From: Foundation for Economic Growth

New Century Politics
Left Versus Right
By Phil Scott
Nov 23, 2003, 16:07

I gather from newspaper headlines that socialism is on the left and that the extreme form of socialism is communism and this is even further to the left. Again, from the newspapers we have capitalism on the right and the extreme form of this called “the far right”, or fascism and nazi-ism. Somewhere in the middle is democracy.

Now these terms are often used loosely so that their meaning has become blurred and when we have discussions about important things such as the economy and politics I find that different people have differing understandings of these terms and then of course it becomes difficult to understand each other’s points of view. One of the most interesting things at the moment is to consider the difference between socialism and capitalism.

Socialism is the system for organizing society into a co-operative group where “each gives according to their ability and receives according to their need.” That is, we all share in the group wealth and do what we can to produce goods and services for the group; A sort of tribal structure but for millions of people rather than tens or hundreds of people.

Capitalism is the system where we all live in our families or by ourselves and work for what we want for ourselves. If we have money to spare we can give to charity or not as we choose. It is our money earned with our energy and enterprise so we are entitled to do with it as we like. A seemingly selfish attitude but somehow it works better than socialism.

One of the interesting things about living in this century is that we can look back on the way things happened last century and see how different countries have changed over the last fifty or a hundred years and see the results of their efforts in running socialist societies and in running capitalist regimes. When we do this it becomes immediately obvious that socialism fails to provide for the daily needs of the people. We remember reading about the USSR where “people pretend to work and the state pretends to pay them” to quote one young “worker” on an assembly line. People had little money and the shops were always running out of goods. The command and control economy which was needed to direct the people to work where they were required was just not capable of sorting out the fine detail needed to supply ordinary people with ordinary goods – like bread and potatoes. After thirty years they had to build a fence just to keep the people in.

The Chinese didn’t start the socialist regime until thirty years later than the Russians. This was fortunate as it gave the central powers a better perspective for the problems with running the “command and control” economy. The Chinese, under Deng Xiou Ping opted for capitalism as a means of running their economy. Getting rich was glorious, ran the slogan. So we now have the interesting sight of the communists of China running a capitalist society and generating more millionaires, faster than any other country.

So here is the question; “Are the Chinese socialists or capitalists?”

It is clear that they are running a capitalist economy as best they can. The people in charge can still make any decision they like without fear of retribution because China is not a democracy. It is a dictatorship, achieved at the point of a gun when Mao’s communists pushed the remnants of the previous Chinese rulers out onto the island of Taiwan. China has always been a dictatorship under warlords and emperors. This is the common point that the far left has with the far right. They are both just dictatorships. Maybe they have differing origins and concepts for running the ship of state but they still have that one feature in common; One person is in charge and the populace has no say in what happens.

The opposite of dictatorship is democracy where ordinary people all have an equal say in who is going to run the country and whenever the people in charge get too big for their boots they get voted out and a new lot has a go. So, if the far left and the far right are both dictatorships then their opposite must be democracy. So this now gives us better definitions for the words we all use in political discussions.

Democracy is the opposite of dictatorship (left or right doesn’t matter) and socialism is the opposite of capitalism. Democracy and dictatorships are ways of controlling a nation state and socialism and capitalism are ways of running the economy of a nation state. I think that is very clear and I suspect that we would all agree that while a democracy may not be the perfect political system it is way ahead of whatever is in second place (to coin a phrase!). That leaves us with the discussion of whether socialism or capitalism is the better way of running an economy.

The good thing about living in the 21st century is that we get a better sense of perspective as we look back at the way different countries ran their economies. If we look at the socialist states the one thing we notice is that they all were dictatorships. The ordinary people just couldn’t live with the problems that socialism imposed on them. They couldn’t buy bread or boots even if the state did guarantee them a job. So of course they tried to leave for places where they could earn a living such as in one of the western democracies. The dictators of these countries then had no choice but build walls to keep them in. Just like North Korea does to this day!

So that makes that very clear. Socialism is out and capitalism is in. The best way to run a country is having a political democracy and a capitalist economy. This seems to be known nowadays as the free market economy. That is we are all free to decide for ourselves how much work we do and how much of our money we spend. Our main problem seems to be that people with a socialist bent still seem to think that when they get into power in parliament that they can start to run the economy by the rules of socialism, ie command and control from the centre.

If we look back at the Muldoon era we can see very clearly that he had this bent towards socialism and towards the end of his command and control reign he had instituted a price freeze, a wage freeze and interest rate freeze. He found that he couldn’t control everything as he had thought and ended up in a position of running the country into the ground and then trying to stop everything in its tracks till he solved the problems. Just like Russia, or North Korea. However, he couldn’t solve the unsolvable and he gave up and called an early election, which he lost.

Thus began New Zealand’s experience of the “free market”. That is, capitalism without continual command and control from the government; Quite an exhilarating joy ride for some but desperate times for others. When the Labour government let the freeze go there were winners and losers as things fluctuated in price towards their natural state – in balance between supply and demand and not distorted by government edict. One of the biggest losers were the group of farmers who had worked and slaved for years building up enough savings to buy a farm and then borrowing hundreds of thousands of dollars to get the farm. When the “unfreeze” arrived the value of lambs dropped as the “Supplementary Minimum Price” disappeared and of course as a consequence the value of the farms dropped in line with the profits that people could make from lambs. Some heavily mortgaged farmers lost everything.

Government interference by Muldoon and his predecessors created this mess. When governments interfere with the free market they cause distortions which then cause much pain and anguish to people trying to run businesses or earn a living. This is known as the law of unintended consequences. Governments who think to control people’s lives with legislation so that they will be better off see these same people end up being much worse off as a result. So the obvious conclusion is that we should not allow our governments to interfere unless it is absolutely necessary. Less government is more happiness.

To maximize happiness minimise government.

New Zealand then had a great deal of economic freedom and the economy has been grew steadily from the mid eighties to the start of the new century. The political distortions took some time to work their way out of the system but once they were gone and people had control back over their lives the economy just started moving ahead. We don’t have to do anything to make the economy grow. In fact, if we stopped all government interference, it would roar ahead and within 20 years we would have caught back up with Australia. It is that simple. It is like the gardener who keeps pulling the plant out of the ground to see how the roots are developing. As long as he keeps doing that the plant will refuse to thrive – it may even die completely on him. Somehow we have to stop governments pulling up the economic plant and studying the roots. Politicians should just devise policies that encourage wealth creation and leave well enough alone!

So now in our discussion of left of centre and right of centre we can see that we are really talking about moves towards more dictatorship. That is, dictatorship going to the left (communism) or dictatorship going to the right (fascism). To achieve maximum growth and hence the wealthiest society of which we are capable we should forget these left and right movements towards a greater command and control society but think about movement towards greater economic freedom away from command and control. This is illustrated with our Political Circle shown above.

For this reason we are pursuing policies of support for politicians who advocate greater economic freedom and hence greater wealth. As Deng Xiou Ping said, “When you want to catch mice it doesn’t matter what colour the cat is.”

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