True Socialism and Modern Technology

Flamed Diving

Anyone who knows a little bit about history and economics can see that the biggest problems that centrally planned economies had was information. They simply couldn't organise capital and labour as efficiently as a free-market could, and hence produced too many tractors, while not enough shoes, etc. Given that society is becoming more and more interconnected through advancements in technology, these information difficulties could be solved. Do you think it would be possible to attempt such a system in the future, and for it to be successful?

I have thought about it, and came to the conclusion that it would probably still run into the same difficulties (dictatorship, civil liberties lost, lack of incentives), but thought I would throw it out there for discussion.

silverharp

The head of SAP came out with some comment in the 90's that if the soviets had SAP the system would have survived.

Although central planning may have been aided by better information I'd have to disagree with the assertion that the problem with Communism was that it was ahead of its time.

brianthebard

Flamed Diving wrote: »

Anyone who knows a little bit about history and economics can see that the biggest problems that centrally planned economies had was information. They simply couldn't organise capital and labour as efficiently as a free-market could, and hence produced too many tractors, while not enough shoes, etc. Given that society is becoming more and more interconnected through advancements in technology, these information difficulties could be solved. Do you think it would be possible to attempt such a system in the future, and for it to be successful?

I have thought about it, and came to the conclusion that it would probably still run into the same difficulties (dictatorship, civil liberties lost, lack of incentives), but thought I would throw it out there for discussion.

As far as these difficulties go, the last one is not credible, the second one is happening now anyways, the first one just depends on your definition and isn't limited to communism.

With regard to technology, conventional marxism is a stagist view of history, that everything is moving progressively towards a certain goal, eventually leading to communism. I think alternative theories of socialism are being made that oppose development (that are post or anti development theory) and which call for non linear means of measuring progress. As such the integration of technology will be seen as superfluous unless it can be used to help people directly (eg in a hospital).

Flamed Diving

brianthebard wrote: »

As far as these difficulties go, the last one is not credible

There is a wealth of literature, with empirical evidence to the contrary. Once you give the people the fruits of their own labour, they become more prodictive, in general. This is especially so when one looks at the transition from communist farming to semi-private/private land rights in China/Vietnam, for example. I would thought this point to have been blindingly obvious by now. Whats the point in working your arse off on a farm commune when you get the same pay regardless? Could you provide empirical literature that shows this to be 'not credible'?

brianthebard wrote: »

The second one is happening now anyways...

Where? Could you please point me towards current Western countries that are on a par with Stalin, Mao, et al? Or at least are obviously heading in this direction? Just saying things doesn't make it so. Where is the evidence?

brianthebard wrote: »

The first one just depends on your definition and isn't limited to communism...

A dictator. Hitler, Stalin, Mao, et al. Of course this isn't limited to communism, but it does have a 'proud' history when it comes to dictators, it has to be said. I don't think communism is possible on a grand scale without dictatorship, unless some kind of decentralised system can aid the decision-making process, which is where technology might be useful. A kind of 'Wisdom of the Crowds' style integrated system. Of course, this is just fantasy, but so is real socialism, when you think about it.

brianthebard wrote: »

With regard to technology, conventional marxism is a stagist view of history, that everything is moving progressively towards a certain goal, eventually leading to communism.

It hasn't really worked out that way, has it? I think the notion that history has a direction, and hence can be predicted is nonsense. But thats just my opinion.

brianthebard wrote: »

I think alternative theories of socialism are being made that oppose development (that are post or anti development theory) and which call for non linear means of measuring progress. As such the integration of technology will be seen as superfluous unless it can be used to help people directly (eg in a hospital).

I don't quite get what is being said here.

brianthebard

Flamed Diving wrote: »

There is a wealth of literature, with empirical evidence to the contrary. Once you give the people the fruits of their own labour, they become more prodictive, in general. This is especially so when one looks at the transition from communist farming to semi-private/private land rights in China/Vietnam, for example. I would thought this point to have been blindingly obvious by now. Whats the point in working your arse off on a farm commune when you get the same pay regardless? Could you provide empirical literature that shows this to be 'not credible'?

Well the first problem is assuming everyone must be paid the same, the second is that there would be no other reward, the third is that not all needs can be met with a simple wage..should I go on? You have heard of Maslow right?

Where? Could you please point me towards current Western countries that are on a par with Stalin, Mao, et al? Or at least are obviously heading in this direction? Just saying things doesn't make it so. Where is the evidence?

Well Stalin isn't of this time either, but there were plenty of dictators before now. They aren't restricted to any one ideology. To connect communism with dictatorship is to ignore everything communism is about.

A dictator. Hitler, Stalin, Mao, et al. Of course this isn't limited to communism, but it does have a 'proud' history when it comes to dictators, it has to be said. I don't think communism is possible on a grand scale without dictatorship, unless some kind of decentralised system can aid the decision-making process, which is where technology might be useful. A kind of 'Wisdom of the Crowds' style integrated system. Of course, this is just fantasy, but so is real socialism, when you think about it.

I think its imminently possible, it just hasn't been put in place in this form yet, except perhaps in some South American nations.

