The myth of a democratic socialist society funded by capitalism is finished

A brilliant article in The Telegraph by Janet Daley about the myth that governments can continue to fund “entitlements”  from the taxes of the wealth producers. She discusses that only the US, with its cut and thrust politics are mature enough to have the debate that is needed.

The cowardice of politicians the world over to confront the entitlement mentality is dooming us to economic failure.

The question that will demand an answer lies at the heart of the economic crisis from which the West seems unable to recover. It is so profoundly threatening to the governing consensus of Britain and Europe as to be virtually unutterable here, so we shall have to rely on the robustness of the US political class to make the running.

What is being challenged is nothing less than the most basic premise of the politics of the centre ground: that you can have free market economics and a democratic socialist welfare system at the same time. The magic formula in which the wealth produced by the market economy is redistributed by the state – from those who produce it to those whom the government believes deserve it – has gone bust. The crash of 2008 exposed a devastating truth that went much deeper than the discovery of a generation of delinquent bankers, or a transitory property bubble. It has become apparent to anyone with a grip on economic reality that free markets simply cannot produce enough wealth to support the sort of universal entitlement programmes which the populations of democratic countries have been led to expect. The fantasy may be sustained for a while by the relentless production of phoney money to fund benefits and job-creation projects, until the economy is turned into a meaningless internal recycling mechanism in the style of the old Soviet Union.

  • Budgieboy

    What chance that this wisdom gets picked up on and acted on? Not at all hopeful.

  • BW_Lord

    THIS is the debate that I have been impatiently waiting for to occur in NZ. Everything else is merely symptons of this issue and sideshows.

    Unfortunately the proponents of the “feel good” aspects of socialism have managed to drown out the voice of caution for so many years now. I mean where on earth did they think this money was coming from?

  • Granger

    Universal entitlements are not sustainable; however, basic entitlements for those in genuine need, are (sustainable), in a standard economic climate.

  • captain Kidd

    I think most of us here have known this for some time!

  • In Vino Veritas

    Hellelujah. This is a conversation that I have had with left leaning friends. The days of Governments being able to buy votes (Labour 1999, 2002, 2005) are now past. The ability to pay for the handout of these new “entitlements” has gone forever. Though I fear, that when LabourGreensMana do get into power, as they will at some point, they will bankrupt the country.
    I often pointed out on left wing blogs, (before being banned), that whilst socialism has failed consistently, capitalism has never failed. I am then given a raft of examples whereby I counter with “socialism relying on capitalism for its income”. And that capitalism always rises from the ashes of any setback, since it encourages motivation and innovation, whereas socialism doesn’t, since it encourages……… well, nothing.

    • Polish Pride

      There are more than just those two options VV

      • Ronnie Chow

        Go away machine man . Who’s going to pay for your parallel universe machine world ? Fixing , maintenance , parts . No labor as nobody works in your movie script . Completely dysfunctional .

        • Polish Pride

          Ahhh yes Mr Ronnie Chow if you are the real Ronnie Chow. One who has done well out of the current system. You too would have nothing to fear and could even gain much from the system being proposed. But I understand your fear of the unknown – try to master it though.
          And no Ronnie as I have said time and time again people would still have to work. This is not a Utopian vision.
          People would just have to work far less. But if your not going to take the time to understand then you are not likely to ever see the failings of the current system or the benefits of the one being proposed over it.

  • Dave

    This comment in the article deserves more debate
    “The fantasy may be sustained for a while by the relentless production of phoney money”

    Is not all money “phoney money”? Are we not just playing a huge game and pretending that there is value in bits of paper that governments produce. All the while trying to keep in check the population as we pretend that sometimes this money is worth something and yet freely produce more of it

  • BW_Lord

    Thats weird my comment disappeared.
    Anyway, THIS is the debate I have been impatiently waiting for to occur in NZ. For so long now the “feel good” aspects of all this socialist policy has drowned out all voice of caution. And even worse, created all this sense of entitlement.

