Wednesday, 25 May 2016

Describing economic collapse


Some folk recently on a local Facebook group called ‘Anarkiwi’ were discussing socialism and how (and here I paraphrase a little just to make the point clear), libertarians have been very poor in describing the process of collapse of a socialist country (here, for example), and further: that the world’s more socialist countries are not even collapsing as we libertarians say they will.

I mean, NZ's a socialist country, right? And I'm not scavenging for food, in fact I just purchased and enjoyed a Moa Five Hop English ale at the local supermarket.

And who wouldn’t enjoy that?

Still, as I pointed out to the fellow who wrote that, NZ is hardly a socialist country by any real definition.

Best description is: it's a hampered market. Or maybe a mixed economy.

So let’s be careful in our labels.

And you know what? The fellow who perhaps most briefly decribed the process of collapse, Friedrich Hayek, was himself aware that (the likes of Venezuela aside) socialism as practiced and espoused “today” is different from that he warned against just after the War. And that’s partly because he warned about it.


And that’s why today’s socialists talk more today about “inequality” and “poverty” and “progressive taxation” than they do about worker’s revolution – and why no Labour Party manifesto today, with the possible exception of Jeremy Corbyn’s is going to call for nationalising everything that moves.

But it’s still untrue to say that we’ve been bad at explaining the process of socialist collapse. Following the lead of Ludwig Von Mises’s Socialism which expained how socialism could never work, Hayek’s own Road to Serfdom was perhaps the first and briefest to explain how the transition to and the collapse of a fully-blown socialist chaos would happen.

Building upon both of those and fleshing out the economic process of collapse was George Reisman’s Government Against the Economy, which first explains how a market works, then the process by which (absent any political pressure to the contrary) a market can become increasingly hampered; how a hampered market can lead inexorably to controls, to more controls and increasing economic chaos; to rationing and police action and confiscations; and then inevitably to tyranny as shortages and revolt against the leaderhip becomes necessary just for human survival.

I commend them all to everyone’s attention.

Especially the folk at Anarkiwi.

[Hat tip Jim Rose]



  1. Although if all the emoting Leftards on Twitter banging on about the increasing poverty, increasing homelessness, etc etc in NZ, are right, then socialist ends in NZ are coming to pass. Those outcomes are due to welfarism and dependency of socialism, and the destruction of free markets by tax and regulation.

  2. Yes indeed. The process use here is to decry the failure of a market that is severaly hampered to call for the end of the market and an increase in the hampering. (Housing being at the intersection of four of the most regulated and centrally-planned parts of the country: money supply, land use, apprenticeships and education, and building standards.)

    Ayn Rand outlined the process: 'If a detailed, factual study were made of all those instances in the history of ... industry that have been used by the statists as an indictment of free enterprise and as an argument in favor of a government-controlled economy, it would be found that the actions blamed on businessmen were caused, necessitated, and made possible only by government intervention in business. The evils, popularly ascribed to big industrialists, were not the result of an unregulated industry, but of government power over industry. The villain in the picture was not the businessman, but the legislator, not free enterprise, but government controls."

    So do controls breed more controls.

  3. Welfarism and dependency on socialism is creating homelessness and poverty. Benjamin Franklin observed
    The more you do for people the less they do for themselves the poorer they become.The less you do for people the more they do for themselves the richer they become. Lesson that have been forgotten.Paula Bennett want to give 5 k to the no hopers so they can move to the provinces. More useless waste of taxpayers money creating more dependency on the state.

  4. NZ certainly has socialist elements, and when it comes to regulation of land-use we're one of the worst (hence the current malarkey around affordable housing), but it also has elements of relative freedom that allow the enterprising and hard working to prosper.

    The Moa Five Hop English ale is a perfect example of this; because as Eric Crampton described sometime ago to an audience at the Chch Beerfest, when it comes to craft beer NZ has one of least restrictive and lowest barriers to entry of any country in the west - and it's mostly for that reason we have such a great range of NZ craft beers. Moa is now a publicly listed company, but I believe it was started about 10 years ago by one young man who start concocting his own brews at the back of his family's winery in Marlborough.

    To really understand deep down why socialism is such a cancer, you have to look not only at disastrous basket cases like Venezuala; but also thriving industries like NZ's craft beer scene, and ask yourself why they're able to punch above their weight.

    Day to day life may be "ok" with the current mixture of socialism and capitalism, but consider how much better it could be without the socialism. There is also the fact that in the long term we are headed towards one or the other, and whilst a degree of socialism may be tolerable for a while, it will eventually grow and become intolerable if the trend is not reversed.


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