Margaret Thatcher once said that ‘the trouble with Socialism is that eventually you run out of other people’s money’. How wrong she was. Money isn’t something that socialists ever run short of. It’s real stuff they lack.
After all, you can create money out of nothing. And you can pretend to produce stuff too. But actually making real stuff (which people actually want) is something central planners have always struggled with.
After a few decades of green policies interrupting every aspect of our lives, of regulation directing and constraining how people can interact with each other in mutually beneficial ways, and with the various COVID policies to cap things off, we now live in a society and economy that carries many of the hallmarks of socialism.
Why, then, does it surprise us that we have consequences?
The precise consequences that free market advocates would expect…
We’ve got rolling shortages in key goods such as petrol, diesel, food, fertiliser, meat, eggs, milk, and more. Each week it’s something new. And it’s mighty familiar reading for those that lived through the Soviet Union and its satellite States, not to mention socialist countries today.
Prices are spiking because of those shortages and the costs of producing the underlying goods. Inflation of consumer prices is only outdone by inflation in producer prices.
A lot of this dislocation comes from governments trying to steer economies. After being demonised for producing oil and gas, for example, companies cut investments in oil and gas exploration, development, and production.
Now the same companies are demonised by the same politicians for not producing enough oil and gas…
The underinvestment in oil and gas has precisely created the shortages and price spikes you’d expect. Indeed, the intended consequences that green advocates once hoped for, back when renewables would replace fossil fuels. But suddenly, high oil and gas prices are considered a bad thing…
If you suspected there’s vast amounts of oil or gas a few hundred feet below your land, would you have the confidence to try and get at it? Or would you expect the government to pull the rug out from underneath you halfway through the process?
Other resources are set to follow in the footsteps of oil and gas, by the way.
Even in Australia, a top global exporter of coal and gas, we can’t get enough of either…
This is an extraordinary failure. Not of planning, trade controls, or legislation, but a failure to buy enough of the stuff in the first place.
The renewables boom only looks plausible if you ignore the vast resources needed to make it happen. Both the environmental damage of getting them and the amount needed.
Europe, faced with the energy and geopolitical debacle of its own making, has bought up the world’s supply of gas, leaving those that cannot compete at high prices without enough. This will have devastating consequences for economies that rely on this energy.
The ‘great resignation’ is another prime example of socialist-style policies leading to predictable consequences. Economies and industries the world over are reporting shortages of workers for various reasons. Some blame early retirement, some mortality, some long-term illness, and some the wrong qualifications. But the world over, the real cause is the same.
As the incentive to work is crushed and the constraints of setting up businesses are tightened, fewer and fewer people decide to do it. You only have to look at people’s faces as they open their first paycheque to understand how strong this disincentive is.
Workers’ wages are also falling far behind inflation, further disincentivising work. Wasn’t inflation something that only happened in the crazy left-wing economies of Venezuela, Argentina, and the 1970s UK?
On the employers’ side, it’s even worse. If the government can shut your business down at will, whether it’s over a pandemic, climate change, or some other politically incorrect violation, you’d be mad to risk your capital starting a business.
Just try getting a GP appointment. Some GPs tell me they’re quitting because they object to the level of government control and constraint in how they conduct medicine. Others say it’s resources, which the government control.
Because it’s impossible to get a GP appointment, I’m on the mailing list of several local practices, which I’ve visited once each. Recently, they’ve all let me know that they’re no longer bulk billing practices because of financial pressures.
Admittedly, the whole GP system is ridiculous to begin with. The world over, people go to see the doctors they need. But in the UK and Australia, we must see a GP who then tells us which doctor to see…
Can you imagine how much more efficient it would be to do away with the referrals system? It would’ve saved me 2–3 hours over the past three weeks alone. It’s not like I didn’t know where I had to go in the end anyway.
Instead of efficiency gains, healthcare systems are creaking under a wave of backlogs, with the universal system in the UK being the worst of all.
Electricity is another example of a perfect storm created by disastrous government policies. This is most blatantly obvious in the UK — the country with the most expensive electricity in the world, which is ironic, but not surprising, given the supposedly liberal Conservative party implemented the socialist policy of price controls.
But the prospect of blackouts is making headlines from California to Texas to France to Germany, not just the UK.
Builders in Australia happen to be the perfect example of all these forces combining into one big catastrophe. They have shortages of goods and labour thanks to supply chain chaos, a lack of production, the great resignation, and more. Many builders went bust, despite a boom in house prices — an odd combination.
Today’s news stories are so cliché that it feels like we are living in an Ayn Rand novel. This quote from her sums up the plot subtext of several of her books:
‘When you see that in order to produce, you need to obtain permission from men who produce nothing — When you see that money is flowing to those who deal, not in goods, but in favors — When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you — When you see corruption being rewarded and honesty becoming a self-sacrifice — You may know that your society is doomed.’
Rand’s books explore different ways people deal with a society based on these miserable principles. Some go into hiding. Some revolt. And some game the system.
I think we’re seeing that play out today. The great resignation, especially of highly productive people, is well underway. Others are trying to avoid the government systems as much as possible, such as GPs ending bulk billing.
But there are ways to play this system to your advantage, which is what our editors do here at Fat Tail Investment Research.
It’s not a very optimistic society or economy to be in. At least we’ve got lots of money sloshing around…
Until next time,
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Nickolai Hubble,
Editor, The Daily Reckoning Australia Weekend
