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Malcolm Fraser’s ignorance and the Soviet collapse
Gerard Jackson
Because I have said some “very unkind things about our Muslim citizens” a certain Mr Spencer told me that I should feel ashamed of myself and “take a leaf out of the repentant Malcolm Fraser’s book”. (Italics added). Now I really am the last person anyone should send this kind of nonsense to. Nevertheless it did get me thinking about how pompous and ignorant this former prime minister is.
He has become a ridiculous figure, strutting about the public arena, parading intellectual pretensions that he sadly mistakes for serious thought, becoming the despair of thoughtful and informed opinion, the but of jokes of the malicious and a source of propaganda for the ignorant and self-serving.
Even when he opens his mouth on something with which we can agree — a rare occurrence — like a greater population for Australia, he still stuffs it up with incompetent and ill-informed comment. This fact was forcefully brought home to me by an idiotic liberal politician who mindlessly parroted Fraser’s fatuous assertion that “. . . Presidents Gorbachev and Yeltsin tore down Russia’s command economy at the behest of the West”, followed by “Is democracy better with 40 per cent unemployment, not being paid, not being able to afford food, with the Russian Mafia running around in the latest Mercedes . . .” (No wonder I despair of the Liberal Party).
I shall do this by the numbers so that even the underdeveloped intelligence of Big Mal’s admirers can grasp it. The fall of Soviet communism was predicted by professor Ludwig von Mises who was the first to explain in a seminal paper called Economic Calculation in the Socialist Commonwealth that was published in 1920. In this paper Mises explained why socialist economies will always collapse.
Mises pointed out that economic calculation is impossible in the absence of markets because without markets there are no real prices. Unable to engage in a rational allocation of resources because there are no price signals to indicate relative supplies and demands the planning agency can only allocate resources in an irrational manner. This brings about economic chaos which eventually causes the system to collapse, unless the government reverts to market pricing, as happened in China.
At this point it is necessary to define economic chaos. People imagine economic chaos in terms of mobs, burning buildings, lawlessness, etc. Not so. Economic chaos can reign even as political order is stringently maintained. The kind of chaos under discussion is the type where resources are misallocated to such an extent and malinvestments become so rampant that productivity and living standards fall to appalling levels even as the state continues with massive ‘investments’. A stage is finally reached where the system begins to disintegrate as shortages multiply and become increasing severe for all commodities, where the transport and distribution systems cease to function effectively and food rots because it cannot reach the market place, tractors rust because there are no spares and goods become shoddier and shoddier, etc.
That it apparently took the Soviet Union so long to expire was probably due to the well-known Soviet practice of using world capitalist prices to try and rationally price factors and resources. This would have helped to inject some economic sanity into the planning process by at least giving some indication of the economic value of, for example, raw materials. But to be fair to Mal, even most of Australia’s so-called free-market intellectuals are not aware of Mises’ work and the real reasons for the fall of communism, and, like Mal, they do not have the humility to admit their ignorance.
Despite appearances to the contrary, the Russian economy is a lot more ordered than it was under the old regime, the economic chaos of which was largely suppressed by KGB thuggery and the threat of the Gulag. But economic chaos there was, revealing itself in lengthening queues for all goods as shortages intensifies, falling life expectancy, rising infant mortality, increasing economic inefficiency and so forth.
Of course, when the system finally collapsed the chaos revealed itself in a mass of economically unsustainable malinvestments, just as Mises predicted. Only an idiot would think the calamity that was 70 years of communist central economic planning could be put right overnight by the market. And only an idiot or a political bigot would blame the present state of the Russian economy on the market — and I know Mal is not a bigot.
It’s a pity that Mal seems to have forgotten that the former regime had systematically and without mercy tortured and murdered millions of its own citizens and imprisoned millions more in barbaric conditions. I think that the ghosts of the Gulag and the purges would answer Mal’s pompous grandstanding with a resounding yes to the present, warts ‘n’ all.
Gerard Jackson is Brookes’ economics editor
BrookesNews.Com
Monday 13 November 2006