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By L. Reichard White

In the years after the 1917 revolution, the Soviets lacked capital to build all the steel mills, dams and auto plants they needed. Soviet leaders seized on the theory of “socialist primitive accumulation” formulated by the economist E. A. Preobrazhensky. This theory held that the necessary capital could be squeezed out of the peasants by forcing their standard of living down to an emaciating minimum and skimming off their surpluses. 

Like Klaus Schwab says – you will own nothing and be happy

Does Central Economic Planning Work? From Gosplan to Market-regulation — Which Would You Choose?

Maybe you could start your next email with a list (or even just one) counterexample [to modern China] of a functioning “unregulated” [economic] paradise? –Bill, Re: [Politics] self-regulating systems

OK, What You Asked For Bill – – –

I thought since you were in Hong Kong when I started writing this, it might be a good example (but it’s Jake who believes in Paradise; I only claim “markets aren’t perfect, just better“) – – –

…”miracles” first gained currency three years ago in a remarkable book published by the World Bank. Called The East Asian Miracle, its topic was the relationship between government, the private sector, and the market. And no doubt about it, the growth had been phenomenal: since 1960 the eight countries in question — Japan, Singapore, Hong Kong, Malaysia, South Korea, Indonesia, Thailand, and Taiwan — had collectively experienced more than twice as much growth as the rest of East Asia, roughly three times as much as Latin America and South Asia, and five times as much as Sub-Saharan Africa…. In my experience everyone wanted to hear about Korea, even though its income per capita was the lowest of the four tigers’ (Hong Kong, Singapore, Taiwan, South Korea); at $8,260, it still remains less than half that of Hong Kong…. the bias is entirely understandable. In Hong Kong, bureaucrats and planners had almost no role. — …and Wrong, William McGurn, National Review

73% of Hong Kong businesses employ nine or less; only 1% employ 200 or more. Hong Kong has had more than a 7% annual growth rate since 1948 [46 years]. –Briefing on Mind Extension Univesity, 3 Mar 1994

Hong Kong rated most free by Heritage Foundation study. Hong Kong has had the longest, steadiest growth of any country over the last 50 years. –Investor’s Business Daily, ~11 January, 1995

The Economic Gradient

First let’s take a look at that favorite of all Tigers, South Korea and how it got that way (which, remember, achieved only about half the per capita income of Hong Kong) – – –

…the Korean model operates on a completely different set of principles. …Like most technocrats, Park associated wealth with heavy industry…There would be none of this trusting the marketplace to sort out winners and losers. The government knew what industries were needed, and those that were favored received credit while those that were deemed frivolous withered on the vine.
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Like the Japanese model, the Korean model rested on three pillars. First, a bias toward the bigness that bureaucrats thought would guarantee economies of scale. Second, the idea that banks would not evaluate risk and credit as their counterparts did in the West but would rather serve as policy arms of the government. Third, that growth would be paid for by the public, by suppressing consumption. “Guided capitalism,” they called it, and though …it came with huge opportunity costs, it did work in the sense that the countries based on this model did develop. — …and Wrong, William McGurn, National Review

So, S. Korea did well — but only about half as well as Hong Kong.

And doesn’t that notion that “growth would be paid for by the public, by suppressing consumption” ring a bell somewhere – – –

In the years after the 1917 revolution, the Soviets lacked capital to build all the steel mills, dams and auto plants they needed. Soviet leaders seized on the theory of “socialist primitive accumulation” formulated by the economist E. A. Preobrazhensky. This theory held that the necessary capital could be squeezed out of the peasants by forcing their standard of living down to an emaciating minimum and skimming off their surpluses. These would then be used to capitalize heavy industry and subsidize the workers. –Alvin and Heidi Toffler, Creating A New Civilization, pp. 69 & 70

The results of centrally planned “socialist primitive accumulation” would probably even shock Jake. Remember, in the old U.S.S.R., somewhere between 16 and 20 million men, women and children were “emaciated” to death by “skimming off their surpluses.” And somewhere north of 38 million were similarly emaciated to death in central planner Mao’s “Great Leap Forward.” And once again, Keynes has something relevant to say – – –

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. –John Maynard Keynes

In these cases, it was defunct economist E. A. Preobrazhensky and his theory of “socialist primative accumulation.”

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