I recently listened to a podcast by Peter Schiff, in which he argued that there is nothing positive about socialism. This is complete BS, Peter Schiff has questionable morals, and here is why.
If you beat up kids, you are not “dominating the dojo”
The biggest problem with Peter Schiff’s argument is that he
- takes an idiotic, pro-socialist claim (in East Germany, sex was better),
- refutes it, and
- thinks that it is proof that socialism sucks.
To me it seems like he took one of the dumbest socialists ever and refuted their idiotic claims. That doesn’t prove anything, and discredits the anti-socialist arguments.
A discussion is a fight. There are better fighters and worse ones. If you choose an opponent, who is much weaker than you (such as a child or a mentally ill person), and then win against them, it doesn’t prove your point. If you fought against the best, most intelligent socialist out there, and won, then your victory would matter.
Let’s look at what opponent he chose to fight with. There was an article (PDF) that claims women in East Germany had better sex, hence socialism is a viable choice for Western countries like the US. Without reading this article, it is obvious that it’s wrong for two reasons:
- Quality of sex cannot be measured
- Sex is only one part of life
First, it is impossible to say who has better sex because every person has their own ideas on what makes sex good. For example, some women prefer the man to be gentle and soft, others are turned on by force bordering on violence. Some women like when the man tells them how awesome they are, others like when the man cusses during the act. These are only two ways to categorize sex out of many. Therefore, the perceived quality of sex cannot be measured scientifically.
Second, even if sex was better in East Germany, it wouldn’t prove the statement that socialism is good for the US (or any other developed nation). Sex constitutes only a fraction of life. It’s important, but there is more to life than sex. If one aspect of life would be better under socialism, it does not mean that all others are better as well.
The claims in this article are idiotic. It is obvious that its authors are incapable of logical thinking. If we consider discussion as a fight, the author of the article either hasn’t developed a crucial ability yet (like a child, who hasn’t grown to his or her full height) or a disabled person. By this analogy, Peter Schiff selected a child (or a mentally unstable person) as his opponent, beat them up, and now brags about winning.
This reminds me of a Seinfeld episode, where Kramer brags before a woman that he “dominates the dojo” and later she finds out that he fights kids.
What Peter Schiff got right
I don’t want to say that Peter Schiff is completely wrong. I completely agree that socialism is not suitable for the US or any other developed country, at least not now and not in the society we live in.
I also like when he destroys people who practice political correctness in a perverted way. His insights into how the economy works are also valuable.
These are all reasons why I listen to his podcast. But you cannot trust anyone blindly, even people you like.
What Peter Schiff got wrong
Politician or truthseeker?
If you try to spread the truth, you tell your audience all you know about a phenomenon — good things and bad. For example, if one good engineer tells another one about some technology, he will tell not only when this technology works well, but also its limitations. Nobody would trust an engineer who claims that some technology is 100 % useless, or perfect.
If, on the other hand, you want the other person to believe in the superiority (or inferiority) of some idea, you will tell them only one side of it — either only the benefits, or only the drawbacks.
Peter Schiff is a politician who believes that socialism is 100 % evil. That’s fine as long as you are aware of this and treat his statements critically (same applies to consuming any information: you always need to keep in mind whether a particular TV show is left or right).
Is there a sound theory of economy?
Peter Schiff claims on several occasions that Marxist economics is wrong. I agree with this.
But he claims that today, in 2018, there are other theories of economy that are correct. As far as I remember, he claimed that Austrian school is the best one.
I’m superficially familiar with its ideas, primarily through reading The Road to Serfdom by Friedrich Hayek. When I was young, I was impressed by this text and Friedrich Hayek excited me more than Salma Hayek. When I got older and the infatuation with Hayek’s ideas wore off, I realized that it isn’t a scientific text. It’s a piece of propaganda. A well crafted piece of propaganda (hey, I fell for it). In that it is similar to other ideas that look awesome in a theoretical treatise, but get very ugly when you try to implement them (Communism, feminism, diversity, political correctness, tolerance).
I believe that today, in 2018, there is no publicly accessible theory that would explain
- how the economy of a developed nation (like the US) or even a small village works, and
- how to make it better.
By publicly available I mean that you can learn it in a reasonable amount of time (like, 5 years at the college) and which is not classified (or accessible only to a closed circle of people).
