- On this episode of Kibbe on Liberty,
we talk to the coauthors
of the forthcoming book
"Socialism Sucks: Two
Economists Drink Their Way
"Through the Unfree World."
We're gonna talk about real
socialism, fake socialism,
kids that love socialism in America
and what the hell that's all about,
and then we're gonna drink some
really crappy communist
beer from North Korea.
You don't wanna miss this.
(rock music)
You have three economists,
and one of my fantasies
for Kibbe on Liberty is to do a podcast
called "Drunk Austrian Economics"
inspired by "Drunk History,"
and I feel like we're
sort of halfway there
because I have two very
accomplished free market
Austrian economists with
me, Bob Lawson, Ben Powell,
and I will read your resumes in a bit,
but before we do that,
let's retell that story.
You flew into DFW today.
This is concerning, I'm
concerned about you.
You flew into DFW and the lady
at the bar knew your drink
sort of like Norm would be
shouted out on "Cheers."
Is this true?
- Yeah, I mean, and
there's four Admirals Clubs
in DFW, so, but, now I live in--
- Do you do this at all four?
- (sighs) No, but, well, yes,
but it depends which bartender
is at which, 'cause they don't
all stay in the same club.
They move between clubs.
But in fairness, I live in
Lubbock and every flight starts
with a flight to DFW and
then I have a layover.
I gotta have somewhere to go.
- [Matt] Yeah.
- It is a little--
- I feel like layovers
and drinking go together
like liberty and beer.
I don't know what that means.
So we're here and you
guys are the coauthors
of a forthcoming book.
The release day is July--
- 30.
- 30, called "Socialism Sucks:
"Two Economists Drink Their Way
"Through the Unfree World,"
and I sort of immediately
resonated with that
because Kibbe on Liberty
is a drinking show, like
we will drink on this show
and we celebrate the vast diversity
of American beer culture
as a beautiful metaphor
for what happens when
entrepreneurs are free
to create beautiful things,
and we actually have
quite a collection here.
It'll offend those of you
who prefer corporate lager,
but we have some beautiful
beers from Hill Farmstead,
which according to all
the crowdsourced ratings
is considered the best
microbrewery in the country.
We have a Heady Topper and
two of my local favorites,
Aslin from Virginia and
also The Veil from Virginia,
but we also have some
commie beers on the table,
which you guys brought
along, Cerveza Polar,
and I don't know what that other one is,
but it's from North Korea,
and we are gonna subject
ourselves to this,
and we're gonna do a side-by-side and see
who makes better beer,
Americans or commies.
- Now you've already tipped
your hand on this, actually,
on the metaphor of
entrepreneurship and creativity
of the variety, and even back
in the corporate beer days
before microbrew, the
variety of American beer,
even then, vastly superior to the variety
that any socialist society provides
in terms of beer for their people.
- Yeah, for me, the whole metaphor of beer
as a symbol of freedom
started, I think it was
almost three years ago
now, there was an article
about Cervecería Polar in Venezuela,
and as far as I can tell,
it's sort of a
government-controlled company.
I don't think it's government-owned,
but you could correct me.
- It's privately-owned--
- [Matt] Yeah.
- But the government, so this
is an important distinction
in socialism, Bob and I go
to great lengths in the book
to say that socialism is
government or collective
ownership of the means of production.
- But we also have cases
where the means of production
are privately owned but
government controlled,
so like National Socialist
Party in Germany, Nazi,
it was privately owned, but
government edict dictated
much of what production was.
Venezuela's far along
that path to socialism,
but there remains
nominal private companies
that face pervasive government control
of their production.
Polar would be one of them,
and you're about to tell me what happened.
So the shocking thing to
me, I'm reading this article
and the headline is the
one brewery in Venezuela
can no longer procure the ingredients
to make beer in Venezuela.
By this time, the Maduro regime
had created just empty grocery stores
and moms lined up trying to find food,
people literally getting killed
in the streets for stealing $5.
Things are much worse today
and I'm thinking to myself,
and this is probably
sort of dark humor, like,
well if I'm living in a socialist
hellhole like Venezuela,
I damn well need a cold six
pack, and now that's gone.
Now that's gone.
Could anything be worse than
living through socialist hell
and not having a cold beer?
I'm sure there is something worse,
and Maduro's working really
hard to show what that is.
I mean, people are eating their pets now.
- People in Venezuela
lost 24 pounds last year.
They didn't all find Jenny Craig.
- [Matt] Right.
- The country ran out of beer.
The problem is they also ran out of food.
Now this isn't Ukrainian-
or Great Leap Forward type starvation,
but shortages are pervasive
there, and not just in beer.
- So let's talk about
the book a little bit,
because we went to Colombia,
we flew to Colombia,
and then we took another flight
to a little town called Cúcuta.
It's on the border of Venezuela,
and if you've watched any of
the news reports of Venezuela
and the tragedy that's going
on there, you've probably seen
these bridges, and this is the bridges
that connect Venezuela to Colombia.
And we went there, this
is about a year and half,
two years ago.
- Different than what you're seeing
of the bridges right now.
- Yeah.
Well, now the bridges--
- The bridges right now
is where you've seen those aid
trucks trying to go across--
- Yeah.
- And the government setting fire to them
and not letting them in.
That's not what we were seeing.
- But the worse thing, it's
probably the most horrific thing
I've ever seen with my own
eyes in my entire life,
was thousands, I mean literally thousands
of people crossing, filled
with bags, luggage on wheels,
just like at an airport, you'd
be carrying two big bags,
maybe a backpack, some people
had another one on their head,
and they were crossing
in to the Colombian side
from the Venezuelan side to
buy food, which is strange.
You know, usually you just
go to the corner market
to get food, and we talked to one couple,
and this was the one that
made the most sort of,
you know, mark on me,
it was Palo and Maria,
I think their names, and they
had come from Ciudad Bolívar,
which is a city, it's
12,000 kilometers away,
it was on the other side of Venezuela,
on the sort of eastern side,
and they'd come all the way
to the western border, three
days, it took them, one way,
so it's a six-day roundtrip,
and we asked them,
well, what are you buying?
They said, well, we're
buying sugar and rice,
beans, and aspirin, and
deodorant, and shampoo,
and so, I'm like, they were
going to the grocery store.
Six-day roundtrip.
And you know, I'm a parent.
I've got a daughter, and
you know, this young couple,
I was like, how terrified would I be
to live in a world where
I had to say, well,
bye, family, I'm going to get in my car
and take this dangerous
ride across the country
so that I can get beans (laughs).
And these people were not poor people.
These were middle-class people.
I think Palo worked in
a hotel in his city.
They were working people,
but they were not, you know,
peasants, and when you've
got an entire country
where people who are
professionals, hotel workers
and so forth, and they're
driven to this desperate,
and it really hit me
personally, I was like wow,
I've never had anything in my own life
that was even close to
that level of desperation,
and I was almost panicked,
like I sort of felt panic for him.
- [Matt] Yeah.
- Like, how would I feel?
- And it really does drive it home,
because what Bob's pointed
out, I mean, both of us
have traveled to many,
many, many, many countries,
and we've seen plenty
of poverty in the world,
but what you see in Venezuela
is not third-world poverty.
It's formerly fairly
well-off rich people who are,
not rich, but fairly well-off
people who are making
the trek across the border to get things.
The real poor people there are the ones
who are losing weight like crazy
and who are having high death rates, etc.
But it's a warning sign,
too, for socialist movements
in places like the United States,
because Venezuela used to be wealthy.
Venezuela as recently as 1970
was wealthier than Spain.
