A Vacation on the sea with 4 Cs and more? IV – a

In case it is not obvious by now, the 4 Cs are Cruise, Capitols, Capitalism, and Communism.  To that we are about to add Cognitive Comments.  But first, a couple of clarifications in terms that we will use.  I prefer the term “free market system” or “competitive market system” to “capitalism”.  Classical economics defines the three factors of production as Land, Labor, and Capital.  In this context, capital is the initial investment in time or money necessary to produce goods and services.  This initial investment is not recovered immediately, but provides some return over the life of the enterprise. This initial investment can be made by either a private enterprise, or the state.  But it is a necessary initial “at risk” investment that for a productive enterprise.  My second preference in this discussion is to use the term “socialism” rather “communism”.  The term “communism” is closely associated with the implementation in the USSR of a socialist economic system.  The effort here in this discussion to think of the political system separately from the economic system which operates within it.

A couple of years ago when we got back from a tour of China.  I was asked if I thought a free market economic system could operate in a dictatorship.  China was/is obviously moving away from a purely collective socialist system to more of a free market  system without having made any significant changes in the ruling government.  My answer to that is “yes, it can”.  In an earlier installment, I mentioned a boss who liked to say, “The best form of government is a benevolent dictatorship”.  He was not advocating moving away from a free market economic system.  We humans sometimes have difficulty addressing unpleasant problems when we should – or like I  was as a kid, not wanting to take my medicine when I needed it because it tasted awful.  Thank goodness I had a mother who made me take it even though I would have voted against it given the choice.  There are times when we all need a “benevolent mother” who can make us do something that we need to do even though it may be unpleasant in the short run.

The other thing a benevolent dictator can do is to make sure things that are helpful to our society and our standard of living get done in a timely fashion.  The comment by out last guide in Denmark was that “we may have gone to far with democracy”  because “we can’t all agree, nothing ever gets done”.  A dictatorship doesn’t have that problem, and we saw some of the results of that in China.  The Chinese government has undertaken infrastructure projects necessary to have a 21st century productive economy that should improve the well-being and standard of living of its people.  This is one of the reasons its manufacturing industry is flourishing. In the U. S., some of those things would, I thought, either not have been done or would have taken much longer. The government infrastructure projects and its freeing the people to use their own efforts and imagination to develop productive businesses has resulted in the rapid growth of their economy.  One result of that has been more and higher paying jobs.

Of course the danger of a benevolent dictatorship is that dictators don’t tend to stay benevolent.  The Chinese government, we were told opened up the economic system because they saw what happened to the communist government in the USSR, and thought they needed to do something different to keep that from happening to them.  So my answer to my friend was, “yes I believe you can have a free-market economy without a democracy, but the question is ‘how long will the benevolent dictator stay benevolent?'”.

The converse question may be more interesting, “Can one have a socialist economy without having a dictatorship?”  To have a centrally planned, collective system where the state owns the property and divides the outcome of the system equally among all the population would seem to require a significant centralization of power.  Our guide in Berlin said what I think many people feel, that the resulting equality from that ideal is very appealing.  She indicated that she hadn’t given up on that idea even though she didn’t like the communist government.  At this point what comes to mind is Lord Acton’s well-known quote that “Power tends to corrupt and absolute power corrupts absolutely”.  If Lord Acton is correct, then the direction the communist government took was inevitable.  But still the idea of equality has a great deal of appeal.

In this country we decided at its formation that we wanted to have equality of opportunity, not necessarily equality of outcomes.  We have had struggled over the last 200+ years with exactly what equality of opportunity means and to whom.  If we mean equal opportunity in the sight of the law, I think we’re pretty good at this point.  If it means that everyone is born into the same economic level and thus has the same opportunity to buy things that money can buy, we’re not quite there.  But without going to a socialist system of forcing equality of results so that everyone is born into a family with the same income and assets, we are not going to get there.  One of the keys to equal opportunity that gives everyone a chance at happiness is to have economic upward (and downward?) mobility and individual freedom of choice.  The data would indicate that we have that.   The Forbes 400 wealthiest American list that came out this Fall has few if any names that were on the list 40, or even 20 years ago.  Studies have shown that most family estates are dissipated within a couple of generations in this country (different from in Europe?).  At the same time, stories of people from poor backgrounds who have made deal of money are common.  At the same time there are people who have chosen to forego careers that would have given them more money in order to pursue things they love to do.  So there is hope, I believe, for all of us.  But the unsettling part can be that we have to take responsibility for ourselves because the government is not going to do it for us.  We won’t have a mother.  But we will have freedom.  We may not be able to have it both ways.

In the presidential debates last night, both candidates were given a limited amount of time to say what they wanted to say.  They tell me these posts should not go over 1,000 words and I am currently at 1083.  So I will save the rest of my observations for the next installment where I would like to cover the current directional opportunities and pitfalls of the U.S. and Europe (in a mere 1,000 words).


About tjc13

BE - Chem Engineering, Vanderbilt Univ, MBA, University of Tulsa - Worked for an energy and chemical company for many years and then started a management consulting business working for both for-profit and not-for-profit organizations.
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