An Economic Lesson That Must Be Constantly Retaught

The primary decision to be made by the American electorate in the upcoming (2020) presidential election is whether or not to allow the political left to substantially shift the economic structure of future America to a socialist format along with the consequential abandonment of most free market benefits and the entrepreneurial American Dream. As the Democrat Party is pulled further and further left it becomes imperative for free market economists to become more vocal about the realities of the socialist model. Note that virtually all present day economists who view and analyze the ongoing economic order (or disorder) of supply and demand utilize always evolving theories and analytical tools that functionally assume the existence of free market forces. The unfounded euphoric trap of socialist utopia, promising all social services for free, has been marketed by the left since the beginning of modern socialist thought in Europe starting in the early years of the 19th century. Socialist thought was modified to be more revolutionary by Karl Marx and Frederick Engels later in the century (Communist Manifesto in 1848 and Das Kapital in 1867). A plethora of free things that are not free is the basic lure of the socialist movement that never leads to long term economic success.

In the upcoming 2020 Presidential election, the American Electorate will be making the most clear cut decision between the free market and socialism in American History. The Democrat Party is apparently trapped in a far left position that is so radically socialistic that they cannot persuasively espouse the free market and push their socialist agenda in one breath. I am surprised that they have abandoned their effective long term plan of eroding the free market bit by bit while loudly espousing what they are striving to slowly destroy. By slowly increasing the role of government in the lives of everyone and taxing the entrepreneur and the middleclass into submission, they have been, in imperceptible increments, shifting the American free market economy toward the socialist model. By doing so, coupled with the utopian deception they present, the left has been slowly replacing a system that works and is effective with one that sounds good but is not effective. It is likely that in the last twelve months leading up to 2020 presidential election the Democrat Party will rein in the more radically socialist messaging of their far left candidates and not allow the decision between the free market and socialism to be so distinct.

The industrial revolution in Europe and American (mid 1700’s through early to mid 1800’s), which witnessed the transition from rural agrarian existence to industrialized urban life, was driven by the introduction of free market forces and new manufacturing processes. The innovations and efficiencies that were inspired and driven by the introduction of free market policies during that period were first effectively depicted and best analyzed by Adam Smith in his seminal 1776 work, The Wealth of Nations. The division of labor, the specialization of tasks and capital innovation coupled with profit incentives constitute the free market’s “invisible hand” to which Adam Smith credits the substantial increase in economic growth and national wealth experienced during the industrial revolution. As the expansion of free markets in Europe and America accelerated during the 1800’s and early 1900’s, the role of government as a referee became more important with regulatory agencies serving as referee, striving to minimize social inequities. Modern economic theory has identified pure competition as the economic structure that maximizes total social welfare. The pure competitive model, which is an ideal state and

not effectively achievable in large complex economies, has become the theoretical target for government regulators who serve as the free market referee. The American economic system, the most effective economy in the world, operates as a relatively open free market system with a significant number of non universal social safety net programs relating to health and welfare, as well as regulatory functions that oversee concentrated industries and eternality issues (i.e. environmental issues) and significant public participation in secondary and college level education.

The government (public sector), as the only (or primary) economic player and not as a referee, was the ultimate goal of the socialist/communist movement as socialist philosophy of the 1800’s, which espoused the public ownership of the means of production. In addition to ownership of the means of production, in the socialist system, central decision making (i.e. government) controls the distribution and allocation of goods, services and resources in society. The pure socialist model obviates the free market and has never succeeded for an extended period of time as an effective economic structure. Large complex quasi socialist economies that have allowed a significant portion of the means of production as well as the distribution of goods and services to operate in a free market environment have survived. These hybrid societies depend on the free market sector of their economies to fund social services, subsidize inefficient publicly owned and run entities and generate at least some growth. In effect, the quasi socialist is parasitically dependent on the on the free market to survive and effectively compete in the global marketplace.

In the case of large complex economies such as the United States, where the existence of a substantially free market over many generations has significantly increased the standard of living and generated a massive amount of national wealth, there is a tendency for much of the population, unfamiliar with basic economic history and theory, to take the success of the free market for granted. Also, never forget that the socialist/communist movement is indeed an international movement that has the ultimate goal of changing the capitalist free market system wherever it is dominant into a central decision making socialist economic structure whenever possible. Consequently, there exists an ongoing push from the political left in America to force the economic structure of the country toward the socialist model. In the process, the left in America continually seeks to mask the lesson that should be learned from the massive success of the American free market experiment whose system rewards individual entrepreneurial effort. The further any functioning free market system moves in the direction of the socialist model, the less efficient and productive society becomes, and the more difficult it becomes for the entrepreneur, the true engine of growth, under the burden of massive taxation and excessive regulatory restrictions, to spin his or her magic. As referenced earlier Adam Smith, often referred to as the Father of Economics, attributes the success of entrepreneurs in a free market environment to what he refers to as the “invisible hand” (as discussed above).

For example of the political left masking the success of the free market, consider the case where inner city squalor is debated on the political stage. The left will use this dilemma, typically due to poor local governance and inadequate educational opportunities, to push national level socialist agendas when the appropriate response would be to fix the problem on the local level. Unfortunately, most large cities are governed by left leaning politicians who adhere to socialist policies that maintain public control of as many aspects of their urban community as possible, but neglect to effectively drill down into the

functions that are failing and correct the errant issues. A typical ploy of the left is to blame the problem on free market advocates who ignore the plights of the poor and label them as racist. The solution offered by the left is to elect more socialists into legislative bodies on all levels of government which will lead to the deterioration of the free market and the diminution of the entrepreneurial American dream. A more effective solution would be to radically improve the education functions within the subject depressed areas, as well as to financially subsidize and reward entrepreneurial activities that benefit those local communities. These actions are compatible with free market values and will allow the affected communities to benefit from the same incentives and efficiencies that have made the United States economic success the envy of world.

In summation, the political left seeks to replace the free market, which works, with socialism which offers utopia and sounds good, but never comes to fruition. Socialism is a movement, international in scope, and is extremely patient and persistent in the pursuit of its singular goal, to entrench the socialist model everywhere. Since the collapse of the Soviet Union the political left has tended to settle for the slow erosion of free markets globally as the political left successfully expands the role of government in the market place as a player. As the free market is eroded, productivity and efficiency decline, economic growth is stymied and every segment of society suffers.

In an upcoming short but important discussion, overlooked terminology misuse, primarily due to definitional nuances, will be elucidated. This discussion will focus light on some of the clever messaging employed by the left over time, which has diverted the attention of most of the voting public who are not familiar with economic theory and history, from the ultimate goal and effectiveness of their international movement. More specifically, in support for their euphoria promise of utopia, they have, over time, hijacked positively defined words such as liberal and progressive to identify their movement. Unfortunately, the basic meaning of neither word accurately defines, in totality, the overall agenda and success of the socialist movement. The terms liberal and liberalism have been “sloppily” used beginning in the twentieth century in America as the left has succeeded, with the help of the media, to secure these positive monikers as their own. Also, be aware that democratic socialism is really just socialism adjusted to sound better. See the upcoming paper “Twisted Terminology” posted in georgeconomics.com