Vietnamese Coffee Industry suffers because Communist Vietnam puts People before Profits

Posted by PITHOCRATES - August 17th, 2013

Week in Review

The American left wants more government intervention into the free market.  Because they hate and don’t trust corporations.  Because they are motivated by profit.  Even putting profits before people.  Whereas government puts people before profits.  So everything is better when government intervenes.  Which is why the left loved Hugo Chávez in Venezuela.  They love Cuba.  They loved the former Soviet Union.  Because they were all socialist utopias.  Where they put people before profits.  Of course, people are robbing women of their hair in Venezuelan streets.  Cubans have risked their lives crossing the ocean to reach Florida on just about anything that floats.  And the Soviet Union is no more.  Because they couldn’t provide for their people.  Despite putting their people before profits.

Another communist country the left likes is Vietnam.  Especially since the communists got the Americans to give up and go home.  Vietnam is still communist.  But like China they add a sprinkling of capitalism to the communist stew.  A sort of state-capitalism.  Capitalism with the heavy hand of the government involved.  The way the American left likes it.  And how are things there?  Well, they are having quite the problem in their coffee industry (see Crippling debts brew a coffee crisis in Vietnam by Nguyen Phuong Linh, Ho Binh Minh and Lewa Pardomuan posted 8/15/2013 on The Globe and Mail).

But its coffee industry is now in crisis, plagued by tax evasion, mismanagement, insolvency, high interest rates and a credit squeeze. Many coffee operators are trapped with crippling debt and banks are reluctant to lend them more money.

Vietnam’s credit crunch is blamed largely on state-owned enterprises that borrowed big during the economic boom of the past decade and squandered cash on failed investments, which has left banks crippled by one of Asia’s highest bad-debt ratios…

Few coffee exporters are willing to talk about their financial problems. In communist Vietnam, people are often reluctant to speak publicly about politics and business, especially to foreign media…

Vietnam’s 2013-2014 coffee crop is forecast to be a bumper harvest, around 17 million to 29.5 million 60-kg bags, based on a Reuters poll. This will add to a global oversupply and pressure coffee prices which have lost about 10 per cent since October…

A government assessment of the coffee industry paints a bleak picture. The value of non-performing loans or debts in the sector likely to go unpaid stands at 8 trillion dong ($379-million), or 60 per cent of all coffee industry loans, said a July circular signed by the Deputy Agriculture Minister Vu Van Tam…

Unscrupulous middlemen have also played a part in the crisis, cheating exporters by selling them weighted coffee bags and inferior beans which are difficult to sell or fetch lower prices.

“What I found out is the market there is quite dirty. Middlemen often sell poor beans to exporters. They even put metal bolts in the bags to outweigh them,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

You don’t have middlemen putting bolts into bags to make them heavier in free market capitalism.  For any inferior product in a free market doesn’t remain long in a free market.  As people will simply stop buying an inferior product.  And it could take years for a company to rebuild its tarnished image.  If they ever can.  This is what happens when you put profits before people.  People win.

So who caused the credit crunch?  State-owned enterprises.  As people in government are horrible at business.  For if they were good at it they would be in it.  But they’re not so they regulate it.  Or run a state-owned business.  Not because of their business acumen.  But because they had friends in higher places in government than anyone else.

Loans are important in any agricultural business.  Because all of your expenses come long before you can sell anything.  So they take on big debts at the beginning of the season.  That they plan on repaying after the harvest.  As long as prices don’t fall because there is a bumper crop.  But if they do they may not be able to earn enough to repay their bank loans.  Which is why 60% of all coffee industry loans will likely go unpaid.  And why bankers don’t want to loan them any more money.  Or charge a really high interest rate when they do.  For if a banker knows that every other loan he or she writes will never be repaid it makes a banker very reluctant to loan any money.  And what they do loan has to have such high interest rates to cover the loans that are never paid back.

This is why governments should not interfere with free markets.  For when they do they just make everything worse.  Because they’re just not good at it.  Unlike oppressing their people.  That they’re very good at.  Which is why people are “reluctant to speak publicly about politics and business, especially to foreign media.”  Something unheard of in free market economies.  But quite common in these socialist utopias.  Yet the left still favors them over free market capitalism.  Go figure.

