Friction vs. Failure: "Wasteful Competition" and the Lessons of History

In an essay about the myth of oil corporation "price gouging" I wrote last year,* I alluded to the fact that the law of supply and demand is a lot like the law of gravity: Both laws will function with or without our recognition or approval; either law is ignored at one's own peril.

To that axiom might be added the observation that there are two models upon which a civilization may build its economic and political institutions. One is competitive with a bare minimum of authoritarian regulation, the other is authoritarian with a bare minimum of competition.

The thoroughly tragic history of the late U.S.S.R. demonstrates what happens to a modern society which adheres to the latter model. In absence of healthy competition between providers of goods and services (and providers of ideas), a nation is left with the unhealthy competition of warring cliques, each seeking power at any cost, each manifesting a singular disregard for the fortunes of the populations theoretically in their care.

Ayn Rand had an interesting take on this dynamic: She said in the absence of the "aristocracy of money" one could only be left with "the aristocracy of pull." As usual, her terms were carefully chosen and as usual her logic was unassailable.

Consider: In a post-feudal world, the "aristocracy of money" is founded upon creativity and productivity and thrives on competition.

The "aristocracy of pull" is founded on whom one knows, which favors may be called in - leveraged through bribery or blackmail - and whose backside it is advantageous to kiss on a quid pro quo basis. The "aristocracy of pull" rejects competition as "wasteful," then proceeds to squander the wealth of nations in eternal power struggles while the interests of the people languish, indeed, disappear altogether in the fog of perpetual wars between dueling oligarchies.

The result of years of national life under the aristocracy of pull is near-universal repression, barbarity, institutional cruelty on an unimaginable scale and, eventually, economic collapse followed closely by political collapse. So it was with the U.S.S.R.; So it will always be in those societies which assume competition is "wasteful" while overreaching governmental authority is "in everyone's best interests," even if "everyone" is unaware of the validity of that spurious supposition.

What does history say about government-protected private competition vs. top-down, command-and-control economic/political systems?

The answer is to be found in Paul Kennedy's landmark work, The Rise and Fall of the Great Powers. Kennedy, who took a First in History at Oxford in his youth, has gone on to claim other signal honors. In 1983, he became Yale's J. Richardson Dilworth Professor of History, a position in which he has been able to focus his extreme discernment of the nature of history upon modern strategic and international affairs. He published The Rise and Fall in 1987, and it immediately shot to the top of every nonfiction best-sellers' list in the English-speaking world.

It also provoked a huge debate among those who had an interest in preserving the status quo of intellectual conventional wisdom.

Those intellectuals had good reason to dispute Professor Kennedy's claims. For within The Rise and Fall are many heretical notions, not the least of which is that at least one reason the great powers of Europe shot ahead of Asian civilizations which were older and, at the beginning of the modern era (1500 A.D.) in many ways more advanced, was that the geography of Europe forced competition upon those nations.

Kennedy posits that the great Mogul Empire of South Central Asia (including most of the Indian subcontinent) and the dynasties ruling China had employed government power to unify their diverse nations and thereby achieve a high degree of civilization while Europe was mired in the Dark Ages. Those great Asian civilizations had accordingly created better institutions with, on the whole, less internal warfare and greater degrees of progress and societal health.

The future great powers of Europe never had that option. Following the fall of Rome, there was no powerful unifying state to prevent constant competition between the warring kingdoms and principalities. Under those bloody, create-or-die circumstances, each language group and amalgamation of small powers was constrained to compete in military conflicts, and, logically, in the invention and creation of economic/political systems which would foster a maximum of arms-related research and development.

During the beginnings of the modern era, it became matter of brute fact that whichever coalition had the best armaments in a given conflict would have an advantage which, often as not, could not be overcome by substantially larger numbers of warriors fielded by its foe. From the English longbows of Agincourt to the Krupp Works cannon employed in the French-German war of 1870 and the American atomic bombs which ended the war in the Pacific Theater in 1945, superior firepower has had a huge influence over the winners and losers in any given conflict.

Moreover, economic systems which allowed more or less free investment opportunities, plus low tax burdens upon the investor classes (especially in England and in the Low Countries), helped foster the invention of the next generation of more powerful weapons systems.

Thus, even though the Chinese possessed gunpowder and primitive cannon long before, say, England, by the time of the great 18th and 19th century European colonial expansions into Asia, the conquerors possessed armament of far greater firepower and destructiveness.

In short, India and China, for all their superb civil and military organization, despite the gigantic armies they could field, never stood a chance against European warships, rifle and musket companies and artillery brigades. In both great Asian civilizations, the overreaching authority of the state had stifled the creation of new and better weapons by constraining the intellectual and scientific curiosity- and concomitant investment opportunities - which led to their invention.

Modern parallels?

My own observation, working from Kennedy's historical findings, is that a 20th century parallel to the success of the European "gunpowder empires" over older, better organized Asian empires might easily be identified in the history of Germany's National Socialism and the Communism of the U.S.S.R.

