Perhaps it is counterintuitive that so much order springs from a system involving millions of transactions by individuals cooperating voluntarily without any organized planning. But Friedman observes that human language and scientific knowledge also developed under similar circumstances.59
The “miracle” of the free market, due to the crucial role of prices, profits, and private property, ensures that societies’ economic needs will be met. “In a capitalist economy, incentives are of the utmost importance,” writes AEI scholar Mark Perry. “Market prices, the profit-and-loss system of accounting, and private property rights provide an efficient, interrelated system of incentives to guide and direct economic behavior. Capitalism is based on the theory that incentives matter!” When you remove incentives, you act contrary to human nature and dampen the human spirit.
The success of the free market subverts the cult of planning that underlies all socialist theories. “How an incredibly complex, high-tech economy can operate without any central direction is baffling to many,” writes Thomas Sowell. “The last president of the Soviet Union, Mikhail Gorbachev, is said to have asked British Prime Minister Margaret Thatcher: ‘How do you see to it that people get food?’ ” Sowell explains that Thatcher had nothing to do with it. Prices served that function—and despite no central planning and Britain having not been self-sufficient in food for more than a century at that point, the British people were better fed than the people of the Soviet Union. “Prices bring them food from other countries.” If prices didn’t do their magic it would take an unimaginably large bureaucracy to meet the food needs of London alone each day. But in a free-market economy there is no need for such a bureaucracy, and the people who would fill it are free to produce elsewhere in the economy “because the simple mechanism of prices does the same job faster, cheaper, and better.”60
None of this means that economic activity in a market economy is completely random. Individuals and entities enter into transactions throughout the economy on mutually agreed terms that are conveyed by prices throughout the system. This happens more efficiently than if planners were to accomplish the same tasks, since they would have no way of knowing all the goods being produced and how much of each resource should be allocated to the production of millions of products. This is where prices come in, which play “a crucial role in determining how much of each resource gets used where and how the resulting products get transferred to millions of people,” explains Sowell. “Yet this role is seldom understood by the public and it is often disregarded entirely by politicians.”61
It’s not only prices that are emasculated under socialism. When a central government controls the means of production and distribution, there’s also no competition, profits, or losses. In a market economy, profits, losses, and prices steer scarce resources to meet their most highly valued means, which are determined by countless people acting freely and making their decisions in the marketplace.62 Socialism’s failures, by contrast, can be largely attributed to its neglect of three incentive-promoting components: prices, profits, and private property rights.63
Central planners couldn’t possibly get access to this much information, and in the real world, they don’t care to know it. Planners issue decrees based on their presumed superior knowledge and goals. In their view, they know better than you what is best for you. But they don’t. They can’t. Planning an entire economy efficiently is impossible. The planners would have to set prices and production levels for all goods and services, and countless wrong decisions would reverberate throughout the economy, creating surpluses and shortages.64
Hayek elegantly describes the market’s ability to produce order out of chaos:
We are led—for example by the pricing system in market exchange—to do things by circumstances of which we are largely unaware, and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant; and we in turn constantly live on the services of other people of whom we know nothing.… Modern economics explains how such an extended order can come into being, and how it itself constitutes an information-gathering process, able to call up, and to put to use, widely dispersed information that no central planning agency, let alone any individual, could know as a whole, possess, or control.65
Sowell points out, however, that prices themselves do not keep people from having all the luxuries they want, such as a beach house—as if a planner could merely lower the price and everyone who wanted it could have it.66 It’s a matter of scarcity; there aren’t enough beach houses for everyone to have one, and prices, which are established by supply and demand (many people bidding on a smaller number of beach houses), reflect that scarcity. Scarcity would exist irrespective of the type of economy, so that in a centrally planned economy the planners would have to handle access to the scarce homes through a different mechanism than price, such as rationing. Despite their unchecked political power, they wouldn’t be able to make enough houses available even if they declared access or ownership to them a basic right.
The concept of scarcity applies to all goods and services in the economy. Healthcare is no exception—planners can issue a fiat that healthcare services are a fundamental right until they’re blue in the face, but their decrees will not alter the scarcities involved, and they will inevitably be reflected in the quantity and quality of care, waiting times, and the like.