It hasn't really worked out that way, has it? I think the notion that history has a direction, and hence can be predicted is nonsense. But thats just my opinion.

Well I didn't say Marxism predicted the future, only that they were suggesting a teleological pattern of time. Personally I don't exactly agree with this either.

I don't quite get what is being said here.

What don't you get?

Flamed Diving

brianthebard wrote: »

Well the first problem is assuming everyone must be paid the same, the second is that there would be no other reward, the third is that not all needs can be met with a simple wage..should I go on? You have heard of Maslow right?

https://faculty-gsb.stanford.edu/mcmillan/personal_page/documents/What%20Can%20North%20Korea%20Learn%201.pdf

Go to page 7, read the section entitled '3. China's Reform Path', and see how private ownership can create the incentives necessary to efficient productivity, far above any previous attempts at wishy-washy 'incentives'.

brianthebard wrote: »

Well Stalin isn't of this time either, but there were plenty of dictators before now. They aren't restricted to any one ideology. To connect communism with dictatorship is to ignore everything communism is about.

Central planning, whenever attempted, has led to dictatorship, given enough time. Mr Chavez will be the next. My assertion is that it is impossible to have a total centralised economy, without it inevitably leading to dictatorship. This has be seen time and again ad nauseum.

brianthebard wrote: »

I think its imminently possible, it just hasn't been put in place in this form yet, except perhaps in some South American nations.

But only if the inevitability of dictatorship can be removed. Perhaps via technology removing the need for such a huge centralization of power.

brianthebard wrote: »

What don't you get?

The entire paragraph, I didn't get what you were saying. Could you rephrase it?

brianthebard

Flamed Diving wrote: »

https://faculty-gsb.stanford.edu/mcmillan/personal_page/documents/What%20Can%20North%20Korea%20Learn%201.pdf

Go to page 7, read the section entitled '3. China's Reform Path', and see how private ownership can create the incentives necessary to efficient productivity, far above any previous attempts at wishy-washy 'incentives'.

Will do that and come back to it.

Central planning, whenever attempted, has led to dictatorship, given enough time. Mr Chavez will be the next. My assertion is that it is impossible to have a total centralised economy, without it inevitably leading to dictatorship. This has be seen time and again ad nauseum.

Central planning is anathema to socialism/communism.

The entire paragraph, I didn't get what you were saying. Could you rephrase it?

Development theory is a theory of modernisation, of how countries modernise, how some are "modern" and some are not, how some are "developed" and some are not. The theory of development follows a linear progression; I have a sail boat. I put a steam engine in it. I have progressed, I can travel faster, further, carry more. I'm now more modern. It is linear because of this, and it imposes a model that says such and such is developed, it has this, such and such is not, it doesn't have this.
To measure progress/development in a different way is to not be linear in terms of cash, or property or technology, but to measure benefits to the people, education, health, etc. Thus a country like Cuba might be more developed than Ireland because of a vastly better health and education system, for instance. Hope that makes sense.

Flamed Diving

brianthebard wrote: »

Central planning is anathema to socialism/communism.

So you mean socialism as a 'revolution of the consciousness'? Something that people will just inevitably all come to agree on? I can see no other way how such a system could be implemented, other than dictatorship.

brianthebard wrote: »

Development theory is a theory of modernisation, of how countries modernise, how some are "modern" and some are not, how some are "developed" and some are not. The theory of development follows a linear progression; I have a sail boat. I put a steam engine in it. I have progressed, I can travel faster, further, carry more. I'm now more modern. It is linear because of this, and it imposes a model that says such and such is developed, it has this, such and such is not, it doesn't have this.
To measure progress/development in a different way is to not be linear in terms of cash, or property or technology, but to measure benefits to the people, education, health, etc. Thus a country like Cuba might be more developed than Ireland because of a vastly better health and education system, for instance. Hope that makes sense.

Ok, I get it. This is a new theme in economic literature, finding ways of measuring 'well being' that moves beyond monetary/capital measurements. Thats a tough one to measure, and will take years, if not decades.

brianthebard

Flamed Diving wrote: »

So you mean socialism as a 'revolution of the consciousness'? Something that people will just inevitably all come to agree on? I can see no other way how such a system could be implemented, other than dictatorship.

Sorry to clarify are you talking about centralised government after a revolution or centralised planning of a revolution? I assumed the first.

Ok, I get it. This is a new theme in economic literature, finding ways of measuring 'well being' that moves beyond monetary/capital measurements. Thats a tough one to measure, and will take years, if not decades.

Well it involves abandoning measuring to an extent, or at least the same conventional means of measurement, which suggest linear progress. Its harder to do, but better results imo. its something that has been involved in sociology for a while, using post-structuralism to critique development, but I imagine its only hit economics recently.

Flamed Diving

brianthebard wrote: »

Sorry to clarify are you talking about centralised government after a revolution or centralised planning of a revolution? I assumed the first.