Now for years it had
been on the down slide
where they had crony capitalists moving
towards socialist systems
before Chavez got to power
in '98 and doubled down on
all the socialist craziness,
but go back to 1950, '60,
this was a wealthy country
that was pretty economically free.
- It was the wealthiest in Latin America,
say 20 years ago?
- [Ben] 40.
- [Matt] 40, okay.
- Yeah.
- We'll let's, I mean, you know the data.
You are the coauthor of the gold standard
on comparing economic performance
in all these countries.
Give us an overview of what that is
and what Ben just talked
about, the radical degradation
of the Venezuelan economy's performance.
- Sure, so I've been involved in a project
called Economic Freedom of the World.
It's an index of economic freedom
and it basically collects a lot of data
for now we're up 160-plus countries,
collects a lot of data on
taxes and monetary policy
and trade tariffs, regulations,
and we try to scrunch
all this information into a single number,
and the number's supposed
to give us an idea
of how free market or
how, if you want to use
the word capitalist, a place is.
So Hong Kong is number one.
And currently, Venezuela is last.
It's 162 out of 162.
But it's basically a scale from one end,
capitalism to the other end,
not capitalism, socialism,
and that's what the index is all about.
And Ben mentioned that
Venezuela was once upon a time
one of the more free countries.
In fact, we scored it not
only as the richest country
in South America, it
was the freest country
in South America, the
most capitalist country.
And then what it did
is it began moving away
from economic freedom.
It went from the top
20% or so of the scores
down to the literally dead last.
And the growth rate in Venezuela
has been negative over the long run.
So Ben mentioned that Spain was poorer
than Venezuela in 1970.
Well today, Venezuela is about
a third as rich as Spain.
Spain's grown very quickly.
- That's before the collapse.
- Yeah, it's only worse now.
- They were a third.
- Yeah, yeah.
- So this is circa 2014
or so, where you can actually get data.
- Yeah.
- Now it's much worse.
- Yeah.
- So I mean, it's like,
I think the growth rate's
been about -1% a year, so
if you imagine if your money
was in a bank account and
you were losing a percent
this year, and then next
year another percent,
and next year, do this for 30 years,
compound a -1% growth rate for 30 years,
well, you take a country
that was by no means rich,
but you took a country
that was pretty prosperous
for its era, and you turned it into
a country where people
are literally starving.
- So let's take a step back
and talk about the concept
of the book, and Venezuela is
one of the darker chapters,
and one that all of us
are unfortunately watching
on the news every day,
and it's pretty shocking
to put that in context, how
quickly bad economic policies
actually take hold, and
we're watching that bridge
between Venezuela and Colombia today
and they are, oh is this--
- [Bob] Polar
- We're moving to, this is not actually
Venezuelan beer because
Venezuela is having a hard time
making beer 'cause they're having
a hard time making anything.
This is Polar produced in the U.S.
- Yeah, it's a Venezuelan brand produced
in Florida.
- Presumably, for all
of the Venezuelan expats
that have managed to escape the hellhole
that is Venezuela today.
- So this is the beer that they ran out of
in Venezuela, but the Florida producer
still is able to produce,
and my Venezuelan friends
here in the United States tell me
that the one that's
produced here tastes better
than the one that's produced
there when it's produced there.
- [Matt] I'm not surprised.
- I'm about to find out for myself.
Sorry, I didn't mean to interrupt
what you were doing with that--
- [Matt] No, drum roll.
- Matt, I was just,
I was thirsty.
- I'm still drinking
American beer, so.
- Let's hear it, how is it, Ben?
- Little bit like feet.
- I'm getting wet feet in this beer.
- Not ridiculously wet feet.
- Well, I just poured some, too.
Let me try it.
It's pretty skunky, but
not in a good skunky way.
You know some beers are skunky
and it's actually a feature?
- [Matt] Yeah.
- This is just like--
- I like funky beers, but
I don't like skunky beers.
- It's not the worst beer I've
ever had, but it's not good.
- Yeah.
- Oh no, remember that shit Tusker?
- Tusker, yeah, that's the worst.
- The only time I ever got a
hangover while drinking beer.
- Yeah, yeah.
- It's disgusting.
- So the incentives align to prevent you
from drinking any more of it.
So let's take a step back and talk about
the concept of the book
because what you guys did,
which most economists don't normally do,
is actually go there and talk to people
and see what their perspective is.
The story you tell about
Venezuela is particularly powerful
to me because my view is Maduro
has used food as a weapon,
as a way to get people who clearly
would want something else,
but if you're not loyal
to the regime, you don't
get those food rations,
and there were some, I
can't think of his name,
there was a socialist
economist imported from Spain
who Maduro pronounced to be
the Jesus Christ of Economics.
And think about that.
Just think about what that implies
that this guy is
omnipowerful, omniprescient,
he knows everything.
- Listen, if he were the
Jesus Christ of Economics,
they wouldn't have run outta beer
because he would have
turned water into beer.
- Well, but this was a guy that said
we must build a barricade between Colombia
and Venezuela because it is
all those capitalist interests
in Colombia and presumably
the rest of the free world,
and the only reason that
socialism wasn't working
in Venezuela is that people on the outside
were corrupting it with
their evil price-gouging,
profit-maximizing interests.
- Well, you know, to a certain extent,
this was true, though.
One of the hallmarks of
socialism, of course,
is price controls, and
the Venezuelan economy
was riddled with price controls,
and it forces down the
price of many things,
which is why shortages happen.
This is Econ 101, I
would teach it literally
in the first week of a freshman class.
So gasoline, for example, in Venezuela
is very, very cheap,
you know, $0.40 a gallon
or something like that.
Meat and basic commodities
would be very, very cheap.
Well, so cheap that you can't find them
because the producers just
don't want to make them
at those low prices, but also, it creates
an arbitrage opportunity,
to use a business school buzz word,
that where if you could find
gasoline or meat in Venezuela,
you could truck it over
to, say, Colombia or Brazil
and you could sell it high.
You could buy low and sell high.
So there was a certain element of truth.
One of the problems with socialism is that
if you force the price down too low,
people will buy it but then
they'll not necessarily use it,
they'll wanna sell it to somebody else
because the price is arbitrarily too low.
And you know, it was kinda
funny, you could see people
on the sides of street,
on the Colombian side,
selling gasoline out of buckets
or like little hand pumps
because you know, gasoline
in Colombia is normal price,
it's a few dollars a gallon, so the prices
in socialist economies, this
is getting wonky, I know,
but the prices are just insanely wrong,
and as a result, when prices go wrong,
we start doing crazy things
like taking gasoline in buckets
across the border so we can
sell it in a different place,
which is stupid, but that's
what socialism does to people.
We should come back to that
thing we talk about in Cuba,
but in terms of the evolution
of the Venezuelan economy,
I think this is an important point of
what was happening under
Chavez during the years
where everybody pointed to it and said,
this is democratic socialism
that is successful,
because there was a
period, and not long ago,
in fact, Bernie Sanders
recently appointed a new advisor
who wrote the column for Salon
called "Hugo Chavez's Economic Miracle"
upon the death of Chavez, in just, what,
six years ago, now?
Not even six years ago.
What had happened during
that time period, of course,
was Venezuela sits on the
world's largest oil reserves.
They were putting in these price controls
and other government controls
that were wrecking their domestic economy,
but meanwhile, they were cashing
in on world market prices
were very high oil,
meanwhile, well, production
eventually starts going down of their oil
because state-owned oil
production is not very efficient,
but they get big revenue
coming in from the high prices
and what you look at happening
in their domestic economy,
food imports are accelerating rapidly
during this time period, which, listen,
I'm all in favor of international trade
and we should be having
actually more food imports
to the United States because
of stupid ag policies
that make us produce too much food here.