In the case of the Nazis, freethinking scientists and inventors, especially those of despised classes - including but not limited to the Jews of Central Europe - were actively discouraged from engaging in their life's work, indeed, they were persecuted and forced to flee to the West, especially America, where they were essential to the undertaking of creating the first controlled nuclear chain reaction … and the first atomic bombs.

The military research-and-development blunders of the U.S.S.R. were similar, but telling in their differences. Let's look at the U.S.S.R. at the beginning of the Cold War. At that time the victorious Red Army toted back to Stalin, as war trophies, a number of the V-2 rockets invented by Werner von Braun. As it happened, Stalin had on staff a brilliant scientist, one Sergei Korolev, whose understanding of rocketry was considerably more advanced than von Braun's, and this scientist begged Stalin to allow him to make improvements upon the V-2 template. Stalin, being Stalin, refused, and demanded the entire thrust of Soviet rocket science be focused upon making lots and lots of V-2s, exactly the way von Braun had designed them.**

It was not until the post-Stalin years of the mid-late 1950s that Soviet scientists and engineers, freed by Khrushchev from Stalin's artificial constraints upon their research options, were finally able to unleash their genius. Sputnik soon followed, and the Western powers were forced to play catch-up.

Which the Western powers did, and with a vengeance. And once again the principles of healthy competition of ideas, investments and workplace skills led to the downfall of the authoritarian model's ability to keep up with a capitalist democratic republic.

Even under Khrushchev's relatively benign rule, and certainly under the neo-Stalinist dictatorships of his successors, the inherent weaknesses of an anti-competitive system of economics, plus the state's repression of intellectual freedom, once again demonstrated the superiority of Western systems of "wasteful competition." When America put men on the moon in 1969 (using rocket, computer and other necessary components which were 100% designed and created by private companies which competed in the bidding process and were then required to perform to expectation)the proof was there for all to see … although too many otherwise perfectly intelligent professional thinkers ignored it.

Conventional Wisdom and the March of the Whorish Intellectuals

History shows, time and again, in century after century, civilization after civilization, that there is nothing wasteful about competition.

To the precise contrary, it is the super-regulatory state which impairs not only advances in societal health via new medicines, labor-saving machines and better understandings of the human condition in the humanities, but which also habitually presents obstacles to a nation-state's essential security and ability to defend itself from outside aggression.

For instance, Stalin's destruction of the upper echelons of his own officer corps during the paranoia-fueled purges of the 1930s was, in the opinion of many military historians, one of the primary reasons it took the Red Army as long as it did to prevail against the Nazi invaders.

And since warfare is, in many ways, an illustrative microcosm of all other collective undertakings of a given nation-state, it is reasonable to believe that while a certain amount of government regulation is necessary to discourage theft, fraud, unfair trade practices and the myriad of similar depredations of economic liberty which twisted, predatory minds may dream up, the proposition that competition, by creatively harnessing the profit motive, is essential to the survival (or at least the autonomy) of any nation-state is undeniable.

In the face of all this historical evidence, the fact that there are still Western intellectuals who defend authoritarian economic and political systems (including today's repressive theocracies of the Middle East) as being somehow equal to capitalism and republican democracy illustrates two important principles.

One is that in a culture of intellectual freedom, it is the inherent right of any person to believe any damn fool thing he wants to. I will defend to the death that right, because it's not for me (or the almighty state) to say what constitutes foolishness and what does not. Only the healthy competition of ideas and the measured outcomes of those competing ideas' execution can determine which are realistic and which are foolish.

The other thing proven here is that there are a great number of Western intellectuals who will, if given the chance, revere postmodern conventional wisdom ("capitalism is inherently evil," "competition is wasteful," "individuals cannot be expected to serve the greater good by being allowed to pursue their own goals for personal profit," etc.) the way a seasoned prostitute reveres her pimp.

Her pimp may inhibit her freedom, take away most of her money and periodically beat her senseless, but the co-dependant relationship between victim and victimizer is so emotionally important to both that they will tend to remain locked in their mutually-destructive death spiral until one or both shuffle off his/her mortal coil.

Lenin, for all his serial denial of objective reality and human nature, said a very true thing when he coined his famously pithy term for such whorish intellectuals. He called them "useful idiots."

* See Windfall profits, price gouging and wounded minnows (May 5, 2006).

** Stalin applied this anti-logic to other, non-military matters. For instance, he put in charge of the Soviet ministries of agriculture a committed Leninist from a politically correct family, one Trofim Denisovich Lysenko. This clever fellow believed Mendel was a charlatan and the science of genetics was "a bourgeois pseudoscience. Accordingly, Soviet agricultural yields were held at artificially low levels for many decades. In view of the fact that the West sold grain to Russia at bargain-basement prices for most of those decades, it is arguable that without the surpluses provided by wasteful competition between agricultural concerns in other countries, the U.S.S.R. would have been starved into collapse long before 1993.

Useful idiots, indeed.