Lenin's Take On Current Events

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What would Vladimir Ilyich Ulyanov, better known as Lenin, think of modern American history, all the way up to and including President Obama?  And as an archetype of the modern-day policy intellectual, what would he do moving forward to advance his core beliefs, if he were alive today? While he has no modern parallels, the question is of more than academic interest, given calls for a permanently greater level of state intervention in the economy.  Lenin, after all, was the 20th century's most ardent champion of the omnipotent state, and using his thinking as a canonical benchmark helps us to assess the likely level, path, and impact of future government interventions in our era.

His insights are also of interest due to his manifest political talents.  Lenin is known as a great (and indeed, fanatical) revolutionary, but scarcely remembered is the fact that he was a brilliant political strategist and orator, too.  Years before the Russian Revolution, in famous political pamphlets such as his Two Tactics (1905) and What is to be Done? (1902) - which Hugo Chavez announced he will give to President Obama the next time the two meet - Lenin outlined in great detail the party strategy, structure, and program to achieve control of a post-Czarist Russia.  Comrade Lenin also envisioned a worldwide workers' revolution, and had thought through the ultimate demise of capitalism in the West.  As a Marxist, he believed the market economy to be rife with internal contradictions, which would eventually engender systemic collapse. 

In this eventual scenario, political and military assets of a Communist Russia (and later, the USSR) would assist historical socialist progression around the world according to a favorable "correlation of forces", which included, Lenin supposedly added, the exploitation of "useful idiots" in the West. That is to say, societal elements in the West - intellectual elites in academia and the media, say - who looked favorably upon socialism but failed to apprehend the ultimate revolutionary designs of the commissars, would be helpful in the furtherance of global revolutionary goals.  Additionally, while an ironclad Marxist who brooked no compromise in doctrine, Lenin showed himself to be adaptive when once in power via the New Economic Policy of market reforms - a strategic move geared toward the furtherance of revolutionary political aims.   

Lenin was also keenly aware of the key features of a modern capitalist economy which, due to their importance, were to be undermined in the progression to socialism. Foremost among these are monetary and banking institutions, and John Maynard Keynes noted that Lenin was "said to have declared that the best way to destroy the Capitalist System was to debauch its currency."  Keynes added that "Lenin was surely right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." 

Reprising Lenin as political philosopher, then, what would he say of 20th century America, and what would his strategy be moving forward?  His writings provide us with strong clues.  First, Lenin would note with approval the general trend in the West toward government intervention and industrial oversight and control, first begun during the Great Depression and accelerated after World War II.  Having died in 1924, Lenin never knew of the Great Depression in the 1930s or the late World War, but he would have described them as "typical convulsions" inherent in capitalism and its "byproduct", imperialism.  Following Marx, Lenin held that the instability of profit-seeking capitalistic production led to boom-and-bust cycles which progressively worsened, and the capitalists would periodically instigate wars with each other in search of new markets and profits.  The "creeping socialism" and mixed economies that have evolved would meet with his approval, and be cause for accelerating the arrival of the communist end-state.  For Lenin the growth of universal health care, extended unemployment coverage, educational benefits, and progressive taxation would be signs of rising class consciousness and validation of the Marxian vision of history, in which capitalism was a phase of social organization immediately prior to the onset of socialism. 

And most importantly, government monopoly of the monetary system (i.e., fiat currencies run by government-run central banks, in which there was no longer any monetary freedom and no role for gold anywhere in the world) would be confirmation for him of the ultimate victory of global socialism.  For gold to be fully divorced from monetary and trade arrangements for the first time in 2,500 years of human civilization would be a sure sign of the end of capitalism: Lenin knew that a fiat currency was a necessary and sufficient tool for eventual political control of any economy.  

(A digression for any non-economist as to why this is so: under a fiat currency, the government can "print" as much money as it needs in support of its obligations.  This allows government to commandeer resources from the private sector - that is to say, shrink the business sector in relative terms by bidding resources away from private use  - without directly taxing citizens.  This also allows politicians to provide a growing number of transfer payments to various citizen-voters who would in turn reward them with re-election.  In time, this "silent" monetary expansion acts to inexorably grow government, as well as tax all holders of the currency, and shows up eventually as higher prices. It also distorts interest rates and hence the production structure in an economy, thereby causing boom-bust cycles, and disrupts economic growth.  Lenin, ever the brilliant intellectual and political tactician, viewed all this benignly, as advancing political control: citizens would grow used to provision of various things such as "free" health care or education, and also grow weary of the disruptions inherent in inflation and boom-bust cycles caused by stop-go monetary policies. Confirming Keynes and Lenin both, politicians and their acolytes in news media and academia blame the downturns on the private sector, encouraging citizens to clamor for even more government involvement to provide further "safety nets" and welfare services.  Ergo, control of the monetary system leads, axiomatically, to control of the economy, over a long-enough period. Lenin knew all this from history: in his own time, for example, the first thing belligerent nations did when war broke out in August of 1914 was suspend the gold standard and assume monetary control, in order to promote war spending at each government's behest.)

Obama's Presidency would be, then, for Lenin a moment of favorable "correlation of forces" for the advancement of socialism.  In addition to the advance of welfare state safety-net programs over the years, the U.S. is now in the midst of a full-blown financial crisis (which, in addition to military conflict abroad, would further validate the Marxian paradigm for Lenin).  As Rahm Emanuel stated, no crisis of this magnitude should ever be "wasted", in terms of advancing programs for permanently larger government involvement in the economy.  Lenin could actually have said that verbatim, and he would recommend the following:

*Push through massive tax-increasing transformation of health care as well as carbon-based energy, while the voting strength to do so is impregnable (as a matter of strategy, Lenin knew to act when circumstances were favorable, because there may well be some voter backlash in 2010 and loss of Democratic majorities of this magnitude).

*Add to these votes on education, and other transfer benefits.

*Pass another major "spending stimulus" bill, favoring as many incumbent politician-backing constituencies as possible. 

*Pass an income surtax on the wealthiest Americans, increase corporate profits taxes, especially a windfall tax on energy companies, and increase taxes on capital gains. Do this in addition to ensuring the Bush-era tax cuts expire in 2011 as scheduled.    Point out that this is all part of the rich paying their "fair share" for a better tomorrow for all Americans, and will promote fiscal responsibility.  This is also nothing more than the "repayment" of largesse "taken" by the advantaged classes during a prior period of economic "unfairness", and will cause no harm to the high-earners, but will greatly benefit Americans who are less prosperous. 

Lenin would have no illusion that such big spending implied tax increases on all Americans, and that a bond market collapse, higher interest rates, and perhaps a punishing inflation and even a currency crisis were all in the offing.  In his view the spending would find its way to the favored constituencies (e.g., the UAW, ACORN, and other elements of the working classes) at the expense of the rich, and the great virtue in any coming period of turmoil, high unemployment, and decline in living standards would be the increasing reliance on government to "solve" the turmoil through guaranteed incomes and services. Bluntly, the worse the economy gets, the more people will turn to government to solve their worries, increasing the power of incumbent politicians.

As such, Lenin would urge that Rahm Emanuel's slip-of-the-tongue comment about moving aggressively on Obama's programs be fully actuated.  Any ensuing economic chaos caused by these policies, including their potential for a 1930's-style catastrophe, is warranted given the ultimate political goal: as Lenin said elsewhere, the ends justify the means. 

An unprecedented level of spending, increase of the national debt by a projected $9 trillion, and the coming fiscal nightmare caused by negative cash flow of U.S. entitlement programs beginning in 2017 all portend higher taxes, a currency breakdown, and a sharp fall in the standard of living here.  But even such a modern version of the Great Depression would be worth it to those who would benefit from it: the incumbent political class.

And, while erroneous, Lenin really did believe that after such a period of turmoil, the State would engender prosperity through total control of the economy.  Again, he did not live through the decades of poverty induced by the Soviet government, or see the misery its rulers inflicted on the peoples of the USSR.  Nor did he understand the great harm done to an economy by a fiat, politically-managed currency; his faith in State management of the economy blinded him to the causes of the German hyperinflation of 1923, which ravaged that society and paved the way for Hitler.  Rather than blaming the German debacle on the Reichsbank and government fiscal policy, Lenin read the situation as one of capitalist class conflict, and one which Soviet monetary management would avoid.

Marx and Lenin were brilliant intellectuals, and Mr. Obama may be as well.  But all share a fundamental lack of understanding about how an economy based on the division of labor works, and how trade, sound money, and private property rights all serve to promote peaceful, harmonious social cooperation as evinced by this division of labor.  As such, all fail to see how government policy errors can cause economic disasters, such as the 1930s or today's mess -- these leaders, like most members of the political class, fail to apprehend how wealth is created, and how this process is stultified via government interventions.  But unless Mr. Obama is stopped by some manner now unforeseen, he will effectuate a fundamental - and indeed, "Leninist", at least in scope and direction --transformation of American society. Sadly, it will come only at the cost of a long recession, and a permanently lowered trajectory for the standard of living here.  Such a decline in the United States, moreover, will have only negative consequences for the rest of the world as well.  But somewhere Grandfather Lenin, as he was called, is smiling.

John Chapman is an economist and merchant banker at Hill & Cutler Co. in Washington, D.C. 

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