Blog 9: The Global Communist Ideology of the Venus Project

A few weeks ago, I came across a rather heavily commented on Facebook post regarding the Venus Project in my Facebook news-feed.  I have heard on the Zeitgeist/Venus movement for some time now, but I had never really looked into it seriously.  What motivated me to launch a more thorough investigation was a comment posted about how ‘airtight’ the arguments are in favor of the Venus Project.  This commenter mentioned how he had never seen anyone present any solid arguments against the Venus Project.  Case closed apparently.  Such self-assured comments are suspicious because I have never seen any social science debate that is ‘airtight.’  Social science debates normally are quite passionate and quite divisive and are not normally settled in any way.  Consequently, I launched this investigation into the Venus Project.  I wanted to see whether this ‘airtight’ claim could stand up to a thorough criticism.  My conclusion is that it cannot be considered ‘airtight’ because the arguments are all unconvincing.  There are also many issues I have with the logic of their arguments, and with the historical accuracy of what they say.  I also wanted to see if I could figure out the ideology driving this project.  My conclusion is that it is a form of global communism mixed in with anarchist rhetoric, or some sort of global anarcho-communism system.  

The Venus Project flatly denies my claims that they have anything to do with communism.  Here are some quotes from their website where they explicitly reject my linking of their project to communism, to Karl Marx, etc. 

This first quote is the first half of their answer to Question 55 “How does The Venus Project Compare with Communism?”

Communism being similar to a resource-based economy or The Venus Project is an erroneous concept. Communism has money, banks, armies, police, prisons, charismatic personalities, social stratification, and is managed by appointed leaders. The Venus Project's aim is to surpass the need for the use of money. Police, prisons and the military would no longer be necessary when goods, services, healthcare, and education are available to all people.

This second is part of their answer to Question 54 “Is this what Karl Marx advocated?”

Although Marx was a brilliant man for his time, he did not foresee the methods and advantages of a high-tech resource-based economy. Communism used money and labor, had social stratification, and elected officials to maintain the communists' traditions. Most importantly, Communism did not eliminate SCARCITY nor did they have a blueprint or the methods for the production of abundance.

The global nature of this plan is stated explicitly in their answer to Question 2 entitled “What is a Resource-Based Economy?”

To transcend these limitations, The Venus Project proposes we work toward a worldwide, resource-based economy, in which the planetary resources are held as the common heritage of all the earth's inhabitants. The current practice of rationing resources through monetary methods is irrelevant, counter-productive, and falls far short of meeting humanity's needs.

Simply stated, a resource-based economy utilizes existing resources - rather than money - to provide an equitable method of distribution in the most humane and efficient manner. It is a system in which all goods and services are available to everyone without the use of money, credits, barter, or any other form of debt or servitude.

Terminological Issues:

One of the major problems is that the terms ‘communism’ and ‘socialism’ and even the terms ‘communist’ and ‘socialist’ have historically had inconsistent meanings.  Initially, these terms were all synonymous.  However, over time, shades of difference in meaning of all of these four terms emerged.  Part of the reason for this has to do with changes in tactical issues pertaining to how to implement communism or socialism.  One view held that communism would come about inevitably and would be achieved in a manner independent of the wills of individuals.  Another view held that communism had to be achieved by revolutionary means.  A further view held that communism had to be achieved through parliamentary means because it was important that the public supported the cause.  Moreover, further refinements in terminology differentiated between an early stage and a late stage with socialism being the early stage and with communism being the later stage.  Further hairsplitting could be raised over whether a proposal should be classified as ‘interventionist’ or ‘petty bourgeois’ or whether it is legitimately communist or socialist.  Furthermore, the history of communism and socialism is full of examples of one communist party accusing other parties of not being ‘true’ communists or being sellouts to capitalism. 

To address these issues, I will try to add modifiers to my use of the terms socialism and communism.  So for example, if I am alluding to revolutionary communism, I might add in a modifier such as the Bolshevik or Leninist or Sorel approach.  My plan is to keep these terms as clearly differentiated as possible.  This will not only cut down on confusion but it will also help classify what the Venus Project is and what it is definitely not.  