Peter Schiff seems to have a good understanding of how the economy works. But he can’t take his skills and transfer them to other people within a reasonable amount of time. That’s what scientific theories are for.
An experienced electrical engineer understands how a complex device works. He got this understanding through decades of experience. If a newbie wants to learn electrical engineering by experience, they also would need to spend decades.
However, if we have a sound theory of electricity, then the experienced engineer can use it to accelerate the learning process of the newbie. Experience is still hugely important, but the process of becoming a good electrical engineer is cut from, say, 30 years, to, say, 5 years at the college.
We don’t have anything comparable in economics. If you don’t agree and know a sound theory of economy (by the definition above), please tell me about it.
The denial that no theory of economy is sound leads to another flaw in Peter Schiff’s argumentation: That some economic model (capitalism) always works, and another one (socialism) always fails.
Such thinking would be acceptable if it was based on science. Ohm’s law works always, as well as the laws of thermodynamics.
If what you know about the economy is not scientific (by the standards of electrical engineering or physics), then you need to admit that your statements are true at some points in time, and false at others. Capitalism works in some cases, and fails in others. Socialism works in some cases and fails in others.
There is no shortage of information, when in history
- capitalism succeeded,
- capitalism failed, and
- socialism failed.
Nobody, not even the socialists themselves, seems to know when socialism worked for the benefit of society.
Success of Socialism in Russia: 1917–1953
Russian history of the first half of the 20th century can be summarized as follows:
- At the start, you have
- a third-world country that produces only raw materials (agricultural products), and
- a government system that is incapable or unwilling to industrialize the society.
- In 1917 the regime changes, but most of the world hates you so that it is reasonable to assume that sooner or later, one or more Western countries will attack you.
- In 1941 they do. You manage to win the war in 1945 (and liberate the world from the Nazis — source, PDF), but your country is devastated. 27 million people are dead (source).
- Less than one year after the end of WWII, on March 5th, 1945, your former allies declare (PDF) the Cold War on you. Their threats are serious: In 1945, the US has both nuclear weapons and means of their delivery, the USSR doesn’t. You try to negotiate yourself out of a major conflict so you can rebuild your country after Hitler’s invasion. In 1954 you propose to join the NATO, thus staying an ally of the West (like you did in WWII).
- But the West wants another war. To your proposal to be friends with the West, your former allies say “the unrealistic nature of the proposal does not warrant discussion” (source, PDF).
- The Cold War starts and you are forced by the Americans to develop nuclear weapons, rockets, maintain a huge military and a presence in Eastern Europe.
This is the historical context, in which Russia lived during the first half of the 20th century. A bit different from what you hear from politicians like Peter Schiff or Stefan Molineux, right? They don’t strictly lie to you, but they conveniently avoid crucial information that make their argument weaker.
Let’s look at the relationships between history of Russia and its socialism. By “socialism” I mean the policy that was practiced in the Soviet Union (not some theoretical ideas).
Society modernizes itself through central power
If Russia stayed a third-world country, it would not have survived World War II. This isn’t mere speculation:
At least 60 percent of every Soviet family lost a member of the nuclear family—mom, dad, daughter, son—in the war. It meant that millions of children grew up without ever knowing their fathers.
Had Hitler won, several nationalities, including but not limited to Russians and Jews would be wiped out from the face of Earth. Hitler didn’t kill the Soviets for being Communist — after all, half of them was not Communist (fought against the Communists in the Russian civil war). He killed them because he regarded them as racially inferior to Germans.
Russia lost World War I, primarily because
- the Tsarist government system was outdated for the challenges of the 20th century and
- Russia lacked crucial technologies (like the ability to mass-produce tanks and aircraft).
Primary goal of the society was to survive. In order to survive, Russia had to re-invent itself as an industrialized nation before the start of the next big war.
How can an agricultural society become an industrialized one?
To become industrialized, you need money that you invest in educating your engineers, building education facilities and factories. These are long-term investments, i. e. they won’t generate profits soon. For this reason, the private economy cannot modernize a society — it lacks the incentive to do so.
How do you get that money?
There are two approaches that worked in the past, and one that is theoretically possible:
- Exploitation of others
- Exploitation of your own people
- Foreign aid
Let’s forget about the last approach because so far no nation has changed itself through foreign aid (correct me, if I’m wrong and you know an example).
The majority of Western democracies became industrialized by exploiting the colonies. England or France conquers a territory with some valuable natural resources, e. g. coal. It extracts the coal from that colony and sells it. The profit from selling the coal from the colony is higher than if that same coal was mined in England.