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LESSONS LEARNED #71: “For socialism to be successful no one can be allowed to escape it.” -Old Pithy

Posted by PITHOCRATES - June 23rd, 2011

Socialism Oppresses and Kills tens of millions of People

It’s easy to point at Cuba as an example of socialism’s failure.  You don’t even have to go to the island.  You don’t have to study their institutions.  All you have to do is to look at the risks people will take to escape Cuba.  And they take some crazy risks to escape.  They will board some barely-seaworthy water crafts and paddle out into the ocean.  Away from Cuba.  And towards Florida.  Away from socialism.  And towards capitalism.  Away from a wretched life of despair and deprivation.  And towards a life of plenty and opportunity.  As they paddle their way to America, how many people do you think they pass who are paddling their way to Cuba?  How about zero?  Because when it comes to refugees, the direction is always towards America.  It’s never the other way.

And it’s easy to point to Mao in China.  His Great Leap Forward killed a lot of his own people.  And by ‘a lot’ I mean in the tens of millions.  Depending on the numbers you use.  It could have been anywhere between 15 and 50 million people.  The Chinese communists were not the record keepers the Nazis were.  Though the actual number may be in doubt the magnitude isn’t.  In the spirit of brotherly love that is the hallmark of socialism, millions were beaten, tortured and killed to ‘encourage’ acceptance of the forced collectivization of farming.  And the funny thing is (not ha ha funny but funny as in sad and ironic) that after beating, torturing and killing so many people to collectivize farming, the agriculture output plummeted.  Partly because of bad planning.  And partly due to nature.  But local party officials reported record harvests to avoid beatings, torture and killings by party superiors.  So China exported much of these record harvests.  Leaving nothing for the peasants to eat.  Resulting in famine.  Again, the record keeping is sparse.  As they often are when your policies end up killing your own people.  But deaths were in the tens of millions.  The Great Leap Forward was a big push to modernize China.  To industrialize it.  For there was little infrastructure in China.  Most of it was rural.  Dotted with peasant farms.  Stretching across vast lands.  With little ways to move around.  Where you probably died less than a day’s walk from where you were born.  Which made it difficult to escape the Great Leap Forward.  Or Mao’s ruthless communist rule.

And it’s easy to point to the former Soviet Union.  Where it all started.  CommunismJoseph Stalin gave Mao Tse-tung a run for his money in the greatest mass murderer of all time contest.  Again, the record keeping was a little sparse.  But the Soviets took socialism to a grand scale.  The government controlled the economy.  And your life.  If you grew up in the Soviet Union, you learned how much better it was there than in the decadent West.  Especially the USA.  Of course, when some Soviets were lucky enough to travel outside the country, they learned that their Soviet teachers were liars.  The West was awesome.  Never before did they see such a wonderful world of plenty.  And some Soviets defected to that better life.  Which was a crime.  And a huge embarrassment for the Soviet Union.  Even Joseph Stalin’s daughter (Svetlana Alliluyeva) defected.  Others included Rudolph Nureyev, Mikhail Baryshnikov, Alexander Godunov, Sergei Fedorov, Martina Navratilova, Ivan Lendl and Nadia Comăneci, to name a few (both from the Soviet Union and the Eastern Bloc).  Some got preferential treatment to keep them from defecting like Katarina Witt.  Or they held family members as ‘hostages’ when some traveled out of the country.  It was a real problem for the KGB.  Who had agents living undercover in the West.  And a lot of them didn’t want to come home.  Of course, there was no such problem with people defecting from the West into the Soviet Union.  There were a few.  Like Lee Harvey Oswald.  But he wasn’t playing with a full deck.  And he did return to the United States.  Because even he found it was better in America.  And he hated America.

It’s easy to point at the big socialist failures.  But just about every story of socialism is a story of failure.  And as different as some of the stories are, they all have much in common.  In particular, the exploitation of the people to serve the state.

In Socialism, Slavery is Freedom

In George Orwell‘s Nineteen Eighty-Four, we see a frightening look at totalitarian socialism.  Big Brother is the leader of an oppressive regime.  Where the government plays with language to control the people.  War is peace.  Ignorance is strength.  And freedom is slavery.  War unites a people against a common enemy.  Who then beg for the government to protect them from this enemy.  And they will suffer through any hardship required to defeat this enemy.  Which makes continued war a handy way to control the people.  And to keep the peace among an unhappy and suffering citizenry that might otherwise rise up and complain.  Or riot.  Or attempt to overthrow the government.

Ignorance is strength.  If you don’t know how rotten your existence is you have no reason to be unhappy.  If you don’t know about that better life on the other side of your border, you have no reason to cross that border.  You’ll stay where you are.  And be a good citizen.  You’ll toe the party line.  Work hard.  Sing party songs.  And be happy.  More importantly, you’ll be subdued.  Easier to control.  And easier to lie to.  There’s a reason revolutionaries rounded up intellectuals and people with glasses (people with glasses can read and may be intellectuals) for ‘reeducation’ during revolutions.  Thinkers are trouble makers.  So it behooves them to keep the people ignorant.  So they don’t get distracted from their patriotic duties.  So they can continue to sacrifice to build a stronger nation.

