraught with hidden fault lines, is Terra Firma. Which is to say we declare we are anti-statists while never imagining we completely grasp the full implication of this position all at once.

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Eating their own…

October 8, 2008 Leave a comment

Russia, Indonesia, Ukraine Shut Exchanges as Stock Rout Worsens

The Russian market has total capitalization of around US$1Trillion…to shut it down means that much capital of owners is taken out of circulation. The Russian state, therefore, has essentially performed the largest expropriation in world history.

Indonesia, and Ukraine followed their lead.

This is fairly silly since it only does all at once what normal trading was doing anyway – imposing massive paper losses on the owners of capital. But, the act itself shows precisely what is necessary: not increased liquidity, but removal of existing liquidity.

Capitalism is eating itself

More on the Russo-Georgia conflict.

August 22, 2008 Leave a comment

“When Mikheil Saakashvili attacked the Russian peacekeepers in Tskhinvali, he expected to find success, or, at least, some cashable Western support. Part of his wish was granted. As soon as the Russians counter-attacked, an American politician was ready with threats and dire prophecies. John McCain was out of the gate on Georgia long before George W. Bush or Condoleezza Rice or Robert Gates made their first statements for the record. Why? Who gave McCain his early cue?

“A fair bet is Saakashvili, through his closest American friend and former agent, Randy Scheunemann. Since Scheunemann is John McCain’s adviser on foreign policy, this looks like a dangerous contact — dangerous, that is, for the security of the United States. Yet it follows a pattern. Scheunemann was the agent of Ahmed Chalabi in agitating for the war against Iraq. He is a former director of the Project for the New American Century, which welcomed a world at permanent war, dominated by the U.S., as the order of the 21st century. And Scheunemann is as closely linked as it is possible to be — while holding a nominally different post — with the American Enterprise Institute, the Office of the Vice President, and the Weekly Standard: the most drastic and persistent lobbying network for the Iraq war, and the group that lately pressed the hardest for a war with Iran.

“The idea of bombing Iran did not catch fire this summer. But these people are ambitious; they never let up one project without starting another. In their way of thinking, the United States — to keep the archaic Constitution at bay, and our enemies on the run — must always be occupied with a war somewhere. Iraq may be turning into a peaceful occupation; Afghanistan is getting to be an old story. Why not start a war in Georgia? At best, you push back against Putin, and show him to be a hollow threat. Or — a different advantage — you make a pitiful spectacle of the tears and the trampled pride of Saakashvili, and prove the brutality of Russia which has never really changed. So you restart the Cold War — a very good thing indeed. As for the run for president: on this issue as on FISA and Iran, Barack Obama can easily be shown to be a diluted version of McCain.”

Full piece here:

Russia’s terrible miscalculation…

August 17, 2008 Leave a comment

The extent of the Russian miscalculation in Georgia is completely revealed by the following excerpt:

[T]he Russians have backed the Americans into a corner. The Europeans, who for the most part lack expeditionary militaries and are dependent upon Russian energy exports, have even fewer options. If nothing else happens, the Russians will have demonstrated that they have resumed their role as a regional power. Russia is not a global power by any means, but a significant regional power with lots of nuclear weapons and an economy that isn’t all too shabby at the moment. It has also compelled every state on the Russian periphery to re-evaluate its position relative to Moscow.As for Georgia, the Russians appear ready to demand the resignation of President Mikhail Saakashvili. Militarily, that is their option. That is all they wanted to demonstrate, and they have demonstrated it. The war in Georgia, therefore, is Russia’s public return to great power status.

This is not something that just happened – it has been unfolding ever since Putin took power, and with growing intensity in the past five years. Part of it has to do with the increase of Russian power, but a great deal of it has to do with the fact that the Middle Eastern wars have left the United States off-balance and short on resources. As we have written, this conflict created a window of opportunity.

The Russian goal is to use that window to assert a new reality throughout the region while the Americans are tied down elsewhere and dependent on the Russians. The war was far from a surprise; it has been building for months. But the geopolitical foundations of the war have been building since 1992. Russia has been an empire for centuries. The last 15 years or so were not the new reality, but simply an aberration that would be rectified. And now it is being rectified.

