Socialist Pigs

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Capitalism produces. Socialism distributes. The two systems do not coexist comfortably with one another. In fact, they are inimical.

Some of the most celebrated champions of socialism have coined terms like “greedy capitalist” or “capitalist pig.” By implication, a socialist is neither greedy nor a pig. But economic history suggests that socialists are just as porcine as their capitalist counterparts…maybe even more so.

One need only look to the recent goings on in Australia, your editor’s country of birth, for a glimpse into the real world outcomes of this ideological struggle. Kevin Rudd was last week ousted from Prime Ministership after a botched attempt to impose a “super profits” tax on the most productive sector of the Australian economy – the mighty mining sector. We provided a few details in Thursday’s issue:

“The story is a classic ‘producer vs. parasite’ tale…Rudd, like any other socialist bully would do, attempted to sell the tax to the Australian public under the familiar ‘fair share’ slogan.

“‘The infrastructure needs of this state are vast and on the existing tax base cannot be funded,’ Rudd told Australian reporters while on a recent visit to Western Australia, the nation’s largest mining state. ‘We say the sector of the economy most able to share a greater part of the burden for funding our infrastructure needs for the future is in fact our most profitable mining companies.’

“If this sounds like thinly veiled Marxist rhetoric,” we remarked, “that’s because it is. As the founder of that ill fated, though persistently insidious ideology himself famously noted: ‘From each according to his ability, to each according to his need.'”

One might be forgiven for thinking that, after Rudd’s spectacular political decapitation, replacement Prime Minister, Julia Gillard, would think twice before trying to kill the goose laying all of Australia’s golden eggs. Alas, it was out with one parasite, in with another.

Ms. Gillard is certainly aware of the research released by the Western Australia Chamber of Commerce and Industry that suggests the “super profits” tax, as it stands, would have erased $4.4 billion and 17,000 jobs from the West Australian economy next year – before the tax was even scheduled to be implemented in 2012. The study further predicts the cost to the state’s economy would have risen each year to total $60 billion and 100,000 jobs lost by 2020.

And yet…Gilliard revealed her parasitic DNA within hours of nabbing the Prime Minister’s post.

“I want to make sure Australians get a fair share of our mineral wealth,” she declared, “But we want to genuinely negotiate…”

Gillard is widely expected to push for a slightly diluted version of the “super profits” tax. “I am throwing open the door to the mining industry,” she said just last week, “and I ask that in return, the mining industry throws open its mind.”

As warm and fuzzy as those sentiments may be, the fact remains that such featherweight idealisms invariably end up weighing a stone…and that is a burden the strongest, most able members of society are usually expected to shoulder. But theft is still theft…even if it is watered down a tad. Don’t expect the industrialists to take her play-nice politico-doublespeak lying down.

Although he welcomed the new leadership’s change of tack, Atlas Iron chief executive, David Flanagan, was unequivocal in his assertion that tax must be axed.

“We’ve been screaming blue murder to anyone who will listen about what the problems are with this tax,” he told The Australian this week.

Australians have been getting a pretty “fair share” of the local mineral wealth for some time now anyway. Those who risked their capital and bought even a single share of BHP Billiton, Rio Tinto, Fortescue Metals, Atlas Iron et al., were richly rewarded over the past decade as the geologic and geographic blessings of the “Lucky Country” and, more importantly, the efforts and initiative of its mining companies, paid off handsomely. (Of course, China and India’s voracious appetite didn’t hurt, either.)

In addition to capital appreciation and regular dividends for shareholders, ordinary, working Australians have also exacted what might be seen as a “fair share” of the local resource wealth. Through compulsory contributions to Australia’s Superannuation Fund – a scheme not entirely dissimilar to America’s Social Security, though decidedly healthier…at this point, anyway – working Australians have a large, indirect holding in the nation’s mining giants. Working Australians, therefore, saw the value of their retirement savings appreciate, more or less, alongside the rise and rise of the very companies the “super profits” tax sought to penalize. [Those same workers, not coincidentally, were among the first to see the value of their retirement nest egg shrink as the share prices of the nation’s mining companies collapsed after the proposed tax was first run up the national flagpole.]

