Friday, May 19, 2006


“The World has never had a good definition of the word Liberty. In fact, we all declare for Liberty, but in using the same word, we do not mean the same thing. Here are two, not only different but also incompatible things called by the same name, Liberty."

The very basic premise of socialist thought is that socialist institution can establish entirely just society. The latter argument is totally false as we shall see in the incoming chapters. The experiment of socialism is in general political as well as economic. From political perspective socialism would accordingly be underpinned as an endless community that would pave the road to proletarian apparatus. But in the real sense the latter component is just a shadow that covers-up all the realistic arrangements of socialism that presumably remain the opposition to private property, individualism and economic order of free entrepreneurship.

No legal protection, no responsibility

Free and dynamic system of free market economy demands detailed knowledge of asymmetric market information that will reward each businessman for productive behavior such as risk-taking, entrepreneurship and work. Each free market system first demands an effective protection of property. Milton Friedman, a Chicago economist, firmly underpinned the importance of legal security -“…a dynamic system of free market economy can only be let going where the legal protection of private property is paramount for the state” (Friedman, 2002). There’s a core of Western tradition that shows an important aspect of the rule of law. As the primary objective of classical liberalism remains an expanded world order, the primary goal of neosocialism remains an invisible “promotion” of world disorder. This actually uncovers the truest face of socialism. The ideology of the latter has no taken place in free market economy in terms of economic context. Socialist leaders have granted power only when there has been disorderly caused chaos coming under way. The apparatus that firms socialism’s devastating approach towards the protection of private property remains a wavering bureaucracy that forces entrepreneurs, managers, successful businessmen and other citizen to become a slave of a highly active state that penalizes every productive behavior with bureaucratic procedures that influence each individual in order to put off his vision for the future. By such confusing and the denunciation of private property each neosocialist protects his fear. And after continuing such practice citizen have begun to become feeling very fearful of doing what their truest desire is in order to participate their interest and put it into practice. Neosocialism is afraid of innovations that’s why it firstly shakes the foundations of legal security and secondly produces fear by sending bureaucracy into the eyes of citizen that are aftermath afraid of expressing productive behavior, such as entrepreneurship, work and risk-taking. The most recognized legal feature of neosocialism is that offers no legal security and causes severe disorder of the rule of law, which remains hidden curtain that shows the real legal face of neosocialism – confusion, legal disorder and very weak protection of private property rights. Neosocialists actually don’t deny their opposition to private property, because sovereign protection of it would damage the project of neosocialism.

"A major source of objection to a free economy is precisely that group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself."

Economic basis of destructive economic thinking of neosocialism

In essence, economic ideologists of neosocialism are not pretty much up to research and economic improvement. Their economic ideology mainly consists of economic nationalism as pinpointed in Karl Marx’s writings. Neosocialist basis of economic thought is fully dedicated to the proposition that it is personally impossible for certain individuals to penetrate into the market and organize productive behavior such as risk-taking and competitive entrepreneurship. The underlying of most of their arguments against free market activity is actually a lack of believe in market competition and private initiative itself. Another strong apparatus in the hands of neosocialist policy-makers is their destructive tax system, based upon progressive taxation. Progressive taxation is a key figure when we try to identify the economic policy of neosocialism which continues to be conducted upon strong egalitarianism and extreme progressive taxation which underestimates business success and blames the function of the latter to be the most commonly appeared reason for “social instability” and “social crises”. Neosocialists argue that taxes are totally static issue and have no effect on how things are run. This only shows how staunchly “socialistonomics” denies classical principles of ‘revenue-rate’ relationship usually displayed within the Laffer curve. The most bizarre argument against lowering tax rates, which boost productive behavior, is that it would be too expensive. This faulty argument presents a moral problem. It implicitly assumes that private income belongs to government until and unless politicians decide they can “afford” to let taxpayers the money they earn. Another bizarre argument that is proposed by socialists is the opposition against the flat tax. Socialists often argue that flat tax would hit the poor people and depreciate their revenues. Such a misperception is truly an economic error that reveals strong how economically illiterate neosocialists really are. First, a single flat tax would not lower the tax revenue collected by the government. Increased tax revenues demands wider tax base. The Government can choose what type of taxation will impose. It can choose between higher tax rates imposed on a smaller fraction of population with higher incomes and it can choose pro-growth type of smaller tax rates on a larger tax base. And this is what all is about. Increased tax revenue certainly needs larger tax base. With lower tax rates people start to work rapidly faster and penetrate with productive behavior because more income remains in their own hands. Flat tax would simply eliminate all the coded provisions and provide equal tax treatment for all. Taxpayers would fill their tax returns on a postcard-size form and so they would get rid of hundreds of pages of writing their tax returns. Furthermore, flat tax would boost the economic growth. Especially current uncompetitive tax system is a very discriminatory taxation of savings and investment with reducing rates of growth that devastates jobs and lower personal incomes. A flat tax would not eliminate the damaging impact of taxes altogether, but by dramatically lowering rates and ending tax code’s bias against saving and investment it would boost economy’s performance when compared with the present tax code. Socialists simply put up with this very simply facts. Instead of rational judgment they rather search their basis of philosophy within the textbooks of Karl Marx, John Maynard Keynes and their followers. If Keynes was wrong on just about everything, his followers have been wrong on absolutely everything. One of the strongest economic components of neosocialist economic policy is “so called” system of collective bargaining that makes decision upon which the live style of certain citizens depends. A system of collective bargaining is very harmful to society and destructive to economic growth. It wastes a lot of time that could have been used for penetration onto competitive market by involving highly productive behavior into the process of competitive advantage. It is highly questionable how can few privileged individuals bargain about daily schedules of all employees? In the market economy, each individual is solely responsible for job searching and taking responsibility in his own hands. The only action required to the state is to enforce labor contracts and abolish minimum wage. It’s economically unreasonable to force entrepreneurs to become some sort of “social service” by paying minimum wages. In terms of economic framework, the Government should continue lowering tax rates on both personal and corporate income and allow individuals to rely solely on private charity. Any kind of governmental financial aid to certain fraction of population must firmly underpin its nature of positive externalities. As to tax rates, Government should immediately approve flat tax and allow faster economic growth because flat tax would spur increased work, saving and investment. By increasing incentives to engage in productive economic behavior, it also would boost the economy’s long-term growth rate. Neosocialist policymakers continuously keep talking about growing the economy. Well they evenly missed the point accordingly. Growing the economy demands government intervention, increased regulation and increasingly jumping tax rates. Free marketers take a different and far simpler step. We just let the economy grow instead growing the economy.