But in Venezuela's case, what
it was, was it was masking
the domestic collapse of their economy
through the high oil
prices, and eventually,
when priced turned down,
and this is what socialists like to say
now is like, oh, well, it's
just oil prices turned down,
it wrecked the economy.
Listen, I live an hour and a
half from the Permian Basin
here in Texas, Permian
Basin ain't collapsing.
In fact, people sacking groceries
still make decent money there.
In fact, Saudi Arabia's doing all right.
What was happening was
these price controls
that Bob's talking about
over even nominally privately-owned things
lacked control of their production
just destroyed the economy,
and once oil prices
weren't there to prop
it up, now, by the way,
not just are prices down,
but production is way down.
They can't import the stuff
to keep themselves well fed.
And the democratic part of socialism
(chuckles)
is gone.
Now it's just merely socialism,
because as you were mentioning earlier,
they don't just hold food
over people's, you know,
people would vote in the,
now what we have right now
is an opposite, by right now, not sure
when you're gonna air this,
right now while we're speaking
is an opposition leader from the assembly
who's claiming to be interim president
and is recognized by
United States government
and dozens and dozens
of other governments.
Maduro is clinging to power,
saying that the last election
for Maduro was not legitimate,
which everybody knows it wasn't,
you had voting places and food
handouts right next to it.
Vote for the regime, get the food.
The state employees were
told, you do not vote
for the regime, you do not keep your job.
The supervisors were told
your employees don't vote
for the regime, they don't keep their job.
Democratic socialism, and
Hayek pointed this out long ago
in "Road to Serfdom," Venezuela
is a living case of it.
In '98, Chavez was democratically elected.
He put in a new constitution afterwards
that was democratically done,
but once you collectivize
the means of production
and have a central plan,
you necessarily confront
economic stagnation
because it cannot deliver.
You are forced to either
release control of the economy
or crack down, enforce your plan harder.
And when you do, those who
oppose you cannot have a voice
of objection or you cannot
accomplish your plans
even approximately, and that's
what's happened in Venezuela.
- So I'm gonna play devil's advocate.
I get trolled by the
socialist Twitter account,
it's the Socialist Party, whatever it is.
- [Bob] It's gonna keep
me up at night, too, man.
- And every time, and they're
gonna go after you guys,
by the way, but every
time I publish a new video
about Venezuela, every
time I publish a new video
about Mao's China or the
Khmer Rouge in Cambodia,
they're like, that's not socialism.
That is not socialism.
What we're talking about
is the Nordic model
and this is where your book starts.
This is where your book starts.
So let's get back to the book,
and you guys are hanging out
in a bar and what happened?
- Yeah, so the first chapter
is called "Not Socialism,"
and it's about Sweden.
And we were drinking
in a bar, and you know,
beer is expensive because
it's Europe, and it's Sweden,
and we're like, why is this beer $8?
And well, it's because
they have high taxes.
Let's not sugarcoat it.
Their taxes are about 50% higher in Sweden
than they are in the United
States, but except for taxes
and maybe some regulatory
issues in labor markets,
but except for a couple little areas,
Sweden is structurally as
capitalist as the United States,
maybe even more so in some ways.
I mean, it's private
ownership of businesses
and private cars, private homes,
private real estate
markets, you buy and sell at
unregulated prices, they
don't have price controls
on gasoline and other things.
It's a market economy that
has really high taxes,
and that's why the beer
is so expensive, okay.
So it's not socialism.
In the Economic Freedom Index that I do,
Sweden routinely scores in the top 25%
of all the countries in the world.
It's not Hong Kong economic freedom,
it's not even U.S. economic freedom,
but it's economic freedom
compared to say, Venezuela
or compared to Congo or other places
where the government infuses itself,
either through direct ownership
or through some regulatory control,
the governments infuse themselves
in every aspect of daily life.
That is not what it's like in Stockholm,
and it's never been that
way in Stockholm, actually.
- So I'm trying to remember
which country it was,
but Bernie Sanders, I think, was pointing
to Norway, is that right?
- He says Denmark,
and Norway--
- Yeah, all of those.
- Sweden, a whole bunch of them.
- They can't remember,
yeah, but the prime minister
of whatever country this was--
- [Ben] Sweden is the one who fired back.
(chuckles)
- It was one of these guys
that said, no, no, no,
do not call us socialists
because I don't want you chasing
international capital
investment away from me.
- [Bob] Exactly.
- We are a market
economy, just to be clear.
And you know, there are
some interesting things
that these countries actually do better
than the United States.
They don't tax businesses high.
In some ways, they don't have nearly
as much labor regulation,
certainly don't have
$15 an hour minimum wages.
They do it in other ways, and unionism
is pretty strong there, but it's not--
- You'd be surprised, like
even environmental regulations,
occupational licensing,
a lot of the things
that we deal with in the United States
in terms of regulatory burdens
on operating businesses,
they don't have those
in the Nordic countries.
And so I think a lot of
American business would find
doing business on a
day-to-day basis easier
in Denmark, except on tax day.
But except for taxes, they
would find day-to-day business,
hiring and firing workers,
putting your product,
marketing, building a
building, all that's,
in many ways, at least the
measures that we track,
would be easier in these
places, so, you know.
- So they don't want Bernie saying that.
- No, goodness no.
- Yeah, they're like please stop.
You're not helping.
So where did you guys go next?
Sweden, not socialist.
- Yeah, so every chapter
in the book is something,
it's an adjective, socialism.
So "Not Socialism."
Venezuela was--
- Starving.
- "Starving Socialism."
And then "Surviving Socialism" was Cuba.
- Subsist --
- Yeah, subsistence Cuba,
"Subsistence Socialism."
- Cuba is an interesting
one because, I mean, listen,
Matt, there's really only
three socialist economies left.
There's plenty of places
with bad property rights,
without good legal systems
that aren't fully capitalist,
but there's only three
where they really try
to centrally command the
economy anymore, right?
And that's Venezuela that's collapsing,
North Korea that you
have very little access
to actually see anything, and Cuba.
Cuba's kind of like the
softer side of socialism
as is left in the world
today, and you can bounce
around there and see it for
yourself pretty easily, and--
- It's kinda like a snapshot
from the '50s, right?
- Well, yeah, the irony
of the cars, right,
is the leftover U.S. 1950s cars.
It's funny because in Cuba,
officials will call it the blockade.
There is no blockade of Cuba.
There's an embargo, which Bob
and I both think is stupid.
America should trade freely with Cuba.
But there's plenty of
other places in the world
that cars could come from.
The fact of the matter
is, the Cuban government
limits car imports and jacks
the prices through the,
or de facto jacks the prices
through the roof, then,
so things that are held
together with popsicle sticks
and bubble gum from the
1950s go for like $15,000
in a country where now,
all income statistics
are bullshit in commie countries
because they're not based
on market transactions,
but listen, the place is poor.
Maybe $2,000 per person
average annual incomes,
and you got cars going for $15,000.
And the more modern ones,
the, what Bob, the early '90s
Peugeots or--
- Yeah, we saw some
early Peugeots and Renaults
that came from France
in the '90s and, I mean, look, Matt,
if you found a 1991
Peugeot on a used car lot
here in Dallas, the guy
would just give it to you
for tax and title, like get
it off my lot, it's free.
Just take it, drive it away.
The market value of a 30-something,
40-year-old Peugeot is zero.
30-plus thousand U.S. dollars in Cuba
for a 1991 French piece
of crap, I mean it was a
piece of crap the day it was
built, and you can imagine
what condition it's in now in Cuba.