Because the wages in particular and the standard of living in general in the colonies is much lower than in England. Hence, the costs of mining a unit of coal are much lower in the colonies.
In England, part of the profits from selling the coal would be redistributed in the society (through taxes) — all those public schools and other improvements. That’s one reason why wages are higher in England.
But when you mine the coal in a colony, you don’t redistribute the profit in the colony. That profit (generated in the colony) goes from the colony to England. That’s why we can call it exploitation.
Those profits generated from the colonies provided the influx of money needed for gradual industrialization of Europe.
Russia didn’t have any meaningful colonies, but it badly needed modernization and fast (10-20 years, the time span between World War I and World War II). So the Soviet government decided to exploit the part of the population that produced something they could sell abroad: The agricultural sector (peasants and farmers).
The exploitation worked in two ways. First one:
- The state confiscates the output of a peasant, except for the food they need for their own survival (sometimes they take everything).
- The state sells the products taken from the peasants at market prices.
- The profit is invested into modernization (e. g building a tractor plant).
When the tractor plant is completed, the state can exploit the peasants in a different way:
- The state buys peasant’s products at prices below the market (for less than a free market would pay).
- The state sells industrial products (e. g. tractors) to peasants at above-market prices (for more than it would be able to charge in a completely free market).
Analogous to people in the colonies, the peasants generate profits, but those profits are redistributed away from them — into building educational facilities, factories, and defense.
A libertarian or a well-promoted idiot like George Orwell with his “Animal farm” will shout: “See, that’s the proof that socialism is bad! They exploited their own people!”
These people make a crucial thinking mistake. They believe that in life you always choose between good and bad. In real life, you sometimes have to choose between two bads:
- Suffer for decades, finance the defense industry with your blood, sweat, and tears, and yourself and your compatriots from physical extermination or enslavement.
- Resist Stalin, lose the war with the Westerners and get exterminated or enslaved.
Now let’s get back to benefits of Soviet socialism. Could a democratic society with a free market economy have prepared itself for the war with Hitler (or Churchill), standing in Russia’s shoes?
No, for two reasons:
- A true democracy would not allow the state to exploit its citizens, even for an important cause.
- Private companies and individuals would not invest their resources in modernization because it would totally change the society (and when you are part of the establishment, you don’t want major changes). Also, there is no economic incentives to do those investments because it would take a long time before they would start to generate a profit.
Under a democratic capitalism, Russia (Soviet or otherwise) would not have survived World War II. It did survive under Soviet socialism. More than hundred nationalities survived (again, the majority of them would be wiped out by Hitler, if the USSR lost the war). Isn’t that a success?
Success of Soviet Socialism for the small man
Let’s look what Socialism did to the lives of people living in the Soviet Union in reality, not in the imagination of Peter Schiff and the like. We will take several important parameters that are correlated with a nation’s prosperity. Then, we will look at those parameters before and after the Socialist period, which started in 1922 and ended in 1991.
According to the RAND corporation (PDF), before the Socialist Revolution, the Russians lived for about 30 years. We only have data for 1896. Obviously, under the Tsars the society was organized so poorly that population censuses have not been conducted for more than a decade.
In the last year of Soviet Union’s existence, the average life expectancy was 62 for men and 73 for women. That’s double the pre-Socialist value! Isn’t that a victory of Soviet Socialism?
That’s more than a 10-fold reduction in infant mortality. Isn’t that a success of Soviet socialism?
Isn’t a more than twofold increase in literacy a success of Soviet socialism?
These and other parameters show that the suffering of the Soviets in the first half of the twentieth century was not in vain: It led to a massive increase in quality of life after the post-war reconstruction was over (since the 1960es).
War is the mother of socialism
Peter Schiff doesn’t lie, but he is immoral nonetheless. He is immoral because he admires criminals like Ronald Reagan (PDF) who first create a problem and then make others suffer for it. I’ll give you just one example: In the 1980es the US supported Islamic terrorists in Afghanistan in order to hurt the Soviet Union (Afghanistan was the USSR’s Vietnam). Eventually, the Soviet troops left Afghanistan. But the terrorists stayed and prospered. It were those US-trained and supported terrorists who organized the 9/11 attacks.