As noted, profits and losses also play a crucial role in economic efficiency and in promoting prosperity because they lead companies and industries to use scarce resources efficiently.67 Preening socialist theorists misapprehend profits, believing them to be a greedy surcharge that robs from labor and overcharges consumers. But in the real world, socialism makes goods less affordable. This is because, as mentioned before, in a free-market economy the business owner’s desire to make profits and avoid losses motivates him to produce at the lowest cost and sell at a price customers are willing to pay. Socialism offers no such incentives for efficiency.68
Leftists decry profits, but the pursuit of profits not only helps the entrepreneur pursuing them but also satisfies the needs of others. He can only make a profit if he meets the consumers’ demands on quality and price. In other words, the businessman will succeed in direct proportion to the extent that he satisfies his customers. Unlike in a command-control economy, if you fail to provide customers what they want, your business will fail. The socialists’ problem is that they believe they know better than their “customers” what is good for them. To paraphrase Andy Puzder again, if they trusted the people to make the right decisions, they’d no longer be socialists but capitalists.69
It is difficult to reach generations of people indoctrinated by universities and a culture hostile to free-market capitalism. Socialism sounds so good to their itching ears and to their admirable desire to eradicate poverty and economic hardship. “The idea of socialism is at once grandiose and simple,” writes Ludwig von Mises. “We may say, in fact, that it is one of the most ambitious creations of the human spirit… so magnificent, so daring, that it has rightly aroused the greatest admiration. If we wish to save the world from barbarism we have to refute socialism, but we cannot thrust it carelessly aside.”70
We must try to reach these misguided people whose idealism will lead them—and us—into the abyss of poverty and possibly totalitarianism. “The dispute between the market order and socialism is no less than a matter of survival,” writes Hayek. “To follow socialist morality would destroy much of present mankind and impoverish much of the rest.”71 On this score there is some cause for optimism. A Fox News poll reveals that a strong majority of Americans still embrace the American dream, with 38 percent saying they’ve achieved it and 40 percent saying they’re “on the way” to achieving it.72 Similarly, 63 percent say they’re optimistic about the U.S. economy, and only 33 percent are negative. These polls should be encourag
ing to supporters of free markets and the American dream. Though polling also shows that younger generations are more negative on capitalism and positive on socialism, as mentioned previously many of them clearly misunderstand what socialism really entails. This should not be grounds for despair but rather a challenge to educate future generations on the true history and actual principles underlying this noxious ideology.
We’ve now compared free-market and socialistic economies, in moral, political, and economic terms. In the next chapter we’ll take an in-depth look at the left’s infatuation with socialism today.
CHAPTER NINE The Green New Deal and Other Socialist Schemes
THE GREEN NEW DEAL IS A RAW DEAL
Conservatives should thank Alexandria Ocasio-Cortez for one thing—by devising the Green New Deal (GND), she has provided Americans with a textbook example of socialists’ pathological ambition to seize control of the economy.
You may have thought the GND is primarily a product of environmental hysteria—the kind of embarrassing, reckless scheme that naturally springs from someone who believes life on earth will end in an environmental cataclysm in about a decade. AOC made this prediction, and ridiculed anyone who would question her plan’s exorbitant price tag, in her trademark linguistic style: “Millennials and people, you know, Gen Z and all these folks that will come after us are looking up and we’re like: ‘The world is going to end in twelve years if we don’t address climate change and your biggest issue is how are we gonna pay for it?’ And, like, this is the war—this is our World War II.”1
As we’ll see, the GND’s scope is breathtaking and utopian. It envisions a vast restructuring of the U.S. economy according to government decrees. What you may not know is that this economic transformation—not any environmental concern—is the true impetus for the GND. In what the Washington Post described as a “surprising disclosure,” AOC’s then–chief of staff, Saikat Chakrabarti, told a Post reporter during an interview, “The interesting thing about the Green New Deal is it wasn’t originally a climate thing at all. Do you guys think of it as a climate thing? Because we really think of it as a how-do-you-change-the-entire-economy thing.”2
And indeed, the GND would surely change the entire economy. The plan, as originally outlined in draft legislation to establish a congressional committee to pursue it, calls for totally eliminating fossil fuels and transitioning national power to 100 percent renewable resources in ten years. AOC would thus summarily scrap America’s entire oil and gas drilling industry and its hundreds of thousands of employees just when the shale revolution has made us a net exporter of oil for the first time in seventy-five years. To grasp the magnitude of this fairy tale, consider that renewable resources now constitute just 11 percent of the nation’s total energy, with wind and solar providing only 3 percent, despite decades of federal and state subsidies and mandates.3
The proposal also calls for phasing out all nuclear power plants, though that was one of numerous elements AOC later walked back following widespread ridicule.4 Most notably, AOC disavowed a GND information sheet released by her office and posted on her own website that called for eliminating air travel and “farting cows” as well as providing “economic security” for people “unwilling to work.”5
