Aleks and Alex, Excellent! I opened yesterday's blog post with this condensation of his latest post:
Alex Krainer (who grew up in Communist Yugoslavia, has thrived as a hedge-fund manager and financial advisor), Untangling the "socialism" vs. "capitalism" dichotomy
Few ideological dichotomies polarize opinions as readily and as completely as that between "socialism" and "capitalism." Those who embrace socialism tend to blame capitalism for everything that's wrong with our world today. Those who embrace capitalism harbor a seething contempt for socialists, but both camps base their views on ideology with only vague notions about the true nature of either system.
The “socialists” think of capitalism as a rapacious system of exploitation that favors a few at the detriment of many. There is some truth in that. The "capitalists" think of socialism as a system that gives free stuff to the lazy and undeserving, choking society's progress. There's some truth in that too, but having lived in both systems and having experienced the ideological brainwash from both sides, I find neither side convincing.
Both systems’ ideological foundations amount to marketing, the intellectual gloss on the cover of their respective sales brochures. But the gloss never captures the essence of either system - an omission that is so egregious that it is almost certainly deliberate...
..I'd rejected the Marxist ideology already as a teenager, not because I had any deep understanding of the economic and socio-political issues we faced but because the system wasn't delivering as advertised... But the more I learned about the "capitalist" system, the more I became convinced that the same seed of doom that made "socialism" unsustainable was also baked into the foundation of the "capitalist" system.
For starters, in both systems we had the familiar old fiat currency with fractional reserve lending. This one element guarantees the collapse of both systems: over time it reliably corrodes the democratic framework of society, suffocates free market economy, kills entrepreneurship and innovation, and guarantees that government sector of the economy will gradually displace more and more private enterprise. It does this due to an economic effect called the deflationary gap...
..[Deflationary Gap explanation paragraphs] ...
..The system can be balanced either by lowering the supply and prices of goods, by enhancing its total purchasing power, or a combination of both. Lowering prices and production of goods will stabilize the economic system at a low level of economic activity [Nixon tried this]. Increasing the purchasing power in the system will stabilize it on a higher level of activity.
Left to itself and without intervention, a modern economic system would fall into what we call a self-reinforcing deflationary depression: the deflationary gap would lead to falling prices and output, decline of income and rising unemployment. Furthermore, in recessions and depressions, the level of investment typically declines even more rapidly than savings. To avert this, government intervention is necessary.
Without government intervention, the economy would stabilize when the level of savings declined to the level of investments which would be at a depression level of activity. This is an anathema in all modern economies, and governments invariably pursue the imperative of economic growth. To generate growth, they must inject new purchasing power into the system. This cannot be done through taxation since taxation doesn’t create new purchasing power: taxes only transfer money from those who earn it to the government.
This is why governments have no alternative but to continuously engage in deficit spending [when money is debt-based, or mining more gold & silver, or printing more bills], adding debt in excess of their tax receipts. This is why virtually all governments in the world today run budget deficits and chronically grow public debt. In spite of all the incessant talk about balancing the budget, paying down debts or imposing debt ceilings, the debts only keep rising at rates that predictably accelerate over time. It doesn't matter whether we call the system “socialist” or “capitalist,” they both necessitate an ever growing role of government in the economy [when economic growth is desired].
Today, in many of the “capitalist” nations, government spending accounts for almost half of the GDP and in some cases significantly more. In the UK, the mothership of capitalism, the government's share of GDP is 44%. In France it's over 58%....
..There’s no point railing against “socialism” and dreaming about a small government, private capital utopia which doesn't, and cannot exist so long as our economies are based on fiat currencies with fractional reserve lending. Even if we start with zero public debt, the pursuit of economic growth will lead to the same outcomes. With fullness of time, the government sector will progressively crowd out private enterprise: it’s a mathematical certainty...
..With that, we can address the false dichotomy between “socialist” and “capitalist” economies as they're commonly discussed. Namely, in what we call “capitalist” economies, a larger proportion of government-injected purchasing power flows top-down. In what we call "socialist" economies, it flows bottom-up.
Capitalist governments splurge their largesse on large private corporations in the form of subsidies and generous government contracts. Socialist governments splurge on social welfare programs like low-cost or free health care, education, generous unemployment benefits and pension plans, and programs that maintain full employment even where jobs couldn't be justified by private enterprise...
