How Mass Immigration Stopped American Socialism

“Friedrich Engels wrote that immigrants in the United States “are divided into different nationalities and understand neither one another nor, for the most part, the language of the country.” Furthermore, the American “bourgeoisie knows…how to play off one nationality against the other: Jews, Italians, Bohemians, etc., against Germans and Irish, and each one against the other.” He argued that open immigration would delay the socialist revolution for a long time as the American bourgeoisie understood that “‘there will be plenty more, and more than we want, of these damned Dutchmen, Irishmen, Italians, Jews and Hungarians’; and, to cap it all, John Chinaman stands in the background.”

Indeed, American meatpackers and steelmakers in the late 19th and early 20th centuries intentionally hired workers from diverse national, ethnic, and racial backgrounds to inhibit their ability to form labor unions: More diverse backgrounds increased transaction costs among organizing workers. Meanwhile, union members in the United States generally opposed immigration and took nearly every opportunity to argue for closed borders.”

“Although immigration increased the number of socialists in the United States, it also increased the perception that socialism was an alien and foreign ideology that was distinctly un-American.”

“There are several potential explanations for why immigrants did not grow government expenditures in the United States. The likeliest theory is that the high levels of American ethnic, racial, religious, and linguistic diversity caused by immigration hobbled the rise of an American labor movement and reduced overall voter demand for bigger government. This is the essence of the complaint voiced by Marx, who warned that immigrant-induced ethnic and racial differences reduced worker solidarity, slowing his efforts to stoke a revolution in the United States and elsewhere.”

“All in all, immigration did more to slow the growth of government in the 19th and early 20th centuries and to frustrate the goals of left-wing reformers than it did to overturn the fundamental economic and political institutions of the American founding. With few exceptions, immigrants helped preserve, protect, defend, and expand American free markets.”

Will Peru Become the Next Venezuela?

“Pedro Castillo, a self-described Marxist-Leninist heading the Peru Libre (“Free Peru”) ticket, has secured a spot in the country’s June 6 presidential runoff election. The only person standing between him and power is Keiko Fujimori, the daughter of a former president who assumed dictatorial control in the 1990s and the leader of Fuerza Popular (“Popular Force”), a right-wing populist political party. If Castillo wins, he threatens to impose the same sort of ruinous policies that have decimated Venezuela.

Peru Libre’s platform calls for an economic transformation that would include nationalization of the mining, gas, oil, hydro-energy, and communications industries; agrarian reform which will include land expropriation and might involve land redistribution; elimination of private pensions; voiding contracts with the companies that are currently in charge of managing airports, railways, ports, and highways, and transferring these functions to regional governments and municipalities; and reviewing all trade agreements with an eye toward abrogating at least some of them.”

“Chavez nationalized Venezuela’s oil industry in 2005. Not only did state mismanagement prove fatal, but the lack of private investment also contributed to the demise of the once-mighty Venezuelan industry. Castillo’s plans to nationalize Peru’s powerhouse copper industry will lead to similarly tragic results. If Castillo wins, expect both government mismanagement and an output collapse that will cripple the nation’s copper production.”

How Socialism Wiped Out Venezuela’s Spectacular Oil Wealth

“Venezuela has the world’s largest proven oil reserves and yet the country has run out of gasoline. The socialist government has lost the capacity to extract oil from the ground or refine it into a usable form. The industry’s gradual deterioration was 18 years in the making, tracing back to then-President Hugo Chávez’s 2003 decision to fire the oil industry’s most experienced engineers in an act of petty political retribution.

The near-total collapse in the nation’s oil output in the ensuing years is a stark reminder that the most valuable commodity isn’t a natural resource, but the human expertise to put it to productive use.”

“Chávez sought control of the nation’s oil wealth to fund his political ambitions, but first, he had to dismantle the mechanisms that were put in place to protect PDVSA’s autonomy.

In a move intended to begin that erosion, Chávez began appointing military leaders to PDVSA’s board. The conflict between PDVSA’s top management and Chávez culminated in a national strike, which took place from December 2002 to February 2003. Chávez proceeded to fire 18,000 state oil workers, including 80 percent of its top engineers, handing control of the industry to the military.

The workers who were fired had “an average of 15 years of experience,” Toro says. “In a sense, he threw away 300 thousand years of experience.”

“Now, instead of producing five to six million barrels of oil [a day], which is the amount we should be producing, last month’s report from OPEC showed that our production, based on external sources, was 339 thousand barrels per day. After once having been a major player in the oil industry, we’ve become nothing. An insignificant exporter of oil,” he says.”

Do I Deserve What I Have? Part II

“I realize that the case of pure socialism is something of a straw man. In the next part of this series I’ll look at the case for simply more redistribution than we have now. But a look at pure socialism on both practical and what I would call spiritual grounds is still illuminating.”

“GDP in the US is currently about $21 trillion. There are about 250 million Americans over the age of 18. So that’s about $84,000 per adult. How about a system that gives $84,000 to every adult over the age of 18? Earn above $84,000 and you pay a tax of 100%. Earn less than $84,000 and you get a check to make up the difference. Bianca and I would be on the same footing. Bianca currently makes something on the order of $30–40,000. Pure socialism would roughly double her standard of living.”

“Full equality simply wouldn’t work very well. If you earn $80,000 you’d get a check for $4,000. If you earn $14,000 (roughly the Federal minimum wage for full-time work) you’d get a check for $70,000. And if you don’t work at all, you’d get a check for $84,000. Some people love what they do or feel some kind of calling to their work and those people might keep doing what they’re doing. But some people will stop working and enjoy the same consumption as someone working two or three jobs to make $50,000.
A policy that equalizes income at $84,000 isn’t a safety net. It’s a safety hammock. Some people would choose to relax in it.”

“GDP isn’t going to stay at $21 trillion. Even if everyone currently earning less than $84,000 stopped working entirely, GDP wouldn’t fall by half because the top half of the income distribution produces more than half of the output. But GDP would almost certainly fall.”

“people currently earning more than $84,000 would work a lot less as well, knowing that any income over $84,000 would go to someone else. So the standard of living wouldn’t be sustainable at $84,000. It would be something less and whatever that lower number is, it probably wouldn’t grow much over time — the incentive to invest and innovate would be smaller. Not a zero rate of growth — as before, money isn’t the only motivator. A lot of people would still try to create new things. But presumably the growth rate would fall fairly dramatically.”

“If everyone earns the same amount after tax, you don’t care what your market wage is. So wages won’t motivate you to do something unpleasant or something that takes skills that can only be acquired over a long period of time. Why would anyone want to wash dishes or cut lawns on hot days or work at a garbage dump? Or do anything that is dangerous? Better to stay home and collect your check”

“The fact that basketball actually pays more than ballet is not irrelevant. The dramatically higher salary of an NBA star relative to ballet is telling Lebron that he is much more valuable as a basketball player than a ballet dancer. That dramatically higher salary is telling Lebron that a lot more people are willing to pay a lot more money to see him dance with a basketball than to dance with a ballerina.
The money is telling him something. It’s not telling him he has to be a basketball player. But it tells him something about what it costs him to be a ballet dancer. It’s pushing him toward basketball.

That’s what salaries do in a market economy. They send us signals. The signals are sometimes distorted — they can ignore costs and push us to do something tawdry but financially pleasant. They can understate what the full impact of something is. Hard as it is to believe, many people are able to enjoy Lebron James without buying tickets to Lakers games or buying his jersey or watching him on television. You can actually make the case he’s underpaid. But ignore that. The point is that salaries and prices more generally are imperfect. But they’re not irrelevant.

When you go to a world of complete equality, salaries play no role in assigning people to tasks. That task has to be performed by some other mechanism, usually the State, which means that a bunch of people with little or no skin in the game have the job of figuring out who should do what. That isn’t going to turn out very well. It certainly didn’t work well in the Soviet Union where the workers in the workers’ paradise had an informal motto: we pretend to work and they pretend to pay us.

So pure socialism doesn’t work very well in the sense that I don’t think Bianca would be better off in that world in the sense of material well-being. This is essentially Rawls’s criterion for redistribution — we should maximize the well-being of the poorest member of society. Bianca’s not the poorest but the point is similar. I think Bianca would have a lower standard of living and her children would have less of a chance to flourish — the world would be a more static place. And by a lower standard of living, I don’t mean just a little lower. Without incentives and the informational content of wages, we couldn’t achieve anything like a modern standard of living for 330 million people. We’d be much much poorer in material ways with consequences for non-material aspects of our life like health.”

CPAC Promised To Take on Socialism but Couldn’t Even Take on Trump’s Spending

“Republicans have often criticized Democrats for their expensive policies and rallied behind spending cuts, but now that Trump is in the White House, many conservatives seem to have abandoned the idea entirely. Rush Limbaugh, the inflammatory right-wing radio host and recent recipient of the Presidential Medal of Freedom, regularly railed against former President Barack Obama for his reckless approach to fiscal issues. In July, he appeared to have changed his position.

“How many years have people tried to scare everybody about [the deficit]?” he said on his show. “Yet here we’re still here, and the great jaws of the deficit have not bitten off our heads and chewed them up and spit them out.””