    All you have to do is look at the model for socialist spending over the last couple decades. Where on earth did they think all this money was coming from, and seriously expect it to continue indefinitely? Continues to blow my mind.

  • johnbronkhorst

    notice …it is the countries Marx went to, directly and indirectly…France and England that have been most severely and detrimentally effected by his “communist manafesto” England spread it to the commonwealth France to the rest of Europe…..Germany however who all but drove him out…..became rich and powerful, USA who ignored him the same….now all countries who are realising that his teachings were blatantly WRONG and damaging to economies and societies are changing away from socialism and are prospering!! China, tiawan, hong kong, india etc…best we follow them!

  • 2ndAmendment

    You still don’t get it: I’m sure it’s your state school education. Reread the article.

    ability to pay for the handout of these new “entitlements” has gone forever

    No – the ability to pay for any entitlements whatsoever has gone forever.

    LabourGreensMana do get into power, …, they will bankrupt the country.

    The country is already bankrupt. NZ, like Greece, Spain, and basically the whole of the “Welfare West” – Western Europe except Norway (worlds 2nd largest LNG producer) – plus ex-colonies that have welfare – is basically down the tubes.

    Key knows this; Key has said this often – which is why it is criminal that he had done precisely nothing to solve the problem, but has wasted four years making it worse!

    • johnbronkhorst

      It has taken 150 years for people to START to realise that Marx was wrong. The welfare dependants and their political supporters (the labour party and greens) have be sucking on the wealfare tit for about 80 years (in NZ), if you just suddenly pull them off the nanny state’s teat now they will scream like any baby does and go running back to the parties that will put them back on the teat (labour/greens) so they must be weaned off gradually!!

      • Polish Pride

        And Capitalism is in its death throws so time for a new system. A system like a Resource Based Economy. No Money = No Bankruptcy. Instead supplying the needs and wants that people have. Just like Capitalism but removing the barriers and evils that come with greed and money. The sooner the better.

        • johnbronkhorst

          what bull shit!!! Capitalism is what built EVERYTHING you see around you. Socialism had the USSR and China with large of the country side living like PRE victorian peasants

          • Polish Pride

            Told you this about 5 times now jb do not attribute gains that have come about because of the invention Of the combustion engine with capitalism. If you want to know what capitalism is responsible for providing or enabling try war for profit, suppression of cancer cures, human trafficking and child pornography – all thanks to people with zero moral compass, sick f&$@s and your beloved capitalism.

            Let me know when your over your addiction to money – there are better ways

          • Magoo

            Does this mean you’ll be moving to the utopia that is the Democratic People’s Republic of North Korea in the near future, or is Greece more preferable?

            http://www.minterdial.com/tag/north-korea/

          • PolishPride

            The solution I am talking about does not require money. It also does not require borrowing from a fractional reserve system that creates money out of thin air. It does not require a hierarchical structure of government. So it is unlike Greece or North Korea or New Zealand or America or any other country. It is a direct solution to the problems that any system needs to solve. It is a system that would eliminate 80% of crime overnight, solve poverty and a myriad of other problems past systems including capitalism have not been able to solve. That is not to say it would not have challenges but any challenges could be resolved. You first need to be able to open your mind to other possibililities. The question is can you do that.

          • johnbronkhorst

            So…Stevenson was lying when he entered the competition to develope the best railway steam engine….for the money!!!!! Ford developed the production line for purely altruistic reasons???

          • Polish Pride

            Stevenson didn’t invent the steam engine John. Henry Ford saw the automobile as a completely sustainable mode of transport with panels originally made from hemp and he envisaged it running on ethanol from hemp crops. But again…….. the significant advances made in the last century were due to the invention of the combustion engine. Not Capitalism.
            The argument you put forward john is also the reason there were child pornography sites. Its not a very good one.
            The thing you fail to grasp is that most inventors invent because it is something they have a passion for. If they get rich under this system yep thats a bonus but for most it is not what drives them to be inventors.
            examples – Tesla, The Wright Brothers, Viktor Schauberger ( I could make this a very long list if you want me too).