..The idea that the state would splurge on the lazy and undeserving free-loaders is understandably revolting. However, all those undeserving free-loaders might also be your customers, so even the hard-core entrepreneurial types benefit if the lazy bums have money to spend.
The alternative in governments splurging on large corporations is far more dangerous. If purchasing power is distributed bottom up, the decisions about how to spend that purchasing power are up to the ordinary people. As such, they'll tend to benefit ordinary businesses that produce consumer goods and services: bakers, apparel makers, restaurants, coffee shops, musicians, tour guides, bicycle repairmen, etc.
By contrast, if the state spends top-down, it runs the moral hazard of determining the winners and losers in the supposedly free market competition. The winners will tend to be those corporations and groups that can “invest” the most in political lobbying efforts. As a result, we get the TBTF banking behemoths, big Ag, big Pharma, big Media, big Tech and a massively bloated military-industrial complex. Ultimately, this favors the emergence of "corporatism", as Benito Mussolini characterized fascism. Today we prefer the sanitized term, “private-public partnership.”
These are the musings that get me labelled “communist,” but, whatever. If we want to fix what's wrong in the world today it is essential that our analysis goes past the handy but misleading labels of “socialism” vs. “capitalism,” or left vs. right, and that we deconstruct our challenges down to their essential building blocks... Labels only perpetuate our problems and make it difficult to transcend the dysfunctional elements in our system and evolve toward better social arrangements.
This is another conversation using Marxist categories that presumes that these "systems" are active algorithms that can be "analyzed" through intellectual discussion. What an utter waste of time when the people doing the talking clearly have a wealth of direct experience that they could share if they would do the work of remembering events in their own lives and the details. When you all go back to talking about particulars and leave the sotheology (the academic speak that is the current secular religion) to academics, let us know.
I have now watched the entire interview, which I found very useful, Aleks.
At the end you commented on the similarity of your views and on working together.
I have recently been introduced to the work of a former Moldovan politician, anti-communist in his youth, Deputy Prime Minister of Moldova at one point, Iurie Rosca, whose views are also aligned.
Aleks and Alex, Excellent! I opened yesterday's blog post with this condensation of his latest post:
Alex Krainer (who grew up in Communist Yugoslavia, has thrived as a hedge-fund manager and financial advisor), Untangling the "socialism" vs. "capitalism" dichotomy
Few ideological dichotomies polarize opinions as readily and as completely as that between "socialism" and "capitalism." Those who embrace socialism tend to blame capitalism for everything that's wrong with our world today. Those who embrace capitalism harbor a seething contempt for socialists, but both camps base their views on ideology with only vague notions about the true nature of either system.
The “socialists” think of capitalism as a rapacious system of exploitation that favors a few at the detriment of many. There is some truth in that. The "capitalists" think of socialism as a system that gives free stuff to the lazy and undeserving, choking society's progress. There's some truth in that too, but having lived in both systems and having experienced the ideological brainwash from both sides, I find neither side convincing.
Both systems’ ideological foundations amount to marketing, the intellectual gloss on the cover of their respective sales brochures. But the gloss never captures the essence of either system - an omission that is so egregious that it is almost certainly deliberate...
..I'd rejected the Marxist ideology already as a teenager, not because I had any deep understanding of the economic and socio-political issues we faced but because the system wasn't delivering as advertised... But the more I learned about the "capitalist" system, the more I became convinced that the same seed of doom that made "socialism" unsustainable was also baked into the foundation of the "capitalist" system.
For starters, in both systems we had the familiar old fiat currency with fractional reserve lending. This one element guarantees the collapse of both systems: over time it reliably corrodes the democratic framework of society, suffocates free market economy, kills entrepreneurship and innovation, and guarantees that government sector of the economy will gradually displace more and more private enterprise. It does this due to an economic effect called the deflationary gap...
..[Deflationary Gap explanation paragraphs] ...
..The system can be balanced either by lowering the supply and prices of goods, by enhancing its total purchasing power, or a combination of both. Lowering prices and production of goods will stabilize the economic system at a low level of economic activity [Nixon tried this]. Increasing the purchasing power in the system will stabilize it on a higher level of activity.
Left to itself and without intervention, a modern economic system would fall into what we call a self-reinforcing deflationary depression: the deflationary gap would lead to falling prices and output, decline of income and rising unemployment. Furthermore, in recessions and depressions, the level of investment typically declines even more rapidly than savings. To avert this, government intervention is necessary.