Analysis of Question 55:

The Venus Project states that it is not communism because, unlike communism, the Venus Project does not have police, prisons, and military.  All that has been proven is that the Venus Project is not planning for revolutionary communism.  It opposes the Leninist Bolshevik brand of communism.  The Venus Project openly rejects the George Sorel approach of ongoing bloody riots and violence.  I conclude that the Venus Project is not revolutionary communism.

But this is insufficient proof for the Venus Project to go on to claim that their non-violence makes them non-communists.  Take for example Ludwig von Mises’s 1947 work entitled Planned Chaos (which appears as an appendix to his larger treatise Socialism:  An Economic and Sociological Analysis.)  Back then, the socialist authors that Mises was debating against said exactly the same thing the Venus Project says today.  Mises writes on page 521 (Emphasis is mine.):

Socialism, they asserted, will bring true and full liberty and democracy.  It will remove all kinds of compulsion and coercion.  The state will “wither away.”  In the socialist commonwealth of the future there will be neither judges and policemen nor prisons and gallows.

Of course, this 1947 quote does not conclusively prove that the Venus Project is socialist.  Moreover, Mises does not specify which socialist authors he is alluding to in this quote so I cannot give any modifying phrase here.  In fact, one could easily quote modern day anarcho-capitalists who vehemently attack the state as a tool of coercion and compulsion.  This is not surprising given their openly anarchistic views as espoused especially by Murray Rothbard.  Furthermore, one could also quote a classical liberal, such as Mises himself to support this claim.  Mises said in Liberty and Property that, “Government is essentially the negation of liberty.”  (Classical liberals call for the ‘minimal state’ that would be restricted to a narrow range of activities usually only the protection of life, liberty, and property.)

However, neither a classical liberal nor an anarcho-capitalist would ever advocate for the abandonment of money.  The advocating for the elimination of money by the Venus Project is, however, a staple of communist literature.  Here are three historical examples of communist experiments that all tried to eliminate money.

Murray Rothbard’s book, Economic Thought before Adam Smith, discussed, what he called the totalitarian communism of Munster.  Munster in northwest Germany in the 1530s provides a nice historical lesson of an early attempt at money-less communism.  From page 153 (Emphasis is mine.):

After two months of severe and unrelenting pressure, a combination of propaganda about the Christianity of abolishing private money, and threats and terror against those who failed to surrender, the private ownership of money was effectively abolished in Munster. The government seized all the money and used it to buy or hire goods from the outside world.

         

Rothbard’s essay entitled The Myth of Monolithic Communism points out the failure of the Soviet’s experiment with abolishing money.  They quickly learned from experience that the plan to abolish money is impracticable even in a fairly economically backward nation, i.e., 1917 Russia.  One has to wonder how this plan could ever be applied to an advanced capitalistic nation.  (Emphasis is mine.)

When the Bolsheviks assumed power in late 1917, they tried to leap into full "communism" by abolishing money and prices, an experiment so disastrous (it was later dubbed "War Communism") that Lenin, always the supreme realist, beat a hasty retreat to a mere semisocialist system in the New Economic Policy (NEP).

Finally, in his book entitled Classical Economics, Murray Rothbard provides, on page 333, historical information on the Pol Pot attempt to abolish money in order to abolish the division of labor (i.e., specialization in production).  To abolish the division of labor is also a rather typical Marxian theme mainly because capitalist production is based on the division of labor.  (Emphasis is mine.)

Perhaps the closest approximation was the short-lived communist regime of Pol Pot in Cambodia which, in attempting to abolish the division of labour, managed to enforce the outlawry of money - so that for their tiny rations the populace was totally dependent upon the niggardly largesse of the communist cadre.

Obviously, this does not prove that the Venus Project will turn into the totalitarian dictatorships that appeared in Munster, in Bolshevik Russia, or in Pol Pot’s Cambodia.  The Venus Project certainly could turn into a global totalitarian dictatorship especially because of their global common holding of property idea.  The point is that historical examples do not prove future events.  They do, however, suggest that communist regimes have a tendency to favor plans that will abolish money.  A capitalist regime can never suggest a plan that would abolish money because money facilitates indirect exchange.  Indirect exchange (i.e., trading goods and services for payment in money) exists because of the division of labor.  The division of labor is specialization in production and so requires exchange between the different specialized producers.  These exchanges are facilitated by the use of a medium of exchange, i.e., by money.

The Venus Project is correct when it asserts that communism tends to lead to social stratification.  In Planned Chaos, page 506, Stalin’s regime suffered from the creation of a small ruling elite that lived very well while the masses of people lived in horrific poverty.

Stalin finds it necessary to explain to the vast majority of his subjects why their standard of living is extremely low, much lower than that of the masses in the capitalist countries and even lower than that of the Russian proletarians in the days of Czarist rule.  He wants to justify the fact that salaries and wages are unequal, that a small group of Soviet officials enjoys all the luxuries modern technique can provide, that a second group, more numerous than the first one, but less numerous than the middle class in imperial Russia, lives in “bourgeois” style, while the masses, ragged and barefooted, subsist in congested slums and are poorly fed.

The Venus Project’s assertion that communist leaders are appointed is questionable.  Lenin did not get appointed; he seized power from the Constituent Assembly at gunpoint (see Planned Chaos, p. 502).  Stalin moreover eliminated his competitor, Trotsky, by forcing him to have to flee the country (see Planned Chaos, p. 514).  Historically speaking, these communists are not appointed; they like to appoint themselves.

Analysis of Question 54:

Question 54 begins by asserting that Marx was a brilliant man.  Given the historical context, this is probably a fair statement to make.  In the Preface to the Second German Edition of Socialism:  An Economic and Sociological Analysis, Mises (pages 5-6) points out that socialism was basically a dead philosophy by the middle of the nineteenth century and that Marx successfully resurrected it.

Thus, about the middle of the nineteenth century, it seemed that the ideal of Socialism had been disposed of.  Science had demonstrated its worthlessness by means of strict logic and its supporters were unable to produce a single effective counter-argument.  It was at this moment that Marx appeared. 

Then, this Venus Project quote mentions that Marx’s major failure was that he did not anticipate a high-tech economy.  However, this claim is contradicted by Rothbard’s discussion on pages 327 to 328 in his book Classical Economics.  Although not technically from Marx, this quote is from Marx’s collaborator, Engels.  Notice that Engels, like the Venus Project, links a discussion of the use of new technology with a discussion of the abolishment of scarcity and the creation of superabundance to satisfy the needs of everyone.  (Emphasis is mine).

Furthermore, in 'The Principles of Communism', an essay written in late 1847 that became the first draft for the Communist Manifesto, Engels laid bare one of the crucial, usually implicit, assumptions of the communist society – that superabundance will have eliminated the problem of scarcity:

Private property can be abolished only when the economy is capable of producing the volume of goods needed to satisfy everyone's requirements...The new rate of industrial growth will produce enough goods to satisfy all the demands of society... Society will achieve an output sufficient for the needs of all members,

This superabundant production somehow will have been achieved by a wondrous technological progress that would eliminate the need for any division of labour.

The Venus Project laments the fact that communist failed to eliminate scarcity.  Ironically, on page 54 (everything is 54 I guess in this section!), George Reisman, in is treatise entitled Capitalism, explains that it is impossible to eliminate scarcity.  As he says, “The desire for goods will always remain far greater than the ability to produce them.”  In his book, Young Lessons for the Young Economist, Robert P. Murphy that scarcity means that at any particular point in time we have limited resources but unlimited desires and so tradeoffs have to be made.  Reisman does differentiate between pre-capitalistic (i.e., food, clothing, and other necessities) and capitalistic definition of scarcity (e.g. I do not want to take the bus, now I want a car).   At first, I thought that maybe the Venus Project was using a pre-capitalistic definition of scarcity as opposed to the capitalistic definition and that a terminological issue existed.  It is certainly possible to eliminate the pre-capitalistic version of scarcity.  However, the Venus Project seems to go beyond the pre-capitalistic definition and wants to provide a superabundance of all goods.  This then makes the wishes of the Venus Project unattainable.  You cannot eliminate the capitalistic version of scarcity because the invention of any new technology creates even more desires on the part of individuals and so desires will always be greater than the ability to produce them.

To conclude my analysis of Question 54, the Venus Project said that communism did not have a plan for the creation of superabundance.  This is not historically accurate.  The revolutionary communists certainly had plans.  The Soviet Union was notorious for having Five-Year Plans.  It seems contradictory to me to claim that communism, which has always been about central planning, does not have any plans for abundance.

Analysis of Question 2:    

Question 2 begins by admitting openly that the Venus Project is global communism.  To abolish private ownership of the means of production is the essence of all socialist and communist plans (and interventionist plans as well.)  Going back to Rothbard’s historical Munster example, from page 153 of Economic Thought before Adam Smith, we clearly see that communist experiments eliminate private property, want to redistribute everything equitably, and also plan to eliminate manual labor.  (Emphasis is mine).

This compulsory communism and reign of terror was carried out in the name of community and Christian 'love'. All this communization was considered the first giant steps toward total egalitarian communism, where, as Rothmann put it, 'all things were to be in common, there was to be no private property and nobody was to do any more work, but simply trust in God'. The workless part, of course, somehow never arrived.

Conclusions:

The Venus Project is global anarcho-communism.  They certainly are not calling for revolutionary communism because of their views against violence and against government coercion that comes in the form of police and prisons.  They are also not for the parliamentary version of socialism because they do not want any government at all (I took this fact from some of their other frequently asked questions—they explicitly state that they want to abolish all government).  I suppose that this makes them orthodox Marxians—that is, they think that global communism is inevitable.  Or in the Venus Project’s case, this new technological revolution is inevitable and so their global communist scheme is therefore inevitable.  But they certainly are kidding themselves if they think they are not communists.  They want to eliminate prices and money—that is pure communism.  They want to hold all property in common—that is pure communism on a global scale.  They want to distribute all goods equitably—that is communism.  They want to somehow violate all known laws of economics and abolish scarcity—that is communism.  They want to create superabundance through all this new radical technological innovation—that is communism.  They want to eliminate manual labor—that is communism.  Everything that they want is some variation of communism of ideology.  Therefore, I conclude that the Venus Project is global communism and is most consistent with the orthodox Marxian version of the inevitable communism.

Blog 8: My First Contribution to Refuting the Venus Project's Economics

Simply stated, a resource-based economy utilizes existing resources - rather than money - to provide an equitable method of distribution in the most humane and efficient manner. It is a system in which all goods and services are available to everyone without the use of money, credits, barter, or any other form of debt or servitude. 

It is not money that people require, but rather free access to most of their needs without worrying about financial security or having to appeal to a government bureaucracy. In a resource-based economy of abundance, money will become irrelevant.

If all the money in the world were destroyed, as long as we have sufficient arable land, the factories, the necessary resources, and technical personnel, we could build anything and even supply an abundance.

Instead people will be introduced to limitless opportunities to explore, create, participate, and learn.

Distribution of goods and services without the use of money or tokens would be accomplished by establishing distribution centers.

The Venus Project's major concerns are producing products with limited labor and eventually eliminating labor and at the same time giving people all the amenities of a prosperous, high energy society.

–From the Venus Project’s Website

To fully disprove why these quotes are completely contrary to sound economics would require me to write a full essay on economics.  I do not intend to do so.  But I will give enough evidence to demonstrate why the Venus Project’s views on economics are utterly nonsense.

The first major point that I want to make is that these quotes are not new.  The Venus Project is not a new vision of society; it is the Soviet Union’s vision of society.  As a student of economic history, I find nothing original in the Venus Project’s proposals; I have read them all before in my books on economic history.  I recognized these quotes right away as being simply regurgitated 1920 arguments coming out of the mouths of socialist dreamers. 

For example, here is a textbook example from Ludwig von Mises’s Liberalism:  The Classical Tradition (1927, p. xxxi) based on a 1925 quote from Leon Trotsky (Literature and Revolution).  All socialist propaganda promises a world of human bliss and abundance.

Socialist authors promise not only wealth for all, but also happiness in love for everybody, the full physical and spiritual development of each individual, the unfolding of great artistic and scientific talents in all men, etc.  Only recently Trotsky stated in one of his writings that in the socialist society “the average human type will rise to the heights of Aristotle, a Goethe, or a Marx.  And above this ridge new peaks will rise.”  The socialist paradise will be the kingdom of perfection, populated by completely happy supermen.  All socialist literature is full of such nonsense.  But it is just this nonsense that wins it the most supporters.

  

All hardcore socialist propaganda calls for the abolition of money and prices.  Take a look at Chapter 12, starting on page 127 of Richard M. Ebeling's book Selected Writings of Ludwig von Mises, Volume 2.   The essay was originally published on November 17, 1920.  This quote from the Soviet Union is exactly what the Venus Project wants, namely, no money and goods to be given out at distribution centers.

According to a report from Copenhagen, the Soviet government has abolished money.  In the future, payments are no longer to be made in rubles but in requisition vouchers that the state distribution facilities must honor.

History teaches us that attempts to abolish money and prices are utter failures.  Even the Bolsheviks realized fairly quickly that the Venus Project approach of abolishing money and establishing distribution centers cannot work. Keep in mind, the Bolsheviks were hardcore communists; they stood for revolutionary communism.  I take this quote from Murray N. Rothbard’s essay entitled, The Myth of Monolithic Communism.

When the Bolsheviks assumed power in late 1917, they tried to leap into full "communism" by abolishing money and prices, an experiment so disastrous (it was later dubbed "War Communism") that Lenin, always the supreme realist, beat a hasty retreat to a mere semisocialist system in the New Economic Policy (NEP).

The Venus Project seems to think that by abolishing money it can eliminate hardships, problems, and suffering.  It thinks that it can create abundance and bliss.  It assumes that mankind can be liberated and freedom will come, but only if we first abolish money.  These views are contrary to historical evidence.  In fact, history teaches us that one of the first things that dictators do is abolish money and prices.  The quote above from Lenin and the Bolsheviks certainly proves that point.  To hammer away at the historical link between dictatorship and the abolishment of money, I will now cite Murray Rothbard’s essay entitled:  Messianic Communism in the Protestant Reformation. Notice also that these communists promised, just as our present day Venus Project promises, that they would create a world without manual labor and work (emphasis mine).

After two months of severe and unrelenting pressure, a combination of propaganda about the Christianity of abolishing private money, and threats and terror against those who failed to surrender, the private ownership of money was effectively abolished in Münster. The government seized all the money and used it to buy or hire goods from the outside world. Wages were doled out in kind by the only remaining employer: the theocratic Anabaptist state.

This compulsory communism and reign of terror was carried out in the name of community and Christian "love." All this communization was considered the first giant steps toward total egalitarian communism, where, as Rothmann put it, "all things were to be in common, there was to be no private property and nobody was to do any more work, but simply trust in God." The workless part, of course, somehow never arrived.

In summary, the Venus Project is just a restatement of failed Soviet and communist experiments.  There is not one original idea in the entire project.  If Lenin were still alive, he would be proud to know that his autocratic and dictatorial plan is still being sold to the naive public.  The best part of this propaganda is that it is sold as liberty and freedom when it is, in fact, a textbook recipe for dictatorship, poverty, and privation.  Please keep in mind, that I have ignored many of the reasons as to why the Venus Project’s plans cannot work.  The purpose of this short essay was to stress two points:  1.  The Venus Project is not new, and 2. The Venus Project is Soviet Communism repackaged.  Simply, this plan cannot work because it is in direct violation of the fundamental principles that make a society work, namely, the division of labor facilitated by indirect exchange.  These are the concepts that make a civilization work.

The Venus Project is what happens when people forget (or aren't taught) to follow Santayana's advice:  "Those who do not remember the past are condemned to relive it."  

Blog 7: Freedom has made a comeback

There were on the campuses once again friends of freedom and they had the courage to speak their minds.  Collectivism was challenged by individualism. […] There are overcautious skeptics who admonish us not to attach too much importance to these academic affairs.  I think these critics are wrong.  The fact that, out of the midst of the college youth, a new movement in favor of the great old ideals of individualism and freedom originated, is certainly of paramount importance.  The spell of the dreadful conformity that threatened to convert our country into a spiritual desert is broken.

--Ludwig von Mises, Statement at Young Americans for Freedom Rally, Madison Square Garden, March 7, 1962.  From Economic Freedom and Interventionism, p. 200.

In this pep-rally speech in 1962, Mises lays out the two competing ideologies, namely, collectivism with conformity versus individualism with freedom.  Reading over his entire statement reveals the optimistic hope that Mises had for the future.  He went so far as to speak of the birth of a new “young generation of liberators.”  If Mises were alive today, he would be so proud to see our current young generation of liberators spreading the ideas of liberty on school campuses, on Facebook, on Twitter, on YouTube, and even on the website of the Institute built to honor his teachings and his legacy.  Mises would also be pleased to see that his message is being listened to not only by Americans but also by people from all over the world.  Today, liberty is making a comeback not only in America but also globally.  People are waking up to the problems inherent in fractional reserve banking.  They see the strings behind the system.  They are beginning to realize that the government is not always right; Big Brother does not know best.  People are starting to see the insanity of perpetual wars, crushing government debts, and interminable business bailouts.  People are starting to ask questions; they are starting to watch alternative news sources.  Conformity has certainly taken a beating.

But why should anyone support freedom and liberty?  Are there any logical reasons to justify the substitution of liberty for conformity?  Or is this just simply a debate over political opinions, i.e., a debate where some people like liberty while others prefer conformity? 

Dictionary.com defines conformity as: “Agreement between an individual's behavior and a group's standards or expectations.”  It then defines a conformist as:  “A conformist is one who follows the majority's desires or standards.”  These definitions imply sameness—a society of conformists would act alike, talk alike, and think alike.  The problem, then, is that, humans are not all alike.  There is no innate equality.  “The fact that human beings are born unequal in regard to physical and mental capacities is not denied by any reasonable man, certainly also not by pediatrists” (The Elite Under Capitalism, p. 21). 

Conformity, then, goes against nature.  Conformity tries to transform inherently unequal people into equal people.  This is counterproductive for society; everybody loses under this scenario.  To increase the amount of goods produced, society turns to the division of labor or specialization.  By specializing, each person can produce more than he or she could by trying to be self-sufficient.  Specialization is simply playing to each person’s natural strengths.  It is leveraging the fact that people are born unequal.  If Bob is physically weak then he will not specialize in an area that depends on physical strength.  If Mary is weak at math then she will not specialize in an area that depends upon mathematics.  If Bob is strong at math then he will specialize in that area.  If Mary is physically strong then she will specialize in a position that requires lots of muscles.  In summary, specialization will dictate that Mary will work in a position requiring physical strength, and Bob will specialize in a position that requires math.  Mary and Bob will be able to produce more goods and services by specializing therefore making both of them better off.  By letting Mary be what Mary is naturally and by letting Bob be what Bob is naturally, everyone is ultimately better off, assuming of course that Bob and Mary are allowed to exchange goods and services voluntarily.

In conclusion, conformity is against nature.  It forces people to be something that they are not.  It undermines the division of labor (actually, conformity is the opposite of the division of labor), and so impoverishes a nation.  It forces people to do things that they are not naturally very good at doing.  Liberty, on the other hand lets people be what they were born to be.  Bob can now spend his days doing what he loves, namely, solving math equations.  Mary can now spend here days doing what she enjoys, namely, using her physical strength to rescue people from burning homes.  By letting everyone specialize in the area that they are best at, more goods can be produced, and the standard of living of society will then go up.  Liberty in this sense means: "do not use coercion to force people to be something they do not want to be."                

Blog 6: Decentralization of Power and Consumer Sovereignty

 

In the market economy every specialist—and there are no other people than specialists—depends on all other specialists.  The mutuality is the characteristic feature of interpersonal relations under capitalism.  The socialists ignore the fact of mutuality and speak of economic power.  For example, as they see it, “the capacity to determine product” is one of the powers of the entrepreneur.  One can hardly misconstrue more radically the essential features of the market economy.  It is not business, but the consumers who ultimately determine what should be produced.  (25-26)

--Ludwig von Mises, The Elite under Capitalism in Economic Freedom and Interventionism:  An Anthology of Articles and Essays, Liberty Fund, Indianapolis.

One of the most important contributions to economic thought was Dr. Ludwig von Mises’s insistence that consumers—the masses of people not a handful of capitalists—ultimately run the market economy.  The masses of people—the ‘labor class’ are also the consumers.  From The Economic Foundations of Freedom, p.6, he wrote: “The same people who are employed by the big corporations are the main consumers of the goods turned out.” 