So the prices, because of the import ban,
the Cuban government
won't let cars come in.
The prices of cars have
skyrocketed to the point where,
like, it's the most valuable
asset that you can own.
The cars are more expensive than homes.
- So in Cuba, the whole
relative price structure,
you go between countries
and go to a poor country,
go to a richer country,
there's like differences
in overall price levels,
but there's some semblance
to the structure of how many drinks
should equal a taxi
ride, how many taxi rides
should equal a hotel room,
all that's out the window in Cuba.
The prices are just bizarro land
because of its managed
economy that does not reflect
the world market in the least.
The puzzle in Cuba, because they're poor,
the puzzle as you walk
around, and as an economist,
it's this, what is off here
because they're just poor,
and that looks like
other parts of the world,
but what's off because
it's centrally planned?
And there's things that
illustrate the incentive problems.
Commercial streets.
Bob and I, as you might imagine,
we like to walk around and have drinks.
And it's hot there.
So we'd walk around and then we'd say,
you known what, we need a drink.
Let's try to sit down, have a few drinks,
walk around some more, take some notes
so that we can write it off our taxes
and eventually write this book.
- This whole thing's a tax
dodge, is what you're telling me.
- [Bob] Pretty much.
- Not at all.
No, not at all, sorry.
- Be clear, be clear in
case anyone's listening.
- Not at all.
But odd thing.
What's missing?
You get to a street
corner and you're like,
should I walk down that
street to try to get a drink
or should I walk down that street?
Signs.
- [Bob] No signs.
- No signs.
Go to the poorest countries in the world,
every place has signs.
Whatever local beer company
there is gives signs
for free to the other places
to say that they have their beer.
Except in Cuba, no one gives
a shit, because if you go
in their store or not,
they don't make any more
or any less money.
- [Matt] Doesn't matter.
Doesn't matter.
- It does not matter.
And you can see this side
by side in the things,
and this is important, actually,
because there's no polar
case of pure socialism
or pure capitalism, right, in the world.
It's a spectrum.
And Cuba's on that far
end of the spectrum,
but they still allow
versions of private property
and ownership and enterprise,
and they have casa particulars,
where people can rent
out their houses to guests to stay
and you can Airbnb it
in the United States,
not directly to Cuba, it's
their relatives in Miami.
You do an Airbnb contract with them
and then they call somebody in Cuba
because internet's not
really so much a thing there.
They call somebody, they
meet you at the property,
they let ya in, and then you can also just
do it in the street in Cuba.
The casa particulars are
well maintained, updated,
customer-service friendly, great.
The state hotels, that's
collective ownership
of the means of production.
What pieces of crap those are.
Prices are about the same,
but one place reinvests
their revenue to enhance the capital
and provide a better experience
because they want more customers,
the other doesn't care.
Same product, difference is
incentives of private ownership
and collective ownership.
- If you go to, so there's
sort of this two-tiered system
in Cuba where the people
have access to almost nothing
but tourists and the
political class have access
to better hotels, which ones
are we talking about here?
- So we went to two state-owned
hotels that would have been
possibly for tourists, but--
- Three-star rated.
- But three-star rated.
But these would be
hotels that like anybody
would have stayed at.
They were not, so the Hotel
Nacional would be the fancy,
glorious Old Colonial hotel.
It actually has been well maintained
by the socialist
government over the years.
That's where you know, if--
- [Ben] Diplomats.
- I'm sure that's where
President Obama stayed,
you know, when he visited, and so forth.
- By the way the people
don't ever stay there.
- Yeah, we didn't stay there.
We stayed at--
- The people don't stay at the
hotels we stayed at either.
- Yeah, so we're sort of in the middle.
But again, I mean, disgusting,
dilapidated, stained towels,
I mean, really quite, I
mean the worst Travel Inn
in America you've ever
heard multiplied by ten
is what we experienced.
- Wow, I'm totally confused by this
because I've seen the t-shirts.
Che Guevera is so freakin' cool.
Like, I can't comport
these two things together.
Are you saying that Cuban
socialism isn't cool?
- No, I think it's, so, I'll give you
a couple examples of how it's not cool.
One is you're outside of the tourist area
where very few American tourists
or European tourists would ever go.
We were walking around
the streets of Havana
and it's actually dangerous
because the buildings are collapsing.
Like, there's rubble everywhere,
and if you ever mountain
climb, every rock that's
on the ground, the saying is,
geologic time includes now,
which means every one of those cornices
off the top of a building that fell
could've fallen
like today--
- Right.
- Like right now.
And so it's literally crumbling.
We watched horrific examples
of sex market opportunities,
which we did not, for the record,
because our wives may see
this, did not participate in.
- May see this.
They knew what you were going to say
before you even said it.
- Yeah, right, yeah.
So I mean, when you're in a
middle-class neighborhood,
what passes for a middle-class
neighborhood in Havana,
and you are propositioned four
or five times on every block
for male or female accompaniment,
this is not a particularly
dignified and lovely experience.
So anyone who says, this is some--
- [Matt] People are desperate.
- They're really desperate.
- They do what they need to do to survive.
- [Bob] Yeah.
- And there's no opportunity.
- So the physical plant's
dilapidated and then--
- Do people, like, do they look--
- Are they starving?
No.
They have some fun, sure.
They drink, and they're surviving,
but it's, I tell ya, again,
when you have that volume
of again, the sex markets
also really kinda hit you
in the face, they could be actually funny.
I mean one guy, I remember, he's like,
"chica, chica, chica."
I'm like, "No, no, no, no."
He goes, "chico, chico, chico."
I'm like, (laughs), so
they could be funny.
- So markets do clear, yeah.
- But it was not, and it wasn't
just some red light district,
this was the entire city.
- But let's be clear,
Cuba is kind of like,
this is functioning econ-speak dorks
equilibrium socialism
of, it ain't starving,
it's not collapsing, it's
been there for a long time.
It's not growing.
It's stagnating.
It's the Caribbean, so it's not
like you have to scratch out
like against Siberia to get your living,
but it's not going anywhere.
One of the striking things there, in fact,
in terms of your beer theme here
as I'm gonna pour a little
bit more of this swill
into my, you haven't tasted this one,
have you yet, Matt?
- I gotta try this, yeah.
And then we're gonna get really
dark and go to North Korea.
- Yeah, there you go.
Have some of that.
I'll grab some more of this.
It's sameness.
So Venezuela ran out of beer.
That's messed up.
Cuba didn't run out of beer,
but they've got two brands.
Is it Cristal and Bucanero?
- Bucanero.
- Bucanero, right.
And they both basically
taste like crappy versions
of Budweiser, and one is like 4.5%
and one is maybe 5%
alcohol, five and a half?
- It tasted the same to me.
One was dark and one was light, but eh,
I couldn't really tell the difference.
- But in terms of the metaphor of alcohol
being used in this stuff,
it doesn't deliver variety.
If you go to a well-stocked
convenience store in Cuba,
and we saw plenty of stores
that weren't well stocked,
but well-stocked ones, what is striking
is the utter lack of variety.
A convenience store that's well stocked,
shelves are full, but
you can identify 20--
- Maybe.
- To 30 distinct products
because it's one of everything.
They've got their cola.
That's it.
I called it commie cola.
That's not its real name.
But there's one of it.
And if they got a lot
of it, they got a lot.
- There'd be a whole
wall of cola, one kind,
take it or leave it, that's it.
And essentially, the same
thing when you came to beer.
There were two kinds for the country.
You had it or you didn't have it.
