Socialism. Has it ever worked economically?

[Chris]

Some interesting leaps of faith there. Has this actually happened anywhere?

Switzerland is one example: high wages, low income taxes, low VAT, very high standard of living.

The Irish version was;

Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).

Higher consumption tax was a state intervention. Apart from that Ireland may have injoyed some productivity gains in the early yearts of the boom, but then the government induced construction and property boom took hold. I would say that for at least the last 8 years there has been no gain in productivity in Ireland. Does anyone have detailed GDP figures with a break down by industry for the last 10 years?

If anyone really thinks that higher productivity leads to a situation that "penalising those who earn less" then they don't understand very basic economics or the first thing about what’s happened in this country over the last ten years.

Absolutely. In a purely free-market economy (as taught by the Austrian School of Economics), where government is not allowed to intervene in any way with the economy, and the size of government is always kept to an absolute minimum you would have the following situation: an increase in economic productivity increases revenue for government, which rather than spend this increased revenue, is passed back to the tax payer in the form of lower taxes, which means that everybody gains.

 

[dahamsta]

Socialism, communism, call it what you like.

Reminds me of the guy on George Hook the other day, who in response to a comment about Joe Higgins, said "well, the Wall came down you know". At least George picked up on it.

When the first sentence of your thread about economics demonstrates that you don't know the difference between socialism and communism, it's time to stop typing.

adam

 

[Purple]

Higher consumption tax was a state intervention. Apart from that Ireland may have injoyed some productivity gains in the early yearts of the boom, but then the government induced construction and property boom took hold.

I agree with that though I’d also add the public sector boom to the list; massive increases in numbers and substantial increases in pay which flooded money into an overheated economy. I contend that this had as much or more of an effect on pay inflation that the construction bubble.

 

[Complainer]

Switzerland is one example: high wages, low income taxes, low VAT, very high standard of living.

How do you measure 'very high standard of living'. I see Switz coming behind Ireland on the Human Development Index, though those figures are a little dated. They are low on obesity measures (must be exporting all the chocolate). They seem to be right in the middle of the tables for developed counties on measures like infant deaths, drug use, imprisonment rates, trust measures, so I wondering what measures you were using?

Higher consumption tax was a state intervention.

But low income tax wasn't? Is it just those decisions that you don't like that you label 'interventions'?

 

[Chris]

How do you measure 'very high standard of living'. I see Switz coming behind Ireland on the Human Development Index, though those figures are a little dated. They are low on obesity measures (must be exporting all the chocolate). They seem to be right in the middle of the tables for developed counties on measures like infant deaths, drug use, imprisonment rates, trust measures, so I wondering what measures you were using?

Yes Switzerland is behind Ireland, but the HDI rating of the top 10 countries are minutely different. However, Switzerland achieves this top 10 spot with extremely low taxes. Add to that higher wages and an increadibly good health service and system, based on universal private health insurance, that costs less per person than the Irish system and delivers hell of a lot more. Swiss unemployment is around 4%, and this in a country that has a very large financial sector during the worst financial crisis of modern history.
I have also visited Switzerland a couple of times, and have friends who have moved their in recent years, and feedback is extremely good.

But low income tax wasn't? Is it just those decisions that you don't like that you label 'interventions'?

My point being, that lowering one tax and increasing another to please the governments needs/wants is direct intervention. E.g. stamp duty on houses was gradually reduced and then abolished for FTBs which fueled the housing bubble; at the same time Ireland had one of the highest VAT rates in the EU.
All forms of taxes are interventions and should always be kept to an absolute minimum. This can only be achieved by having a government that is as small as possible, which directly contradicts socialism.

 

[Complainer]

Yes Switzerland is behind Ireland, but the HDI rating of the top 10 countries are minutely different. However, Switzerland achieves this top 10 spot with extremely low taxes. Add to that higher wages and an increadibly good health service and system, based on universal private health insurance, that costs less per person than the Irish system and delivers hell of a lot more. Swiss unemployment is around 4%, and this in a country that has a very large financial sector during the worst financial crisis of modern history.
I have also visited Switzerland a couple of times, and have friends who have moved their in recent years, and feedback is extremely good.

OK, so it is all anectodal evidence, based on a couple of visits and a couple of friends. Hardly a basis for an economics arguement.

