This is a staggeringly stupid thing to say, even for someone who is as self-evidently dim as Trainer. For decades Marxists (think Paul A. Baran and Paul M. Sweezey) and every other hue of leftist thought (think Kenneth Galbraith, Ralph Nader, E.J. Mishan, etc.,) condemned capitalism for forcing the masses to buy oodles of useless trinkets like cars, foreign cruises, plasma televisions, fridges, DVD recorders and players, computers, cordless phones, mobile phones, etc. In other words, capitalism stands condemned for giving the masses what they want instead of what lefty intellectuals think they should have. Yet Trainer mindlessly asserts that capitalism produces only for the rich. Apparently this clown has never heard of mass production. This cretinous line of thought was nailed many years by Ludwig von Mises’ astute observation that

...men who become rich in the capitalistic society are serving the people. The capitalistic market economy is a democracy in which every penny constitutes a vote. The wealth of the successful businessman is the result of a consumer plebiscite. Wealth, once acquired, can be preserved only by those who keep on earning it anew by satisfying the wishes of consumers.

The capitalistic social order, therefore, is an economic democracy in the strictest sense of the word. In the last analysis, all decisions are dependent on the will of the people as consumers. Thus, whenever there is a conflict between consumers’ views and those of the business managers, market pressures assure that the views of the consumers win out eventually. This is certainly something very different from the pseudo-economic democracy toward which the labor unions are aiming. (On the Manipulation of Money and Credit, Free Market Books, 1978)

Trainer doesn’t even know his Marx. It was Marx who condemned capitalism as “anarchy in production” that frequently generated crises resulting in “overproduction”. (Marx and Engels, The Communist Manifesto, George Allen and Unwin LTD, 1948, p. 157). If Trainer had been able to tell Marx that capitalism had been “well organised to serve the capitalist class” Marx would probably have broken his cane over his head and roared something about the “anarchy of competition and the peculiarity of the bourgeois mode of production”. (Capital: A Critique of Political Economy Vol. III, Charles H. Kerr and Co., 1909, p. 305).

A call by Rodbertus to abolish the market elicited a remarkable rejoinder from Engels who pointed out:

To desire, in a society of producers who exchange their commodities, to establish the determination of value by labour time, by forbidding competition to establish this determination of value through pressure on prices in the only way in which it can be established, is therefore merely to prove that, at least in this sphere, one has adopted the usual Utopian disdain of economic laws.

In the second place, competition, by bringing into operation the law of value of commodity production in a society of producers who exchange their commodities, precisely thereby brings about the only organisation and arrangement of social production which is possible in the circumstances. Only through the under-valuation or over-valuation of products [the laws of supply and demand] is it forcibly brought home to the individual commodity producers what things and what quantity of them society requires or does not require. But it is just this sole regulator that the Utopia in which Rodbertus also shares would abolish. (Preface to The Poverty of Philosophy, London, Martin Lawrence Ltd, 1934, p. 17).

Very few critics of socialism could have said it better. The exception was once again the Austrian economist Ludwig von Mises. He was the first one to explain why socialist economies will always collapse unless they reverse their destructive economic policies. (Economic Calculation in the Socialist Commonwealth, first published in 1920, republished in Collectivist Economic Planning, edited by von Hayek and published by Augustus M. Kelley, 1975. Also see Mises Socialism: An Economic and Sociological Analysis, Liberty Classics, 1981)*.

Mises explained 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.

In his TV interview Trainer said that Australia’s per capita energy consumption is 18 times or more than the average for 50 per cent of the world’s poorest people. This was cited as evidence that we are responsible for Third-World conditions; that the West feeds about one-third of the world’s grain to cattle was produced as further evidence that rich countries are starving the poor of the world. Free trade is used to exploit weak nations by directing their resources into producing for the rich countries when they should be using these resources to produce for their basic needs. (What he is preaching is autarky for poor countries).

“Anyone can see” all of this, clearly ramming home the staggering extent of his economic illiteracy and ignorance of economic history. If any of this were true then it would show up in statistics. Last year the World Bank released a report showing that since 1990 200 million people had been lifted out of extreme poverty. Enough said.

Not only does the market impoverish poor countries it also creates unemployment in rich countries. What Trainer is really talking about, of course, is widespread persistent unemployment. Now market economics is absolutely clear on this point: so long as there is sufficient capital and land to employ people there will always be jobs for those able and willing to work so long as markets are allowed to clear. The fall in the level of unemployment is evidence of this fact. (The fall is the result of a combination of labour market reform and a reckless monetary policy that has made it profitable to hire more people).

Now for government spending and regulations. If markets are responsible for family breakdowns, the decline in the respect for tradition and a “ballooning prison population” then we would expect the opposite to occur where government spending, taxes and regulatory activity have been rising. In 1960 total social spending in America was (in constant 1990 dollars) $1,970.8 billions, amounting to 12 per cent of per capita GNP. By 1990 this spending had risen to $4,877.5 billions, absorbing 24 per cent of per capita GNP; 1995 saw per capita federal spending leap to $5,030 billions or $24,000 for every single household.

Even though individual incomes increased by 121 percent from 1959 to 1995 government taxes and fees paid per head jumped by 155 percent in the same period. The total share of national income taken by all levels of government rose from 32 percent in 1965 to about 40 percent in 1994. In addition, the costs of regulations skyrocketed during the same period. The very period that left-wingers finger for declining standards, falling incomes, rising crime and a “ballooning prison population”. In other words, America’s social problems worsened as government grew. The same can also be said for Australia and the UK. No wonder Leftists carefully select their statistics.

Defending economic growth against leftwing fanatics, part I

*I’ve spent nigh-on 12 years trying to bring von Mises’ great economic achievements to the attention of Australia’s self-appointed defenders of market, to no avail

Gerard Jackson is Brookes’ economics editor

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