Those are things, again,
in poor countries, it's not poverty.
It's once you're centrally
planning your economy,
variety is no longer a thing.
- Yeah, there's no
choice, and I wonder what
a lot of the young people
that would really go wild
about some of the beers that I have here,
and I love craft beer culture,
and they live in this
radically choice-driven world
where anything is available to them
at the click of a button.
What would it be like to
go to one of these stores
where let's hope the shelves are full,
but there's not that much there.
I can live, but it's gonna suck.
That's Cuba.
- You know, this is an
important point, too, Matt.
I can live but it's gonna suck.
Bob and I, we wrote that socialism sucks
and we describe our travels,
and a couple of people
when we've talked about things it's like,
oh, I could have done this differently.
Well, why don't you go back and do it?
They're like, no, because it sucks,
but Bob and I were doing
it from the privilege
of basically rich white people visiting.
And even a couple-week stint in Cuba
when you have money and can go to places
that are relatively
nicer, you still get lack
of variety and blandness and sucky.
These people live their lives with it.
It's much worse than visiting it
and being able to take
an airplane ride away.
- So I'm really depressed,
but let's go darker
because you guys went up to
the border of North Korea,
and let's just start with the--
- Since my glass is empty, I'm gonna start
on this North Korean beer.
- Ugh, okay, so we have
a beer from North Korea.
Tell me the story about this beer.
Is it legal?
Did you break laws to buy this?
- No, we didn't break any laws to buy it.
Somebody broke laws to
be able to sell it to us.
(laugh)
- We might've almost--
- This is an old pull tab.
This is such an old, I hope it works.
I haven't done this in a long time.
- Yeah right.
- Pull tab like that?
- [Matt] That's old school.
- Old school.
- [Matt] That's old school.
- That's actually.
- Guy drives a Beetle.
Probably keeps them there for--
- Okay, well, we'll--
- [Matt] Go first.
You go first.
- Find out.
- Unfortunately, we know
what the punchline is.
This is probably gonna be disgusting.
- That wasn't open.
- You're already breaking.
- So we went to the, you
want to keep talking?
I'm gonna drink.
- Have a smell and get ready.
I'll set up the story
while you set up the drink.
So you probably have a
big libertarian following
that watches your show.
I bet you a bunch of them
have Googled, if you haven't,
go ahead, Google it now.
Not now, after you're done watching.
You know, satellite image
of Korean peninsula at night
and you can see the South is
lit up like a Christmas tree.
The North is dark except for the capital,
there's a little dot there,
and then you can clearly tell
the Chinese border where
all the lights are.
The brightest spot on that Chinese border
would be Dandong.
That's the city we went to in China.
That's the main export
city for North Korea
where all the trade happens.
So in terms of capitalism, socialism,
free and unfree, there's nowhere
where you get a better
natural experiment than Korea,
where you have a place
with the same history,
the same culture, the same language,
but at the end of World
War II, if anything,
North Korea was richer than South Korea
in terms of its natural
resources, its electricity,
its output, everything.
Everything except farming
because it's a little bit warmer
in the South and less mountainous.
Whole thing gets decimated
by the Korean war
and then you get two different systems.
The main difference between the two halves
is just the economic
system, and you have one
that rapidly transforms
into a first-world economy
that incomes are about
37, $38,000 per capita now
and the other one where income
statistics are bullshit,
but less than $2,000 per capita.
You can see it from a satellite at night,
but on the South
Korean-North Korean border,
you can't see it so well because
of the demilitarized zone.
Go up to the Chinese border in Dandong,
that satellite photo ain't BS.
We check into our hotel room at,
I don't know, 10:00 at night,
look out the window, can't
see anything across the river.
You can see the three
little arches of the bridge
that are lit up and
nothing on the other side.
You wake up in the morning,
there's a city over there.
- [Matt] But it's black at night.
- [Ben] It's black at night.
- The Chinese side is,
I mean it's not Shanghai
or Beijing's skyline
but the Dandong skyline
is an impressive modern
city of skyscrapers
with modern advertising
logos and a lot of light
on the Chinese side, and the river,
and then across the
other side of the river,
we thought, we were actually worried
that when we woke up in the morning,
oh my God, what if there's nothing here?
I mean, the guidebook
and some of our research
said that there's a city over there,
but we were concerned because
it was literal darkness
and it was a full moon that night.
- [Ben] It was the edge of the world.
- It was a full moon the night.
There was nothing to see.
- And it's a major city.
It is the main export city
for North Korean economy.
- It's probably the prosperous one, right?
- [Ben] Yeah.
- So let's take a commercial break here.
I am talking to the authors
Ben Powell and Bob Lawson
of the forthcoming book "Socialism Sucks:
"Two Economists Drink Their
Way Through the Unfree World."
We are drinking our way
through this podcast,
but you guys would surely encourage people
to sort of pre-order this
book if you want to be
one of the cool kids,
you gotta have this book.
Is that a fair statement?
- Oh, yeah, absolutely, yes, Matt.
Buy the book.
- It's categorical, buy the book.
- If you wanna be one of the
uncool kids, also buy the--
- Yeah, like if you wanna be
uncool, buy the book, too.
- [Ben] Yeah.
- Because one of those two
things will work for ya.
So I'm drinking the fake Cervecería Polar
and it's bland, is more
than anything else,
like this is the lowest
common denominator of beer
that you would accept as
drinkable in the U.S.,
but we have opened, drum
roll, a North Korean beer.
How's that going over there?
- It's rough.
Actually I have no word for the smell.
I've never actually smelled that.
It's--
- [Matt] Ass?
- Vaguely, no it's vaguely.
- He's smelled that.
(laughs)
- Vaguely industrial, actually.
That's kind of, maybe industrial solvent
would be the nearest--
- So you'd use this to
clean your tires, maybe.
- Yeah, I mean the color,
you know, it's a little,
it's okay, but it's not good.
- Can we get a spit
bucket on set here just...
I'm kidding.
- I hope it doesn't kill me.
- Actually, I'm not kidding.
(laughs)
- I can't wait for you to try some.
- So it just tastes like
shit is what you're saying.
- Actually, the taste isn't so bad,
but the smell is extremely
off-putting, yeah.
- Love to put that on tap
in some craft beer bar
and sort of rebrand it
as we've rebranded PBR.
- [Bob] Right.
- You know the fun thing
that I would've liked to see
is when Bob and I, we attended
the socialism 2018 gathering
and on tap there they had I
think Revolution IPA maybe,
either way, it was a Revolution
Brewery from Illinois,
and it's the largest
independently-owned brewery
in Illinois, and they
have lots of commie logos
and symbolism on their beers,
including their raised-fist
green tap with the red star on it,
except that privately-owned brewery
that celebrates commie stuff
produces about 20 regular beers
and God knows how many
specialty beers after that,
and they range from like weak beer of 2.5%
to barley wines in the 16, 17%.
They produce a variety
of beer that's greater
than all of the socialist
countries in the world combined
in one company that has a
profit incentive to do so.
And now the people who ran
the Hyatt Hotel understood
their audience and they put that on tap
and they made a pretty penny off it.
I would have loved to see them pour Polar
and this other swill side by side with it.
- [Matt] The beer of the people.
- (chuckles) Yeah.
Ask them for their comments on it.
- Yeah, you should have
trolled, and we'll go back
to the American socialist
thing, because I do want to get,
I want to get to something
that's not nearly
as depressing as North
Korea, but I think the way
that beer tastes is probably the best news
coming out of North Korea,
and you guys didn't cross the border
because you're like I don't wanna die.