My point being, that lowering one tax and increasing another to please the governments needs/wants is direct intervention. E.g. stamp duty on houses was gradually reduced and then abolished for FTBs which fueled the housing bubble; at the same time Ireland had one of the highest VAT rates in the EU.

I'm not clear why you persist in labelling Govt policies that you don't like as 'intervention'. Any Govt policy, whether increasing or lowering taxes are interventions.

All forms of taxes are interventions and should always be kept to an absolute minimum. This can only be achieved by having a government that is as small as possible, which directly contradicts socialism.

Apart from this being your personal opinion, is there any good reason why it should be taken as Govt policy? Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?

 

[Purple]

OK, so it is all anectodal evidence, based on a couple of visits and a couple of friends. Hardly a basis for an economics arguement.

no, he added anecdotal evidence after giving some facts.

I'm not clear why you persist in labelling Govt policies that you don't like as 'intervention'. Any Govt policy, whether increasing or lowering taxes are interventions.

The less the government takes out of the economy and redirects back in the less they are intervening.

Apart from this being your personal opinion, is there any good reason why it should be taken as Govt policy? Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?

Will he change your mind if he does?

 

[Chris]

no, he added anecdotal evidence after giving some facts.


The less the government takes out of the economy and redirects back in the less they are intervening.

Thanks Purple, this answers the questions.

Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?

As already mentioned, the Swiss case is not unproven. Another example of huge economic gains in absence of most government interventions is Germany after WWII (I already posted a comment and link, but here it is again: http://mises.org/daily/3635).
The UK and most of Europe, along with North America had the biggest, continuous (100+ years) economic growth in history during the industrial revolution, which was led by private enterprises at a time when taxation and government intervention was at a minimum. This led to an improvement in living standards and life style of everyone, unmatched, in even the remotest sense, by anything that any government has ever tried.
BTW, my argument is based on Austrian Economics and is not just some theory I have come up with.

 

[zephyro]

It should also be remembered that the free market is an artificial construct and open competition can only exist with intervention and active regulation from governments.

Possibly but some people think otherwise: http://en.wikipedia.org/wiki/Anarcho-capitalism

 

[mainasia]

Thanks Purple, this answers the questions.



As already mentioned, the Swiss case is not unproven. Another example of huge economic gains in absence of most government interventions is Germany after WWII (I already posted a comment and link, but here it is again: http://mises.org/daily/3635).
The UK and most of Europe, along with North America had the biggest, continuous (100+ years) economic growth in history during the industrial revolution, which was led by private enterprises at a time when taxation and government intervention was at a minimum. This led to an improvement in living standards and life style of everyone, unmatched, in even the remotest sense, by anything that any government has ever tried.
BTW, my argument is based on Austrian Economics and is not just some theory I have come up with.

This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.

Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.

 

[ringledman]

This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.

Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.

China's economic growth stems from an authoritarian free market. They are hardly socialist in the realm of running a large bloated state. You won't find much in the way of socialist 'social services' in China.

People there are expected to look after themselves and their families.

Sinagpore was built on an authoritarian free market that did everything in its power to bring in foreign companies and capital. Low taxes & low state regulation of business under Lee Kuan Yew.

HK - Built off the back of low taxes, low regulation and the rule of business law under the British rule.

Asia is probably the least socialist region of the world and part reason why the 21st century is its century. The socialist/communist states there are opening up, reducing regulation and burdensome state enterprises and welfare.

We in the West are doing the exact opposite, hence why we will eventually have a total collapse of our debt based system.

 

[Purple]

This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.

Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.

China is a super corporation with surfs rather than employees.

 

[Chris]

This could have more to do with technological advances than systems of government e.g. look at China now.

Yes indeed, but all those technological advances came from private enterprises that prospered through innovations. No governments intervened by using taxation to redistribute money into certain sectors. It was the free market and profit/loss system without government intervention that set this time of vast technological and industrial growth in motion.

Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.

China's "total control" is a common misconception. It took a friend of mine 9 months to expand his business by 25 employees in Germany in 2008. Last year he set up his first production facility in China, with 70 employees, and it took him a total of 3 months and far less paper work and regulation to satisfy. China makes it a lot easier to do business than most people think.