Of course, all this is to say nothing of the tens of thousands of hard-working individuals who actually spend their days and nights thousands of feet below Australia’s rusty red surface actually digging the stuff up…and the carpenters, plumbers and electricians who build and service lodgings to house them…and the local businesses that profit from an influx of workers to the region…ect., etc., etc… (Not to mention the exorbitant taxes each and every link in this value chain already pay!)

After all, a barrel of oil or a ton of coal is worth nothing until it is first brought to market. Invariably, that process takes an immense amount of capital, the expertise to extract said resources and the gumption to actually get one’s hands dirty doing the job.

At the end of the day, those who deserved a “fair share” of the resource wealth got exactly what they deserved: a share commensurate to the effort they put in. By contrast, those who don’t work, don’t pay into Superannuation, don’t build or service mining towns in some way, don’t risk their capital by investing in those “conspicuously productive” companies; those who don’t actually contribute anything to the process of bringing the product to market at all, get exactly what they deserve: nothing.

People seem to think that just because they have an emu and a big red kangaroo on their passport they are somehow entitled to a bounty of riches…riches someone else must earn for them, no less. They define a “fair share” as a Divine Right handed down to them the moment they were born – coincidentally – in a resource rich land.

People of such a mind should consider asking how their poor brothers and sisters are faring in Venezuela, or Mexico, or Iran, or Nigeria or, for that matter, just about anywhere else on the African continent. These lands all enjoy an abundance of natural riches…and an abundance of government involvement in “distributing” the profits. And yet, curiously enough, the people living under these supposedly benevolent regimes are among the most repressed and impoverished on earth. Hmmm…

Socialist maxims may score high marks for eloquence and pathos; but they score very low marks for economic wisdom. Capitalism produces. Socialism distributes. Without capitalism, socialism cannot function. In other words; socialism needs capitalism.

Intriguingly, the inverse is not also true. Capitalism has no need of socialism whatsoever. Capitalism distributes wealth by creating opportunity, forged in the crucible of open competition. Capitalism amasses the capital that invests in the enterprises that enable others to advance their financial conditions. Capitalism does not confiscate wealth and redistribute it. Capitalism multiplies wealth…and in the process redistributes opportunity.

Of course, productivity and wealth creation does not come from penalizing the most productive members of society. It comes from standing aside and allowing them to do what they do best, be that excavating minerals, building cars or growing bananas.

Left alone, the free market operates as a kind of evolutionary arms race. Companies compete to offer the same product at a better price, or a better product at the same price. Those that cannot keep pace eventually whither and die. Through this “survival of the fittest” process, prices are over time driven down and the quality of goods and services forced higher. In this fashion, those at the lower end of the socio-economic spectrum benefit most from the toils of companies competing to capture their business. And, the best part is that nobody has to steal a penny to pay for it. The “capitalist pigs” will finance the whole operation themselves…if only the safety-net socialists would get out of the way and let them.

Cheers,

Joel Bowman
for The Daily Reckoning Australia

Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
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Phil
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The Little Red Hen, Ronald Reagan Version [I somehow never tire of reading this. How apt it is today!] Once upon a time there was a little red hen who scratched about the barnyard until she uncovered some grains of wheat. She called her neighbors and said ‘If we plant this wheat, we shall have bread to eat. Who will help me plant it?’ “Not I, ” said the cow. “Not I,” said the duck. “Not I,” said the pig. “Not I,” said the goose. “Then I will,” said the little red hen. And she did. The wheat grew tall… Read more »
Phil
Guest

Ooops don’t think DR want me to embed video in comments.