- Yeah, so actually both
of us promised our wives
when we started working on
this book, one of the promises
was that we wouldn't get
imprisoned or killed.
Jailed is okay because that's temporary
but imprisoned or killed, and...
North Korea, technically,
actually, the U.S. government
asks you now to get a special
permit from them to go.
There was a window when we were writing
where we could've appealed
to North Korea for a permit
without having to get permission
from the U.S. government,
but let's be honest, man.
I run the Free Market
Institute, this guy runs
the O'Neil Center for
Global Markets and Freedom.
North Korea's not gonna have us--
- [Matt] You would be detained.
- High on the list of people
to let in, if they let us in--
- [Matt] You would be detained.
- Yeah, we're not anonymous.
They're good at state security there.
- You know I don't see anyone,
unlike Cuba and Venezuela,
where there's still
apologists or even people
that celebrate the
systems in this country,
I don't see anybody sort of apologizing
for Kim Jong Un and the
tradition in North Korea.
Or maybe you do.
- We have, well, not
apologizing, disowning.
It's the thing that you brought up before
with the socialist, listen,
it's not a huge surprise
to me that you don't
want to own Mao's China,
Stalin's Soviet Union, current
Venezuela, or North Korea.
But at this socialist
conference, we had people
do a session on imperialism
on the Korean peninsula,
and they talked about
U.S., Chinese, Japanese,
Russian imperialism and
they never mentioned
the two different economic systems,
and instead, they call it
state capitalism North Korea.
And that they're opposed to
state capitalism North Korea.
We're fully on board with
that there's this spectrum
between capitalism and socialism
and that pure capitalism
as Bob and I or you would
like it doesn't exist
in the world, but I'm
perfectly happy to own
the countries that are closer
on the spectrum to that
and what their performance are.
What the socialists are
not happy to own is those
that are closest to not
having private property
and the major means of
production are the ones
that all end up being authoritarian hells
with miserable living standards.
They won't own, they'll just say
unless it's my particular unicorn
that's never existed, it doesn't count.
- Yeah, that's not us, and
they're quite insistent
about it, and the same trolls
that probably harass you guys harass me.
That's not state capitalism,
that's oligarchy.
Or that's not socialism,
that's state capitalism,
that's oligarchy.
Whatever that is, they don't
want responsibility for that,
but I feel like they
should probably go back
and read some Marx and Engels
and learn about the arc
of history, the determinist
arc from feudalism
to capitalism to late-stage capitalism
to socialism to communism,
and they all sort of fantasize
about the unicorn of communism,
and it sorta sounds kinda cool.
There's no scarcity, there's
no prices, there's no money,
you don't have to work.
- [Bob] There's no state.
- There's no state, there's no government.
- I'm cool with at least
one of these things.
- I mean those things would
be sort of neat to experience
if you could get there, but
Marx was quite explicit, state--
- [Ben] Socialism.
- Socialism, that's a violent transition,
and that's exactly what
Maduro's trying to do,
and that's, at least his
Jesus Christ of Economics,
he's keenly aware that you
have to jolt the system
out of late-stage capitalism
and a lot of people
are gonna die in that process,
and that was certainly true
with Mao's Great Leap Forward,
and it was explicitly true
with Pol Pot when he took
all of his Marxist teachings
from Paris and brought
them back to Cambodia.
Violence is part of the
process from transitioning
from socialism to communism,
and they're not at all clear
about what the mechanism is
that sort of suddenly happens
where things are magical,
but what happens in practice
is you get violent dictators
that are just killing a lot of people.
- And the world's two closest movements
to pure socialism on that spectrum,
probably, Bob, I don't
know if you disagree.
It's not in the index, but
in the reading of history,
right, would be war
communism in the early years
of the Soviet Union
under Lenin, by the way.
A lot of these people disavow--
- [Matt] Was an expert.
- A lot of current socialists
will disavow Stalin
but still like to hold Lenin up.
Lenin under war socialism did almost all
of the exact same evil things Stalin did
in the name of the
transition, but the collapse
was so massive, he started
new economic policy,
which was a reintroduction
of weak versions of markets
into what was supposed to
be the socialist economy.
The other example would be the
Great Leap Forward under Mao,
where you have true
collectivization of the means
of production to the
extent that they could,
and the massive collapse
and cost of lives of that
and then again, retrenchment afterwards,
relatively mild retrenchment there,
but retrenchment all
the same, then you get
cultural revolution till you get
real reform starting in '78.
- And in both of those
experiments, millions and millions
and millions of workers, not the elites,
but the workers, they died.
They starved to death or
they were assassinated
for not toeing the party line.
- So there's two kinds of ways
in which the current socialists
are trying to get around it.
One is they're just
forgetting their own history.
I mean, there were apologists
in the Western socialist movement
for the Soviet Union under Stalin,
Walter Duranty, the New
York Times columnist.
There were apologists for
Venezuela just a few years ago
who were saying, oh, Chavez was a hero.
- [Matt] Jimmy Carter.
- And so in one sense it's,
but as soon as it goes bad,
as it inevitably does, they, oh, no,
sorry, we didn't mean that, right?
So that's one sense.
The other sense is there
are these socialists
who say, well, we want what
they call socialism from below,
and as near as I can tell, talking about
what do you mean by
socialism, because to me,
if you read Marx, if you read Engels,
there was no socialism from below.
It was socialism from above.
It was gonna be, you know--
- [Matt] Top down.
- Capitalism, socialism, state socialism,
and then maybe--
- War communism was not
a power to the people
kinda thing.
- So there are
socialists today who are saying, well, no,
the reason Venezuela isn't socialism
is because that's socialism from above.
We're in favor of socialism from below.
And I think it means communes.
I think it just means,
like, Israeli kibbutz
and things like that, and I
gotta be, I got no problem.
Matt, if you and your crazy
friends want to go set up
a commune in the woods
of West Virginia, go,
you know, there's nothing I'm gonna do
or anyone is gonna do to stop you.
But that's not what
socialism has ever meant,
and it isn't what socialists
meant just a few years ago.
When things are going well in Venezuela,
ah, this is socialism, and
then as soon as it isn't, bam.
No, that's not what we meant.
- See the irony, the oddity
of all of this, right,
is the socialism from below,
and I completely agree
with you, if you wanna
go have a hippy commune,
go ahead, but let's not pretend
your hippy commune's
gonna produce iPhones.
- [Matt] Right.
- You need advanced material production
with a division of labor
across many, many minds
to produce the goods that all of you
take for granted everyday.
What the socialism from
below people don't get
is that you have to coordinate
economic production,
and that in the market
economy, this is prices,
profit and loss that drive this.
When you get rid of that and
you have communal ownership
of various forms, you
gotta have a central plan.
Instead, they say, oh, the workers
will just determine what
they want to produce.
Well, what if the workers in one firm,
let's say the tire firm,
want to make 18-inch tires?
- [Matt] Oh my God.
(chuckles)
- Industrial solvent?
- Kim Jong Un lager is not
something that I'll return to.
- I was gonna warn you
not to pour so much, but--
- Yeah, I don't--
- I gotta get in on this, too.
- You gotta pour at least
that much, because--
- You gotta man up.
- It is, and by the way, we
may all be dead tomorrow,
but in the meantime, we
committed to this experiment.
- All right, I'm game for it.
But listen, the workers from
the socialism from below thing,
what it seems to me that they young people
who are into this version
of it don't understand
is that you still gotta
coordinate production.
If the workers in one firm
want to make one product,
they still gotta coordinate
with all their other suppliers.
Somehow they gotta all agree.
You don't agree across big
society with lots of people,
you use prices to make people agree.
