Obama Care’s Commissar’s Conceit

As a writer on  Soviet planning, I am struck by its parallels with Obama Care.  Both believe their planning is “scientific” and executed by “the best of the best,” who know what is best for ordinary people. Both types of planning commissars suffer Hayek’s “fatal conceit” – the belief that they can plan incredibly complex economic systems. Their “scientific” plans, however, fall apart under the weight of unintended consequences as ordinary people circumvent their genial rules and instructions.

The New York Times’ Mr. Health Care Mandate features economics professor cum scientific planner, Jonathan Gruber. After the Supremes’ brutal questioning, the Times probably felt that Obama Care needed a boost from Gruber, who, by his own admission, “knows more about this law than any other economist.” It was to Professor Gruber that the White House turned to design its new health care law.

The Times reassuringly describes Gruber as “the numbers wizard at MIT,” who has “spent decades modeling the intricacies of the health care ecosystem.”  Gruber has “brought a level of science to an issue that would otherwise be just opinion.” The Soviets reserved such praise for their planning commission, Gosplan. I draw little comfort from Professor Gruber’s scientific-planning credentials, especially when I learn “he’s the only person you can go to for that kind of thing.”  Gruber, aided by his MIT graduate student assistants, is a one-man Gosplan. Science is better served by competing ideas not by monopoly.

go to Forbes.com

Public Opinion Says A Conservative Message Wins In 2012

Republican politicians should ignore H. L. Mencken’s quip: “Never overestimate the intelligence of the American people.” Americans understand what’s gone wrong better than our politicians and chattering pundits.

The alignment of public opinion with conservative principles offers Republican candidates a unique opportunity in 2012 as the party that opposes big government, special interests, and state intervention. Republican candidates must have confidence that the American people see what’s what through the filter of the liberal media, and are fully capable of understanding a bold Republican message.

Public opinion polling shows voters share three basic insights about government:

First, government is too large, tries to do too much, and regulates too much.

Second, government is run by opportunistic and even crooked politicians for the benefit of special interests.

Third, government is more likely to make things worse.

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Hayek’s Gloomy Prognosis for Egypt

F.A. Hayek’s most important insight is that we cannot have political freedom without economic freedom. Hayek’s inexorable Road to Serfdom, from which it is difficult if not impossible to return, describes a number of today’s troubled countries, and it likely portends the future of post-Mubarak Egypt. Those caught up in the euphoria of democratic street demonstrations must confront the reality that the long-run outcome is likely to be bad.

Take Russia and Iran as possible role models for Egypt. Despite their huge differences (a KGB state versus an Islamic theocracy), they share a common and sinister pattern: A revolution occurs (the collapse of the Soviet Union, the Iranian revolution); a nominal democracy is established; the democracy is hijacked by the ruling elite; the ruling elite (Kremlin-favored oligarchs, the Revolutionary Guard) gains control of the commanding heights of the economy; the ruling elite viciously blocks democracy and liberalization as mortal threats to their vested interests. Anyone who stands in their way is dealt with harshly as corrupt or traitorous.

Egypt is poised to follow this same path. Its private economy is weak. Some thirty five percent of Egyptians work for the state. Ninety percent of cotton spinning and sixty percent of fabric manufacture is in the hands of the state. The poor Egyptian public receives its food through state ration coupons as it did 3,000 years ago. Only ten percent of property rights are secure.

Egypt is currently a democracy in name only; the goal of its idealistic young “tweeter-generation” demonstrators is to make it a real democracy with real elections. Egypt has thrown out Mubarak and will surely punish the corruption of Mubarak, his family, and associates. The country is ruled by the military, who will oversee the transition to something that will be called “democracy” no matter what the outcome.

Herein lies the rub: Egypt’s commanding heights were under the shared control of Mubarak and associates and the military. His removal places a vast amount of Egyptian wealth up for grabs. Mubarak’s share may go to “society” or it may be gobbled up by the military, giving the military even more incentive to avoid the voter scrutiny and transparency of true democracy.

The truth of Egypt’s military’s economic clout is just coming out: The ruling military council is a strong advocate of state controls and a staunch opponent of economic liberalization. The military owns day care centers and beach resorts, makes television sets, jeeps, washing machines, furniture, olive oil and bottled water. Estimates of the military’s share of economic output range from ten to thirty percent. It enjoys huge advantages over private enterprises. Military enterprises pay no taxes, use conscripted soldiers, buy public land on favorable terms and have no obligation to disclose their activities to the Parliament or the public.

As in Putin’s Russia and the Mullah’s Iran, the Egyptian military can eliminate opponents through charges of corruption, collaboration, or other misdeeds. Threat alone will be enough to silence most advocates of reform and change. As in Russia, liberalization can be discredited by associating marketization and privatization with chaos and corruption.