http://www.youtube.com/watch?v=LQAwdEdAT3Y&feature=related

David Bode
Guest
You can’t be serious. This has to be the worst single article i’ve ever read in this site. If I knew how to operate your mystery ratings above I would have given this Zero for sheer and utter ignorance, naivity and stupidity. If Mr Bowman had a real education, he would know that the problems of Africa cannot be explained in moronic simplistic terms of capitalism Vs Socialism. Everywhere “capitalism” has prevailed in Africa it seems to me that its accompanied by unbridled exploitation and misery, to a large extent resulting from the cosy deals between corrupt African politicians and… Read more »
Biker
Guest
HaHa… !~ Do you think the author, Joel Bowman, is either ‘a property millionaire’ or a ‘property bull’, David? :) While I agree with much you’ve written, above, this site utterly _rejects_ property as an asset, promoting gold, silver and mining shares virtually exclusively. Joel Bowman could no more spruik property here than he could flap off to the moon… . ;) I’m interested in your comment: “…events unfolding every day from now on will tell…” Yes, it’s a new financial year, but I see little difference from the last. Do you foresee an end to capitalism? Even Moore failed… Read more »
MadJak
Guest

I wonder if Kevin Rudd will sue for Unfair dismissal?

David Bode
Guest
Actually Biker I don’t see an end to capitalism at all – but I do see a severe contraction in globalisation in the near future due to a number of factors, both political and economic. By “…events unfolding every day from now on will tell…” I didn’t mean anything profound other than that the trends we are seeing in global markets will continue unabated, regardless of how many debt based bailouts are attemped in the meantime. By this I mean the debt based “wealth” created by the brand of capitalism that Bowman crows on about is being increasingly & systematically… Read more »
Peter
Guest

So why is the super industry in favour of the mining tax? Is it, perhaps, because they make most money from a percentage of contributions rather than growth or ongoing fees? If so, an increase in compulsory contributions is great for them, even if it means funds give negative returns. Conclusion: the super industry represent advisors etc not investors. Does that make them zombies too?

Greg
Guest
“Of course, productivity and wealth creation does not come from penalizing the most productive members of society. It comes from standing aside and allowing them to do what they do best, be that excavating minerals, building cars or growing bananas. ” But there is a difference between building cars or growing banana’s. You can always grow the next crop of banana’s and there are always more cars to build, but there will not always be easy minerals to excavate. They are a finite resource. Iraq will be one of the richest countries when they get their house in order because… Read more »
Joe
Guest
Joel obviously believes in the pre agricultural society back in the UK and harkens back to it. In those days, people born into the gentry exploited those that worked for the gentry. No one ever crossed the boundary between the two as to be within the gentry class was a privelage of birth. Capitalism is purely a principle of trade nothing more and nothing less. Our model today is more dedicated to trade than to actual production, so it seems that in Joel’s haste to slaughter Socialism he has confused modern capitalism. In our modern day brand of capitalism you… Read more »
Biker
Guest
“..in Joel’s haste to slaughter Socialism he has confused modern capitalism.” Yes, I tend to agree, Joe. I was always uneasy about those first four short sentences Bowman opens with. Too black-and-white. As you’ve noted, there are numerous examples of capitalism which are non-productive… and perhaps many more which actually damage production and output. The second paragraph is even less conciliatory. Why? It would probably be enough to relate the story of Rudd’s demise as either resulting from inept management, or ideologically unsound practice, or both; but it’s probably less dramatic than using a stick of dynamite to deal with… Read more »
bearamundi
Guest
There is a tendency on DR to reduce the debate to two polarities: bears vs bulls, optimists vs pessimists, socialists vs capitalists, even christians vs ‘the rest’etc. Perhaps the poles could better be described as the status quo vs anarchy. True anarchists, among which that misunderstood intellectual giant Marx is virtually peerless, have insight into the ‘system’ socialist as it is practised or capitalist, which is a hierachy of exploitation based on power. Anarchy has been much maligned but it represents mature insight, the kind of which is emergent on DR in my humble opinion. Bloggers are just getting wise… Read more »
Abby
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David
So you think socialism is a raging success by comparison in Africa do you?
Which must make you a great fan of Robert Mugabe…

about the only country in sub-saharan Africa which is not a complete ballsup is Botswana – which also happens to be the only capitalist country there. surrounded by a cancer of socialist countries – including Zimbabwe, South Africa, Mozambique, Angola, etc – all ‘success’ stories of socialism…

You’re such an 1d!ot!

