Shakedown Socialism

by Oleg Atbashian

  In the meantime, factories continued to close, in part because no one wanted to buy their crude products designed for the Soviet market. The economy was crumbling, half of the country's workforce was unemployed, and even a monthly wage of $50 would have been an improvement, at least until things would pick up.

  It was then that we visited the unsmiling woman director of the local sewing factory with a proposal to make jeans from the locally made hemp cloth for a Californian store chain. Keeping a poker face, she gave us a production cost estimate per item that equaled their retail price in an American thrift store. That made no sense, given that in local terms the cost was higher than her average worker's weekly earnings. She was lying and we diplomatically asked her to reconsider. The director, who in Soviet times used to be the equivalent of a US Congresswoman, looked us sternly in the eye and repeated that such was the real cost and it was final. We didn't even get to the part where we could gripe about the quality of her products.

  At least she didn't ask for a cushy job for her niece right up front like some others did. Every encounter was different; the attitude was almost always the same. One by one the frustrated Americans went home empty-handed, leaving the local officials complaining about the greedy Yankees.

  I sincerely hope that the business climate has improved since I left the country. But at the time, the solicitations of kickbacks aside, the indignation at the prospect of capitalist exploitation seemed genuine - at least on the part of former Party bosses.

  The gap between Western and local wages was painful and incomprehensible to most Soviets, whom the fall of the Iron Curtain suddenly exposed to the real world. Whatever inequality existed between them and the Party elites was now dwarfed by the wealth of American middle-class visitors. The bureaucrats seemed to resent the fact that private US citizens, obviously standing on a lower societal rung because they didn't hold privileged government jobs, could easily travel around the world, launch projects without any government supervision, act like equals with anyone they spoke to, and pay for a single dinner with a few guests at the local restaurant, costing almost as much as their betters in the local government earned in a whole month.

  The money the Americans paid me was a pittance by their standards but it was generous by ours, and I was grateful for it. I didn't hate them because they were "rich"; I was happy for them. They were lucky to be born in a free country that followed a normal path of development fit for human beings. It wasn't their fault that I was born in a country that mutilated itself with inhuman social and economic experiments that made us so poor. America didn't degrade us; our own government did, by throwing our potential into the bottomless pit of an irrational utopia.

  The only way to close the gap, I thought, was to abandon the unworkable Soviet system and adopt the American model. It would be a long project but well worth the effort. Certain others believed that the gap should be closed by cutting America down to size. I knew such people; their attitude was a mix of hurt self-esteem, jealousy, and irrational collectivist selfishness, which had been cultivated for generations by the official propaganda. That was to be expected. What I didn't expect was to find a similar attitude inside the United States .

  I had previously believed, in my parochial Soviet ignorance, that the spectacular failure of forced equality in my country would serve as a repellent for the rest of the world, making sure that people would stop solving problems by bringing everyone down to the lowest common denominator. Little did I know.

  The self-righteous campaigners for "fairness" use a clever trick to advance their ideas. They shock fellow Americans with statistics of how outrageously low wages in the Third World are, without adding that prices on the local markets are low in the same proportion and that people might be able to get by on a dollar a day. That's what my own family's budget was at one time - and we weren't dressed in rags and we didn't starve. Living was cheap as long as one wasn't considering imported goods or foreign travel. Of course, a pair of black market made-in-the-USA Levis equaled a month's wages.

  The trick of optical illusion: The three Lenin figures are of the same size, but their placement out of context of linear perspective is distorting our judgment.

  In the absence of the free market - the only reliable instrument of price creation - prices and wages were determined by the government. Everything was state-subsidized, which may sound like a great idea to all those who don't realize that state subsidies come from their taxes.

  The Soviet tax system was a mystery wrapped in an enigma. Under Stalin, taxes were integrated into the state-run economy by default and the workers didn't actually "pay" them. The government simply kept everything according to its needs and gave the workers the rest - just enough to eat and buy simple clothes. On top of that, in the 1960s, Khrushchev introduced a flat income tax of about 10%, which was deducted automatically, without any need to file tax returns. The exact combined income tax was unknown due to a complete lack of transparency, but according to some estimates, it was as high as 95%.

  Such camouflaged taxation allowed the official propaganda to describe taxpayer-subsidized services - healthcare, education, and housing - as "free gifts" from the benevolent Party and the government, for which the people had to be eternally grateful. I remember that formulation, taught to me in the state-run school named after V.I. Lenin.

  At a closer look, however, the "gifts" turned out to be economic traps, restricting people's choices in healthcare, education, and housing. Even moving to another city was an almost insurmountable problem.

  Such government "largesse" turned people into slaves of the state. Little wonder it resulted in a Third-World-type poverty.

