Friday, December 9, 2016

Capitalism V Socialism

By Andrew Atkin

What's the difference?

Capitalism versus socialism is a wrong way of looking at the debate. It's really a question of a free economy (capitalism) versus a controlled economy (socialism), because what we call capitalism is at base nothing more than free trade among the populace. We call the free economy 'capitalist' simply because it allows for capital investment coming from private individuals, which drives its development.

Socialism, in practice, means a controlled economy - a centrally planned economy. It's called 'socialism' because that is its rationale. It's embraced to the end of achieving equal prosperity and eradicating poverty.

With socialism, capital investment in industry comes from the government, so you have collective ownership of the means of production. And with it, comes strict controls on how the people within the system can live and invest their personal resources, including how they can invest in themselves as a human resource.

The ultimate expression of socialism is what I would describe as a militarised economy, where the entire society functions like the military with regimented control. Every economy is to a degree socialist and capitalist. Ultimately we are talking about degrees.

Historic success and failure.

Very few people believe in the socialist system as an ideal, because socialism has been a failure wherever it has been tried from over the last 200 years, and now. And it has indeed resulted in the opposite of what it was originally set up to achieve. Socialist systems achieve economic development very poorly, and their inability to adapt to changing conditions historically leads to devastating scenarios.

A good example today is with Venezuela. Unlike New Zealand, which rapidly reformed to a much more free market system in the 1980's (as urgently required), Venezuela did not. Many people are beginning to starve now in Venezuela, and civil unrest has become serious.

There's no doubt about it. Free market economies make people richer and can adapt quickly to changing circumstances. And due to their strength, they have proven to be far more proficient in helping the needy who cannot help themselves.

Free market systems provide the best social security in practice. Mainly because a prosperous society will not tolerate the sight of people starving on their streets, and due to their prosperity they simply do not have to.

How capitalism generates wealth.

Take a man with a lot of money. He wants to invest his wealth into some kind of industry to get richer still. He sees an opportunity when he comes across a small group of 10 men cutting down trees for firewood for sale - with handsaws. The rich man then goes into town and buys 10 new chainsaws (that's capital investment), and employs the group of men to cut down more trees with the chainsaws, where they then achieve 5x the productivity.

The rich man gets richer as he makes a huge profit on the woodworkers labour. The woodworkers get a 10% increase in their earnings as well, but at first the gains mostly go to the capitalist.

However, as the supply of wood increases from the greatly amplified productivity, the cost of wood goes down. In this way, everyone benefits from the increased capital investment and likewise productivity - rich and poor.

As time goes on further, the rich capitalists start to run out of cheap labour to amplify the profits from their capital investments. This naturally forces a bidding war for available workers, amongst the capitalists. The workers wages then get bid up, over time even dramatically, and in this way the spoils are progressively shared throughout the maturing economy.

This process of free markets and its accompanying capital investment, has had such a powerful impact on the Western world that the living standard of even the poorest western people towers above what most people had just 100 years ago, when most people were lucky to see anywhere near their 80th birthday. It has also served the developing world extremely well. We have seen radical reductions in poverty rates, worldwide, from capital investment and economic development in the industrialising world.

How socialism generates wealth.

Socialism tries to generate wealth in the same way capitalism does (by capital investment), though the investment comes from the state.

One problem. The incentives and price signals in socialism are a mess. Contrasting, in free markets people know how to invest their money.

For example: If you get a particularly cold winter then the people will want more wood to burn. That extra demand naturally drives the price of wood up, and that in turn means that those who supply the wood make more money. This, in turn, gives us the *price signal* to incentivise those with capital to invest in more wood production, as naturally they want some of those greater yields for themselves. Then, as more wood gets produced, the price comes down to more normal levels (matching production costs + reasonable profit) as you no longer have an under-supply of wood.

Hence, capital investment is driven by price signals. Those price signals are erroneously called "the invisible hand". Erroneous, because there's nothing really invisible about it. The supply-demand-investment process is quite transparent.

So socialism, which responds to state dictates, controls the supply and inevitably does so badly. And not only does it force the supply, but those that make the decisions on investment have no personal skin in the game. Meaning, they do not spend the state's money carefully because it makes no difference to them, personally, if the investment proves either good or bad. Not only that, but in socialism the people in general are unmotivated, and in many ways unaccountable, leading to a lack of energy and public apathy towards progress and industriousness.

