Unbreakable Union: Lessons from the Demise of the Soviet Union

By Dr. Yuri Maltsev

Carthage College

Paper delivered to the Austrian Scholars Conference March 12, 2011, Ludwig von Mises Institute Auburn, Alabama.

“If we wish to save the world from barbarism we have to refute socialism, but we cannot thrust it carelessly aside”, – Ludwig von Mises

Good Morning Ladies and Gentlemen.

My Name is Michael McKay and I have the privilege of delivering this paper by Dr Yuri Maltsev titled “Unbreakable Union: Lessons Learned from the Demise of the Soviet Union.”

Why did Dr. Maltsev choose this title?

Because of its irony.

The opening lines of the State Anthem of the USSR went as such:

“An unbreakable union of free republics,
Great Rus’ has united forever!
Long live the created-by-the-will-of-the-peoples,
The united, the mighty Soviet Union.

But indeed it was not Unbreakable – twenty years ago it broke apart spectacularly.  I would refer you to Dr. Maltsev’s other Scholarship where he talks about how the USSR was “Too Big NOT To Fail”.

In those lectures Dr Maltsev outlines how the USSR had 1/6^th of the landmass of the entire planet, covered 11 time zones, was blessed with vast and abundant natural resources – yet failed.

In this lecture Dr Maltsev asks ‘Why are ALL of these Empires which look so formidable and insurmountable – even eternal – SO FRAGILE?’

Indeed, How Fragile ALL empires have been – and are yet today.

There are many lessons the World can learn from this. Here are some of the lessons that the wreckage of Soviet Russia leaves us to learn, ponder and appreciate.

Lesson #1  REAL Property Rights Matter

Please notice the word ‘Real’. There are many ways to trick people about Property Rights. But before we examine these tricks let us remember that TRUE Property Rights mean that I can:

a)    Acquire,

b)    Use,

c)    Develop

d)    Profit From, and

e)    Dispose of my property as I see fit.

But Socialists have learned that they can creep up on people.

The tragedy of the Bolshevik Revolution of 1917 was not an isolated event in Russian history. The beginning of the 20th century was marked by ‘encroaching’ Socialism through the increasing of regulations as well as social and ethnic engineering.

The huge bureaucratic regulatory state created by the government of Nicholas II in Russia was the direct predecessor of socialism. The First World War led to further militarization and centralization of Russia.

Socialist leaders: Lenin, Bukharin and Larin with great sympathy were watching how the German military-economic machine was replacing the market mechanism. They argued that the combination of this type of economic organization with the socialist party in power is socialism. “Here we have the last word in modern large-scale capitalist technology and planned organization”, wrote Lenin.

Ludwig Von Mises analyzed “two patterns for the realization of socialism”: Russian with wholesale socialization and German or Nazi with property rights subjugated by the State and its central planners. In summary, the fascist economic model is related to property rights in the following ways:

·        Incrementally Regulated and Restricted, which is ‘Gradual Confiscation’,

·        Arbitrarily imposed to apply to one class or group and not another

·        Total State Control of Private Property and the creation of a New type of ‘property right holder’ …..the Bureaucrat.

It was and still is common in academia to identify the Communists as the Left and the Nazis as the extreme Right, as if they stood on opposite ends of the ideological spectrum. These definitions were first coined by Stalin himself at the 7^th Congress of the Communist International in 1935. To put these regimes in their true perspective we should point out that they are varying versions of the same socialist ideology. The economic policies of Mussolini’s Italy and Hitler’s Germany resembled the “state socialism” which Lenin wanted to institute in Soviet Russia upon coming to power, under which private enterprise would work for the government – an idea Lenin was forced to abandon under the pressure of the “Left Communists”. Under both fascist and communist regimes government bureaucracy completely controls the production. It decides what shall be produced, how much, for whom and how.

The difference between the systems is that the German and Italian patterns did indeed allow – or, more accurately, tolerated – private property. However, it was “property” in a peculiar and very restricted sense – not the virtually untrammeled private ownership of Roman law and nineteen-century Europe, but rather conditional possession, under which the state, the owner of last resort, reserved to itself the right to interfere with and even confiscate assets which, in its judgment, were unsatisfactorily used. But in fact the governments of fascist Italy and Nazi Germany directed production decisions, curbed entrepreneurship and the labor market, and determined wages and interest rates by centralized authority similar to that in the communist states.

Communist Russia was the first country to completely officially abolish property rights, which were declared “a sanctification of capitalist oppression and exploitation”. “Lenin pursued the expropriation of private property with fanatical zeal and unhesitating brutality… When the massive expropriation was completed, the state sector of the USSR was officially reported to account for 99.3 percent of the country’s national income’[1]The results of this action can be considered as the worse tragedy experienced by humanity.

Lesson #2 Sound Money and Free Banking Matters

Ludwig von Mises has explained that Social Cooperation REQUIRES a Division of Labor since no one person can do, make, refine, grow, cultivate, gather, foster, raise, process, enhance, and deliver EVERYTHING that they need and want in their life.

AND there are Several KEYS that are required for the Division of Labor, and therefore Social Cooperation, to work at an optimum level.

At the individual interaction level it is the MONEY that is the Blood That Moves Throughout The Body Of Mankind that makes the Inter-Action work – and Workable.

Without Money – as the Interactive Medium of Exchange – the Division of Labor cannot function beyond a subsistence level.