Ivo
Guest
“Left alone, the free market operates as a kind of evolutionary arms race. Companies compete to offer the same product at a better price, or a better product at the same price.” In making his argument, the author conveniently forgets that there is no such thing as an ideal real world “free market”. A free market assumes unencumbered access to the same resources to produce, and no hurdles to entry – a level playing field. And there’s a million and one reasons why this never can (and will) be the case. As much as I abhor socialistic blabber, this is… Read more »
Sandra
Guest

this place sounds like a reuniuon of the Old Boys Socialist Club!

Why dont you bugger off to Venezuela then? I’m sure Hugo Chavez would appreciate you bunch of useful imbeciles

Jim
Guest
This is somewhat lengthy, for which I apologise in advance, but I’d like to back up comments by David, Joe, Biker et al. (One great thing about DR is that the standard of debate dwarfs most websites – Sandra is obviously the exception that proves the rule…) IMHO : There’s a tendency to use the term ‘socialism’ as a pejorative shorthand for at least three quite different things, which we should think of separately. One is overt control of the population (e.g. id cards, (e)mail snooping), which is really Totalitarianism and highly undesirable to anyone with libertarian tendencies, whether they’re… Read more »
Lachlan
Guest
Crumbs I wish we did live in an anarchy state where people are truly free. However human nature does not allow it. People will always take advantage of others. The options we are left with are always tied to ideologies which are all preposterous. A socialist prime minister says he will take from the rich and give to the poor..while a paying himself a million dollars a year. OK In reality any group with excessive privelage/power to take capital from a population can be a central planner and contribute to market distortions. These include governments, banks and large corporations. Ideologies… Read more »
Lachlan
Guest

The same relationships play out everyday on a smaller scale wherever people meet/relate to each other…families, friendships, clubs, schools, religeous groups etc etc. The top feeders are not in it alone.
I’m not discounting the efforts of people trying to be different but they are outnumbered.

bearamundi
Guest
Yes, I agree, you cannot defeat the Machinations of Interest, and that it is not worth it to think too much about it anyway. If Marx and Thomas Paine were eclipsed then there is no way guys like me stand a snowballs chance in hell. But there are decent people and decency is still alive and kicking. The trick is to figure out where true culture lies on the ground,in real time, so to speak. In the midst of your dealings with others who is really generous? Once you can answer that question then you find the wife who loves… Read more »
Ned S
Guest
“I wish we did live in an anarchy state where people are truly free. However human nature does not allow it. People will always take advantage of others” – Concur fully Lachlan; If human beings are capable of stuffing up a perfectly wonderful concept like Socialism (with Marx’s best answer being Do it or die!), then I dread to think what a balls up we’d make of Anarchy. If the clay that societies are based on really could be changed over time, then all the long term fear and greed and herding stuff written about market psychology would be crap… Read more »
bearamundi
Guest

But Ned, you read Tolstoy, that most poetic Anarchist. And from what I can gather, you enjoy him. Anarchy is for the few, it will never be a social movement for the very reasons you have pointed out. But don’t throw it away, and harden your heart. You can live with contradiction can’t you? And you never know, a few drops of rain can one day become a river.

Ned S
Guest

“You can live with contradiction can’t you?” – One definition of genius goes along the lines of being able to hold totally contradictory thoughts in one’s mind simultaneously without going crazy as I recall it Bear? – And after digesting same and coming to strongly suspect that I was not, and never would be, a genius, I can happily report, that I discovered the age old Russkie answer, that alcohol helps to mute contradictory thoughts! :)

bearamundi
Guest

Ha,Ha!!
Have you seen the T-shirt based on Nokia advertising? it says: ‘Vodka-bringing people together’.