Well, I take it you are saying that Marxist teachings would assert that a socialist world is inevitable, given time. (if im wrong, read no further!) So I take it that this would mean some kind of revolution (evolution?) of the consciousness in order for people to accept this new social paradigm, without it being forced onto them.
My suggestion is that, irrespective of how such a world comes to be, it is close to impossible to implement this without a highly centralised (and hence all-powerful) government, which is highly likely to tend towards dictatorship, over time. The revolution of the consciousness, in my view, would be the only way that such a society could be built, without the need for such central planners but only if some kind of super-technology that links everyones actions together to a non-human system which carries out the distribution of production and the economy's productive needs accordingly. Hence, eliminating the need for centralisation of power. As I said, this is pure fantasy, but so is the idea that 'the people' will all come to this communal zeitgeist, by necessity or whatever means.

brianthebard wrote: »

Well it involves abandoning measuring to an extent, or at least the same conventional means of measurement, which suggest linear progress. Its harder to do, but better results imo. its something that has been involved in sociology for a while, using post-structuralism to critique development, but I imagine its only hit economics recently.

I wonder whether the tools even exist to create meaningful analysis for such questions.

brianthebard

Flamed Diving wrote: »

Well, I take it you are saying that Marxist teachings would assert that a socialist world is inevitable, given time. (if im wrong, read no further!)

Yes that is what conventional marxist teachings on development/progress would be, but there are many many more ways of looking at the situation using marxist ideologies, that we shouldn't discount it as meaning one thing.

So I take it that this would mean some kind of revolution (evolution?) of the consciousness in order for people to accept this new social paradigm, without it being forced onto them.
My suggestion is that, irrespective of how such a world comes to be, it is close to impossible to implement this without a highly centralised (and hence all-powerful) government, which is highly likely to tend towards dictatorship, over time. The revolution of the consciousness, in my view, would be the only way that such a society could be built, without the need for such central planners but only if some kind of super-technology that links everyones actions together to a non-human system which carries out the distribution of production and the economy's productive needs accordingly. Hence, eliminating the need for centralisation of power. As I said, this is pure fantasy, but so is the idea that 'the people' will all come to this communal zeitgeist, by necessity or whatever means.

I'm quite the fan of Friere these days, so lets talk about what he suggests is needed; a liberation praxis. That is, a teaching that involves the implementation of theory, the combining of theory and action into a praxis. This would involve conscientisation amongst the people, spreading the message and gathering a popular following. Once this is achieved revolution would be possible with or without totally centralised power. For examples, Cuba comes close.

I wonder whether the tools even exist to create meaningful analysis for such questions.

Click the link in my sig below the picture, semanalysis offers such a tool imo.

SkepticOne

Flamed Diving wrote: »

The revolution of the consciousness, in my view, would be the only way that such a society could be built, without the need for such central planners but only if some kind of super-technology that links everyones actions together to a non-human system which carries out the distribution of production and the economy's productive needs accordingly.

How would such a system determine societies needs even if given sufficient information? Would there be a distinction between needs and wants? Should people get what they want or just what it has been determined by experts they need?

The Soviet Union was trying to implement some sort of system when it collapsed. The Allende regime in Chile also attempted something along those lines much earlier. Although these systems never had a chance to be completed, you still have the problem of incentives in a centrally planned economy. Significant reward is expensive but severe punishment is cheap. How do you avoid a system dominated by punishments like the Soviet Union?

It seems to me that the basic problems of a centrally planned economy run deeper than what can be solved by data processing.

Red Hand

Flamed Diving wrote: »

Anyone who knows a little bit about history and economics can see that the biggest problems that centrally planned economies had was information. They simply couldn't organise capital and labour as efficiently as a free-market could, and hence produced too many tractors, while not enough shoes, etc. Given that society is becoming more and more interconnected through advancements in technology, these information difficulties could be solved. Do you think it would be possible to attempt such a system in the future, and for it to be successful?

I have thought about it, and came to the conclusion that it would probably still run into the same difficulties (dictatorship, civil liberties lost, lack of incentives), but thought I would throw it out there for discussion.

Personally, I think that true equality could only be achieved if humans were not in charge/had no input into governing themselves. Something totally inhuman would have to attend to the needs of all people, thus cutting out all chance of any one human or society of people controlling the means of production.

brianthebard

Why? Why can't a society own its own means of production? http://www.greenleft.org.au/2007/698/36281 According to this Cuba has eliminated poverty. While I think that's probably a little bit of exaggeration, its not too far from the truth.

Red Hand

brianthebard wrote: »

Why? Why can't a society own its own means of production?

Cause, while I think people may in theory agree with doling out equality, and yes, logically it makes sense for everyone to be provided for, I don't think it would last for long ( a society where means of production are controlled and the fruits shared out equally along with all that goes with that). Social hierarchy is important in humans, and this is tied who you are, what you are, what you can do, what you can achieve, social currency-a whole host of stuff that is important in human relations, and imo, is pre-programmed into us. Such things don't seem to any way related to the parts of the brain that go,

"Hmmmm...equality-that makes sense!"