If you don't use prices,
you gotta use commands.
That means centralized
authority, and it's no accident
that every socialized economy
ends up being a totalitarian hell.
That's what's missing
in the, they get to say
that none of these totalitarian
hells are what they mean,
but they don't understand the logic
of why what they mean ends up being that.
- Before we move on to American socialism,
(Ben makes noise of disgust)
and the here and now, isn't that like--
- I told you, it's the smell.
The taste is bad, but the smell is deadly.
- Yeah, there's no redeeming
qualities in this beer.
Like, I don't think, if
I was in North Korea,
I suppose I would drink this.
- I think you'd have to, but--
- Because my preferences
would be completely warped,
but this is disgusting.
If you're listening to this,
particularly young people,
I'll look into the screen, do
not drink North Korean lager.
It is not good.
- [Ben] I'll get it down.
- But let's go Austrian economics geek,
because I always am, the way
that I talk about government
and particularly socialist policies,
it comes down to two simple concepts.
One is sort of the Austrian
critique of socialism
is that nobody knows enough
to redesign things from the top down.
The other is sort of a
public choice argument
that might more accurately be called
the Lord Acton argument,
that power corrupts
and absolute power corrupts absolutely
and maybe that's the transition
from Lenin to Stalin,
but that's probably being
too fair to Lenin, right?
Lenin was a brutal murderer
as well because the only way
to do this from the top down,
but what would Mises do?
What would Ludwig von Mises
say to wannabe socialists
at this conference you guys were at?
Why isn't this gonna work?
- So actually, I think
the Mises critique to them
would be something closer to the lines
of what I was just saying,
is that you need a way
to reconcile the production
plans across society
and if you abolish the private property
in those means of production,
you're not gonna generate prices.
You need some other way to do it.
What other way do you have?
And his answer's gonna be
you don't have another way.
Now that's an even stronger
answer than when I said
that the other way is command and control,
because command and control's another way,
it's just not gonna be efficient,
is what Mises would say.
And then the question is how inefficient,
how much production do you lose from that?
In a world of pure socialism,
it's gonna be astronomical,
but Mises' argument ultimately
is a theoretical one,
not an empirical one about
magnitudes, and when we look
at real-world socialism of
the countries we visited,
the historical ones
that we've talked about,
their failures, there's
plenty of, and you see this
in the Cuban system now, there's plenty
of informational failures
of prices being wrong,
but it lives in a world
of capitalist economies
where there's other
prices that the planners
can use to approximate scarcities.
It's not right, but it's a ballpark.
The incentives, or what you
called the Acton problem,
are massive, both in terms
of the power corrupts
and absolute power corrupts absolutely,
but also, new socialist man
didn't show up for work.
There's a reason Bob and
I talked about in Cuba,
where there's lots of people
who wanna be musicians
and everyone's pipes are clogged.
When you pay plumbers and
musicians about the same,
being a musician's kinda fun.
Doing someone's shitty pipes is not.
That's an incentive problem,
and real-world socialist systems
suffer immensely from that.
Mises was making a higher-order argument,
saying even if we say everybody will work
for the collective good and
the tyrants won't be tyrants,
you still can't do it well.
- But Hayek, you know, they
went from pure socialism
and sort of acknowledged Mises and said,
well let's use markets
and sort of manage them
in a very progressive
top-down sort of elitist way.
Hayek was banging his
head against the wall.
He was debating Keynes, he
was debating neosocialists,
I don't know what we called 'em back then,
market socialists, I think, is
what they called themselves,
and that's when he gets
into trying to explain
this thing that we call
the spontaneous order.
There is this process by which
free people share information
and they have this personal knowledge
and through their choices and interactions
and the price system, we learn things.
My professor, Don Lavoie,
did you guys know Don?
I don't remember.
- I did, yeah.
- Don talked about a
greater social intelligence
that was created by
markets, and I think this,
if we could sorta
translate Friedrich Hayek
and Don Lavoie to these
young democratic socialists,
we might get somewhere because the beauty
of understanding how it is
that people spontaneously
coordinate, solve problems, create wealth,
help each other, create civil institutions
like communities, that may be
where they're trying to get at
when they talk about bottom-up socialism,
which I think is a contradiction in terms,
but they're definitely wanting
to get at something like that.
- Ben is really right.
The problem was without market prices,
I don't know how that
bottom-up socialism can work.
I mean, tonight I might go home
and maybe I want to eat a salad,
which requires that someone make lettuce.
Now in a market economy,
there's a pretty good system
for figuring this system out.
I go to the store with money in my hand
and say where's the
lettuce, and the guy goes,
oh, there are people out there
who will pay money for lettuce.
That sends a signal to
people on the other side
of the country or sometimes
the other side of the world,
hey, let's grow some lettuce.
The flip side of that is
what if there's a flood
in the lettuce fields and
the lettuce gets flooded
and destroyed by the rains.
- (murmurs) Put it down, open a can.
Our experiment in socialism
has failed.
- We need a system
where people who wanna buy lettuce tonight
tell the people who grow
lettuce to grow lettuce.
- Right.
- And we need a system that
if something goes wrong
with lettuce growing, like a
flood, that tells the people,
hey, guess what, there's
no lettuce to eat tonight.
And guess what?
Prices do that, magically
and automatically,
and this is Lavoie's, I think,
point about the sort of
collective intelligence.
I actually don't know what
happened in California
to cause the lettuce crop to be destroyed
by a flood or whatever, all I know,
and all I need to know,
is that the price went up.
And that sends me a signal
to buy less lettuce.
So the point is these prices
are just constantly nudging us
to buy more, produce more,
buy less, produce less,
and it's this sort of cosmic dance
where billions of consumers
and millions of producers
are trying to coordinate
the things we want to eat
and drink and buy and have
with the production
decisions of the producer.
Can you imagine if you were
the czar trying do do all this
in some, like you're the Wizard of Oz,
you're gonna pull levers.
I can't run my own
household half the time.
Can you imagine trying to
run a whole economy without,
so the system gets almost on autopilot,
or spontaneous order, if
you wanna use another,
because of this.
This is very subtle, but it's powerful,
and it actually works.
That's why we get beer
every day at 7-Eleven.
- This is market economy or capitalism
from the bottom up, right?
We can do it from the bottom up.
The collective intelligence
is something that empowers
each of us to use all of the
knowledge in our own brains
and then coordinate that
knowledge with everybody else
in society, because I'm
speaking into a microphone
that I have no idea how to
make, how it communicates
into this thing, and there's a camera,
or I don't even know how to
make this North Korean swill,
but what we need is to
empower each individual
from the bottom up to use their knowledge,
but to make them take account
of the knowledge everybody else has,
and prices are what do that.
When you get rid of private ownership,
you get rid of the prices,
and you have to substitute
something else, and that's
the collective authority,
and that does not use the
collective intelligence.
It uses the intelligence of
the politburo and the planners
and pushes it down on everybody else
and generates this swill
instead of the stuff
that you're drinking.
The way you guys explain
that is why I'm optimistic
that we might be able to
connect with young people
that are entranced by
Alexandria Ocasio-Cortez,
the young people that go
to these Socialists of America Conference,
which is the last chapter in your book
because I feel like what
they're grappling for
is something that democratizes
choice and knowledge
and creates a greater social intelligence.
That's what they're trying to describe.
They don't necessarily have the economics
to sort of put those pieces
together and rhetorically,
that doesn't sound like capitalism.
It sounds like some of the
stuff that AOC actually says.
She talks about bottom-up
and she talks about dignity
and people working together.