          • johnbronkhorst

            didn’t say he did, but he did make locomotion practicle, using it. Capitalism made education common, capitalism was the race to improve ones self necessary and therefore the very mother of invension!.Pornographic web sights are symptom of human nature (a seedy side) and there equivilent has ALWAYS been there. Tsla, the wright bros. etc all had WEALTHY backers who expected financial results….capitalism!!!!!

          • Polish Pride

            I am happy you raised Tesla being backed by a wealthy backer John. That Wealthy backer was JP Morgan as in the banking Magnate JP Morgan. Telsa developed free energy and wanted to make this available to the world. JP Morgan on realising that no profit could be made regardless of the MASSIVE benefit to Man, withdrew the funding. Teslas workshop was raided and burned to the ground. and the work destroyed. That is Capitalism in action holding us back. There are many examples of this as a result of Capitalism and the fact that some will go to any lengths to protect profit. I currently reading a book that I highly recommend. The book is The Source Field Investigations by David Wilcock. The second topic in the book discusses Free energy and the surpression of it. It talks about Dr Stefan Marinov (the head of the European free Energy Movement) who allegedly jumped to his death. Interestingly he ‘jumped’ out of the window backwards and forgot to first write a suicide note. He was also reportedly apparantly a very high spirited and happy individual. I guess he must have just had a really bad day. Then there is Dr Mallove who was incredibly unlucky to have been bludgeoned to death outside his parents home the very day before he was due to go on Coast to Coast (the largest nighttime talk-radio show in America) with a working tabletop free energy device. Earlier in his career he had also been instructed to suppress research into cold fusion that had showed positive results suggesting free energy was being generated from the reaction. You see John This is one industry. There are numerous examples in other industries also – food, medicine to name another couple. Unfortunately we have reached the point where the problems are such that not only can they not be solved by Capitalism. It is in fact Capitalism that is the cause of many of them. Many of the problems will not be solved until we move to another system. And John those inventors may hve had wealthy backers. But those and nearly all inventors would continue to do so in a system with no money so long as they have access to the resources they need. Under Capitalism ‘money’ was the barrier to them getting those resources, hence the need to have a wealthy backer. Remove the money and things become much easier in many ways.

          • Tony

            Sorry PP, but it seems to me that if Tesla had been successful, somebody else would have com up with it by now. Your central assumption seems to be that Tesla was successful. What if he wasn’t and there was no energy free lunch?

            Also, if there was such a thing as free energy wouldn’t the command and control economies (ie those with no/limited capitalism) have managed to recreate the invention of one man by now?

          • Polish Pride

            It has been – there are more than 3000 energy patents that are suppressed. I thought a lot about this in the past and quickly realised that such sn invention frees people so much they arguably would no longer need to rely on the system. Read entire economic systems for countries would collapse. Governments need their people to have a certain amount of reliance on them to maintain their legitimacy.

          • Tony

            I accept that argument, however can’t adherence be achieved in ways other than energy dependence? Mind you, if no one is dependent upon the system, they would still depend on other individuals for free exchange of goods/services – isn’t this Adams’ capitalism?

          • johnbronkhorst

            conspiracy theorist twaddle

          • Polish Pride

            Which part John?
            The 3000 suppressed energy patents
            The free energy Leader that jumped backwards out of a high rise window.
            Or the Free energy inventor bludgeoned to death less that 24 hours before he was to go on National Radio to talk about the free energy device he had invented.
            Or is it your the Child porn, human trafficking, War for profit and poverty of today thanks to your Capitalist system John that is the conspiracy theory?
            Here’s another thing for you to consider John – a conspiracy theory is a theory based on evidence. That does not make it not true.
            There is plenty of evidence to back up what I am saying but then you have shown time and time again that you in all likelihood do not have the desire to even attempt to understand what is being discussed. I guess you can’t teach an old dog new tricks eh John.

