Monday, May 2, 2016

Marxism's Three Primary Principles

I forgot the exact time I decided to postpone my reading of Ludwig von Mises' "Socialism: An Economic and Sociological Analysis". After watching a youtube video that the leading presidential candidate was a self-confessed socialist and after stumbling with few Facebook status updates advocating socialism, they motivated me to delay no longer my reading of  Mises' book.

Digesting Mises' book on socialism is vital to have an informed understanding of the conflict between socialism and capitalism. I don't want to follow the example of what Mises describes as "irresponsible babbler" who publicly talks and writes a lot about capitalism and socialism without familiarizing himself with what the economists have to say about these issues (Ludwig von Mises, "The Anti-Capitalistic Mentality," 2008, p. 47). 

Mises' book on socialism has a credible reputation to have refuted the socialist paradise. The author argued that the central weakness inherent in socialism is  the impossibility to have a sound economic calculation and planning due to the absence of price system. As such, socialism will inevitably lead to waste of resources and poverty.   

Returning to my reading of this book, my goal was to finish it, digest its content and write my summary and reflection of it. In achieving this goal, I want to bite the 600-page book one small piece at a time. And so I want to post a series of excerpts, which I think will show the flow of thought proving the central argument of the book. And I would like to start with the "Preface to the Second German Edition" identifying the three primary principles of Marxism: 
"Thus about the middle of the nineteenth century, it seemed that the ideal of socialism had been disposed of. Science had demonstrated its worthlessness by means of strict logic and its supporters were unable to produce a single effective counter-argument. 
"It was at this moment that Marx appeared. Adept as he was in the Hegelian dialectic - a system easy of abuse by those who seek to dominate thought by arbitrary flights of fancy and metaphysical verbosity - he was not slow in finding a way out of the dilemma in which socialists found themselves. Since Science and Logic had argued against Socialism, it was imperative to devise a system which could be relied on to defend it against such unpalatable criticism. This was the task which Marxism undertook to perform. It had THREE LINES OF PROCEDURE.  
  • First, it denied that Logic is universally valid for all mankind and for all ages. Thought, it stated, was determined by the class of the thinkers; was in fact an 'ideological superstructure' of their class interests. The type of reasoning which had refuted the socialist idea was 'revealed' as 'bourgeois' reasoning, an apology for capitalism.

  • Secondly, it laid it down that the dialectical development led of necessity to Socialism; that the aim and end of all history was the socialization of the means of production by the expropriation of the expropriators - the negation of negation.

  • Finally, it was ruled that no one should be allowed to put forward, as the Utopians had done, any definite proposals for the construction of the Socialist Promised Land. Since the coming of socialism was inevitable, Science would best renounce all attempt to determine its nature."

Source: Ludwig von Mises, "Socialism: An Economic and Sociological Analysis," 1951, pp. 15-16. 

Friday, January 15, 2016

Hoping for an Intellectual Recovery

Gold Money published an article two days ago about two important papers that I hope will bring reform in central banking and the monetary system of the world. I am referring to the papers that just recently came out from the Bank for International Settlements (BIS) and from the Britain's Adam Smith Institute. These papers confirm the message of the Austrian Business Cycle Theory. I wish that this is just a beginning of intellectual recovery that Murray Rothbard told us in his essay, Economic Depressions: Their Cause and Cure:
“Once again, the money supply and bank credit are being grudgingly acknowledged to play a leading role in the cycle. The time is ripe for a rediscovery; a renaissance of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away; and we would see a massive retreat of government from the economic sphere. But for all this to happen, the world of economics and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years” (“The Austrian Theory of Trade Cycle and Other Essays”, 1978, p. 91).
Let me just share three important paragraphs from Gold Money:

"Within one month of the Fed raising the Fed Funds rate by a miniscule 0.25%, it seems the whole world is falling apart. The usual market cheerleaders are now on record of expecting a global crisis to develop, the signs being too obvious to ignore. Markets are over-valued relative to deteriorating economic prospects. Collapsed energy and commodity prices tell their own story. Shipping rates and the share prices of US utilities (including rails and freight) are falling. The days of blaming China for a contraction of world trade are over: the downturn is now far larger and more widespread."

". . . the banking crisis of 2008 was a prelude, rather than the crisis itself. The Fed will almost certainly reduce interest rates back to zero, and reluctantly will have to consider imposing negative rates."

"The Keynesians will blame the Fed for a complete policy failure. They will argue in retrospect, as they did following the banking crisis, that the financial and economic crisis of 2016 was made immeasurably worse by the Fed raising the Fed funds rate and not pumping yet more money into the economy at such a crucial time. It's like saying alcoholics must drink more to be cured."