To me, dignity is the fact
that you knew something
that your neighbor doesn't know,
and you have an opportunity
to sort of exploit that
and express that and be part of something
that's bigger than yourself.
And so let's take that idea and let's go
to the socialist conference
that you guys were at.
You wore a Cincinnati Reds hat.
That's funny.
- Not me.
- I did.
- You would never--
- I'm a Bostonian man.
- Put that on your head, yeah.
- I thought that was funny.
I'm from Cincinnati, and I thought, well,
wear a Cincinnati Reds hat.
I mean, that's funny right there.
- [Matt] You guys wore red.
Why wouldn't you?
- Sure.
- So you went to Chicago to hang out
with American socialists after
seeing a lot of devastation
and maybe some phony
socialism in other countries
and you're wondering why
the hell are kids turned on
by socialism here in this country?
- We ran into some hard socialists.
I mean, people that
actually knew about Lenin
and war communism--
- [Matt] So not John Lennon.
- [Bob] Yeah, (chuckles) no.
- Vladimir Lenin.
- And oddly, who still
thought it was a good idea,
and that's, forgive me, that's
some pure evil right there.
If you can actually know the
history of Vladimir Lenin
and war communism or
Mao's Great Leap Forward
and still think it's--
- Just gotta try a little bit harder.
- [Bob] That's some pure evil.
- And we'll break some eggs.
- But I didn't find much of that.
I found 2/3 or more of
the people who were just,
people that actually I personally
even had some affinity for,
people who look at the world
that we live in, either in
the United States or abroad,
and they saw injustice of various kinds.
They saw police brutality
in minority communities.
They saw immigrants being treated poorly.
They cared about women's
rights in various ways.
And I have actually, I'm
kind of a libertarian,
I'm like, yeah, I have
some agreement with you,
but what they lacked, and I think this is
where the social science
of economics comes in,
what they lacked was any sense
of how to achieve the goals
that they had, and rather
than pursuing what I think
is the best way to achieve some
of these social justice goals, which is
through authentic
capitalism, they were for
what they called socialism,
but it usually just meant
something like Alexandria Ocasio-Cortez,
I always get it wrong, AOC.
- Alexandria Ocasio-Cortez.
- I'm gonna say AOC.
- Yeah, AOC is easier.
- The Bern, AOC, it's easier
with these shorthands.
And it's Medicare for All,
which is kind of socialism,
but it's not exactly like
we're nationalizing hospitals.
So they've latched on to
the label of socialism
and they think it's the antidote.
Now I'm gonna be a little
bit more pessimistic
than you though, Matt.
I saw that some of the organizers
of the socialism conference
I think were using
these young people who
had authentic concerns
about the world we live
in and they were kind of,
it's almost like a gateway drug.
Let's get them in here,
and hey, guess what,
we care about abortion too
or we care about the environment too.
We care about immigrant rights too.
Guess what?
Socialists care about these things.
Come be a socialist.
And it's a little bit
of a bait and switch.
Oh, by the way, you know
what socialism also means?
It also means taking over
the means of production,
which we know from
history will kill people.
So I was a little bit worried
about a sort of bait and switch element
to the socialism conference.
That was mostly the leadership
was using the conference
as a way to recruit people
in and then switch them
into hard socialism, but
the participants themselves,
I came away, I wouldn't say I was like,
these kids are great, but I came away
fairly sympathetic to them.
- And I wouldn't be sort
of Pollyanna-ish about it.
I don't think everything's
just gonna work out,
but I think there's a
generation, the generation
that's going to decide for
America what direction we go in,
they're up for grabs because
they're flirting with socialism
and they're trying to figure things out
and they're looking at the
two-party duopoly and saying,
I don't think I fit in any of this,
but the socialists, the
phrase community organizer
doesn't come from the Right,
it comes from the Left,
and it is a gateway drug,
and as much as anything else,
it's as sense of community,
it's a sense of romance,
it's an emotional appeal to going back
to the thing that Don Lavoie said,
"We're better together than we are alone."
And sometimes libertarians
sort of blow that narrative
because we focus so much on individualism.
I see you've abandoned the
North Korean beer as well.
- Yeah, swill.
- By the way, markets clear.
You can see that right here.
So it's sort of a burden on our side
to create that alternative narrative
that's beautiful and sexy and something
you wanna be part of, and
all those Ron Paul kids
and all the young people
that are attracted
to liberty ideas, I just spoke in Tbilisi,
I think your final chapter before you go
back to America is Tbilisi.
They know what socialism is.
They have family members who died
under some sort of mutated
form of Soviet socialism,
so they have that fire of
liberty in their hearts
and that, to me, is encouraging.
- [Ben] And it's a dramatic success story.
- Yeah.
- In a country that made
little to no reforms
in the first 13 years since the
fall of the Soviet Republic,
after the Rose Revolution, does some
of the most radical reforms
that anybody in the Soviet Block
and the transformation's been amazing.
Bob's seen it firsthand more than I--
- Yeah, I started going
to Georgia in 2005,
and they had a little
mini-revolution in 2004,
so I got to watch first,
and I've been there
more or less every year
since, sometimes twice a year.
So I've kind of watched
Georgia reform towards markets,
and it's been really spectacular.
It's still a pretty poor
place, but their incomes
have gone up from, again, income estimates
in these countries just
don't mean anything,
but $3,000 to maybe
$8,000 or $10,000 today.
But the title of our chapter for Georgia
is not "Not Socialism," it's "Capitalism."
- [Ben] "New Capitalism."
- "New Capitalism," because
it's real capitalism,
and it's been gratifying to
see the Georgians really take
ahold of their destiny and
break from their Soviet past.
Not all the former Soviets
did that.
- You heard
a finance minister tell
you, "We're gonna become
"more economically free
than the United States."
- On my very first visit, in
a room with no electricity
and no heat in February, it was freezing,
Kakha Bendukidze was his
name, he was a really,
I mean he must have been--
- [Matt] New Kakha.
- Yeah.
Drink to Kakha, he died.
- [Matt] Here's to Kakha.
This huge, hulking man,
I'll drink to Kakha.
- Yeah.
- He told me in this, with no electricity,
there was one generator
running one light bulb.
This is how, with no heat.
He says, "We are going to
be freer than Hong Kong."
I'm like, you're an idiot.
There's zero, I'm like,
look at this place.
The potholes in the streets, there's no,
this place is going exactly nowhere.
In five years, you go
back, and I'm not gonna say
Tbilisi's Paris, but
you've been there recently.
- [Matt] Beautiful city.
- It's a pretty cool little
town with a lot of life
going on, a lot of--
- Beautiful city, great wine.
- [Bob] Arts and music and
wine, and a lotta culture.
- Culture.
- [Ben] And in terms of your index now?
- In terms of the index, they are sixth
on the Economic Freedom
of the World Index.
- [Matt] Wow.
- Higher than the United
States, so there you go.
And that happened in the span of 10 years.
- That should be a call to
action for Americans listening
to this, because we're not
necessarily doing so well,
but we've been talking for over an hour
and drinking a lot of beer,
and I'll be honest, I have to pee.
So I appreciate you guys doing this,
and I'm gonna do one more shameless plug.
I am talking to the
coauthors of the forthcoming
New York Times bestseller,
are you gonna own that?
"Socialism Sucks: Two
Economists Drink Their Way
"Through the Unfree World"
by Robert Lawson and Benjamin Powell.
Comes out in July.
Pre-order it now so that you
have the very first copy.
Thank you guys for doing this
and don't ever make me drink
North Korean beer ever again.
(laughs)
- All right, deal.
- Cheers.
- Thank you, buddy.
- Thanks for watching Kibbe on Liberty.
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