          • Tony

            I think that I am starting to understand yr issue PP. You are using Capitalism for describing Corporatism. Capitalism is the free exchange of goods and services whereas Corporatism is a perversion which seeks to control the factors of production via monopoly, cartel or cronyism.

            In this regard Corporatism is actually interchangeable with Socialism in that the factors of Production are not controlled by individuals.

          • Polish Pride

            Possibly Tony but I do not believe you could seperate the two in the real world under the Capitalist system. You can when discussing Theory (as you just have). I think that it is impossible to do in reality though and thus the reason that I have reached the conclusion that we need a new system.
            The same argument goes for communism. Its arguably great in theory, unfortunately it always ends up as a dictatorship that restricts freedoms and opresses its citizens, not too mention exceptionally poor distribution and allocation of resources.

          • Tony

            I can see yr point. I would counter that it is possible to separate Corporatism from Capitalism. Many of the current Corporates (if not all) have directly benefited from cronyism and governments picking winners (and therefore designating losers).

            1. Greater desire to prevent large scale mergers would assist – we have the appropriate legal mechanisms.

            2. Increase marginal tax rates on monopolistic ventures – a challenge I admit

            3. Get shareholders to actually take responsibility for the board of directors and their fees – and of course their company debits

            4. No bail-outs. A bad business model is a bad business model. Corporatism argues for bails outs while capitalists want the scarce resources to used in other ways

            5. Consumers need to choose to exercise their freedom of choice. This will always be the most effective limiter on Corporates.

          • Polish Pride

            Yes I agree that it is possible but think that it is too difficult now that the horse has already bolted so to speak.
            The key reason I keep pushing this is that what I am talking about solves the problems and ensures we never get into this position again.
            My concern is that lets say we stick with the current system and lets say that everything you outlined above although difficult is achieved. I would submit that over time influence from corporates would creep back into politics and as a result legislation would again be watered down or changed to again make the playing field more palitable to corporates. This will be done under the guise of needing to attract foreign investment and foreign corporates or creating an environment for investment that means NZ corporates want to keep operations and jobs here in NZ. Why? Because under the current system you need a job to survive and provide for your family. Jobs, Jobs, Jobs. That and the fact that we compete in a global economy for resources. Now think of Companies as an important resource that bring with them (or tke with them if they off shore) jobs. For this reason Sticking with the current system will in my view (and logically) lead us back to the same position we find ourselves in today.
            What I continue to push gives everyone what they want under capitalism and potentially more through better use of resources and ensures we never end up back with the problems we have right now which in my view are only getting worse.

          • Tony

            ok – do you have a web site / book that I could review in order to understand your perspective and your favoured solution?

          • Polish Pride

            The closest In have come (and it is very close) is Zietgiest Moving Forward which is free on You Tube.
            Where I differ in view is that I would prefer to see direct democracy backed by a constitution and a limited senate type function.

          • Tony

            thank you

          • Polish Pride

            It astounds me that you still can’t grasp that there are more than two options John.

        • Richard McGrath

          Money is a medium of exchange. Better than the current fiat money system would be co-existing and competing currencies backed by real wealth such as precious metals. And no more bailouts for failing banks – let them suffer the consequences of their own choices. Without money you would be looking at a cumbersome system of barter.

          • Polish Pride

            No.. you do not have to have barter in fact you do not have to even have a medium of exchange if the system is set up to satisfy the needs and the wants of the individuals or humans if you prefer living in a society. It is time we evolved from all of this way of thinking.
            One of the greatest lessons from Capitalism is planned obsolescence. it shows us that despite what Capitalism tells us we do not have a scarcity of resources to meed the needs and wants of society. It is actually the opposite which i true. It is possible and high time the system was redesigned to serve and work for man rather than the Man working for the system as it is today. This is the ONLY system where man would be truly free and be able to live a peaceful and fulfilled existence. No other system provides that. Not one.