"The socialists have a certain kind of logic on their side: if the collective sacrifice of all to all is the moral ideal, then they wanted to establish this idea in practice, here and on this earth. The arguments that socialism could not and would not work, did not stop them: neither has altruism ever worked, but this has not caused men to stop and question it. Only reason can ask such questions - and reason, they were told on all sides, has nothing to do with morality, morality lies outside the realm of reason, no rational morality can ever be defined."

Another economic demise of neosocialist experiment is their vision of self-managed enterprises and the promotion of workers’ profit participation. Neosocialist simply cannot understand contemporary model of entrepreneurship. Its objective is to maximize the owner’s profit, to increase working productivity, to increase investment in research and development and to restructure the production towards more value-added power. Workers are not able to obtain detailed knowledge of supply and demand so they are also not able to understand how to organize the production by bearing certain measure of risk. If workers truly show their interest then they should show it as consumers and not as owners. The only thing workers as owners want is higher wages without any reflection on business output of each firm. That’s how the philosophy of workers as owners cannot replace rationally understated entrepreneurial decisions. Entrepreneur is always exposed to the question of risk and capital yields so the best way is to let business minds to be in charge of making decisions without government intervention or workers’ ownership.

“The transfer of ownership to the workers of an enterprise by law would create a very rigid economy, especially if they were not allowed to sell their newly acquired property and use the proceeds for themselves. It would not create economic responsibility in the way that is inherent in separate ownership of capital.”

The economic demise of neosocialism is more than obvious. In fact socialist’s solution to the problem is invariably to create an even bigger monopoly belonging to the Government. Neosocialists are afraid of private education system because essentially neosocialists are afraid of technological revolutions and improvements. The latter would ultimately mean the transformation of public toward productive behavior which is something what neosocialists usually call “dirty neoliberalism”. In fact it is very hard to define the word neoliberalism which is only used by economically illiterate and intellectually unknowledgeable people. Neosocialists (un)fortunately undertake their duties by reading Marx and Hegel. Telling a neosocialist is not difficult at all. That’s someone who reads Marx and Lenin. And telling an anti-socialist is even easier. That’s someone who understands Marx and Lenin. Neosocialist paradigm takes place within the selection of ideas of economic nationalism that express extreme hostility towards foreign investment as “foreign invasion”. Neosocialism is evenly destructive to itself. When neosocialist looses his high-flying hopes, then he becomes the victim of himself. Libertarian initiative offers different path. Instead of pessimism it states the importance of shining optimism and hopeful stream into every new day. Instead of “night parties” we, free marketers suggest hard study and knowledgeable approach into every day ahead. Neosocialists tell themselves to be economic patriots. Well as Samuel Johnson said, “Patriotism is the last shelter of scoundrel”.


Milton Friedman (2002), Capitalism and Freedom, 40th Anniversary, University of Chicago Press

Friedrich August von Hayek (1978), The Constitution of Liberty, Chicago University of Chicago Press

Friedrich August von Hayek (1991), Fatal Conceit: The Errors of Socialism, University of Chicago Press

Ludwig von Mises (1996), Human Action: A Treatise on Economics, Fox&Wilkies

Karl R. Popper (2002), Open Society and its enemies. Volume 2: From Hegel to Marx, Routledge Classics

Ayn Rand (1986), Capitalism: An Unknown Ideal, Signet

Joseph Schumpeter ( 1962), Capitalism, Socialism and Democracy, Harper Perrenial

Ljubo Sirc (1994), Criticism of Self-Management Still Relevant?, The Centre for Research into Communist Economies

No comments: