Think Aussies Are Capitalists? Think Again…

Wouldn’t it be nice if there was no poverty?

There would be no more ‘have-nots’. No more needless deaths or pain because of inequality.

Yet when most people start describing solutions they invariably sound like socialists.

It’s how my wife’s parents ended up living under communist rule. With an idea like prosperity for all, the Soviet Union turned Poland into a hell hole.

Towards the end of the Second World War, the Soviets pushed Nazi Germany out of Poland. The current Polish government had been in exile since 1940, so it was very easy for the Red Army to enforce their ideologies upon the Polish populace.

I’m sure Stalin didn’t think he was doing anything wrong…no dictator ever does.

Yet the typical communist policies result in exactly what communists don’t want: a population starving and living in poverty.

It ruins wealth, countries and most importantly, families.

Venezuela is just another example to add to the pile of failures.

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How youth of today see communism

Before meeting my wife, I had never met anyone who has actually experienced communism. Hearing what it was like to line up for rations from her parents was extremely powerful.

It’s why I was so shocked — when visiting Poland a year ago — to hear that some of the youths wanted to bring back certain socialist policies.

But maybe it’s understandable.

These kids really have no life experience. An idea of prosperity for all surely does sound good. But they didn’t grow up with little or sometimes nothing to eat. They didn’t know what it was like to live in fear that the government could take them — or one of their family members — away.

But their parents did.

Maybe the older generation just doesn’t like to talk about the dark times of suffering with the red disease.

It’s why most Polish dinners I’ve been to end up in an argument about the European Union. The kids argue to stick with the EU, likely because they like to travel across Europe with their friends.

The parents can’t stand the EU. They see it as another socialist organisation trying to enforce their ideologies upon Poland.

Why Venezuela and China should serve as examples

Why don’t the youths of Poland just look at Venezuela? They want socialist policies to return to Poland, but just look at how they’ve devastated Venezuela.

From The Australian Financial Review:

Venezuela’s consumer prices rose 833,997 per cent in the 12 months through October, according to a report by the opposition-controlled Congress published on Wednesday, the latest sign that policy changes in August failed to halt rampant hyperinflation.

‘…The legislature has become the only source for economic indicators after the central bank stopped publishing such information nearly three years ago as the economy unravelled amid a collapse in crude oil prices.

Socialist President Nicolas Maduro in August slashed five zeroes off the ailing bolivar currency and boosted the minimum wage thirty-fold in an effort to stabilise inflation, which has eroded purchasing power and contributed to an exodus that has seen 2 million Venezuelans migrate since 2015.

But inflation has continued unabated. Critics blame years of government intervention in the economy through strict foreign exchange restrictions and price controls for the economic collapse, which has led to chronic shortages of food, medicine and other basic goods.

‘Ah, but what about China?’, they say.

China’s economy is speeding ahead. Within just two generations, China has climbed out of the dirt to become the second largest economy in the world.

And they’ve done it with a Communist Party at the helm.

You’ll even see young Chinese students talk about why communism is a good thing. One of them said:

I think that the United States is trying to transport their own values, like freedom and democracy, to other parts of the world. But maybe China or India or Cuba, these are countries that have their own situation that don’t suit these values.

Yet what else can you expect from someone with no life experience, and who is indoctrinated to think communism is a good thing?

Ask someone a bit older, who has been crushed (literally) under the foot of the China’s Communist Party, and I’ll bet you’ll get a different response.

And when it comes to their economy, China is not exactly communist. They’re semi-capitalist. I say semi, because there’s still a lot of government control in various industries.

But generally, the law of supply and demand is alive in China. Prices still find equilibrium and businesses cut costs and innovate to get a leg up on their competitors.

It’s actually sort of similar to what we have here in Australia.

Our government has the power to veto particular businesses from entering industries they deem essential to Australia’s success. They also play a role in many industries, taking money from some and giving subsidies to others.

We just don’t have the control and social surveillance to the extent of China.

Is the RBA a socialist organisation?

Don’t even get me started on the Reserve Bank of Australia (RBA).

Central bankers and their regulated monopoly on money supply is the reason you’ve seen the Aussie stock market tumble more than 10% within months.

Central bankers have created far too much money for far too little goods and services. As a result, assets prices climb far higher than they should.

These socialist central bankers effectively guide assets prices as they see fit. Their aim is to manage inflation with a secondary focus on unemployment.

But just take a look at their track record (below) and it’s clear they’re far from effective. Central bankers use one of the bluntest tools in the shed: interest rates.

MoneyMorning 09-11-18

Source: Financial Times

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I can’t see central bankers or China’s Communist Party being toppled next year. But hopefully with time, we can make some changes toward a market that is only governed by Adam Smith’s invisible hand.

Expect more market declines ahead.

Your free market friend,

Harje Ronngard

Editor, Money Morning

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Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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