I'm rambling and tired-I'll just summarise and say that I take a dim view of humans in this regard.

brianthebard

I think you're taking a far too narrow view of humanity. Science is not a good basis for examining society. I see you dismissed the Cuban example, any particular reason for that? It may not be possible to achieve 100% equality, but the system in place at the minute is working against equality, and the Cuban system is working towards it. If humans were pre programmed then neither would be possible.

Flamed Diving

I think commuism is perhaps possible on a small scale, such as Cuba, although I know very little about Cuba. But seeing as Cuba is such a small country and economy I wouldn't think it to be impossible. Although I think for large economies it is easy to see how the obvious problems would arise. However, Cuba still fell to the issues of dictatorship, as communism is always doomed to.

brianthebard

Flamed Diving wrote: »

I think commuism is perhaps possible on a small scale, such as Cuba, although I know very little about Cuba. But seeing as Cuba is such a small country and economy I wouldn't think it to be impossible. Although I think for large economies it is easy to see how the obvious problems would arise. However, Cuba still fell to the issues of dictatorship, as communism is always doomed to.

Its not a dictatorship.

Red Hand

brianthebard wrote: »

I think you're taking a far too narrow view of humanity. Science is not a good basis for examining society.

Maybe not, but biology is more grounded than the higher social science branches (which are the most complex and least understood imo)

I see you dismissed the Cuban example, any particular reason for that?

Cause, even if I thought that that link was totally factual and unbiased, I don't think such a system will last that long. Conciously/unconciously, some people will strive for more-money/social status/social currency/mates..some fulcrum that will allow them a greater advantage. How long has Cuba been socialist? Revolution in '59, so all these improvements take place over 50 years-that's a blip in "civilisation", and an eyeblink in as regards our specie's history. Someone will have to cream some off for themselves...

It may not be possible to achieve 100% equality, but the system in place at the minute is working against equality, and the Cuban system is working towards it. If humans were pre programmed then neither would be possible.

We are pre-programmed for language. Likewise, I believe we are preprogramed with certain drives-to learn, acquire, defend etc. All in different amounts for different people as there is a certain amount of variety in us. There are certain varieties in conjunction with environment that will produce dictators/business leaders/politicians/power seekers.

You can never be sure of someone's motives for doing something, concious or unconcious (or more likely a mixture of both)

gar32

JI would like to get back to using technology for politics and people. I feel some sort of online voting could be set up in the near future where people can vote on issue of the country. Like a referendum once a week or maybe on going votes on subject where maybe even a boards.ie system to talk about the issue before hand. Estonia will be voting using mobile phones next year. Internet & mobile security is improving weekly. People spend millions online ever day so I am sure a tamper proof system could be invented if needed. Pin numbers, codes, password or maybe even finger print scanner. Maybe not full on socialism but a more involved way of the masses running the country. I for one feel the power is been taken from the normal people more & more. Lisbon etc leave to much power in too few hands. I don’t want 1 person looking out for all my interest or the countries interests. I want to be involved and have a say in what happens. Look at the USA where you can for the right or the almost right parties. I say give the power back to the people but lets do it slowly bit by bit.

P>S> I am not talking about them s&*t electronic voting machines some one with half a brain in the government got.

Permabear

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Flamed Diving

brianthebard wrote: »

Its not a dictatorship.

Ok then, a leader that won't quit, until recently. Whatever.

Flamed Diving

donegalfella wrote: »

This post has been deleted.

I already know why. I'm just putting a question out there for discussion, not for people to make authoritative, one lined statements of 'fact'.

brianthebard

Flamed Diving wrote: »

Ok then, a leader that won't quit, until recently. Whatever.

They have elections in Cuba, and you don't need to be a party member to be elected either. Plus Castro didn't hold anything near supreme power. But you know, whatever.

Flamed Diving

brianthebard wrote: »

They have elections in Cuba, and you don't need to be a party member to be elected either. Plus Castro didn't hold anything near supreme power. But you know, whatever.

I'm rather suspicious of anyone who holds power for that long. If you wish to direct me to any readings, I would be happy to learn more about why I am wrong.

brianthebard

Well the link I posted on the previous page for a start. Also Castro wasn't president from the beginning, he chose someone else but they weren't up to the task. In fact it was a few years iirc before he actually took political power, despite leading the revolution. And when he did it was with the popular support of the people. I will have a look for sources on how much power he actually held, but considering the popular elections that are held and the council that passes most of the laws, its only really enemies of Cuba that seriously consider Cuba to be a dictatorship. To my mind there's little or no difference between it and the US two party system.

Flamed Diving

brianthebard wrote: »

Well the link I posted on the previous page for a start. Also Castro wasn't president from the beginning, he chose someone else but they weren't up to the task. In fact it was a few years iirc before he actually took political power, despite leading the revolution. And when he did it was with the popular support of the people. I will have a look for sources on how much power he actually held, but considering the popular elections that are held and the council that passes most of the laws, its only really enemies of Cuba that seriously consider Cuba to be a dictatorship. To my mind there's little or no difference between it and the US two party system.

