Installment # 59

When the Soviet Union collapsed, some writers said that what happened was simply that they ran out of money before we did.  With their planned economy, the redirection of so much of the country’s resources to the arms race left gaping holes in the availability of basic materials and goods needed by the populace.  In the absence of free enterprise and the profit motive, no one was stepping in to “take up the slack,” so to speak.  My limited understanding of a planned economy, from my Stanford days, is that it is a massive and basically impossible job to plan everything, to consider and anticipate everything, and to make the system work as well, or even close to as well as the free enterprise system works.  I must admit that based on logic alone, I don’t really see why our free enterprise system works so well, either.  But I’m not alone.  One of the top Russian leaders back then commented to one of our leaders that socialism works in theory, but not in practice, while capitalism works in practice, but not in theory.  I think in both cases, aspects of human nature are not being considered.

To quote someone who seems never to be unsure about anything, columnist Ann Coulter, writing in early 2001 said in her usual biting, tongue-in-cheek way, “Only a little over a decade ago, the centralized planning of the Eastern bloc was exposed as having created a squalid, poverty-stricken abyss.  Meanwhile, corrupt running-dog lackeys of the capitalist system here in America managed to produce a society in which the poorest citizens have televisions, refrigerators, telephones, and the opportunity to appear on the Jerry Springer Show.”  She also pointed out in one of her columns that an economy needs a concentration of wealth to facilitate investment and growth, the difference being that in a planned economy the wealth is concentrated in the government, as opposed to the citizens (e.g. the 1% we hear so much about).  Good point, which leads me to another: In the oil-rich Arab countries wealth is concentrated in the royal families, where it really isn’t even available for investment in the economy.  Governments at least invest in infrastructure – roads, bridges, dams, etc. But private capital in a free market economy fuels innovation and growth.

In movies like Gigi, My Fair Lady and The Sound of Music we see wealthy families or individuals that do not seem to be doing anything productive.  Professor Higgins had a beautiful home, but no job, apparently; Captain Von Trapp was retired military with a huge, fancy place, but no role in the economy.  The young man who falls in love with Gigi seems to have no occupation or function at all.  I guess we call these the “landed gentry” or the “idle rich.”  By contrast, the movie Sabrina, which takes place on Long Island, had the wealthy man driving into New York City each morning and running a company, providing jobs and creating wealth.  That may be the key difference in the American economy versus many other capitalist countries: the wealthy and successful continue to work, or at least provide leadership for the next generation of business leaders.  They are busy; they are working.

I developed in my mind a very simple picture of free enterprise versus socialism where we have a primitive fishing village.  Each morning the men take up their spears or sticks, wade out into the water, and try to spear some fish to feed themselves and their families.  It takes them all day just to catch enough fish for the village to survive.  Then someone conceives of the fishing net, a tool with which, when completed, a few men can catch enough fish to feed the whole village.  Now if the fishermen appoint, say, one person to stay back in the village and work on creating the fishing net, and agree to share their catches with him and his family, then the fishing net, when completed and placed in service, belongs to the entire village, as does the resulting overabundance of food.  But if the individual who conceived of the fishing net spent all day fishing with the rest of the men, and then sacrificed sleep and family time at night to make the fishing net, then the tool belongs to him.  He should be free to rent it out to others, or catch extra fish and sell them to others or in other ways benefit from his idea and his willingness to work harder than the others.  Of course, the productivity created by this tool creates other opportunities in this society, since now only a portion of the men in a portion of the time are able to catch more than enough fish to feed all, but there is no need to introduce complications here.

Under socialism the state owns the means of production and plans the economy.  In general, the few are not to be unduly rewarded for their extraordinary abilities at the expense of the many that are less able.  The ideal is “From each according to his ability; to each according to his need.”  Yeah, good luck with that!  The first part of the phrase works as long as the individual has the choice to put forth his best or not, and as long as - like our fisherman/net maker - he can expect rewards and benefits commensurate with his efforts and abilities.  The second part of the phrase does not seem to recognize that if people are having their needs met, they have no incentive to contribute to society or to the economy in any helpful way.   So socialism works in theory, but not in practice.

If I may offer another quote from War and Remembrance that describes and maybe supports my confusion, or my contention that I am not alone in my confusion, Wouk has one of his British characters in the early 1940s, writing to an American friend, say: “Your country baffles me: a luxurious unharmed lotus land in which great hordes of handsome dynamic people either wallow in deep gloom, or play like overexcited children, or fall to work like all the devils in hell, while the press steadily drones detestation of the government and despair of the system.  I don’t understand how America works…but it’s an ongoing miracle of sorts.” (Page 396 in my 1,039 page edition).