The sudden, forced, and total transformation of our energy supply is just the beginning. The bill would also create a new energy-efficient grid, compel transition to electric cars and hydrogen-powered plants by abolishing transportation emissions, eliminate industry emissions, and upgrade every single one of America’s 136 million homes and all industrial buildings for energy efficiency.6 The grandiose scheme would guarantee a living wage and possibly basic income programs and universal healthcare. It would supposedly “mitigate deeply entrenched racial, regional, and gender-based inequalities in income and wealth” while “virtually eliminat(ing) poverty in the U.S. and… “mak(ing) prosperity, wealth and economic security available to everyone participating in the transformation… to be driven by the federal government.”7 The GND included no estimated cost for its grandiose initiatives, but AOC later suggested a price tag of $10 trillion,8 while an analysis by the conservative American Action Forum put the price much higher, between $51.1 trillion and $92.9 trillion, or $316,010 to $419,010 per household.9
AOC is not merely posturing; she is a deadly serious vanguard of today’s Democratic Party. And she makes her contempt for capitalism quite clear: “We should be scared right now because corporations have taken over our government.… Capitalism is an ideology of capital—the most important thing is the concentration of capital and to seek and maximize profit.… To me, capitalism is irredeemable.”10
Many observers understandably focus on AOC’s economic witlessness, but the real culprit is her ignorance of history and the demonstrable failure of the socialist ideology she champions. She has now effectively endorsed the startling goal of Christiana Figueres, former head of the UN’s climate program, “to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution.” This should alert the slumbering among us that climate change activism is grounded in its ambition to transform the world’s economy through international government coercion—national sovereignty be damned—to socialism.11
Some GND supporters have touted a survey by the Yale Program on Climate Change Communication and the George Mason University Center for Climate Change Communication showing that 92 percent of Democrats and 64 percent of Republicans support the GND.12 Apart from propaganda purposes, the poll is meaningless, if for no other reason than it failed to present the plan’s astronomical projected costs. In fact, polls show “climate change” remains a low priority for Americans.13 A survey by the Energy Policy Institute at the University of Chicago and the AP-NORC Center found that 71 percent of Americans say climate change is real and most of them believe that human activity is primarily responsible, while only 9 percent disagree. The believers, however, are unwilling to put their money where their fears are, which suggests the fears aren’t that serious. The poll shows 57 percent of Americans would pay a one-dollar monthly fee to combat climate change and 23 percent would pay forty dollars per month.14 This paltry commitment wouldn’t even give AOC a down payment for her plan.
It is inconceivable that more than a handful of extremists would support the GND if Americans understood the sweeping changes it demands. As always, theoretical socialism gets annihilated in the real world. This could serve as a template for fighting socialism on a grander scale. Once people realize the costs and other consequences of socialist projects, they reject them out of hand. Had President Obama been forthright about the costs and consequences of Obamacare, for example, there’s little doubt more Americans would have opposed it.
Even if you accept the false assumptions on which the GND is based, its projected costs are prohibitive. But if its draconian initiatives were affordable and people were willing to sacrifice the modern luxuries of conventional energy, they still would only have a minimal environmental impact. According to a Heritage Foundation study, if the United States were to entirely eliminate all its carbon dioxide emissions, the earth’s temperature would decrease less than 0.2 degrees Celsius by the year 2100. If the entire industrialized world cut carbon emissions to zero, which is a howling pipe dream, global temperatures would be reduced by less than 0.4 degrees Celsius by 2100.15
Not only would the GND be ineffective and fiscally ruinous, but it would hurt the poor and minorities the most. Craig Richardson, president of the Energy and Environmental Legal Institute, calls the GND a reckless prescription for poverty that “will most certainly harm those already living in poverty and do nothing to improve the environment.… Behind the rhetorical smokescreen, the ugly truth is that a mandatory shift to higher-cost solar and wind energy before the market is ready to support those, as the GND does, would serve as a regressive tax on the poor.”16 Richardson points to Europe for a preview of the GND’s likely results. Far less stringent energy mandates in Germany
caused an enormous hike in electricity rates, with people paying an average of $400 a month. In France, ambitious environmental measures have rendered electricity unaffordable for eight million households, some 12 percent of the population. And one-third of British families are struggling to pay their energy bills and are not using their heaters even during colder months. Since it’s even more radical than these European measures, the GND would impact America’s middle class and the poor even harder.17
Other experts concur with these dire predictions. Philip Rossetti, director of energy at the American Action Forum, estimates the costs per household of transitioning entirely to renewable energy: “Simply, a 100 percent renewable electricity grid would require Americans to pay between 43 and 286 percent more on their electric bills. In 2017, the average monthly electric bill was $111, so a 43–286 percent increase would translate to an average of between $576 and $3,882 more spent on electricity per year per residence.”18
Heritage Foundation energy and environmental policy expert Nicolas Loris provides a succinct summary of the GND’s predictable effects:
The so-called Green New Deal would make energy unaffordable and devastate the economy, hitting working-class Americans the hardest. Not only would [it] be fiscally and economically catastrophic for American families and business—there would be no meaningful climate benefit, so this is nothing but a raw deal for America.… If the Left was serious about anything other than amassing power for itself, it would offer a real new deal that included removing barriers to technology innovation, permitting new projects and energy trade, providing efficient pathways to commercialize research at America’s national laboratories, and promoting competitive electricity market policies that empower consumers to choose what type of energy is best for their needs.19
Guilty by Reason of Insanity Page 23