Peter Schiff has no moral right to criticize socialism because it’s warmongers like Ronald Reagan (whom he supports) that made socialism the only viable option for the Soviet Union. Without people like Eisenhower and Reagan the Soviet Union would have transitioned to a capitalist economy much sooner. Below I explain, why.
A society, any society, can vary the amount of power in state hands. In peaceful times, the less the government does, the better. The greater challenges a society faces, the more centralized, socialist it becomes.
For example, in almost all countries, including democratic ones, the government (e. g. president) has more power during the war than at peace. War makes any country more socialist, peace makes it more capitalist.
Why is that so?
Because any big project requires resources (material and intellectual) not available to private corporations. It’s not only war that requires massive state effort. The American lunar program was driven by the state. JFK (representative of the state) said that Americans need to land on the moon, and then the NASA implemented that project (in cooperation with private companies).
Would a profit-seeking banker fund the moon program? Probably not. It was highly questionable whether that mission was possible at all. Even if you could convince him that getting to the moon was possible, he would ask you how you could generate money there. Are there any precious natural resources? As far as I know, there aren’t. The moon program was a huge scientific advancement, but from a purely economic point of view, it was useless. One purposes of the state is to do things that benefit the society, but don’t generate a profit.
At the end of WWII the USSR faced a challenge greater than all achievements of the NASA combined. It was again about survival. Judging by their deeds, the Americans wanted to finish what the Germans started in Russia.
The Americans and the British were as immoral as Peter Schiff who admires Reagan. The Soviet Union killed most of the Nazis and thus made the largest contribution to the victory over them. Instead of being grateful for this, the Americans and the British wanted to attack the Soviet Union (PDF) as early as July 1st, 1945 (WWII ended on May 9th, 1945).
The nuclear bombing of Hiroshima and Nagasaki was a signal to the Soviets that next time it could be Moscow or St. Petersburg. In August 1945 the US started to threaten the Soviet Union with a nuclear Holocaust of 20 Soviet cities (Moscow, Gorky (today Nizhni Novgorod), Kuybyshev (today Samara), Sverdlovsk (today Ekaterinburg), Novosibirsk, Omsk, Saratov, Kazan, Leningrad (St. Petersburg), Baku, Tashkent, Chelyabinsk, Nizhny Tagil, Magnitogorsk, Molotov (today Perm), Tbilisi, Stalinsk (today Novokuzentsk), Grozny, Irkutsk, and Yaroslavl). Fortunately for the Soviets, this was an empty threat (today known as Plan totality, PDF), but you get the idea how Americans and the British express their gratitude to those who helped them defeat the Nazis.
American capitalism conceives, quite correctly that it can only survive in opposition to socialist democracy; that is the real meaning of the Truman Doctrine. That is why we ring our socialist ally who won the war in the East and thereby prevented Fascism from engulfing the West–that is why we ring her borders with military bases. That is what you do to a man who does you a favor. You cannot admit your debt, so you find a way to hate them. We made love with Soviet Russia during the war because we needed her. Now we jilt her once again and resume the great conspiracy that has gone on since the very days of the Revolution when American troops occupied Siberia in hopes of restoring Czarist tyranny.
Book of Daniel, E. L. Doctorow
In 1949, the Soviet Union managed to test its first nuclear bomb, but it was useless. The USSR lacked long-range bombers capable of delivering the bomb to the US. The US could nuke Russia, but not vice versa.
That same year, 1949, the Americans laid out the nuclear destruction of the Soviet Union in 1957. This plan was called Operation Dropshot (PDF) and was declassified in 1977. This time, it wasn’t a bluff. This time, it was serious.
Dropshot included mission profiles that would have used
- 300 nuclear bombs and
- 29,000 high-explosive bombs
- on 200 targets
- in 100 cities and towns
- to wipe out 85 percent of the Soviet Union’s industrial potential at a single stroke.
Between 75 and 100 of the 300 nuclear weapons were targeted to destroy Soviet combat aircraft on the ground.
Doesn’t that sound similar to Hitler’s plans?
The only reason why this plan wasn’t implemented is this: In their desperate attempts to create a means of delivery for the nuclear bombs, the Soviets turned their eyes to rockets. They couldn’t create a suitable bomber, but they managed to build the R-7 rocket, the first intercontinental ballistic missile.
You only can deter a bully by fear. The R-7 allowed the Soviets to frighten the Americans and prevent them from attacking the Soviet Union as they planned in 1949.
