Aesop's Golden Goose Fable

Aesop's Fable of the goose that layed golden eggs is an ancient metaphor for why Socialism cannot work. In the fable, for those that cannot remember their Mother Goose days, a man and his wife had a goose that layed eggs of gold. This made them very wealthy, but as is the norm for humans, they were not satisfied. The wife suggested that if they cut open the goose, they could have all the eggs at once. Of course, there was not a hoard of golden eggs in the goose, and the dead goose was done laying eggs.

The Capitalist Free Market (CFM) system of economics is the real manifestation of the golden egg laying goose. Those societies that have embraced it have enjoyed the greatest increase in the standard of living of any in history. Although it is inevitable that those capitalists that represent the goose in a CFM system do enjoy relatively more 'eggs', their standard of living is only incrementally better than the poorer members of the society that are merely consuming the eggs. One need only visit the typical Walmart to see that the rank and file are not only well fed, well clothed and as healthy as their voluntary choice of lifestyle permits, but they enjoy all the smartphones, TV's and other toys that the wealthy do. The Welfare State is only possible because of the eggs produced by CFM, not in spite of it.

The current mania of the populace advocating for socialism is, relating back to Aesop's Fable, the equivalent of the wife wanting to kill the goose to get all the eggs at once. All schemes of taking from those, rich or not, that invest savings in productive enterprise, are an attempt to kill the goose to get all the eggs at once. Most of the 'wealth' that the non-investing public covets is in fact the goose that they benefit from, i.e., the capital of CFM. With a welfare system that consumes most of the eggs CFM currently produces, it is a testimony to the robustness of CFM that our standard of living is as great as it is. Make no mistake though, if you take the last egg or kill the goose, the good times end.

The fable of the goose is also a good metaphor for a point made in my earlier post Socialism CANNOT Succeed. Just as there were no eggs in the goose, there are no hoards of desired goods and services in the Capitalist's pantry. Appropriating the Capital that is the basis of CFM is the immediate end of the great standard of living we currently enjoy.

Democracy is Not a Panacea

Back in the early 1980s Mikhail Gorbachev visited the United States, presumably to learn why we seemed to be much more prosperous than his communist dictatorship. If I remember correctly, he was shown through a few stores and was 'blown away' by the cornucopia of goods available to the US consumer. He returned to the USSR with a determination to try to apply what he had seen to improving the lot of the Russian people. The problem was, he went away with the wrong impression.

Gorbachev mistakenly believed that the success of the US and the rest of the West was due to the fact that they were 'Democracies'. Apparently this was in part due to an overwhelming majority of Westerners also believing the same, so much so that leaders such as George W. Bush have tried to export Democracy to the Third World, mostly with disastrous results. Gorbachev returned to the USSR with the intent of moving toward a Socialist Democracy. This had in part the positive result of the collapse of the Communist Soviet Union, but did not lead to the economic results he had hoped for.

What Gorbachev and the others do not seem to appreciate is that it is Capitalism and the Free Market (CFM) that is the secret behind the overflowing shelves of the Walmarts and the like of the Western World. Exactly which form of government is most compatible with CFM is certainly debatable, and may yet to be determined, but Democracy has been shown to be only MORE compatible with CFM than Communism, at least in the short run. China's economic success as a result of embracing more CFM in spite of retaining a totalitarian government illustrates my point. However, the degree to which China's rulers interfere with the Free Market may yet be its undoing.

The point to be made here is that Democracy is not the source of wealth and prosperity, nor is it even a guarantee of such that comes with CFM. In fact, pure Democracy may tend to destroy CFM in that allowing universal suffrage seems to engender anti-capitalist government. The envy of the lower classes of those that succeed in CFM leads to legislation and regulation that ultimately stifles economic activity. The egocentric nature of the individual that, because of Adam Smith's "invisible hand", produces the benefits of Free Markets is very detrimental to the same when lumped together to produce governmental laws and regulations. It is not unrelated that the West, as it has become more democratic, has also become more socialistic.

Austrian economic theory points out that economic control of production by a governmental body is a guarantee of disaster because, as Ludwig Von Mises noted, it cannot solve the problem of what he termed 'economic calculation'; i.e., it fails to properly ascertain what products to produce in what quantities. In the extreme case of such control as was the case in the Communist USSR, the result was disastrous. Unwanted goods piled up while the populace stood in lines for bread.

It is very unfortunate that, as the Western Democracies become more and more socialistic, the economic failures are blamed on Capitalism and Free Markets. This is the basic flaw with Democracy, in that when the mob is in control they will never admit that the problems they create are their own doing, and only total collapse will end the errors.

Consumption vs Capital Investment

Several terms are bandied about loosely without most people really knowing what they mean.  Examples are democracy, capitalism and free markets.  Let's look at capitalism.

A couple we know recently took a trip to northern Europe. In the videos that he took were many of the opulent castles and palaces that the kings, barons and czars - i.e., the 'wealthy' of yesteryear -built with the resources taxed or stolen from the peasants. What occured to me was that these wealthy only spent for their own aggrandizement. In other words, they only consumed. Their expenditures did not result in productive investment, and thus the only benefit (if you can call it that) to the peasantry was to be allowed to live for the benefit of the aristocrats.

As the mercantile class grew, more and more wealth gained from trade was reinvested in capital goods - ships, factories and the like. The wealthy became wealthier, but in addition the standard of living of the entire populace rose. With the Industrial Revolution, capital investment yielded ever greater returns in productivity. By the twentieth century the 'poor' were enjoying consumer goods and a standard of living that were undreamed of by the palace building kings and czars.

 The moral of all this is that what counts is not how wealthy some people are, but what they do with the money. If they spend it on lavish living or even give it to the poor for consumption, no standard of living increases in productivity occur. Only if their wealth is invested in capital goods - i.e. productive enterprises - is the overall standard of living of a society improved.

 A corollary to this fact is that when the government confiscates wealth from the members of a society and uses the funds for anything other than supporting the rule of law, property rights and enforcement of contracts that are necessary for a capitalist system to exist, the improvement in the standard of living will slow, stagnate or even deteriorate. Wealth transfer programs result in resources being diverted from capital investment to consumption, with the attendant loss in productivity.

 Since the majority of the people in a society put little to nothing into capital investment, their labors are no different than that of the serfs that built the palaces unless their efforts are directed toward building productive resources. As the Russians and Chinese found out, if capital investment is not allowed to flourish, the society soon is standing in lines for bread.

One principle obviously follows from the above observations. Taxing income, especially of the 'wealthy', puts the emphasis totally in the wrong direction. The taxation should be on building palaces, not on building factories. The proper form of taxation is thus on consumption by the individual, not on investment.

I also note that those who become wealthy manipulating or even destroying financial markets are NOT capitalists.  They are in many ways like the kings and barons of old - parasites that garner much of the wealth of a society for their own pleasures, but invest little to none of their wealth in capital goods for productive purposes.