But where socialism fails worst, is when circumstances absolutely demand change. When a socialist economy receives a 'shock' and needs to adapt, it can't. People start to starve and riot. In the name of creating social security socialism ironically does the opposite.

The evils of capitalism.

For the most part, the evils that we see in capitalism are not actually capitalism at all. They are the socialist (centrally controlled) components in a capitalist system, rearing their ugly heads.

We've all heard of crony capitalism. What is it? It's when private capitalists get into bed with governments to skew free markets (via anti-competitive regulations) in their favour. So crony capitalism is basically a kind of privately-driven socialism.

The dirtiest expression of crony capitalism, in my opinion, can be seen in this thing we call schooling. Schooling was invented 200 years ago in Prussia to produce obedient military personnel. It was later embraced by governments backed by industrialists, who liked the kind of citizenry (corporate drones) that the Prussian system tended to create. This is not capitalism - it's socialism. Forced schooling as we know it is a socialist intervention, and a deeply intrusive version at that.

But there is another component of capitalism that might be seen as toxic. In free and (inevitably) competitive markets, the bottom-line is the only line. Any 'love' an employer gives to his employees is given only to the end of maximising the bottom-line. Which is a bit creepy if I may say so as the love is not real, and the truth behind it all (which is the never-ending threat that you will lose your job, as soon as you don't make economic sense) makes for an undercurrent of constant low-level intimidation. It's not natural, and probably not healthy, for humans to live like this ahead of a more community mindset.

To a degree, we try to mitigate against these effects by employing government to create laws to avoid the worst of this. But this has a somewhat impotent and double-sided effect, I believe. Government regulations on human conduct can too often do more harm than good, as intrusive laws originally meant to protect are notorious for being used as weapons, and likewise undermine goodwill. From my observation, we end up playing politics and find ourselves walking on eggshells, rather than communicating openly and sorting our differences that way.

However, again, I believe that at base this is a created problem not of the free market system, but of government interference in it. Because in a real free market the people, as a function of natural demand, would have largely solved this problem on their own - because they could.

If people did not want to live in "corptopia" then that demand would turn into new products, all on its own. You would end up with various forms of reclusive "micro-socialism" of the type that is manageable and effective (which in practice means small scale*) being supplied and sold under the umbrella of a national free market system. And indeed, alternative developments like this would hold the wider job climate to account. Respect that people only tolerate an unhealthy work climate when they feel that they have to.

But, I would argue that this secondary evolution that we might expect to see within a developed society, is being suppressed. Suppressed first through status-quo cultural indoctrination via forced schooling, and second through national laws that don't allow for private communities that are truly of their own design to be created.

But again, these evils are not really born out of free markets, but a lack of them. The natural demand for more community is being choked off through crony capitalism and the subsidised state sector (meaning socialist sector) of the economy. And the politically-engaged people who want more community are confused about how to get it. They need to understand that the evolution of community must be bottom up - not top down.


Since the 2008 financial crises the US government, in particular, has been inflating their economy with cheap money (super low interest rates), which in itself suggests that the 2008 crisis was never solved, and that instead we've been operating on borrowed time with money printing. This will demand an economic correction in the future, as the game of money printing and deficit spending can't go on forever.

The great danger is that people, in feeling pain from a correction, start demanding change but without knowing what to change to.

The solution to a financial crisis is to let the bad investments take their losses, with bankruptcies and tears, and to in turn let the machines of production keep turning after their *rapid* price corrections. And then to enforce a stable monetary system, where the money supply can't be so easily inflated.

The solution will not be socialism, though no doubt many opportunistic ideologues will try to tell us that it is. And this is what I have tried to show, because nothing is more dangerous than a populace demanding change yet not knowing what to change to - yet thinking that they do. Stress-driven revolutions can be good - or tragic!


*Think of a household economy expanded out to the size of a club. Go beyond a couple of hundred people and the social body loses awareness of its managerial head, and accountability and market-responsiveness will begin to collapse. I believe that if any form of socialist type system is to be effective, then it must operate on a strictly human scale.


Extended: Good video which further looks at the differences:

And more, on Adam Smith:

Part 2:

Serious example of crony capitalism today (New Zealand relevant):

Public transport and driverless cars: How they will play.

By Andrew Atkin

Many people believe that driverless cars are decades away. They have not followed the technology closely, or thought seriously about its deployability.

My example is the twizy car. It weights about a quarter of a modern sedan. Now imagine having this car in a car-sharing scheme whereby it can drive itself to the next customer, though you drive it when you're in it.

