“The problem with socialism is that you eventually run out of other people's money.”
-- Margaret Thatcher
In this case, they managed to run even out of petro-money. Takes some skill.
-- Margaret Thatcher
In this case, they managed to run even out of petro-money. Takes some skill.
The Norwegians got it right. If you discover oil create a sovereign wealth fund and invest the revenues outside your own economy. [1]
[1] - http://www.spectator.co.uk/2008/04/why-hasnt-britain-got-a-s...
I was under the impression that this phenomenon does not hold for so-called developed countries, like Norway and the UK. I could be mistaken.
The long and short of the dutch disease is that if you introduce a revenue source that is independent of the rest of your economy and pour all of the money into your economy, it will cause your currency to appreciate, making every product made in your country less competitive. So even while your country keeps getting richer through oil revenues, all the rest of your economy stagnates or decays, until you import most of what you consume and are wholly dependent on your oil revenues.
Note that this is not limited to oil. The Spanish went through this in the 16th and 17th centuries because of silver imported from the new world.
For most of the first half of the 20th century, the Saudi Arabia of the world, in terms of oil extraction, was the United States.
But the situation was moderated by a few factors, at least as I see it:
1. The US had an industrial capacity (though much of that developed over this period), largely in the northeast. Much of the oil production was in economically underdeveloped regions of the country, particularly Texas and Oklahoma.
2. There wasn't a large world market for oil initially. Oil demand was being built up as supply was established. Flooding the market with cheap oil money simply didn't happen. Actually, demand was so low relative to extraction costs that oil prices hit a low of two cents per barrel after the 1930 East Texas Oilfield discovery (see Daniel Yergin's The Prize for an extended discussion of this).
3) WWII. The economic climate from 1930 - 1945 was not one of what we consider conventional growth markets. Initially the problem was the Great Depression, during which global economic activity contracted markedly. Then came the command economy of WWII. In the aftermath, the US was both the sole oil and economic power left standing.
4) By the time other countries were establishing themselves as substantial consumers of oil, the US itself had begun importing oil from Saudi Arabia.
I'm not aware of formal economic treatments of this, though it strikes me that the US experience was significantly different from that of, say, Argentina, Saudi Arabia, or even Russia / the USSR.
this might not be totally true, the Saudi Arabia sovereign wealth fund is almost as large as Norway's (so the saudis have not just dumped all money on their people) and AFAIK it's quite secretive but somewhat diversified between internal and foreign investments, so they will still have money when the oil runs out.
As it is, Britain’s sovereign wealth was effectively distributed to taxpayers to spend or save as they chose, and in very many cases that means it ended up in bricks and mortar, in Britain’s absurdly overpriced residential property market. But it’s too late now: the end of North Sea oil is nigh, we’ve privatised everything, the pensions bill is mounting, the habit of personal saving has been all but lost, the housing market is tottering and the government’s finances are hopelessly adrift. We’re on a course set for us a generation ago; in a generation’s time, as John Hawksworth says, we’ll look enviously at Norway and the Gulf and wonder: where did our oil money go?
I think this is a somewhat lazy analysis that mars an otherwise interesting and thought-provoking piece. I'm not convinced that the government disbursing oil wealth in the form of tax cuts went mostly into higher property prices. I get that real estate is inflated - it's inflated in all major cities in the US too - but I feel like the author takes too large a leap of faith in his logic here. What is the mechanism that links this argument together?
It may be that they have a cultural preference for investing in residential real estate.
First, on even a moderate scale, you quickly find out that democracy is not well suited to make the zillions of decisions needed to run an economy. Voters will be making too many decisions about things they know too little about.
So, they have to delegate the power. Under capitalism, government powers are somewhat limited, so delegating has some checks and balances. But under socialism, you have to delegate power over every aspect of the economy, which is basically everything.
In other words, you've just delegated arbitrary power, which has a bad history.
Even if that all works out, now you have an information flow problem. Prices no longer reflect supply and demand, so how do you deal with shortages and surpluses? What if you have 10000 people applying to be "beer taster" and zero people applying to be nurses?
If you look at socialist countries throughout history, and classify them into "nice moderate progressives" and "plain old dictatorships" on the basis of outcomes, then that's not a valid distinction: it's just retroactively repainting the lines on the ideological landscape to fit your views.
An ex post facto difference is none at all.
Venezuela has not had democratic ownership of the means of production. Venezuela is a state capitalist entity with either a centrally administrated or command economy depending on how you want to look at it.
If people elect representatives who try to run the economy as if it were a diesel engine, is that democratic control? Or does it mean a plurality of worker's owned corporations?
Furthermore, "state capitalist" is about as pitiable a phrase as "late capitalism". Venezuela is populated by Communists and run by Communists who ran their political campaigns on Communist promises, therefore, Venezuela is a Communist country.