Real revolutions always redistribute society’s wealth. This is why entrenched elites resist change and protect their vested interests. The Bolshevik revolution redistributed wealth from the nobility and landlords to what Lenin and Stalin called “the worker state.” The Putin revolution redistributed Russian wealth from one group of oligarchs to another. The Iranian revolution redistributed wealth from the Shah and associated businesses to the Mullahs and Revolutionary Guard. In a real Egyptian democratic revolution, the military would lose its wealth – either to a true democracy or to a triumphant Muslim Brotherhood, and it understands this fact clearly.

Among the first moves of the military government was to charge with corruption or force from their jobs businessmen and public officials favoring opening the economy and liberalization. The military is satisfied with the status quo of its monopolies, economic privilege, and insecure private property rights.

The Hayek model points to the incredible obstacles facing the true Egyptian democrats. The military “fox” is “guarding the hen house.” The young democrats must somehow figure a way to persuade the military to sacrifice its own economic interests and to do the “right thing” for the country. Judging from past history, their chances of doing so are remote.

An Egyptian Power Struggle: Why the Worst Will Win (Lesson’s from Lenin’s Playbook)

The media has again begun its celebration. Another repressive dictator has been overthrown (or is about to be). The people are massed in the streets demanding freedom. Talk turns to a successor who will restore order and create a new and better order. We hear these familiar words as the thirty-year-old Mubarak regime totters on the brink.

The hard reality is that this optimistic scenario rarely works out. A worse (or equally bad) dictator rises to the top, not a democracy or even a more benevolent dictator. Throughout history, it is the Lenins, Stalins, Ayatolla Khomeneis, Saddams, and Aristides who replace the Czars, the Shahs, the al-Bakrs, and the Papa Docs. Successful transitions from dictatorship to democracy of the Philippines and South Korea are the exception and require special circumstances.

Machiavelli advised that “a man, who wishes to profess goodness at all times, must fall to ruin among so many who are not good.” Even a well-intentioned “Prince” must learn “how not to be good.” F. A. Hayek expressed the same sentiment when he explained why “the worst will rise to the top” in a power struggle played without rules. In Russia, the “good” Kerensky fell to Lenin. In Iran, the good “Bakhtiar” could not contend against Khomenei. In Egypt a “good” El Baradei will fall to a yet unidentified leader of the Muslim Brotherhood.

The Lenin-Stalin-Khomenei-Saddam has substantial advantages in a power struggle, and there is little the outside world can do. He is unconstrained by a moral compass; he is willing to do whatever is necessary to gain power. These advantages are multiplied when the dictator-to-be does abhorrent things in the name of a powerful ideology. Lenin and Stalin had socialism and its intellectual admirers in the West. Saddam had Arab nationalism, and Khomenei had his vision of a fundamental Islamic revival.

Dictators are loathe to designate a successor (unless it is their son or daughter, but even then they hesitate). Hence, the power struggle will take place in a vacuum without established rules. In such a free-for-all, the most brutal contender is advantaged, particularly if he has organizational skills. Nor does it particularly matter what the people want. In the absence of established democratic institutions, their voices can be scarcely heard.

Lenin’s playbook of 1917 is still the classic. His Bolshevik party was organized as a tiny party of professional revolutionaries. The Bolsheviks were part of the February-revolution coalition that dispensed with the Czar. The victors agreed to elect a constituent assembly to create a new multi-party parliament. Lenin had carefully wooed supporters within army and navy units, and he had enough of them to drive Kerensky’s timid provisional government from the Winter Palace in November 1917 without a shot.

After the Bolsheviks received only twenty percent of the popular vote for the constituent assembly, Lenin sent in armed sailors to its first meeting and bolted the doors forever. Lenin then ordered his bloody Red Terror against rival parties and independent thinkers. Notably, he suppressed those parties most brutally that were the closest to the Bolsheviks in ideology. He could not afford to have any rival in the wings. The Czar and his young son and teen age daughters were slaughtered in Siberia.

It was left to Lenin’s successor, Stalin, to move against his own party. By 1938, he had executed any and all party leaders, whom he regarded as a threat.

Lenin’s formula for power fits the Egyptian situation to a T: A popular revolution overthrows a despised dictator. There is no planned succession. Any figure associated with the old regime is tainted. There will be some popular figures among the “revolutionaries,” but they are disorganized and have no ideology to sell. The dictator-to-be’s party may be small, and it may not be particularly popular, but it is well organized and can bring force to bear when necessary. It employs its organizational superiority, brutality, and raw power to outmaneuver or liquidate rivals. Once the dictator-to-be’s party is in power, he can turn his attention within to eliminate his rivals.

The Egyptian army is the one wild card, just as the Czarist army was Lenin’s wild card. Indeed, remnants of the white army fought Trotsky’s Red Army to a standstill, until they were split apart by internal disputes. The advantage to Lenin and the next Egyptian dictator is that both armies were conscripted rather than professional. Conscripted armies are less likely to fill a power vacuum than professional armies.