How far away is this car-sharing revolution, if that is all you need to provide for a major market impact? It should be with us in a year or two, in principle. The technology can already do this.

There are no serous safety concerns with a system operating like this when the cars are so light, and no one is in them when in driverless mode.

Now take the picture of little twizy cars everywhere, costing a fraction of conventional cars to use, and using about 20% of the energy of buses, trains or cars. Where does this leave public transport as we know it?

Well for a start, a driverless twizy system is perfect for solving the last-mile problem of buses and trains. In particular it's good for supporting buses, as the supply for the demand is more spread out.

But driverless twizy's will of course cover much more than the last mile. They will replace conventional public transport wherever they realistically can. Though where driverless technology can't go, public transport will survive.

Public transport:

The only places where public transport can survive as a competitor to driverless cars (car sharing) will be in areas where the transport demand is high enough so that congestion becomes an issue.

Assuming that congestion-charging is employed to control for congestion, certain roads will be costly at times to use. This is where buses step in. People can avoid the expensive road toll by using buses as a point-A to point-B bridge. This is somewhat easily done as passengers can switch from the driverless twizy to a bus, at both trip ends, and maybe in as little as one or two minutes.

So this is how it would work...

Buses will be dead except for where they can provide capacity bridges for high-demand roads.

But to the end of providing capacity, buses can be very efficient in this context because:

1. They're operating on congestion-free roads.

2. Have high average passenger loadings.

3. Have rapid trip times due to minimal stop-and-go (only 2 or 3 bus stops at each end of the major trip).

Certainly you should not require subsidies to support public transport in a driverless reality, if they stick to their sensible role.

Demand for collective transport:

However, buses and trains will have to compete with other forms of collectivised travel.

How about shuttle buses? And what about car-pooling specifically as a driverless service?

A driverless car can be built as, say, a 6-seater, with retractable partitions for privacy (ref. yellow lines on image). That will be cheaper and more efficient than a bus, be great for low-cost long distance travel, and provide a more responsive service.

Driverless car-pooling would probably make more sense in most applications than a bus, to the end of providing capacity relief as required. Many small vehicles are always going to be better than a few large ones, insofar as capacity demands allow for it.

End game:

It's very difficult for me to imagine how buses and trains can survive long term.

There will surely be demand for collective travel for where it makes sense as a cost solution, but buses and trains will probably prove to be an intermediate solution that will only survive until driverless solutions, plus some inevitable infrastructural upgrades, finally render them redundant.

It can't be under-stressed as to how close this movement is. Again, all that little twizy car needs to do is be allowed to transport itself to the next customer, and it's the beginning of the end for transport as we know it. The transition to driverless-based car-sharing will be rapid. The cost reductions and convenience of this kind of car-sharing are great, and it can absorb most travel demand pretty much immediately.

So to conclude, conventional public transport, as a solution, will serve as a capacity bridge and little more than that. And that somewhat minor demand will most likely prove very temporary as well.

Sunday, December 4, 2016

Zero Crime Cities: You can run - but you can't hide.

By Andrew Atkin

I would like to highlight some major technological movements that will almost certainly, in good time, give us a new age in terms of safety and security within our cities (excluding what goes on behind closed doors, in the domestic world).

The advantages of appropriately employed technology will be particularity advantageous for cities that are seriously dangerous, and suffering from rampant corruption.

1. A cashless society.

With nearly everyone owning a smartphone, and with smartphones rapidly dropping in price, there is no reason why we can't have a cashless society as soon a given government enforces it.

Imagine: You open up a simple app on your iPhone, take a photo of the QR code displayed on your friends (or other) phone, and then from there you type in the cash to pay and then hit the enter button. You approve the payment with the thumbscan on your phone for biometric security. It can be as simple as that.

The result with a payment system like this, is that there is a record of where the transaction was made (via GPS) and who made it, when, and how much. It can all be recorded on a central database for every transaction that anyone makes, or can make.

The effect of these records, other than transaction and accounting efficiency, is it makes operating a black market virtually impossible (unless it's barter). If the police have a concern and want to look for possible criminality, then with a search warrant they can review people's transaction records on the database and identify any suspect dealings, and quickly.

2. Internet-based biometric security doors.

Imagine the equivalent of a simple, stripped back iPhone being a door lock.

So, to access any location you use a biometric lock that allows you to keep a record of who, where and when there was access to a given location. Often it will not function as an actual lock - just a biometric log in.