Without government intervention, the economy would stabilize when the level of savings declined to the level of investments which would be at a depression level of activity. This is an anathema in all modern economies, and governments invariably pursue the imperative of economic growth. To generate growth, they must inject new purchasing power into the system. This cannot be done through taxation since taxation doesn’t create new purchasing power: taxes only transfer money from those who earn it to the government.
This is why governments have no alternative but to continuously engage in deficit spending [when money is debt-based, or mining more gold & silver, or printing more bills], adding debt in excess of their tax receipts. This is why virtually all governments in the world today run budget deficits and chronically grow public debt. In spite of all the incessant talk about balancing the budget, paying down debts or imposing debt ceilings, the debts only keep rising at rates that predictably accelerate over time. It doesn't matter whether we call the system “socialist” or “capitalist,” they both necessitate an ever growing role of government in the economy [when economic growth is desired].
Today, in many of the “capitalist” nations, government spending accounts for almost half of the GDP and in some cases significantly more. In the UK, the mothership of capitalism, the government's share of GDP is 44%. In France it's over 58%....
..There’s no point railing against “socialism” and dreaming about a small government, private capital utopia which doesn't, and cannot exist so long as our economies are based on fiat currencies with fractional reserve lending. Even if we start with zero public debt, the pursuit of economic growth will lead to the same outcomes. With fullness of time, the government sector will progressively crowd out private enterprise: it’s a mathematical certainty...
..With that, we can address the false dichotomy between “socialist” and “capitalist” economies as they're commonly discussed. Namely, in what we call “capitalist” economies, a larger proportion of government-injected purchasing power flows top-down. In what we call "socialist" economies, it flows bottom-up.
Capitalist governments splurge their largesse on large private corporations in the form of subsidies and generous government contracts. Socialist governments splurge on social welfare programs like low-cost or free health care, education, generous unemployment benefits and pension plans, and programs that maintain full employment even where jobs couldn't be justified by private enterprise...
..The idea that the state would splurge on the lazy and undeserving free-loaders is understandably revolting. However, all those undeserving free-loaders might also be your customers, so even the hard-core entrepreneurial types benefit if the lazy bums have money to spend.
The alternative in governments splurging on large corporations is far more dangerous. If purchasing power is distributed bottom up, the decisions about how to spend that purchasing power are up to the ordinary people. As such, they'll tend to benefit ordinary businesses that produce consumer goods and services: bakers, apparel makers, restaurants, coffee shops, musicians, tour guides, bicycle repairmen, etc.
By contrast, if the state spends top-down, it runs the moral hazard of determining the winners and losers in the supposedly free market competition. The winners will tend to be those corporations and groups that can “invest” the most in political lobbying efforts. As a result, we get the TBTF banking behemoths, big Ag, big Pharma, big Media, big Tech and a massively bloated military-industrial complex. Ultimately, this favors the emergence of "corporatism", as Benito Mussolini characterized fascism. Today we prefer the sanitized term, “private-public partnership.”
These are the musings that get me labelled “communist,” but, whatever. If we want to fix what's wrong in the world today it is essential that our analysis goes past the handy but misleading labels of “socialism” vs. “capitalism,” or left vs. right, and that we deconstruct our challenges down to their essential building blocks... Labels only perpetuate our problems and make it difficult to transcend the dysfunctional elements in our system and evolve toward better social arrangements.
https://alexkrainer.substack.com/p/untangling-the-socialism-vs-capitalism
This is one of the most informative interviews I’ve ever listened to. Well done!! As with the best “classes”, I walked away with more questions.
Nice work. I've shared the link.
A Skeptic War Reports
https://askeptic.substack.com/
Great interview, thanks to both of you!
This is another conversation using Marxist categories that presumes that these "systems" are active algorithms that can be "analyzed" through intellectual discussion. What an utter waste of time when the people doing the talking clearly have a wealth of direct experience that they could share if they would do the work of remembering events in their own lives and the details. When you all go back to talking about particulars and leave the sotheology (the academic speak that is the current secular religion) to academics, let us know.
I have now watched the entire interview, which I found very useful, Aleks.
At the end you commented on the similarity of your views and on working together.
I have recently been introduced to the work of a former Moldovan politician, anti-communist in his youth, Deputy Prime Minister of Moldova at one point, Iurie Rosca, whose views are also aligned.
https://iurierosca.substack.com/