I don't hold the US in very high regard wrt its democratic 'validity' (touche or turd sandwich). But that is well off topic.

brianthebard

Ok well returning to the OP, there is a suggestion that the "free-market" will always self correct, but the notion of a free market is extremely tenuous and as much of a myth as people tell me socialism is. So I would question the assumption that the free market is more or less efficent at organising the economy, especially going on the last ten-fifteen years of it, as speculation became more and more aligned to one particular commodity.

Secondly, if we consider centralisation to be against the tenets of socialism/Communism, then the introduction of more sophicated means of technological management would be moving further away from the ideal rather than closer. Although most people in favour of capitalism will not admit it, there is a growing acceptance in some areas of academia/or by some theorists that capitalism veers towards monopoly at every opportunity (Braudel, Sweezy, Wallerstein). Thus the use of technology as first outlined would bring us closer to the "ideal" or most pure version of capitalism as outlined by these and other theorists. This is not good.

Flamed Diving

brianthebard wrote: »

Ok well returning to the OP, there is a suggestion that the "free-market" will always self correct, but the notion of a free market is extremely tenuous and as much of a myth as people tell me socialism is. So I would question the assumption that the free market is more or less efficent at organising the economy, especially going on the last ten-fifteen years of it, as speculation became more and more aligned to one particular commodity.

Secondly, if we consider centralisation to be against the tenets of socialism/Communism, then the introduction of more sophicated means of technological management would be moving further away from the ideal rather than closer. Although most people in favour of capitalism will not admit it, there is a growing acceptance in some areas of academia/or by some theorists that capitalism veers towards monopoly at every opportunity (Braudel, Sweezy, Wallerstein). Thus the use of technology as first outlined would bring us closer to the "ideal" or most pure version of capitalism as outlined by these and other theorists. This is not good.

Unfettered markets do not behave the way the some people would like to think they do, in general. And, yes in practice they do tend towards monopoly and all the problems associated with it. The only place that unfettered markets come to a desirable conclusion are in mathematical models, or in small, narrow markets where most of the axioms of these markets can be met (such as a local farmers market, selling homogeneous produce). Therefore for free markets to reach their best potential they require a little control. This can be partially achieved by organising the rules of the game so as to avoid the issues outlined above. But of course this is easier said than done, and there is no 'perfect' solution, given the sheer complexity of economics in reality. That is why I am an advocate of the balanced approach to economic policy, espoused by the likes of Joseph Stiglitz and Paul Krugman. It is possible to mix the better elements of unfettered capitalism and central-planning/socialism to achieve a balanced outcome. Again, this is kinda veering off topic-ish.

Permabear

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Flamed Diving

donegalfella wrote: »

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I did.

donegalfella wrote: »

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I don't consider newspapers to be reliable sources of evidence, hence I don't read them. By definition, all economies are mixed, some lean towards the left more, and some to the right. Unless I'm wrong, these economies are not all 'moving inexorably towards socialism—the power of the state increasing as the power of the free market diminishes', so that little hypothesis doesn't really hold up to whatever journalist's opinion you just regurgitated.

Please try and come up with something more useful, next time.

Permabear

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Flamed Diving

donegalfella wrote: »

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A small market, such as a farmers market (homogeneous goods, perfectish information, freedom of entry, etc) can satisfy some, if not most of the mathematical axioms required for unfettered markets to work efficiently. But even in these markets, some minor intervention is needed, in the form of rules/regulations, which Stiglitz, among others show in their paper below.

donegalfella wrote: »

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Ah, the classical school. The very reason why we are in the mess we are in right now. You know, it was Stiglitz and others who developed theories which showed that all the assumptions the classical school made in their models are total nonsense. Here is one example:

http://ideas.repec.org/a/tpr/qjecon/v101y1986i2p229-64.html

I wish people would move on from this von Mises, et al, nonsense. Most of its proponents have never even seen the models (and axioms) behind these theories. I am astonished that people still believe that markets somehow solve themselves, if left unfettered. This has been shown to fall apart time and again, especially so in the 1990's. Russia's transition alone should be a lesson in this.

donegalfella wrote: »

Reading newspapers can occasionally be useful for broadening one's intellectual horizons.

Newspapers are a waste of time. Manipulative, slanted tripe, imo. If you want an opinion on a topic, hand-fed to you, I guess they are useful.

donegalfella wrote: »

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Perhaps you should listen to your own advice.

Permabear

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Flamed Diving

**** me. I spent the past 20mins writing a response, and when I clicked post, I was brought back to the login page. The post is gone, methinks.

To the mods, is there any chance of digging that up?

EDIT: Just went through my browser history, and the ****ing thing is gone. It was quite a beauty. I'm gonna give it a day before I write that again.

Permabear

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Flamed Diving

donegalfella wrote: »

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If by dog, you mean Dell. Then yes.