George Friedman: Russia stamps its authority

The writer believes the Americans to be outmaneuvered by the Russians, owing to the American problem wars in Iraq and Afghanistan.

Nothing could be further from the truth.

The role of the dollar is key here, as we will show this when we return to the piece. With the dollar, Washington command not only the economic strength of the US, but of all countries which use the dollar to complete trade transactions.

Obama has promised to increased the military by 90,000 troops, McCain has promised an equal measure of increase. Added to this is Secretary of Defense Robert Gates plan to “counterbalance what the secretary sees as the U.S. Defense Department’s natural tendency to focus excessively on winning conventional conflicts rather than ‘irregular wars’ such as those in Iraq and Afghanistan.”

The actual increase will likely be much more than this. Why?

As you know from this little series we have been writing, business is good for war.

The present cascade of economic difficulties the US is now experiencing would have been diagnosed by Keyserling, the economic architect of NSC-68, as resulting not from too much military spending, but too little.

Keyserling estimated the US timidity to go all out with a really aggressive military build-out resulted in the loss of “…8 trillion dollars worth of GNP and about 85 million hours of civilian unemployment…” between 1953 and 1981.

The American economy is hollow, consisting of nail salons, restaurants, real estate and financial speculators, and millions of employees who spend all day moving emails from their inbox to folders under their inbox.

Increasingly, China and the rest of the world provide an ever larger percentage of what Americans consume; and, the dollars exported through trade return to the American economy as loans for ever more consumption.

The Americans can, in other words, provision themselves with very little effort, while amassing astonishing military power. There are sufficient manpower resources to undertake a massive military buildup without causing the slightest impact on American consumption.

The self-deluding Russia leadership believe it is confronting the United States at the limits of the latter’s power – that the US will back down owing to its draining wars of occupation. They have, in fact, merely positioned themselves to be an object lesson for China and any other challengers.

Russia has tragically misread global power relations; it has engaged in a hopeless battle against the economic power of an entire planet which effectively sit in hands of Washington.

War of my dreams…

August 16, 2008 Leave a comment

This blog doesn’t really cover breaking news because, we are lazy, and shit keeps piling up faster than we can shovel. However, the Russia-Georgia conflict provoked such a good response from one blog writer, we felt the need to post an excerpt here, and flag it for you:

This is the war of my dreams—both sides using air forces! How often do you see that these days?—so I’ll skip the history. Just remember that South Ossetia is a little apple-shaped blob dangling from Russian territory down into Georgia, and most of it has been under control of South Ossetian irregulars backed by Russian “peacekeepers” for the last few years.

The Georgians didn’t like that. You don’t give up territory in that part of the world, ever. The Georgians have always been fierce people, good fighters, not the forgiving type. In fact, I can’t resist a little bit of history here: remember when the Mongols wiped out Baghdad in 1258, the biggest slaughter in any of their conquests? Nobody knows how many people were killed, but it was at least 200,000—a pretty big number in the days before antibiotics made life cheap. The smell was so bad the Mongols had to move their camp upwind. Well, the most enthusiastic choppers and burners in the whole massacre were the Georgian Christian troops in Hulagu Khan’s army. Wore out their hacking arms on those Baghdadi civilians.

So: hard people on every side in that part of the world. No quarter asked or given. No good guys. Especially not the Georgians. They have a rep as good people, one-on-one, but you don’t want to mess with them and you especially don’t want to try to take land from them.

The Georgians bided their time, then went on the offensive, Caucasian style, by pretending to make peace and all the time planning a sneak attack on South Ossetia. They just signed a treaty granting autonomy to South Ossetia this week, and then they attacked, Corleone style. Georgian MLRS units barraged Tskhinvali, the capital city of South Ossetia; Georgian troops swarmed over Ossetian roadblocks; and all in all, it was a great, whiz-bang start, but like Petraeus asked about Iraq way back in 2003, what’s the ending to this story? As in: how do you invade territory that the Russians have staked out for protection without thinking about how they’ll react?

Full post here.