          • Grant Dawson

            You can still use money but not something that is based on fractional reserve and Govt cant bail any corporate entity out by printing money and pushing debt onto the public.( Iceland got that right). If hugh recession follows that is just a resetting of the system.(Followed by war) People will die and that is unfortunate but there is no other system and we are a finite planet so every 50 to 100 years we have a reset. Keynesian economics has run its course after WW2 and is not working too well. Maybe it was Nixon removing the gold standard , that screwed it up. History repeats so are we 1925 1930 1935 or 1938

          • Polish Pride

            You can (and the fractional reserve system is a big player in many of the causes of the worlds problems, it is simply a huge scale fraudulent system in my view) but you do not need to. You do not need to have a medium of exchange. Not with the level of production and technology that is available today. Its a little hard to explain in a blog post but for a start think about the number of both new and used vehicles sitting on car yards in the town or city nearest you, then expand this view to include the country..then the world. The simple fact is that under the current system if you want something and you have the money you can get it. Evolution of the system is removal of the money. It is no longer needed and in this day and age serves more as a barrier to people getting the things that they need or want or to the problems we have being able to be resolved. Remove the money and you lose nothing. In fact you gain on many many many fronts. Free time, reduction in crime, elimination of poverty and there are many more.
            Capitalism has served its purpose. It is now holding us back. We would already have free energy available to everyone if not for Capitalism

        • Tony

          I’m really not sure what you mean PP. If there was no money (uniformly acknowledged unit of exchange) I’m not sure how goods/services would be exchanged.

          We no-longer barter b/c it was inefficient and did not take account of the need to be able to acquire things in the future that were out of stock/season now.

          Money was invented in order to deal with challenges brought on by season / distance / transportability / language. To say that the killing of money would also kill greed does not seem to make sense. Also of course you seem to combine ‘wealth’ with ‘money’ with ‘greed’.

          Forgive me but you need to provide some more info so that I can understand yr point.

          • Polish Pride

            This is difficult without a whiteboard or a movie but here goes
            The question here is….. given the following
            The level of technological advancement society has reached.
            The level of manufacturing that has been reached.
            The level of (for lack of a better word) enlightenment that has been reached.
            Do we still need a medium of exchange??

            Many will automatically say ‘Yes’… ‘yes we do’…
            But I would submit that they are saying ‘Yes’ because this is all they have ever known i.e. a system that has an intermediary method of exchange.
            They don’t stop and think, how would the system look, how would our lives be different if we removed that current medium.
            For simplicities sake start with the system that you have today right now. Shops, service stations, and so on.
            Now remove the money.
            Now remember having removed the money from the system you can’t hoard stuff for the purpose of on selling it and making a profit. After all no one has any money to buy what you have hoarded. Unless you are using it this extra ‘stuff’ just ends up taking up extra space and then becomes more of a problem than anything else.
            That basically sets the scene for the system. Now if you need groceries and can go and get what you need, or petrol, or a car even. Would you begrudge anyone else being able to do the same…..?
            Especially if there is enough food and enough resources to do it….?
            The automatic responce for many will be to say that there aren’t enough resources. But then that is what we are conditioned to believe under Capitalism and any system prior to capitalism for that matter.
            There’s a couple of questions that you need to answer for yourself in looking at this system. If you no longer had to pay for things does your level of consumption increase dramatically. ‘Dramatically’ is the key here. Would you eat 2x the amount you do now? Would you eat 10x the amount you do now. Probably not!
            When you go to the petrol station is there always petrol?
            Would you use more or less petrol if you didn’t have to go to work every day to earn money?
            A key premise is that Capitalism is very poor in its use of resources yet you can have almost any product that you need or can conceptualise. They are there they exist in stores or online right now. The only difference is now you need money before you can get your hands on them. For the most part though the product you want already exists. There is no scarcity so to speak.
            It is not quite as simple as I am making out but that is the start point to conceptualise such a system. Once you have that you can start to see areas that can be improved/automated and look to add those improvements into the system leading to the removal or more accurately reduction in the requirement to have people work.
            That is not to say that there is an abundance of all resources though and where there is a shortage society should determine the best use of that resource.
            Two examples – Super Yachts and Stradivari Violins
            Say you live in Hamilton – well that pretty much rules wout superyachts as you don’t have a harbour
            Say however you live in Auckland and 500,000 Aucklanders want a superyacht. There’s not enough harbour space. Society may decide that its a good use of resources to have 20 superyachts built and that through a roster or some form of allocation system those that want to use superyachts can go out on cruises on them.
            Take the violins – Society my determine that the best allocation of these is to symphony orchestras so that everyone has the opportunity to hear them. Or they may decide that they should be part of an extended library system so everyone can play them.
            This can be used for countless other things that we use…well not that often, chainsaws, lawnmowers, etc,
            The key is that you’d have access to more than you do now if this iss set up well (and it can be) and society gets to determine the best use of resources where there is scarcity. They can also work on a solution to eliminate that identified scarcity should it arise without money being a barrier to doing so.
            The movie ‘Zeitgiest Moving Forward’ (its free on youtube) is the best movie I have come accross for explaining such a system and why we should have it. It doesn’t go into how we get from where we are today to there though. That said I believe I have solved much of this but think that such a transition would take 10 – 20 years. It would be something our children and our childrens children woould benefit the most from.