In fact it is the SOUNDNESS of Money that allows the Division of Labor – of people that want different things in life at different times (and that is all of us) – to EXPAND and for Social Cooperation to have a chance.

Lesson #3 Freedom of Speech, Mobility and Information Dissemination & Acquisition Matters

Lesson #4 Rule of Law must mean that Nobody is above the Law

Socialist tyranny is incompatible with the rule of law.

Lesson #5 Non Centrally Controlled Education Matters

Central Control of Education leads to people learning what suits and serves those who want greater control over people.

Decentralization of Education is no guarantee that proper education – learning and discerning Truths that are useful and necessary in Life – but it at least makes better education possible.

The ideal goal of Education is learning valuable truths such as:

·        Life Principles – Eg Economic Laws that are true regardless of Time and Place

·        History – Understanding the Important Lessons that True History Teaches us.

·        Methodologies – People must know HOW to learn and how to filter information.

Lesson #6 There is a Direct Relationship between Coercive Central Control and Suffering and Death

…and the Greater the Coercive Central Control, the greater the Suffering and Death.

This system was based on destruction of markets: rationing was introduced on everything from means of production to consumer goods), and the creation of non-economic institutions of compulsion to work: mass murder, mass incarceration of millions providing cheap labor, and a ban on peasants leaving collective farms, supplemented later by a similar ban on jobs and residency changes for urban residents.

Most Western historians believe that Stalin’s terror took place mainly in the cities, against intellectuals and political opponents. But the great purges were really an assault on the countryside. Over half of all executions took place in rural areas. The liquidation of the kulaks ended up in ten million of them deported to Siberia where most of them died. In Ukraine alone Stalin starved to death over 7 million peasants. Bloodthirsty communist leaders ended up deporting women, children, and crippled people who were no threat to the government. Often authorities had a different agenda, like clearing out people they might have to feed.

What else have we learned? For those who are committed to Coercive Central Control:

1.    Tactics will change but all will involve ‘Force’

2.    “Incrementalization” will be used.

3.    Propaganda starts early and must be pervasive – from Education to Media to Entertainment.

4.    Choices in all areas of life must be limited.

5.    Central Controllers never can have enough control over others.

6.    Fear is their best tool.

7.    War Works….it is, as stated by Randolph Bourne, “The Health of the State”.

Some will say that History teaches us one thing: that we never learn anything.

But this is not totally true.

Some of us learn. To be sure, not enough of us learn – yet.

There are those, and they are many, that still believe that Socialism is fixable – that it is like a guitar that only needs to be ‘tuned’ correctly and that all the Socialists – so far – were merely imbeciles and that ‘WE NEW SOCIALISTS’ can fix that.

The biggest lesson is that Socialism is Not Fixable – why?

In “The Essential Von Mises” Murray Rothbard wrote:

”In an environment of accelerating statism and socialism, Ludwig von Mises…turned his powerful attention to analyzing the economics of government intervention and planning. His journal article of 1920, “Economic Calculation in the Socialist Commonwealth”, was a blockbuster: demonstrating for the first time that socialism was an unviable system for an industrial economy; for Mises showed that a socialist economy totally deprived of a free market price system, could not rationally calculate costs or allocate factors of production efficiently to their most needed tasks” [2].

Social Cooperation requires the Division of Labor – as Mises tells us. This, in turn, is built on the bedrock of Private Property, Sound Money, Rule of Law and the other integrated Principles of Peace, Prosperity and Freedom.

The linkage between human effort, the resulting product, and well-being must be secure and stable for economic activity to flourish.

Economic and political systems of different nations differ in the amount of planning they do and in the extent to which they restrict private ownership of property. Wherever you see shifting, arbitrary or unstable property rights, you see poor decimated societies like in Belarus, Moldova, and Turkmenistan.

The absence of the property rights being “the Mother” of human rights inevitably leads to negation of every other right starting with the first right – a right to life. 

The utmost importance of property rights for human dignity and prosperity cannot be overestimated. Unfortunately it is still far from being understood by the majority of people.

Supplement

Here is the Slavery Formula which you can easily contrast with the Peace, Prosperity and Freedom Formula

SLAVERY FORMULA or ‘How to make Coercive Central Control Work’

·        State Owned Property, Means of Production and Transportation

·        Fiat Money & Legal Tender Laws

·        Central Banking

·        Controlled Competition or Non-Competition

·        Licensing, Awarded Monopolies, Subsidies, Tariffs & Protection

·        Political/Arbitrary Law

·        Censorships and Restrictions on Associations and Mobility

·        Centrally Controlled Education System

·        Central Redress System (Govt. Courts)

THE ONE THING THAT TIES ALL OF THIS TOGETHER IS THE MONOPOLY USE OF FORCE.

Here is the Peace, Prosperity and Freedom Formula

·        Private Property

·        Sound Money and Competing Currencies

·        Free Banking

·        Freely Competitive Certification Systems

·        Rule of Law

·        Freedoms of Speech, Press, Association and Movement/Mobility

·        Non-Centrally Controlled Education & Free Competition in Education

·        Freely Competitive Risk Management, Conflict Resolution and Redress/Recompense Systems

·        Freedom FROM Monopoly in all of the above areas

·        And most of all: Abolition of any Monopoly Use of Force

THE ONE THING THAT TIES THIS ALL TOGETHER IS PEACEFUL COOPERATION.

Note that all of these are in consonant with each other.

All Slavery elements support one another.

All Peace, Prosperity and Freedom elements support one another