Socialism – Page 18 – artdiamondblog.com

McCraw on the Nature of Schumpeter’s Defense of Socialism

McCraw on the third part of Schumpeter’s Capitalism, Socialism and Democracy:

(p. 359) In answer to the question that opens Part III, “Can socialism work?” Schumpeter responds with the provocative statement, “Of course it can.” But a close reading of the subsequent text reveals that he actually means, “Of course (p. 360) it can’t,” at least in comparison with capitalism. He is now writing in full ironic mode, like the satirist Johnathan Swift. “A Modest Proposal”—Swift’s famous pamphlet of 1729—had suggested that problems of famine and overpopulation could be met by one simple step: feeding children from poor families to the rich. His proposal, Swift argued, was “innocent, cheap, easy and effectual.”

Schumpeter’s Swiftian approach to socialism recalls to mind the delight he took as a young man in Vienna’s coffeehouses, where political and artistic discussion often continued well into the night. In this kind of setting, no proposition was too absurd or too subtly hedged with conditions and exceptions . Speakers won admiration for their sarcasm and wit, no less than for the cogency of their arguments. To puncture a point of view while seeming to recommend it was especially delicious.

Source:
McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

Keynes Was Relying on the Invisible Hand of the Market in 1946

Source of book image:
http://www.tbpcontrol.co.uk/TWS/CoverImages_0/074/757/0747579857.jpg

(p. B7) As Mr. Kynaston sets his scene, what immediately becomes clear is that the recent past is not so recent. “Britain in 1945. No supermarkets, no motorways, no teabags, no sliced bread, no frozen food. … No launderettes, no automatic washing machines, wash day every Monday, clothes boiled in a tub, scrubbed on the draining board. …Abortion illegal, homosexual relationships illegal, suicide illegal, capital punishment legal. White faces everywhere.” And with all those white faces was the single overwhelming, blanketing fact of deprivation, a bare-bones existence. Britain had just prevailed in a struggle for its very survival, but victory never looked so grim.
. . .
The Labor Party won the 1945 election in a landslide on a promise of national planning. The debate now was how far to take socialism, with the Laborites divided between the hell-bent nationalizers and the more market-oriented Keynesians. In 1946 Keynes himself admitted (though privately) that “I find myself more and more relying for a solution of our problems on the invisible hand” of the market, “which I tried to eject from economic thinking 20 years ago.”
. . .
Almost invisible in Mr. Kynaston’s sparkling panorama is a sign of what was to come. One Conservative politician was out of step not only with Labor’s policies but even with the prevailing views of her own party. Margaret Roberts was just about alone in condemning the welfare state as “pernicious,” destructive of the national character. In 1951, a year after Labor’s second postwar electoral victory, she got married. Her husband’s name was Thatcher.

For the full review, see:

Barry Gewen. “Books of The Times – In Postwar Britain, the Grim Face of Victory.” The New York Times (Thurs., June 12, 2008): B7.
(Note: ellipses within the Kynaston quote are in the original; ellipses between paragraphs are added.)

FDR Turned Schumpeter into a Fan of Ludwig von Mises

From McCraw writing about Schumpeter:

(pp. 318-319) The New Deal struck him as still another prelude to authoritarianism. He became convinced that Roosevelt’s program represented a step toward either fascism or socialism, and in either case potential dictatorship. He wrote a friend that Roosevelt was like a child mindlessly breaking a machine because he didn’t understand its design. The president “is going to turn me into a fan of [Ludwig von] Mises,” his classmate at the University of Vienna who had become a free-market fundamentalist and an opponent of almost all government intervention.

Source:
McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

In Many Capitalist Companies “People Think They’re Involved in Socialism”

Empirical comparisons between capitalism and socialism are in some ways unfair to capitalism, because many capitalism managers act as though they believed in socialist ideas. The difference in productivity and economic growth would be even greater, if capitalist managers consistently acted as though they believed in capitalism. Consider the following, from a portion of Execution written by Larry Bossidy:

(p. 73) Larry: When I see companies that don’t execute, the chances are that they don’t measure, don’t reward, and don’t promote people who know how to get things done. Salary increases in terms of percentage are too close between top performers and those who are not. There’s not enough differentiation in bonus, or in stock options, or in stock grants. Leaders need the confidence to explain to a direct report why he got a lower than expected reward.
A good leader ensures that the organization makes these distinctions and that they become a way of life, down throughout the organization. Otherwise people think they’re involved in socialism. That isn’t what you want when you strive for a culture of execution. You have to make it clear to everybody that rewards and respect are based on performance.

Source:
Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.
(Note: in the book, the quotation is presented as being Bossidy’s.)