I recall from my Economics education at Stanford that “economics” or “the economic problem,” if you will, was defined as “The efficient allocation of scarce resources.”  I recall questioning the word “scarce,” arguing that in some countries resources were not necessarily scarce.  The professor’s response was along the lines of the idea that society always wants more; that the desired standard of living is always above the current level; that there is always a significant portion of the population living below a defined “poverty level”; that where humans are concerned, there is never enough.  The word I am focusing on now is “efficient,” noting that it does not say “fair,” “equitable,” or “equal,” or any such similar word.  It seems clear to me that the more we strive for equality, the less efficient we are; and the less efficient, the lower the total output of goods and services in the economy.

One wag posited that a) If we give more money to wealthy people, it will end up in savings accounts and not stimulate the economy much at all, but b) If we give more money to poor people it will end up in the hands of bartenders, drug pushers and prostitutes.  This will stimulate the economy some, but does not help the families living in poverty.   The efficient allocation of resources in a free-enterprise economy is seen to be the best way to grow the economy overall, which in turn helps some groups more than others, but in a sense, “A rising tide raises all boats,” not just the nicest yachts in the harbor.  Another writer commented that the Liberal response to Reagan’s “Trickle down Economics” is Obama’s “Trickle up Poverty!”  The issue is a lot more complicated than any sound bites can address, but the extremes are: either plan everything (socialism) or let the free enterprise system do everything (capitalism).  Neither works perfectly.

Wouk also has a Jewish-American character, seemingly trapped in occupied Europe, express his dismay in his journal with his reiteration of something he says a Greek philosopher had said centuries before Christ: “Democracy satisfies best the human thirst for freedom; yet, being undisciplined, turbulent, and luxury-seeking, it falls time and again to austere single-minded despotism.” (Page 299).  Since the mid 1970s, of course, we have seen the decline of threats from nation-states and the rise of threats by non-governmental terrorist organizations.  Osama Bin-Laden comes to mind as an “austere single-minded despot,” who represented not a country, but an ideology.  There are many more democracies throughout the world today than there were in the 1940s, so the possibility of one or more of them falling to a despot is real, but it would seem that democracy itself is no longer threatened with extinction.  I hope I am right.

As I learn about the rise of Bolshevism in Russia or Nazism in Germany or radical jihad in the Middle East, I can’t help but wonder how a society allows a small group to become a big group and take control of a country.  What kind of citizenry elects a Hitler and allows him to try to eradicate the 11 million or so Jews of Europe?  (He succeeded by about 50%, as the military obeyed his orders).  What kind of people give rise to leaders who think it is a good idea to pull an unprovoked sneak attack on Pearl Harbor, killing some 2,400 young men?  What did the kamikaze pilots believe?  By comparison, the attack on the World Trade Center on September 11, 2001 that killed about 3,000 people of all ages, both genders, various walks of life, was perpetrated by a non-governmental group of like-minded people.  The 19 hijackers thought of themselves as martyrs who were going to be rewarded by Allah.  In this case we need to ask what kind of a government allows the existence of such groups in large enough numbers and with enough funding to do something like that.

As a nation we have quickly become accustomed to the long airport security lines and the restrictions on what can be taken on board.  For young people it has always been this way.  When I worked at Pan Am in the late 1960s and early 1970s, all they tried to do was keep the passenger on the same flight as their luggage, on the theory that a “bad guy” wouldn’t plant a bomb on the same plane that he himself was going to be flying in.  If a passenger checked in a bag and then didn’t show up and board at the gate, the departure would be delayed while we scrambled through the cargo hold looking for that person’s baggage.  These days, of course, we know that there are many poor saps that have been brought up to believe that it would be a great privilege to sacrifice their lives for the cause of radical jihad.   This led a spokesman after 9/11 to point out that “You can’t fight insanity with sanity,” which I’m afraid is true.  I’m afraid that not only are we not better as humans; if anything we are worse, and maybe we are worse off in the ways that really matter.

I remember how some passengers would show up at Pan Am with their belongings wrapped up in a mattress, rolled and tied with rope or belts; or with their things stuffed into a tied off pillow case.  I remember because I had to handle and load this stuff.  Not everybody could afford a nice-looking, matching set of luggage in those days.  Luggage didn’t have wheels in those days, either, so “luggage” was a good name for it, because you had to ‘lug’ it.  We all wonder why in the world it took so long for someone to come up with the idea of putting wheels on luggage.  Now it seems like an obvious “no-brainer.”  If I may digress even further, my 2007 Nissan beeps at me if I turn the ignition off and have forgotten to turn the headlights off.  What a simple fix!  With all the electronics in cars way before that, why didn’t someone come up with that simple reminder?  I mean, power windows were standard many years before someone finally gave us that little reminder about the headlights.  Lastly in this sidetrack, there was never any charge back in those days for checking in a reasonable number of bags, including skis, golf clubs, surf boards, etc, although there must have been some practical limits per person.