Permabear

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Flamed Diving

Ok, my errands for the day took me a much shorter time than I thought. So lets try again. I will copy & paste before posting this time!

donegalfella wrote: »

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I think you are somewhat confused here. I was referring to microeconomic modelling, which is where the idea of markets solving themselves comes into play. Macroeconomics is the aggregate of these situations, although I find the neoclassical models for this field equally flawed.

donegalfella wrote: »

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No, because I was not discussing macroeconomics in the portion your quoted just there. You seem to be confusing the two fields. I recommend reading a entry-level economics textbook, in order to alleviate your confusion. But of course, you also seem to be assuming that the likes of von Hayek and Friedman rely on literal logic when they write the books you have been reading (Road to Serfdom, Freedom to Choose?). What you fail to realise is that the logic they use to construct these arguments are derived from the models they use. This is especially the case with Friedman. In their world, markets magically solve themselves because they do so in their models. It was only in the 80's and 90's that these assumptions were truely tested, and tragically, they failed.

donegalfella wrote: »

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Of course not, but you cannot develop economic policies for a country based on literal logic. Therefore economic models are developed for the purpose of understanding how the economy works, and how these can be used to create future economic policy. This is what economists do, after all. Unfortunately, the neoclassical school relied heavily on their outdated models, much to the detriment of emerging economies, in the 90's, and in the developed world today.

donegalfella wrote: »

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I have no idea what this means. But the problems we face today are a direct result of the process of deregulation which stretches back to the 1970/80's, which was very much the product of neoclassical thinking. Before then, the actions of banks was more restricted, and we had a far more stable system as a result. The neoclassicalist stormed in and asserted that by deregulating the market, we would arrive at some kind of pareto optimal solution, just like the maths suggested. Over the next quarter century the regulations were removed and the bubbles grew, leading us to where we are today. A burst bubble. People are still attempting free-market based solutions to the problem, but they are not working, and will continue to fail unless the problems of the way the system is set up are addressed.

donegalfella wrote: »

Actually I don't know that at all. And I'm loathe to accept your assertion that Stiglitz has exposed all of the assumptions made by entire schools of economic thought as "total nonsense."

But you fail to acknowldge the implications that these new theories (it wasn't Stiglitz alone who arrived at these conclusions, but he is the most popular one) had. They removed two of the most fundamental axioms of the neoclassical microeconomic models. 1) Markets have perfect information. 2) There are no externalities. Of course these problems seem obvious, when you think about them, but the neoclassical school were using these models to create policy proposals. You take those two axioms away, and the whole thing falls apart, like a house of cards. To be fair, you do need an advanced degree in economics to see why this is, so I can understand why this is not clear, to some.

donegalfella wrote: »

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No, my arguments are based on theory and evidence. As far as I can see, your's are simply based on dogma.

donegalfella wrote: »

(Oh, by the way, I don't think "classical school" means what you think it means, either.)

You are wrong. I have a fuller understanding of their arguments than you could hope for. All you have is the coffee-table economics books you read. I have read the theories underlying those words.

donegalfella wrote: »

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But the project has failed. We have had a quarter century of neoclassical application of theory and it has led to nothing but instability. It destroyed most of the transition economies of the 90's, it destroyed the emergent economies of East Asia. It has created a world financial collapse. These models do not work.

donegalfella wrote: »

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Of course they model the theories, what else are you supposed to do with them? How can you test a scientific theory without modelling it? But, I repeat, the models have been tried, and they have failed. Just the example of Russia alone is enough to show this. The neoclassical ideal was attempted through the Washington Consensus. Their models were flawed, we knew that they were, but their dogma led them to implement them, regardless. They failed. This is called evidence. You seem to be relying entirely on arguments from authority. Do you think that just because a theory has some kind of history, that it should be above questioning? How far would science get if we took that approach? Everything is open to criticism, and if the evidence is overwhelming against them, and if new theories shed light on the fallacies of these theories, then they should either be updated or cast aside.

donegalfella wrote: »

Again, this is jejune and naive reasoning. Do you really think that free-market economists ignore the complex interconnectedness among economics, law, philosophy, science, religion, political theory, and so on...? :rolleyes:

Yes, they do. The Washington Consensus alone is a perfect example of this. One model fits all, irrespective of the culture of the recipient country. It failed, again and again. Here are more examples of empirical literature attempting to justify this:

http://www.fbird.com/assets/MancurOlson_on_Transition_Econ__732003152238.pdf

http://elsa.berkeley.edu/~chad/ajr2001.pdf

As far as neoclassicalists are concerned, culture, geography have little, if any role to play in development. Its all about 'institutions'. Which could be categorised under 'law'. But when you read about the involvement of the IMF/WB in the transition of Russia's economy, pay particularly close attention to role these institutions played in ensuring the correct laws/regulations were in place to ensure a desirable outcome. I will leave that up to the audience to decide. There is a wealth of literature out there on the topic. The question is: Did the Washington Consensus ensure that the correct laws were in place before they imposed unfettered capitalism, or did they simply apply outmoded economic models, where every outcome is optimal, and imposed lax regulations to allow a tiny cabal rape the country of its resources while the people suffered?

You decide.

donegalfella wrote: »

"Every time a newspaper dies, even a bad one, the country moves a little closer to authoritarianism; when a great one goes, like the New York Herald Tribune, history itself is denied a devoted witness." ~Richard Kluger

A blind man will not thank you for a looking-glass.

