Why it matters for investors
Private property
Private: confined to an individual(s). Property: Something Owned.
Something restrictively owned by an individual.
Government
Govern: to rule, to control. -ment: the action of the body, the mind.
To control the actions of the body & mind. Mind control.
Does your government respect private property rights?
The goal of investing is to acquire, grow, and maintain control of capital to accumulate wealth, and become financially independent. It might be in your interest to know if your government is aligned with your capitalist interests, and take a look at where a country may be headed. You could look at governments as a gradient or shade of statism and government control vs the individuals and their private property.
Lets go through a thought experiment
You have money (capital) because you have worked hard in society, and you want to buy a farm(s) (private property) to become wealthy. Does it matter what political jurisdiction this farm is in to accumulate, and maintain your wealth?
I. Free Market Capitalism
A Free Market Capitalist country is one where the population owns property, and the population controls production.
You own your farm. You control what is produced, and you keep all the profits because profits are private property. You reap what you sew. It is all up to you to do what you want with the property. You reallocate all the capital with no government regulation, or taxation because this would be considered coerced theft of private property. The goal of a free market capitalist country is for private individuals to produce goods and services other individuals desire with little to no government involvement over the process. This is also known as a Libertarianism.
Free market capitalist governments include : United States (pre FDR), UAE (Dubai), Monaco, Switzerland (pre FATCA), Singapore, and most tax havens.
Some of these countries were free market capitalist driven for +100 years without need of taxation, regulation, or even an actual federal government. Productive individuals thrived, investors and capital is treated best to accumulate wealth.
“If you are going to have a government at all, it should have nothing but a police to protect it’s citizens and their private property from violence within a country, a court system to allow them to adjudicate disputes private and public without resorting to force, and a strictly defensive military, kept within our borders. Nothing more.”
– Doug Casey
II. Socialism
A Socialist country is where the population owns property, but the government begins to partially control production through legislation, regulation, and taxation. Under socialism, capitalism still exists but begins to be restricted by government intervention via laws and regulation.
You own your farm. You have control of what is mostly produced, and you keep a portion of the profits. The government begins some control of your productivity through indirect, direct regulation, taxation and redistributes the proceeds for better or for worse. You could have reinvested the profits to benefit society by creating more goods and services, but the government thinks it can do a better job allocating the capital. Another term for this is statism. Note: you do not have to have free healthcare to qualify as a socialist country.
Socialist governments include : United States (post FDR), Sweden, Denmark, Norway, Canada, Australia, New Zealand, etc.
Humans have an endless amount of wants, and a limited amount of goods. If everyone wants their neighbor’s property, especially if they can get it for “free” by voting, they can vote in a politician who will take it from them through regulation, taxes, and even outright confiscation. Private ownership no longer becomes private, and usually is mismanaged by socialist politicians. Socialism can degrade into a fascist or communist state due to a misunderstanding of human incentives. If the tree of free market capitalism is cut down, there is no more fruit to harvest, and everyone begins to fight over the decaying wood.
“Democratic socialism is a system in which two wolves and one sheep sit down together at the table to discuss who they are going to eat for dinner.”
– Rick Rule
III. Fascism
“Fascism is capitalism in decline.”
– Vladimir Lenin
A Fascist country is where the population still owns property, but the government controls the production.
You own your farm. You have little to no control of what gets produced, and you do not get to keep much of the profits due to increased taxation. The government has control over your productivity, but you still get to “keep” the farm. Private property is still somewhat preserved, but control is not due to direct government oversight, regulation and taxation. Fascists understand that people work harder if they think they still own what is in their possession, even though they really don’t control the property. If the individual does not comply, the property is confiscated. Through this confiscation the government begins to own private property.
Fascist governments include : Nazi Germany, China (post Deng Xiaoping), Russia, Venezuela
The last step of degradation of personal private property rights is no property rights at all.
IV. Communism
A Communist country is where the government owns all property, and controls the production.
You lose ownership in the farm. The government owns the farm. The government owns everything. Everything is centrally planned by a government. The government has control of what is produced, and the government gets the profits. The government owns your productivity. You cannot own anything, and do not get say over what is produced, or ownership of the profits. All private property is dissolved, and controlled by the government. You do not even get to own the teeth in your head if the government has a use for them. You do not own your body, and what you choose to put in it or not put in it. You are essentially a slave for the “greater good.”
The first steps toward communism is nationalization of the private economy. The government takes control of the private sectors of housing, utilities, agriculture, banking, transportation, mining, healthcare, technology, education etc. You may or may not be compensated during this transition, but ultimately this does not matter because the money becomes worthless because you can not own anything of value. The economy is centrally planned by a few people in a room. There is only one bank used to plan the economy. Mass surveillance programs are used to spy and immediately report all non-compliance against the government.
Communist governments include: Soviet Union, China (pre Deng Xiaoping), North Korea, Cuba, Laos
All private property was confiscated under communist governments. If you made an investment, it was lost forever. A permanent loss of capital and destruction of wealth. A capitalist’s nightmare, and should be avoided at all costs.
“There’s a problem with centralization. Once you start centralization it just continues…We’ve had this before in history in the Soviet Union with a centrally planned economy that does not ultimately deliver success…The decentralized system empirically is far more successful, more efficient, more effective, more resilient to market shocks, and is more flexible.”
– Richard Werner Ph.D. (LSE, Oxford)