Mankind’s future is bright. I laid out the case for that last week with some disruptive new technologies such as automation.
But the path won’t be easy. Many will be dislocated. What’s worse, the frustration and issues arising from these transformational technologies will lead many towards a dark path.
A century ago, the Russian Revolution occurred. It overthrew the Czarist government and established a communist one, sending a large portion of the world down this dark path. The scars of this path are more visible, and more relevant today than the healed trenches of World War I.
The path was called communism. And it was sold to the masses as a different, and brighter way of doing things. Property would be seized from its owners, and given out to people according to their need. The goal was a more equal society.
We know the results wherever it’s been tried. The Soviet Union’s command economy made some rapid goals towards industrialization at first—as going from an agrarian society far behind its European counterparts would have done at some point anyway—but at a tremendous human cost. The country may have developed a nuclear bomb, but only after stealing the secrets from the United States. It’s easy to pretend your system works when you’re cribbing the answers off of the society that’s doing the real innovative work.
Totalitarianism of communism that is a necessary feature to try to force the scheme to work, led to the death of 20 million in the Soviet Union through various purges and starvations. And another 80 million around the world, and the communist ideology has claimed over 100 million souls in the 20th century in an attempt to force an unworkable system to work. Some places have learned better, others continue down this dark path.
Yes, a peaceful world where people work together to create a better future sounds great. But there’s a snag with that kind of logic. Who determines that equality and who gets what property? The problem with communism, like its lighter counterpart socialism, is that you end up with a ruling class. That class is political. Their views are enforced with the boot, baton, and, if necessary, battalion. You don’t get that under a system we do know that works, capitalism.
It’s true that under capitalism, a small number of people may end up with a large part of the total nation’s wealth as well. But that control isn’t absolute. It’s always under attack in the marketplace, where free people making choices of their own free will have say.
Bill Gates, Jeff Bezos, and the other tech titans of today didn’t seize their wealth. They created products and services that made life easier and more convenient for the masses. Their wealth is a reflection of their service to others, not their seizure.
That also shows why wealth grows where there’s capitalism, and why it stagnates where there’s communism (or even socialism, which is just a wolf in a different style of wool).
Seizing property creates a huge disincentive to create more. Knowing that you can enjoy most of the fruits of your labors does the opposite.
The bigger problem with communism isn’t who ends up on top or how. It has to do with very simple, day-to-day things. Like what the price of eggs should be.
I don’t know. I don’t raise chickens. Do you? Probably not. The time, labor, land, feed, care and storage of chickens sounds like a lot in aggregate. But farmers who do the actual work know the costs involved and price eggs accordingly. You can go to a grocery store and find eggs of all sizes and types at a reasonable price as a result.
When some politically-appointed bureaucrat is in charge of pricing an asset, do they think like an owner? Or do they think of what’s going to make their boss happy?
Show me who prices the eggs in a country, and I can tell you if it’s on the way up or the way down. As President Trump recently stated about Venezuela, “The problem in Venezuela is not that socialism has been poorly implemented but that socialism has been faithfully implemented.”
Venezuela was blessed with substantial amounts of oil and other natural resources. But because their government forcefully chose a path that involved a political decision to make oil cheap for the masses, the country can’t produce what it needs to fit its energy needs.
The government has tried papering over the problem—literally. Their economy is reaching a hyperinflationary endgame, and the average Venezuelan has lost 19 pounds in the past few years thanks to declining supplies and quality of food. It’s a humanitarian crisis in the making—but worse, it was a deliberately planned one by its own government. Whether you call it communism or socialism, the fact that it’s easily preventable is the real tragedy. It’s the ultimate red herring that many still point to as the real way to move humanity forward.
It’s a tragedy we may yet see here. The United States may talk tough about being a bastion of freedom, but government regulations (finally on the decline under President Trump), a government-takeover of healthcare with the Affordable Care Act, and other measures constantly threaten to erode our liberty in ways more small than big. We won’t see the big takeover like the Russian Revolution or its contemporary counterpart in Venezuela (among other nations). It will just happen in barely perceptible little ways.
That said, I still expect our future to be bright. The path will have its challenges. Dealing with communism and socialism shouldn’t be one of them. Its track record always ends in failure. Tweaking it or modifying it for new times won’t matter either, for the simple reason that it won’t tell you how to price eggs.
All you need to know as an investor is to avoid countries heading toward socialism, and to look closely at investing in countries coming back from socialism.
Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.
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