Thomas Fuller

Permabear

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brianthebard

You're both wrong. I'm not going to do a line by line quote off cause that's ghey, but I will say that the farmer's market example will not prove either of ye right. Its a very specific niche market, which has a virtual monopoly on its products and the lifestyle it is selling. It is quite unregulated, but it exists within the framework of a much larger grocery market as well, so it is not simply self regulating.

Donegal, I'm not going to go through all your post either, but the question about the US speculation bubble needs to be addressed. Yes its true that the US is not directly responsible for the Irish bubble, but the same speculative processes were at work in the US, Ireland, the UK, and other countries.

Permabear

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Flamed Diving

donegalfella wrote: »

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Christ almighty. You are tripping over yourself here. You are demanding examples, yet I have provided them. You ask me to document claims, yet I have provided examples of published literature. You don't even understand why I provided the example of the farmers market, and you insist that it is a macroeconomic example. You continually misrepresent what I am saying, its almost as if you are debating someone else! I'm really not sure what you are looking for. In fact, I'm not even sure you do. I did my best in the last post to address your queries, there isn't much more I can say without repeating myself.

Permabear

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Flamed Diving

ARRRRGH! The exact same thing happened to me, as earlier. ****ing hell!!!

I give up.

Permabear

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Red Hand

donegalfella wrote: »

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The Russian economy in the early 90's.

brianthebard

donegalfella wrote: »

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The culmination of this would be the present financial situation.

SkepticOne

Jeremiah 16:1 wrote: »

The Russian economy in the early 90's.

Though in fairness this was most likely due to problems arising from the previous failed system.

asdasd

The culmination of this would be the present financial situation.

at the very very worst 5% will be dropped off world GDP. Meanwhile North Korea starves, whilst China is 10,000% richer than when it followed the strict Marxist model.

Frankie Lee

Just thought this would be relevant:

By Noam Chomsky

The Washington Consensus

The neoliberal Washington consensus is an array of market oriented principles designed by the government of the United States and the international financial institutions that it largely dominates, and implemented by them in various ways-for the more vulnerable societies, often as stringent structural adjustment programs. The basic rules, in brief, are liberalize trade and finance, let markets set price ("get prices right"), end inflation ("macroeconomic stability"), privatize. The government should "get out of the way"-hence the population too, insofar as the government is democratic, though the conclusion remains implicit. The decisions of those who impose the "consensus" naturally have a major impact on global order. Some analysts take a much stronger position. The international business press has referred to these institutions as the core of a "de facto world government" of a "new imperial age."

Whether accurate or not, this description serves to remind us that the governing institutions are not independent agents but reflect the distribution of power in the larger society. That has been a truism at least since Adam Smith, who pointed out that the "principal architects" of policy in England were "merchants and manufacturers," who used state power to serve their own interests, however "grievous" the effect on others, including the people of England. Smith's concern was "the wealth of nations," but he understood that the "national interest" is largely a delusion within the "nation" there are sharply conflicting interests, and to understand policy and its effects we have to ask where power lies and how it is exercised, what later came to be called class analysis.

The "principal architects" of the neoliberal "Washington consensus" are the masters of the private economy, mainly huge corporations that control much of the international economy and have the means to dominate policy formation as well as the structuring of thought and opinion. The United States has a special role in the system for obvious reasons. To borrow the words of diplomatic historian Gerald Haines, who is also senior historian of the CIA, "Following World War II the United States assumed, out of self-interest, responsibility for the welfare of the world capitalist system."

***

... There have been many experiments in economic development in the modern era, with regularities that are hard to ignore. One is that the designers tend to do quite well, though the subjects of the experiment often take a beating.

The first major experiment was carried out two hundred years ago, when the British rulers in India instituted the "Permanent Settlement," which was going to do wondrous things. The results were reviewed by an official commission forty years later, which concluded that "the settlement fashioned with great care and deliberation has unfortunately subjected the lower classes to most grievous oppression," leaving misery that "hardly finds a parallel in the history of commerce," as "the bones of the cotton-weavers are bleaching the plains of India."

But the experiment can hardly be written off as a failure. The British governor-general observed that "the 'Permanent Settlement,' though a failure in many other respects and in most important essentials, has this great advantage, at least, of having created a vast body of rich landed proprietors deeply interested in the continuance of the British Dominion and having complete command over the mass of the people." Another advantage was that British investors gained enormous wealth. India also financed 40 percent of Britain's trade deficit while providing a protected market for its manufacturing exports; contract laborers for British possessions, replacing earlier slave populations; and the opium that was the staple of Britain's exports to China. The opium trade was imposed on China by force, not the operations of the "free market," just as the sacred principles of the market were overlooked when opium was barred from England.

In brief, the first great experiment was a "bad idea" for the subjects, but not for the designers and local elites associated with them. This pattern continues until the present placing profit over people. The consistency of the record is no less impressive than the rhetoric hailing the latest showcase for democracy and capitalism as an "economic miracle"-and what the rhetoric regularly conceals. Brazil, for example. In the highly praised history of the Americanization of Brazil that I mentioned, Gerald Haines writes that from 1945 the United States used Brazil as a "testing area for modern scientific methods of industrial development based solidly on capitalism." The experiment was carried out with "the best of intentions." Foreign investors benefited, but planners "sincerely believed" that the people of Brazil would benefit as well. I need not describe how they benefited as Brazil became "the Latin American darling of the international business community" under military rule, in the words of the business press, while the World Bank reported that two-thirds of the population did not have enough food for normal physical activity.