Hitler’s Critique of American Materialism

Here are some musings by Hitler, in which he compares Germany under Hitler’s National Socialism, with America. The musings are dated August 1, 1942, and are quoted in the article cited below:

(p. 3) I grant you that our standard of life is lower. But the German Reich has 270 opera houses – a standard of cultural existence of which they over there have no conception. They have clothes, food, cars and a badly constructed house – but with a refrigerator! This sort of thing does not impress us.

For the full story, see:

MARC D. CHARNEY. “Ideas & Trends; Well, at Least He Liked Our Cars.” The New York Times, Section 4 (Sun., April 3, 2005): 3.

“Isn’t This a Teeny-Weeny Bit of Socialism?”

(p. 12) FROM the very beginning of the nation’s modern social welfare system — even before Michael Moore began to explore the issue — there was a tension in it: What should the government be expected to provide? What should be left to the individual? How much government is too much?
The questions were asked even in 1935, not exactly a time to instill confidence in the resilient power of private markets. Senator Thomas Pryor Gore, Democrat of Oklahoma, put it bluntly when Frances Perkins, the secretary of labor, testified on Capitol Hill that year about President Franklin D. Roosevelt’s plan for a new program called Social Security.
”Isn’t this socialism?” Senator Gore demanded. When Ms. Perkins denied it, he asked again: ”Isn’t this a teeny-weeny bit of socialism?” In recent days, on Capitol Hill and on the campaign trail, a new version of that debate has been flaring, this time around an issue that the New Dealers decided (perhaps wisely) to put off for a later date: health care.

For the full commentary, see:
Robin Toner. “IDEAS & TRENDS; Less, Less, Less! More, More, Moore!” The New York Times, Week in Review section (Sun., August 5, 2007): 12.

Kibbutzim Abandon Socialism

“Once for communal use, the Kibbutz Yasur swimming pool is now run as a private business.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) KIBBUTZ YASUR, Israel — For much of Israel’s existence, the kibbutz embodied its highest ideals: collective labor, love of the land and a no-frills egalitarianism.

But starting in the 1980s, when socialism was on a global downward spiral and the country was mired in hyperinflation, Israel’s 250 or so kibbutzim seemed doomed. Their debt mounted and their group dining halls grew empty as the young moved away.

Now, in a surprising third act, the kibbutzim are again thriving. Only in 2007 they are less about pure socialism than a kind of suburbanized version of it.

On most kibbutzim, food and laundry services are now privatized; on many, houses may be transferred to individual members, and newcomers can buy in. While the major assets of the kibbutzim are still collectively owned, the communities are now largely run by professional managers rather than by popular vote. And, most important, not everyone is paid the same.

. . .

(p. A4) The kibbutzim were once austere communes of pioneers who drained the swamps, shared clothes (and sometimes spouses) and lived according to the Marxist axiom, “From each according to his ability, to each according to his needs.”

Today, most are undergoing a process of privatization, though kibbutz officials prefer a more euphemistic term: renewal.

. . .

Mr. Varol was born on a kibbutz in the far north, but he left at 18. He is at peace in his new home, but bitter about the past. “My parents worked all their lives, carrying at least 10 parasites on their backs,” he said. “If they’d worked that hard in the city for as many years, I’d have had quite an inheritance coming to me by now.”

For the full story, see:

ISABEL KERSHNER. “The Kibbutz Sheds Socialism And Regains Lost Popularity.” The New York Times (Mon., August 27, 2007): A1 & A4.

(Note: the online version of the article had the title: “KIBBUTZ YASUR JOURNAL; The Kibbutz Sheds Socialism And Regains Lost Popularity.”)

(Note: ellipses added.)

“The dining room in Kibbutz Nachshon charges members $4 per meal. While kibbutzim once paid all members equally and provided food, today many have adopted a system of varying wages and require payment for many services.” Source of caption and photo: online version of the NYT article quoted and cited above.

“Liberty and Life”

(p. 8) At the time of last month’s referendum on Mr. Chávez’s efforts to remake the Constitution to his liking, I got to know some of the “chamos,” as the student activists are known. What struck me was not only how effective they were, but how different their movement was from almost all its many antecedents in the region.

Most important, the Venezuelans are not calling for socialist revolution, but for liberal democracy. Instead of vindicating the statist ideologies of the 20th century or the romantic passions of the 19th, they have embraced classic 18th-century humanism.

. . .

Will they make up a new political party? Can they remain united? Their enemy is formidable, and the chances of a violent or even tragic conclusion are very likely. But against the Chávez slogan, “Socialism or Death,” they have their own: “Liberty and Life.” In the battle of words they might have the upper hand. Perhaps they can take hope from a line by the Mexican poet-diplomat Octavio Paz: “We must give back transparency to words.”