And let’s look at the history again: Right after the devastating World War II (1945) the Soviet Union faced another threat, worse than Hitler: A nuclear eradication by the United States and their suckups, incl. Britain. From 1941 to its dissolution in 1991, the Soviet Union was either
- defending itself from an external enemy like the all-European army of Hitler (1941-1945), or
- fighting a Cold War with the constant danger of a nuclear attack.
Remember what I wrote about war making any society more socialist? Because of the Nazis and the Americans the Soviet Union has been at war since 1941! American right-wingers started the Cold War and made it impossible for the Soviet Union to stay out of it:
- Any society becomes more socialist at war (hot or cold).
- Because of the Germans and the Americans the Soviet Union has been at war from 1941 through 1991.
- From statements 1 and 2 follows that the Americans, by starting the Cold War against Soviet Union, prevented the latter from transitioning to capitalism.
Imagine an alternative scenario: Let’s say that in 1954 Soviet Russia joins the NATO. Since the risk of extermination from outside has vanished, people like Joseph Stalin aren’t needed any more. Gradually, the expenditures for the military are reduced. At some point, private entrepreneurship becomes legal, kind of NEP 2.0. After the October revolution of 1917, the Soviets experimented with the idea of a “mixed economy”. This was called NEP (PDF). From 1921 through 1928, individuals were allowed to own small enterprises, while the state controlled banks, foreign trade, and large industries. This means that the Soviet government was willing to transition to market economy, if it didn’t endanger national security. This means that without American warmongers socialism in the Soviet Russia would have ended much sooner.
But in real life we can write down another win for Soviet socialism: Survival in the Cold War started by the Americans.
Success of Socialism in China
Another example of a society that managed to elevate itself from poverty through socialism is China. It started from a level similar to Russia. Today it is the second most powerful nation in the world, and may become the next superpower.
We can regard Chinese socialism as an improved version of the Soviet one. In the 1970es China made the decision to allow limited private entrepreneurship. Over time this led to a rise of individual prosperity (benefit of the capitalism), while continuing to develop the society as a whole (benefit of socialism). The latter includes advances in education, technology, and military.
Chinese socialism could have lifted more people out of material misery than all charities combined. Does this count as a victory of Socialism?
Success of Socialism in Austria: 1918–1934
In Vienna the socialists produced a remarkable administration, making it probably the most successful municipality in the world. […] The achievements of the Vienna socialists were the most exhilarating social movement of the post-war period in any European country.
They managed to introduce all these improvements without running into debt. The source of money were taxes on luxury items and Residential Construction Tax (Wohnbausteuer). It leaned toward taxing the largest properties the most. As a result, the taxes for the 0.5 % of the most expensive residential objects delivered 45 % of the tax money.
I believe that these improvements prevented the Communists from acquiring power in Austria (like they did in Russia, and, for a short period, in the Bavarian Soviet Republic).
Social change without debts, how is that for an achievement of Socialism?
Can Socialism do good for your country?
All of the examples above are about the past. If you have read this far, you are probably interested in whether or not Socialism can be a recipe for the future.
The answer is: It depends on how economically developed your country is. If is industrialized, with plenty of human capital (i. e. well-educated people, valuable knowledge and know-how), then the answer is no. I don’t believe that Socialism is a good choice for Americans and most Europeans.
But if your country is very poor and corrupt beyond measure, then Socialism may be an option to think about: Both Russia and China started out as poor and corrupt countries and improved themselves tremendously because (among other things) of Socialism.
Three Socialist steps to freedom
If you live in Africa or certain parts of Latin America or Asia, Socialism can work for you country in the following way:
- Socialist government gets to power (analog of the October revolution of 1917 in Russia)
- Socialist government implements a forced industrialization by extracting excess profits from whoever is creating a demanded output (analog of peasants in Russia).
- Once your country is industrialized enough, you kill your Mao Zedong and replace him with your version of Deng Xiaoping. This is the start of transition to a mixed economy.
It’s a violent way to true freedom. But the road to freedom and prosperity is always covered with blood.
- Image at the top: Soviet poster from 1941 by N. N. Vatolina (source). The lettering in Russian says “Fascism is the biggest enemy of women. Fight fascism!”, probably referring to the rapes of the Wehrmacht.
- Data on what percentage of people the Nazis intended to kill in the occupied Soviet Union: General plan Ost (PDF)