Writing in 1989, Haines describes "America's Brazilian policies" as "enormously successful," "a real American success story." 1989 was the "golden year" in the eyes of the business world, with profits tripling over 1988, while industrial wages, already among the lowest in the world, declined another 20 percent; the UN Report on Human Development ranked Brazil next to Albania. When the disaster began to hit the wealthy as well, the "modern scientific methods of development based solidly on capitalism" (Haines) suddenly became proofs of the evils of statism and socialism-another quick transition that takes place when needed.

To appreciate the achievement, one must remember that Brazil has long been recognized to be one of the richest countries of the world, with enormous advantages, including half a century of dominance and tutelage by the United States with benign intent, which once again just happens to serve the profit of the few while leaving the majority of people in misery.

The most recent example is Mexico. It was highly praised as a prize student of the rules of the Washington consensus and offered as a model for others-as wages collapsed, poverty increased almost as fast as the number of billionaires, foreign capital flowed in (mostly speculative, or for exploitation of cheap labor kept under control by the brutal "democracy"). Also familiar is the collapse of the house of cards in December 1994. Today half the population cannot obtain minimum food requirements, while the man who controls the corn market remains on the list of Mexico's billionaires, one category in which the country ranks high.

***

How Countries Develop

... In the eighteenth century, the differences between the first and third worlds were far less sharp than they are today. Two obvious questions arise

1. Which countries developed, and which not?

2. Can we identify some operative factors?

The answer to the first question is fairly clear. Outside of Western Europe, two major regions developed the United States and Japan-that is, the two regions that escaped European colonization. Japan's colonies are another case; though Japan was a brutal colonial power, it did not rob its colonies but developed them, at about the same rate as Japan itself.

What about Eastern Europe? In the fifteenth century, Europe began to divide, the west developing and the east becoming its service area, the original third world. The divisions deepened into early in this century, when Russia extricated itself from the system. Despite Stalin's awesome atrocities and the terrible destruction of the wars, the Soviet system did undergo significant industrialization. It is the "second world," not part of the third world-or was, until 1989.

We know from the internal record that into the 1960s, Western leaders feared that Russia's economic growth would inspire "radical nationalism" elsewhere, and that others too might be stricken by the disease that infected Russia in 1917, when it became unwilling "to complement the industrial economies of the West," as a prestigious study group described the problem of Communism in 1955. The Western invasion of 1918 was therefore a defensive action to protect "the welfare of the world capitalist system," threatened by social changes within the service areas. And so it is described in respected scholarship.

The cold war logic recalls the case of Grenada or Guatemala, though the scale was so different that the conflict took on a life of its own. It is not surprising that with the victory of the more powerful antagonist, traditional patterns are being restored. It should also come as no surprise that the Pentagon budget remains at cold war levels and is now increasing, while Washington's international policies have barely changed, more facts that help us gain some insight into the realities of global order.

... the question of which countries developed, at least one conclusion seems reasonably clear development has been contingent on freedom from "experiments" based on the "bad ideas" that were very good ideas for the designers and their collaborators. That is no guarantee of success, but it does seem to have been a prerequisite for it.

Let's turn to the second question How did Europe and those who escaped its control succeed in developing? Part of the answer again seems clear by radically violating approved free market doctrine. That conclusion holds from England to the East Asian growth area today, surely including the United States, the leader in protectionism from its origins.

Standard economic history recognizes that state intervention has played a central role in economic growth. But its impact is underestimated because of too narrow a focus. To mention one major omission, the industrial revolution relied on cheap cotton, mainly from the United States. It was kept cheap and available not by market forces, but by elimination of the indigenous population and slavery. There were of course other cotton producers. Prominent among them was India. Its resources flowed to England, while its own advanced textile industry was destroyed by British protectionism and force. Another case is Egypt, which took steps toward development at the same time as the United States but was blocked by British force, on the quite explicit grounds that Britain would not tolerate independent development in that region. New England, in contrast, was able to follow the path of the mother country, barring cheaper British textiles by very high tariffs as Britain had done to India. Without such measures, half of the emerging textile industry of New England would have been destroyed, economic historians estimate, with large-scale effects on industrial growth generally.

A contemporary analog is the energy on which advanced industrial economies rely. The "golden age" of postwar development relied on cheap and abundant oil, kept that way largely by threat or use of force. So matters continue. A large part of the Pentagon budget is devoted to keeping Middle East oil prices within a range that the United States and its energy companies consider appropriate. ... one technical study of the topic ... concludes that Pentagon expenditures amount to a subsidy of 30 percent of the market price of oil, demonstrating that "the current view that fossil fuels are inexpensive is a complete fiction," the author concludes. Estimates of alleged efficiencies of trade, and conclusions about economic health and growth, are of limited validity if we ignore many such hidden costs...