Arnold Beichman writes in honor of the 60th anniversary of Hayek’s classic in the Washington Times:
The Austrian-born Hayek who died in 1992, explained what he called “the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism.” In his later book, “The Fatal Conceit: The Errors of Socialism,” he elaborated on his thesis, namely socialism could never work, no matter how it came to pass, whether by revolution and dictatorship, as in the onetime Soviet Union, or by the ballot box, as in postwar Great Britain. Socialism to Hayek, a Nobel Laureate, had become a code word for the “economics of scarcity.”
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Socialism in its purest form has failed. Now the world has switched to what is known as a “mixed economy”, combining high tax burdens and statist policies with a free market. Governments have discovered that they can garner much more wealth and power if they allow a free market to exist and then just simply tax away a portion of the wealth it creates.
Unfortunately, the demise of the mixed economy to truly free markets may take much longer, if it ever occurs. It is my contention that this will probably only occur when people cease using fiat currency as their medium of exchange, for it is fiat currency that has greased the wheels of taxation and government invasion of financial privacy.
Steven,
I agree with you, however states only know too well how much they rely on fiat money for survival, so they’re unlikely to abandon it. A major crisis of the banking system may, for a time, force them to revert to the gold standard (thereby limiting their ability to spend), until people’s memories start to faint (as always) and states start all over again with fiat currency.
The demise of the mixed economy may indeed take very long as states are getting better and better at using the “right” mix of taxation, deficits, money injection, borrowing, creation of boom and bust cycles, aggressive foreign policies, popular lobbies, etc… to continue to prosper and manipulate public opinion, thereby rendering the predator/prey (or parasite/host) system increasingly stable.
I don’t even think that a collapse of the welfare-warfare state (should this happen) would necessarily bring about a libertarian society. It is only when people really start valuing liberty, responsibility and property rights that this will happen. A very long term prospect indeed!
Lawrence:
The government will never abandon fiat currency, but people eventually might. In fact the economist and senior fellow of the Discovery Institute, Richard Rahn believes that people will eventually dump national currencies.
His book: “The End of Money and the Struggle for Financial Freedom” (you can get it off amazon.com for about $5 used) discusses this topic in more detail. Dr. Rahn discusses technologies such as smart cards to some extent, which would replace cash. However, I believe that the threat to fiat currency will actually come from technologies being developed in parallel. Smart cards would have an enormous installed base cost for point of sale terminals etc. The credit card companies are already way ahead in that area.
However, there are three technologies being developed that could converge in parallel to present a threat to fiat currency. They are:
1. City-wide wireless broadband (called wi-max).
2. PDA/PDA-cellphones.
3. Gold backed digital currencies.
Wi-max is basically wireless broadband that blankets an entire city. Instead of having “hotspots” like you do with wi-fi, you will have broadband access on your laptop/PDA anywhere in the city. However, I do not believe that there are any wi-max enabled PDAs yet, I think it is for laptops only right now. Here in San Diego we already have wi-max through Verizon.
The main gold backed digital currencies today are e-gold(e-gold.com), GoldMoney(goldmoney.com), e-bullion(e-bullion.com) and pecunix(pecunix.com). These currencies enable you to convert your fiat currency to a claim of gold in a vault of the digital currency site. This claim or a portion thereof can be sent to anyone else who has an account with the same site, instantly.
So now you can probably see the scenario. You will be able to go all over town and spend gold backed digital currency. You could spend it at a business such as a restaurant to pay for a meal, or a cab driver on a wi-max enabled PDA.
Here is a list of benefits of gold backed digital currencies:
Here is a list of beneficial properties of gold backed digital currencies:
1. They are secure (by strong encryption).
2. Transactions are irreversible (unlike credit cards or checks).
3. They are not subject to banking regulations such as transactions over $10,000 having to be reported to the IRS.
4. The value of your account is based on the value of gold or metal that your account is based on. This is a bonus in the long run because inflation causes the price of gold to inevitably go up.
5. Transactions are instantaneous. As soon as the funds leave the payer’s account they are immediately deposited into the payee’s account.
6. There is no distinction between a seller’s account and a consumer’s account. All accounts have the same properties and fees.
7. The account holder determines how much of their holdings are sent and to whom they are sent to. Vendors do not access or control the accounts of their customers. This is of course in contrast to credit cards where fraud is rampant.
8. Digital currency sites will only reveal information on an account holder if a government goes to it and requests such information. However, see property 9.
9. Digital currency accounts are by and large anonymous. A minimal amount of information is needed to set up an account and all of it could be made up. This makes it difficult for authorities to prove who owns what account.
10. Transactions on digital currency sites are private. They are private in the sense that no information on the account holder is transmitted during the transaction. The only information on the account holder that is transmitted is their account number, which is of little value to a fraud artist or thief.
So, there are many benefits to be had because the digital gold backed currencies are way ahead of the banks and credit card companies. The technology is already here to fully realize the potential of these currencies, it just needs to come down in price.
Personally, I’m going to start depositing my paychecks into a GoldMoney account and jump on the bandwagon of a sound monetary system.
The notion of a “mixed” economy is a socialist con job. It’s like saying a man confined to his office and home has a “mixed” type of freedom.
No, No, NO! A thousand times “NO!”
No matter how thin or pretty the chains that bind your economy, they are still chains.
If Orwell were alive today he’d say simply “I told you so.” Don’t let people use this execrable term to deny reality to your face. It’s a lie and it’s nothing but a lie, and it’s deliberate, evil, and told with malice aforethought.
You cannot think rational thoughts without a rational language, so don’t let people get away with doing violence to your language.
(Because when they do this, violence to you is not far behind.)
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