Actually, this opening quote is fairly tame because it understates the full extend of the power placed by the free market economy in the hands of the masses.  It does so by restricting the discussion to production of consumer goods.  A full treatment of this issue would delve into how the consumers, control the distribution of income, how the time preferences of consumers control the supply of loanable funds thus influencing the rate of interest, how the consumers form the prices of all goods both producer (i.e., material factors of production, human or labor) and consumer, how the consumers decide what gets produced in what quality and in what quantity, and how the consumers ultimately regulate profit and loss.  The study of government interventionism in economic affairs can always be reduced down to the one common denominator of substituting government control for consumer control.

A central bank means that a handful of central bank governors have replaced the consumers in setting the interest rate.  By unilaterally imposing an interest rate, the central bankers can distort the time preferences of the consumers.  (“Time preferences” refers to how ‘future oriented’ versus how ‘present oriented’ people are, so it asks do they want to have more goods today or more goods in the future.)  Redistribution of income through transfer payments means that legislators not consumers get to decide what the income distribution will be.  Government bailouts of businesses are the overriding of the consumers’ decision to impose losses on companies and the overriding of the consumers’ decision to shift the control of factors of production away from inefficient producers and toward more efficient ones.  Trade barriers are a way to override the consumers’ purchasing decisions by replacing them with the decisions of trade negotiators.  Labor union contracts substitute the union’s wage demands for those of the consumers.  State funded health care and education substitute the plans of social engineers for those of the consumers.  In sum, government interventionism always means the substitution of the government’s unilateral plan for the personal plans of the masses of consumers. 

Consumer sovereignty means decentralized control.  It means that individuals can form their own plans in life and endeavor to make them a reality.  It means that individuals get to decide what is produced, when it is produced, who produces it (i.e., who controls the factors of production), how much of income should be invested or saved and how much of it should be consumed, and a whole host of other decisions.  This is a perfect recipe for stopping tyranny in government because power has been distributed into millions of hands.  Moreover, notice that everybody wins in this scenario—both the producers and the consumers.  By obeying the orders of the consumers, the producers become rich.  Therefore, a harmony of interests has been achieved; everybody wants to keep the system going because everybody is winning under it.  Everybody wants to keep working together.  Everybody wants to cooperate.  The owners of the firm want to keep satisfying the consumers so that they can keep earning profits.  The consumers want to keep lending funds to this firm so that it can expand and grow and satisfy even more of the consumers’ needs. 

Now, contrast consumer sovereignty with government interventionism, which is basically just producer sovereignty.  Producer sovereignty means that the producers of goods get to dictate terms to the consumers.  The best illustration is trade protectionism where the producers, through trade barriers, get to dictate to the consumers what they will be allowed to buy.  All government interventionist measures lead to social disharmony because they inherently create winners and losers.  In the examples above one group wins at the expense of another.  The losing group is always the masses, the consumers.  You cannot run a society where some groups are winning at the expense of other groups.  This just breeds hatred, hostility, frustration, resentment, and maybe even revolution. 

Mises goes even further and argues in Planned Chaos (the Epilogue to his treatise on Socialism called Socialism:  An Economic and Sociological Analysis) that government regulations of business sow the seeds of socialism of the German pattern through a gradual step-by-step process of regulation, failure, more regulation, more failure and so on.  This process is reminiscent of the Theory of Bureaucratic Displacement, mentioned in my earlier blog pertaining to the continual ‘dumbing down’ problem in public education.  This ‘socialism of the German pattern’ goes by the name Zwangswirtschaft (compulsory economy) and was used by the Nazis.  Conceptually, this process is like a cancer that slowly spread to infect all stages of production.  Once the government has the power to regulate and restrict activities at all stages of production, it can easily control the entire economy, meaning, it can override all the wishes of the masses of consumers. 

In conclusion, the choice is ultimately between consumer sovereignty and producer or government sovereignty.  Consumer sovereignty places the power to make decisions in the hands of individuals.  Because power is now so widely dispersed, tyranny in government becomes a relic of history.  The government will return to its limited role as servant of the people, meaning that the government will be restricted to doing only those things delegated to it by the people.  Producer sovereignty or government sovereignty means that the masses will be placed in a subordinate role.  They will no longer be making decisions; instead, they will be taking orders from their superiors.  In this world, the consumers, the masses, have no way of controlling the behavior of the government.  No ‘checks and balances’ exist under such a scenario.  This in turn, creates the distinct possibility of the arbitrary use of power and hence the creation of tyranny.  The choice then, is between individual liberty and slavery.