Capitalism is a form of economic organization based on markets, private property, the accumulation of capital, and exploitation in the "neutral" sense of extracting property from investment. Capitalism comes in many different forms just as socialism does. Just because welfare capitalism and laissez-faire capitalism are distinct does not mean capitalism as a concept is devoid of content. Just because "market" and "private property" are abstract terms that need to further instantiated to be analyzed does not mean capitalism isn't a coherent concept.
State capitalism is when the state owns all the property and administers or directly controls the means of production through a bureaucracy, exactly like a corporation at the scale of a nation.
> This is too broad and abstract to be actionable, let alone analyzable. What is "democratic" control?
Well that's why there are so many different flavors of socialism. A lot of socialists would say you cannot simply elect socialism into office. Are they wrong? You're the one who wants to lump all people who call themselves socialists together, even though that sort of reasoning leads to absurdities like considering both North Korea and the United States of America democratic countries. If defining socialism as an empirically verifiable condition of the relationship between people and the means of production is too abstract to be analyzable, lumping everyone together based on intent and self-labeling is even worse.
Yes, that's the point.
When a phrase, concept, or ideal is so broad and abstract as to incorporate anything and exclude little, then when it is time to analyze the results, you can (in)validate all of it based on the whims of the people in power. It's really a neat trick.
Whereas the current dominant system (whatever one wishes to call it) doesn't have this problem, because it provides the elites with more highly nuanced, and much more effective ways of siphoning money, power, and hope from the disadvantaged -- and in covering its tracks whilst doing so.
The US, Canada, Australia, Germany, UK, Japan, France, Netherlands, Sweden, Denmark, Singapore, Italy, South Korea - all utilize the free market system to one degree or another, and none of those are remotely close to being Socialist. Nearly all of most prosperous major economies on a per capita basis, those with the highest standard of living, are free market oriented, and anti-Socialist.
The US has the fifth highest GDP per capita, and one of the highest median household income levels, as well as nearly the highest median disposable household income level; as well as a median household net wealth level higher than Germany or Sweden. For a nation of 330 million people. Let's see Socialism manage that; the closer you get to actually implementing Socialism, the faster you collapse.
Versus: USSR, which struggled to even keep extremely basic grocery store shelves stocked. Cuba. Cambodia. Vietnam. Socialist Germany and Italy of the 20th century. North Korea. Mao's China. Venezuela.
You can't show me one single example of Socialism ever working, not after 200 years of disastrous results from every attempt at Socialism. I've got dozens of extremely prosperous examples of the free market working, it has worked in the US for two centuries.
There is no contest.
Even today, with the affordable healthcare act, the U.S. is one of the least socialist countries in the world, but it's never been completely free of socialism, even in the "better dead than red" era. Take public infrastructure such as power generation as an example. Some sectors are so big and require careful planning decades in advance, and doing things the socialist way (i.e. Taking short-term market interests out of the equation) is often the best way. If we left scientific research entirely to the free market, where would the funding be for curiosity driven, long-term, core science that is typically decades from producing anything remotely commercializable? How would corporations justify the research that led to lasers or carbon nanotubes to a corporate board only interested in the bottom line for the next quarter?
Socialist policies make sense in certain areas. Americans are unusual in having turned "socialism" into a dirty word, and most have turned a blind eye to the many benefits it brings them.
Right-wingers don't care about "socialism" (and they certainly don't care about the living standards in any of these countries). It's just a bugaboo, and a stand-in for the comparatively more micro-scale issues they do care about -- things like progressive taxes, rent control, or (domestic) business regulation generally; and of course welfare and entitlements (for persons less advantaged than themselves), generally.
"If you're in favor of, or even not rapidly opposed to ('financial regulation','rent control','zoning',...) then to all intents and purposes, you are the walking reincarnation of Mao, Honecker and Chavez rolled together" is what they're really trying to say when they bring up this cold war stuff.
There are a lot of things that could be said about this -- such as the real effect on "living standards" outside of the former imperial core, a.k.a. the rest the world, since "the current system" forced its way in these countries during the era roughly encompassing 1790-1950. (Hint: by some accounts utterly devastating; in general less than 1850 standards; in some cases abysmally worse). Or say, that small matter of the ecological impact of our wonderful system, and the ever-widening cornucopia of goods, pleasures and experiences it produces -- and the very real, imminent, and starkly negative effects this impact will have on "living standards" across much of the planet, not too far off from now.
Or heck, even that pesky little subject of not just "stagnating", but declining median living standards in the U.S. generally, over the last 20-30 years.
But I wasn't talking about living standards. So it's a completely different subject.
Versus: USSR
Living standards in modern CIS countries "versus" those the peak socialist years (late 50s - late 70s) would make for a very interesting comparison, indeed. (Again, just as a hint: they've largely plummeted, across the board).
Cuba. Cambodia. Vietnam. Socialist Germany and Italy of the 20th century. North Korea. Mao's China. Venezuela.
Aside from the naked cherry picking (by listing only "their" basket cases and failures, never "ours"), listing Italy in the same sentence as the GDR, North Korea and Mao's China, in virtually any context, is just... bizarre.