Recent events in Russia evoked memories of conversations I had with tour guides and other acquaintances when I spent three weeks touring that country this past August. Russia is in transition. After 70+ years of communism, the Russian people finally had enough by the early 1990s. One tour guide - a lady of 50 - said things had become "so bad" that something had to change. The Rouble - artificially valued at $2 by the communists - was essentially worthless by 1990. People had plenty of money, but there was nothing for sale in the stores, as it was not possible to produce goods for the artificially set low prices.
The Rouble was not convertible to foreign currency, for communism had built no real wealth. After eating its "seed corn" for 70 years, the Soviet Union finally collapsed because it ran out of people who would work altruistically. In Gertrude Stein's words, there was "no there there".
Now, after a chaotic "intermezzo" of crime and an unstable economy, the country has moved toward capitalism and a market-based economy. Lucrative, high-tech jobs are becoming available. Young people see a future in earning, investing and building wealth. There is hope. On the downside, the Rouble - now trading in international currency markets - has collapsed to 4¢ (about 2% of its former artificial value). Americans tourists find Russian prices reasonable: a bottle of soda-pop selling for about $1.25; a small pizza, $8; daily tip for the guides, $4; etc.
But not every Russian is hopeful about the future. People on fixed pensions are in serious financial shock, as their monthly stipends have not been adjusted for the drastic reduction in the Rouble's value. One of our guides during the Russia tour - a lady in her 60s - was quite bitter about the change. Her pension of about 1200 Roubles a month, which had bought vacations on the Black Sea and a comfortable living style during the controlled economic era, is practically worthless now ($48). She is reduced to depending on the generosity of foreign tourists to make ends meet. She and millions like her want to "go back" to that time when life was pretty good.
But even the most economically ignorant Russian knows that a communism-redux cannot be. People who remember how "good" they had it can also recall how bad it became. What good is money with a high face value if there is no real economy and no products? Yet many distrust the free markets that seem to have impoverished them. Mr. Putin offers return to a "safe" economy, controlled by his authoritarian hand. His offer is seductive, and Russians seem to be buying it.
In recent weeks Mr. Putin won a smashing (if somewhat questionable) electoral victory when his United Russia Party got 63% of the vote - thus setting the stage for his elevation to "national leader" (Führer), after he steps down from the presidency in the spring. (Russia's Constitution prohibits more than two four-year presidential terms.) A new, weaker president might take orders from Leader Putin. Russia's people are going to have a long struggle within themselves before they can embrace free markets, free enterprise, and a free future. Right now, it is just too scary.
Remarkably, the United States of America - freest of all free countries - is engaged in a similar tug-of-war over "going back" to the past. A significant faction of the electorate wants to return to socialism, higher taxes, and entrusting people's futures to government. We have just passed through a quarter-century of lower taxes, enhanced enterprise, widespread investment and unprecedented economic growth. Many ordinary people riding this wave have become financially independent. (Over 3 million Americans now have a net worth exceeding $1 million.) Yet many others long for a return to American socialism's "golden age". Why is this?
Part of the reason is a lack of historical knowledge of what our socialist era really was. Younger Americans - poorly educated in the details of that history - are shocked to learn that the top marginal income tax rate from the 1930s through 1964 was 92%. It was tough to keep a buck, if you made one. Standards of living were nothing like today's. But government was going to be everything to everybody. We were going to defeat poverty and improve everyone's life. The future was bright. The sky was the limit. In 1967, the Dow Industrial average reached 1000.
And by 1980 the Dow had hit... 950! The LBJ/Nixon/Carter era of glorious (socialist) promise actually produced a high-tax, high-inflation, welfare-engorged, socialist-leaning economy that generated zero investment growth. Toward the end of the Carter Administration we had 18% mortgage rates, 15% inflation, and 8% unemployment. The term "stagflation" was invented to describe a stagnant, high-inflation economy. We had run out the string on American-style socialism, and voters were ready to try something different. For 20 of the next 28 years we elected Republican presidents, and at least one GOP house in congress for 18 of the 28.
But socialism doesn't die easily. Actually, it hasn't died at all. It has only been sleeping. Although the Reagan/Bush(41)/Clinton/Bush(43) era has produced unprecedented wealth and living standards in every economic stratum, a stubborn political faction hangs onto the socialist dream and continues to run candidates to champion it. Democrats are (generally) the party of "going back" to the socialist model. For them, the solution to every difficult national problem is government, government and more government. On retirement - citizens can't be trusted to handle their own financial futures. On medical care and insurance - government must solve the problem, since private enterprise cannot. On business and markets - the benevolent hand of government must exert control. Government must handle it all and be the nation's "provider".
Without going into chapter and verse, I simply note that each Democratic candidate wants to "go back" to some part of the American socialist era. John Edwards wants to go back to 19th century populism. He preaches the virtues of the poor and the workingman as though he is really one of them - not a multi-millionaire tort-lawyer sporting a $400 haircut and wearing $2000 suits.
Senator Obama wants to take us back to the New Deal. He distrusts markets and financial autonomy, and he believes government can best provide for us. Mrs. Clinton - triangulating in classic Clintonian style - wants to take us in two directions at once: back to the Great Society and forward into a Brave New World of high taxes and expanded socialism consonant with her much-disguised leftist roots. Each wants to "go back". The only real difference is how far.
History shows that as people age they become more cautious. They look to government for "security". This might explain why my informal poll of post-65 people shows a strong preference for keeping retirement pensions under federal control, rather than entrusting them to individual control. Many cite the "untrustworthiness" of financial markets, saying only government can deliver promised benefits. (Long-forgotten are government's broken promises on original Social Security agreements like untaxed benefits.)
As the Baby Boomer generation ages, this caution - this visceral (but unwarranted) "trust" of government - will strengthen until socialism awakens from its sleep. In time, I believe, socialism will again rule us, and our great experiment in individual financial empowerment will end. We shall all be poorer for this, but the seductive lure of "going back" will be irresistible.
"Those who do not learn from history are doomed to repeat it." (George Santayana)