For the full commentary, see:

ENRIQUE KRAUZE. “Humanizing the Revolution.” The New York Times, Week in Review section (Sun., December 30, 2007): 8.

(Note: ellipsis added.)

Qaddafi’s Nomadic Defense of Socialism

Inside a nomad tent near Kabul. Source: online version of the NYT article quoted and cited below.

(p. A4) In some instances, politicians seek to use nomadic traditions to justify their policies, just as American politicians try to exploit nostalgia for America’s rural past to justify farm subsidies, said Robert Rotberg, a professor at the John F. Kennedy School of Government at Harvard, who studies failed states in Africa and Asia. “Take Qaddafi in Libya,” he said, referring to Col. Muammar el-Qaddafi. “He would say, you Westerners don’t understand us because we have a nomadic ethos that is essentially socialist, and so we have to nationalize our country’s oil industry to be true to our tradition.”

For the full story, see:

ILAN GREENBERG. "Memo From Almaty; Ancient Nomads Offer Insights to Modern Crises." The New York Times (Weds., August 8, 2007): A4.

Pulling Teeth Slowly

Source of book image: http://mitpress.mit.edu/images/products/books/0262113023-f30.jpg

Many years ago, I read János Kornai’s The Road to the Free Market, which gave Kornai’s advice on how Eastern Europe could best make the transition from communism to the free market. What I remember most from the book, is his discussion of whether it is more humane for the transition to be quick or gradual. He answers the question by asking another: if you need to have a tooth pulled, is it more humane for it to be pulled quickly or gradually?

(p. B15) . . ., Mr. Kornai’s books and lectures in Europe, North America and Asia established him as one of the leading scholars of socialist economics and an expert on the difficult transitions that many countries face when they move from socialism to a more democratic and capitalist system. . . .

At one point in 1974, under the more relaxed rule of János Kádár, when Hungary was the "most cheerful barrack in the camp," Mr. Kornai and his wife decided to build their own home. Over the course of several months, they personally confronted the corruption, endemic shortages and shoddy construction materials that were so common in Eastern Europe. A year later, on a trip to India, Mr. Kornai was faced by idealistic young Maoists whose concern for the desperately poor reinforced their support for socialism. Mr. Kornai responded to them by arguing, as he puts it here, that "rationing systems that spread misery equally may assuage feelings of injustice for a while, but they will not solve anything."

For the full review, see:

JOSHUA RUBENSTEIN. "BOOKS; Critic Behind the Curtain." The Wall Street Journal (Tues., January 30, 2007): B15.

(Note: ellipses added.)

The book reviewed, is:

János Kornai. By Force of Thought. (MIT Press, 461 pages, $40)

The earlier book by Kornai, that I read and liked, is:

Kornai, Janos. The Road to a Free Economy: Shifting from a Socialist System, the Example of Hungary. New York: W.W. Norton, 1990.

Latin America Discourages Entrepreneurs

Source of table: online version of the WSJ article cited below.

(p. A18) Economist Joseph Schumpeter (1883-1950) may be best known for his innovative work showing the link between entrepreneurial discovery and economic progress.

But as Carl Schramm, president of the Kauffman Foundation of Entrepreneurship has pointed out, Schumpeter’s insights about risk-takers didn’t make him an optimist.

In a speech last year to European finance ministers in Vienna, Mr. Schramm explained Schumpeter’s fears: He "worried that entrepreneurial capitalism would not flourish because the bureaucracies of modern government and big corporations would dampen innovation — the process of ‘creative destruction’ would be too ungovernable for a modern, Keynesian-regulated economy to tolerate." As a result, Mr. Schramm said, Schumpeter thought that "the importance of entrepreneurs would fade over time as capitalism sought predictability from governments who would plan economic activity as well as order social benefits."

Mr. Schramm’s comments caught my attention because they so accurately describe Latin America. There the entrepreneur has been all but run out of town by the bureaucracies that Schumpeter feared. Growth has suffered accordingly.

The World Bank’s annual "Doing Business" survey, released last week, demonstrates the point. The 2008 survey, which evaluates the regulatory climate for entrepreneurs in 178 countries, finds that Latin America and the Caribbean was the slowest reforming region this year and that it "is falling further behind other regions in the pace" of reform.

. . .

The most important lesson for Latin America from the World Bank’s report is that its competitors around the world are working to unleash entrepreneurial spirits, and doing nothing is not an option. As Mr. Schramm told his Vienna audience, "Schumpeter saw what a century of evidence would prove: Socialism has not sustained economic growth." Now, if only more Latin American policy makers would catch on.

For the full commentary, see:

MARY ANASTASIA O’GRADY. "THE AMERICAS; No Room for Entrepreneurs." The Wall Street Journal (Mon., October 8, 2007): A18.

(Note: ellipsis added.)