It could be one system. A private body could set up the security system, and sell the iPhone type door locks/logins to people wanting that form of security for their premises. People (especially contractors) could establish an account to use the system, and in turn apply for access to any given location.

The result would be extremely tight yet practical and fussless security. Forming temporary clearances, and blocking people, is dead easy. Also it creates a location trail for citizens which makes both guilt and innocence easy to prove for if there are problems, just like with the cashless money system.

Imagine the fuss it could remove in airports as well, if governments world-over embraced a single international system like this. No more passports - just your thumb scan.

This can be built as a totally private venture. Frankly, I don't know why this isn't being done already today. My prediction is that someone will produce this service soon. It makes sense and it should be very profitable.

3. Instant response police drones.

Imagine a grid of drones positioned over a city, with the drones positioned about 1 kilometer apart from each other. This would make no point in the city more than 700 meters from a police drone.
Now, if someone's security alert goes off, that drone could automatically transport itself to the location of concern, with an initial reaction time of less than a second. The instant the alarm goes off - the drone is moving. If the drone travels at say 80km/h on average, then it will be at the most distant (700m) point in about 30 seconds.

A drone can't detain people of course, but it can certainly track and follow them until a policeman can get to the scene. Hence the deterrence value is huge. You can run - but not hide.

You might need a couple of hundred drones for totally comprehensive coverage in a medium sized city. But if they cost say $10,000 each, then that's only about $2m. Peanuts.

4. Driverless cars.

Driverless cars will also work with biometric access for the public.

Again this allows us to create an explicit location record for any individual, and it also makes detainment easy. If necessary, the police could override the system and have your driverless car come straight into the police station (with you in it).


What I have just described is a city with insanely good security. It's also cheap because it's directly rooted into the architecture of civil operations, and it's mostly just software.

One of the good things with security like this, is you can get rid of the police state feel that you might otherwise get with conventional policing. The image of some kind of Mr gestapo standing at the door holding a machine gun is completely eliminated. Police will be almost entirely invisible to the general public, mostly just dealing with domestic problems.

Rather than creating an atmosphere of authoritarianism, you create an atmosphere of trust as it becomes almost impossible for people to commit violent or serious crimes and get away with it, as the suspect lists can almost always be rapidly reduced to just a handful of people. Hence, only crazy or unusually foolish people will even try to steal and kill, etc (again this excludes the domestic world, which is where our most serious crimes really occur, in the industrialised world).

So does all this look Orwellian to you? Take your mind out of the movies, please! Technology will not increase the risk of us developing some form of tyrannical government. Indeed, if your government wants to be tyrannical, insofar as it can, then it can do so with our without advanced technology (they used to do it with just swords!). For a tyranny it's the legal infrastructure that counts - not the technological infrastructure. Reliable resistance to tyranny requires public education, good child care (no madmen, please), and political decentralisation. It does not require that we unnecessarily compromise policing and general security.

So what I am describing is nothing more than a system that allows our police to do their job, and with amazing efficiency. Your privacy would only be invaded if it needs to be, like it is today when the police obtain a search warrant. And note that the ability to prove innocence is of course the best protection against false accusations, which all of us can be vulnerable to.

And again, it can't be under-stressed that the deterrent value is enormous. The best police force is the one that hardly needs to be used.

So why don't we have these systems in place now, now that we have the opportunity to build them? Because it's only *just* now that we have in fact got the opportunity. Very soon I predict, we will see governments and the private sector making moves in this direction. And it will be a saviour for countries like South Africa especially, that are being devastated by a gross lack of civil control.

Addition: 09-05-17:

I will also make a note on security cameras, using modern technology.

Your face is a biometric object, and modern computers can identify you with a face scan, if you are on record. The problem is, security cameras generally lack the definition to see your face at a distance.

This can easily change if we used compound cameras. In other words, one camera for a broad view, and another camera which acts with a small telescopic lens that targets your face, and finally imposes a high-definition image on the low-definition image - giving relevant definition with minimal information.

None of this should be difficult or expensive. It gives us the opportunity for excellent security which is especially relevant for countries dealing with serious civil unrest. Indeed, if you had all citizens faces scanned and on record, so you can know who the bad guys are (such as Isis and their friends), then a domestic enemy could be automatically identified and neutralised without any human intervention at all. The ultimate in surgical warfare. And that 'neutralization' could be as simple and efficient as a pulsed laser to the eyes, instantly leading to permanent blindness. Better than watching peaceful civilians getting butchered by the tens of thousands? I would say so.