  But the international income gap is not set in stone. When some Asian countries admitted that their poverty was the consequence of archaic political and economic systems, they remodeled themselves and embraced capitalism. It caused a torrent of sob stories in the Western media, in which well-paid journalists championed "economic equality and justice" by accusing local and Western entrepreneurs of running sweatshop economies. Armies of smug armchair egalitarians participated in well-funded, professionally orchestrated boycotts against companies like Nike that dared build factories in the area and give jobs to poor Asian families.

  It almost seemed as though they didn't like the fact that the Asians made an effort to improve their lot instead of begging and demanding aid from richer nations like the rest of the Third World did. But the Asians knew better. Today, such formerly poor countries as Hong Kong, Singapore, and South Korea enjoy median household incomes that are twice as high as those in the former Soviet Republics, which continued to protect their labor. They achieved it, not by accumulating grievances and demanding entitlements, but by releasing their potential through free enterprise and technological advancements. And others are on the way.

  Even the Chinese communists have come to the realization that, instead of exporting the “workers' paradise" they would be better off exporting consumer goods. Seeing that their experiments in "fairness" resulted in disastrous poverty, they scaled back forced equality and jump-started a new semi-capitalist economy by entering into a symbiotic relationship with the arch-capitalist America . The last thing China needs right now is for the US to turn into a China, which would be a giant step backwards for both nations.

  In the past, Marxist state-run economies had to rely on capitalist free markets to determine the true cost of their own products. Today, as major capitalist economies themselves are falling under the spell of anti-market regulations, the true cost of their own products is also becoming unclear, causing an unsustainable growth of wages and cost of living. This leaves the least regulated economies of the upstart capitalist nations as the only reliable gauge of the true cost of labor and products.

  The more realistic foreign wages may seem scandalously low to Americans who don't cringe at $4 for a Grande Caffe Latte. Quite a few of them enjoy sitting at Starbucks in the company of like-minded comrades - each holding a cup of overpriced fair-t
rade-certified coffee - and complaining about the "unfairness" of this economy, the income gap, big corporations taking advantage of low-wage foreign laborers, and the outsourcing of American jobs. They would surely be surprised to learn that the amount they're paying for one Grande Latte may actually be the true cost of their own day's work and in a truly fair economy, it would also be a fair daily wage.

  But they could still go to Starbucks - in a fair economy, a cup of coffee might also cost about ten cents, in addition to a forty cent lunch. And - best of all - low domestic wages would bring those outsourced jobs back!

  They might be even more surprised to learn that the "evil" corporations are their best allies. Both politically and culturally, the big corporations are some of the biggest champions of state-regulated entitlement programs and labor wage hikes, thus making the $4 coffee at Starbucks affordable to the masses.

  Proponents of forced economic equality like to explain corporate support of government entitlements as evidence that such programs are actually good for business - otherwise why would these "mega-monsters of predatory capitalism" encourage entitlements?

  But the truth is much more cynical. Anti-market measures give big companies an unfair advantage over smaller competitors and upstarts who can't afford to have a lobbyist in Washington, and who will choke on higher wages, taxes, and entitlements. Large corporations can swallow the extra cost more easily, as economies of scale allow a smaller price increase on their products.

  Corporations are neither demons nor angels - they are merely playing by the rules given to them by the government, which keeps "correcting" the playing field to make it more "fair" by inventing new rules and tampering with the score in the middle of the game.

  The rules may be always changing, but the goal does not. And the primary goal of any business organization is profit. So the players must keep adapting to the changing field conditions in order to benefit the shareholders. And if trying to make the best of a rigged game is turning them into monsters, the fault is not so much with the players as with those who have corrupted the game by rigging it.

  So the next time a proponent of "fairness" gripes about the rich getting richer and the poor getting poorer, we should agree wholeheartedly - adding that the reasons for the shrinking middle class and the stagnant economy are government regulations born of the dream of forced economic equality, which in real life results in a rigged game, arrested upward mobility, and a more rigid class structure.

  The same argument applies to the champions of forced global equality. Since the productivity of labor cannot be made equal globally, the only option within their reach is a global equalization of wages, which they see as a variable they know how to control. Some have made careers out of it.

  Instead of leveling the playing field by reducing the government dictate, and by promoting liberty, opportunity, and property rights in developing nations - which is the only fair, realistic, and moral solution to poverty and stagnation - the collectivists are now proposing the imposition of a global minimum wage.

  This is as practical as legislating greater rainfall in the Sahara Desert, or establishing international quotas on floods, pestilence, and volcano eruptions. The only thing that is certain to start growing as a result of this measure will be the power of the coming global government, whose first major task will be to tackle a self-inflicted global crisis.

  CHAPTER 6

  The Fallacy of "Economic Equality"

  On the surface, the idea of economic equality may seem like an honorable moral goal, which explains its resilience and attraction. This is why it continues repeatedly and with impunity to bring one economic and social disaster after another anywhere it's tried. On the flip side, opponents of economic equality are branded as greedy, selfish, and immoral - which is why few politicians dare oppose this absurdity.