Ned S
Guest

Yeh, back in the old days when the Russkies didn’t have a religion, the boss Russkie poobah apparently invited the Jews and the Muslims and the Christians to all front up and tell him their yarns – The Jews quite wisely figured that the Russkies weren’t likely to stack up against their standards – So stayed home! But both the others fronted – To which the boss Russkie poobah said Well, there is no way my mob will get by without their booze, so Christos it is! :)

Lachlan
Guest
Good afternoon Ned :) Hope I didn’t sound low on the human race. Its not really where I’m coming from though. We can all forgive ourselves and live on. I can take a little calf from its mum, feed it grain and hay, pat it, talk to it, enjoy its company and it enjoys mine, even give it hug…… eventually I kill it and eat it. My conscience allows me to do that. If anyone disagrees I sympathise sincerely. If I dont feed my breeding stock properly (bull and cows) they wouldn’t cycle and the system would collapse. But within… Read more »
Ned S
Guest
G’day Lachlan – “Hope I didn’t sound low on the human race” – Not high; Not low – Realistic is about as good as it gets maybe Lachlan? And Yes, “Vote one for smaller, unintrusive governments. Please spare us the theories about human rights and economic management” is probably as close as I can envisage things getting to a reasonable society anytime – But even then the transition will be slow. (We only officially outlawed slavery in the last nation on earth in 1989 as I recollect?) Marx sort of seems to have thought in terms of the possibility of… Read more »
Lachlan
Guest

“And all this I considered to be the pursuit of perfection. The beginning of it all was of course moral perfection, but that was soon replaced by perfection in general: by the desire to be better not in my own eyes or those of God but in the eyes of other people. And very soon this effort again changed into a desire to be stronger than others: to be more famous more important and richer than others.”
Leo Tolstoy

Wow, heavy stuff fellas.. yeah you got me curious Ned…had to look him up.

Ned S
Guest
I found Tolstoy impressive Lachlan. Mind you, Russians also rave over a poet called Pushkin – Who (from what I’ve seen to date) wrote nothing I’d ever personally feel to re-read (so presume a lot is lost in translation?); Or that Russkies are significantly more romantic than me???; Or that I’m a total Philistine!!! :) – With Pushkin being most recollected in my mind for having croaked at 37 after an agonizing 2 days of being shot in the groin during a duel over someone having bonked someone else’s missus??? – Can only hope it seemed worth all the effort… Read more »
Lachlan
Guest

well he seemed honest, extreme and powerful.. and therefore interesting….from what little I read. I’ll read more sometime Ned.
Night mate :)

Biker
Guest

Anakee? Resisted for years, but was finally won over. Crossed Minilya Creek in flood, two-up, with them. Nearly went sideways ‘over-the-falls’ but we made it, horns blasting from both banks.

http://two-wheels.michelin.com/2w/front/index.jsp?codeRubrique=2092004104045&codePage=2092004104045_10092004102229&lang=EN

No-one followed us for a coupla days… . :)

mike
Guest

…but what if, capitalism is the papa-produces…aaand socialism is the mama-distributes…do you support gay marriage?…

Ned S
Guest

Don’t specifically recall the creek at Anakie Biker? But the beer in their pub was wet! :) :

http://www.smh.com.au/news/Queensland/Anakie/2005/02/17/1108500202073.html

Biker
Guest

Anarchy, Anakee, Anakie… . Don’t think we’re going to get that far south this trip, Ned. Just bought the missus a 14.1 mp underwater digital camera for her birthday… . Maybe I’ll get her the Ducati for Christmas. ;)

Bargeass
Guest

I don’t think the Bodey man has heard of the economic cycle.

The world, including the climate, has always been changing, so get used to it.

If you want less change in your life either go to the moon otherwise you’ll have to wait for death.

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