            My view differs from this movie around governance though as I’d prefer to see a direct democracy model backed by a constitution and maybe a senate type function to enact the will of the people provided it is inline with the constitution.

          • Tony

            thanks – i’ll study up!

      • 2ndAmendment

        so they must be weaned off gradually!!

        We have neither the time nor the money. When communism ended in Eastern Europe, whole nations were thrown into the gutter. That’s what will happen in the Welfare West as those socialist regimes come to the end!

        Who could rationally expect anything different.

    • In Vino Veritas

      Hmm. Last time I looked at the Crown Balance sheet (2011, with forecast 2012) assets outstripped liabilities, therefore the Government is still solvent. Check, its publicly available.

      • 2ndAmendment

        The crown may be – the nett debt and deficit show the country as a whole is down the gurgler

        • phronesis

          Even if this were true, who is the debt owed to? Most of it is peoples retirement savings. When the system collapses it is those who have savings that will lose the most.

          • 2ndAmendment

            Mostly Chinese bankers. Why?

  • 2ndAmendment

    Again, read the article. There is no longer a “standard economic climate” where half of the developed world was communist and another half social-democratic welfare states.

    Now the welfare states (those that are not oil exporters) are uniformly bankrupt – outcompeted by capitalist Eastern Europe, capitalist South East Asia, and capitalist China.

    The “leftmost” governments are never sustainable – it is always outcompeted by more right-leaning countries. The Soviet Union used to be the left-most government — Now it’s the Welfare West

    There is no way the Welfare West can compete against China, Singapore, Taiwan, or even Eastern Europe.

  • cows4me

    I suspect even if capitalism had provided enough for this country it would never had been enough. Liberalism and the politics of the left will be the killers of this country. We have elected governments that have continually chosen the path of leftist policy and mediocrity. Is it not easier to oil the squeaky wheel, thus the growth of welfarism. I’m not against welfare to those in genuine need but you only have to look at something like the DPB to realise the genie has long since escaped the bottle. When first introduced there were less then a hundred recipients now they number in the tens of thousands.
    The house of cards is beginning to collapse but still the grasshoppers hop around in the sun, they of course have their entitlements (tui add)

  • 2ndAmendment

    Meanwhile in Pravda – which at least covers stories no NZ newspaper, radio, or TV channel will touch:

    Moody’s cuts European Union rating outlook to negative. Germany, France, the UK and the Netherlands could stop fulfilling their obligations to the EU if the crisis worsens.

    http://www.guardian.co.uk/business/2012/sep/04/eurozone-crisis-moodys-european-union-negative

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