  The current political debates mostly end up in the following compromise: capitalism may be more economically efficient, but it's still morally inferior to economic equality that benefits most people. Such a view has two big problems.

  It is, in fact, efficiency that benefits most people by raising living standards, reducing the number of workers involved in low-paying and tedious manual work, increasing the number of well-paid intellectual jobs, continually improving everyone's quality of life, and giving the poor access to things that only the rich could enjoy only a short while ago. Therefore, efficiency is moral - and, as such, it renders the above formula invalid.

  But let's assume for the sake of argument that economic equality is also efficient, so that we could leave this part out and compare what's left. The resulting picture still can’t withstand moral scrutiny.

  Since economic equality cannot be attained by bringing everyone up to the level of the achievers, the achievers will have to be brought down to the level of mediocrity, with most of their earnings and property taken by the government. Even the most "progressive" achievers wouldn't submit to this voluntarily (see Hollywood tax returns), so it has to be a forced measure. To do this on a national scale, the state must assume supremacy over private citizens and limit certain freedoms. What's more, forced extraction and redistribution corrupts the government by giving it arbitrary powers to determine various people's needs, for which there can be no objective standards. Most bureaucrats are not paragons of honesty. Even if they were, in due course idealists will become replaced by eager crooks seeking to distribute entitlements in exchange for kickbacks. And finally, such a system corrupts the very people it intends to help, by demeaning the individual productive effort and encouraging a destructive collective scuffle for unearned privileges among pressure groups driven by greed and selfishness.

  These are the reasons why all attempts at forced economic equality have always resulted in corruption, poverty, oppression, and moral degradation. What honorable and moral idea would bring such results? What honorable and moral idea would require a blind, endless sacrifice of people's work, careers, ambitions, property, and lives, to an unattainable utopian goal that, at a closer look, isn't even a virtue? The only way economic equality can benefit most people is by satisfying their class envy.

  Some people understandably fear the uncertainty of outcome of their daily efforts, seeing it as a dangerous void separating them from a safe and comfortable future. A rational reaction to this would be to remind oneself that, ever since people lived in caves, nature has never offered us certainty, and that risk-taking, combined with intelligence and creativity, has built modern civilization - which may be imperfect, yet it's as good as it gets historically in terms of comfort and safety for those participating in it.

  An irrational reaction would be to panic, take offense, become impatient with the world, and join a self-righteous political cult that promises a guaranteed certainty of results on the other side, just as soon as they fill the void in front of them with other people's property and the dead bodies of those who dare stand in the way of their brazen march toward the bright future.

  The problem with this plan is that the void has no bottom. Enormous wealth is known to have disappeared in it without a trace, along with many people's dreams, aspirations, and entire lives. And even if it could be filled, against all laws of nature and economics, what kind of monsters do we expect to enjoy walking over this smoldering mass grave and be happy on the other side of it? What does it say about the moral character of the champions of this plan?

  * * *

  A complete economic equality is unattainable. Since all of us have different talents, experiences, knowledge, skills, ambitions, and physical characteristics, the only way to make us equal is to bring us down to the lowest common denominator. Besides the fact that it would make everyone unhappy, jealous, hateful, irritated, and suspicious of each other's motives and achievements, it is also humanly impossible to enforce. If that were to happen, musicians would need to have their fingers broken to compensate the non-musicians. Alternatively we could issue government quotas for the tone-deaf minority to be included in all musical perfor
mances, while forcing all the others to appreciate their tunes under the threat of punishment. Or we could simply ban music.

  If some people had wings and others didn't, and the government wanted to enforce "fairness," soon no one would have wings. Because wings cannot be redistributed, they can only be broken. Likewise, a government edict cannot make people smarter or more capable, but it can impede the growth of those with the potential. Wouldn't it be fair if, in the name of equality, we scar the beautiful, cripple the athletes, lobotomize the scientists, blind the artists, and sever the hands of the musicians? Why not?

  Back in 1883, a Yale professor, William Graham Sumner, brilliantly addressed these issues by explaining why the real progress of civilization is attained, not by redistributing wealth, but by expanding economic opportunities and ensuring people's liberty to earn their own wealth. And since some will always profit eagerly from the opportunities while others will neglect them altogether, the greater the freedom and opportunity in a society, the more economically unequal the citizens will become. "So it ought to be, in all justice and right reason," said Sumner.

  "The yearning after equality is the offspring of envy and covetousness," Sumner wrote in his book What Social Classes Owe to Each Other. ". . . there is no possible plan for satisfying that yearning which can do aught else than rob A to give to B; consequently all such plans nourish some of the meanest vices of human nature, waste capital, and overthrow civilization. But if we can expand the chances we can count on a general and steady growth of civilization and advancement of society by and through its best members. In the prosecution of these chances we all owe to each other good-will, mutual respect, and mutual guarantees of liberty and security. Beyond this nothing can be affirmed as a duty of one group to another in a free state."