Slavery is Freedom.  Because slaves never have to make a decision.  Or provide for themselves.  What a joyous and simple life.  Someone provides everything you need.  Your job.  Your clothes.  Your food.  Your home.  Your health care.  And your funeral.  And all you have to do is give yourself to the state.  Give up all your freedoms.  Give up all hope.  All your dreams.  And all of your comforts.  You have no bills to pay.  Because you don’t have anything.  You get up, work, eat and sleep.  Simple.  Easy.  And carefree.  True freedom.  Lucky slaves.

Adolf Hitler was a Socialist

Of course, if you talk to some slaves you’ll probably hear a different story.  Real slaves.  Like 19th century American slaves.  Those working the plantations.  They didn’t all buy that ‘slavery is freedom’ line.  If any did.  Because a lot of them did try to escape.  Just like those who tried to escape from Soviet socialism.  Interestingly, there are similarities between the two.  Because if you take socialism to its logical end you do arrive at slavery.  Friedrich August von Hayek wrote a book about this.  The Road to Serfdom.  Even said that if socialism grew unchecked in a state some guy named Adolf Hitler may come along and create an oppressive state dictatorship.  He didn’t quite say it like that.  But a guy named Adolf Hitler did come along and created an oppressive state dictatorship called National Socialism.  Or Nazism.  Anyway, suffice it to say that Hayek was right.  As proven by people everywhere who have tried to escape their socialist utopias.

Despite popular belief, everyone was not equal in these socialist utopias.  The inner party people lived well.  And their apparatchik.  But little changed for the masses.  In fact, life often got worse for them.  They were hungry, living in crowded quarters, with poor sanitation, some without running water, living in fear of state punishment for breaking a rule or not making quota, days of endless labor, no say in your future, no liberty and little hope for a better tomorrow.  Very similar to a 19th century American slave.

The American plantation is a microcosm of socialism.  The few at the top did very well (the glorious leaders).  Those close to them that ran the plantation (the party apparatchik) did not do as well but did much better than most.  And then there were the slaves at the bottom.  Who were all equal.  Equally miserable.  And without any hope.  Living in fear of abuse for breaking a rule or not making quota.  And working days of endless labor.  This is socialism taken to its logical end.  Which is why people risked death to escape places like the Soviet Union.  East GermanyCzechoslovakiaRomania.  Cuba.  To escape servitude.  Because the state could do anything they wanted to you.  And often did.  Just like a plantation overseer.

Slaves of the Social Democracies Riot

Of course, the critics will say that this isn’t true socialism.  That these are just mad dictators who corrupted socialism in their quest for absolute power.  And I’ll say, well, of course.  You’re right.  But they all used socialism in their rise to power.  Not a one of them said anything about cutting taxes or reducing stifling government regulations in their climb to power.  Quite the contrary.  They used every facet of socialism (egalitarianism, redistribution of wealth, taxing the rich, nationalization of private companies, etc.) in their climb to power.  In fact, one could say that without these tenets of socialism to unwittingly rally the people behind them they could never have risen to power.  Which is why socialism is not just a Road to Serfdom.  It’s a blueprint as well.

Some will roll their eyes at this.  And say Europe is full if social democracies that treat their people pretty damn well.  Let’s call it socialism-light.  These socialist countries have large and generous social welfare programs for their people.  Generous unemployment benefits.  Generous vacations.  Generous health care benefits.  Generous pensions when they retire.  Some at the ripe old age of 50.  A large and generously paid public sector.  Clearly these people aren’t oppressed.  And I’ll agree.  The people receiving these benefits are not oppressed.  But it places an incredible tax burden on those who work.  Who must make continuous sacrifices as their taxes continuously rise.  Let’s call these people slaves-light.  Because they are not allowed to enjoy the full fruits of their labor.  So, yes, the people in these social democracies in general are free.  And happy.  When they’re not rioting, that is.  Like in Greece.  Again.  Where the nation is broke.  And had to borrow money to pay its bills.  Which they have.  But one of the conditions for getting these loans was to cut back on those generous benefits.  Which hasn’t gone over well with the people receiving those benefits.  So they rioted.

Of course they rioted because they had become slaves of the welfare state.  Politicians promised them everything they wanted for their vote.  And delivered.  Until they could deliver no more.  Having become so dependent on the state the thought of taking care of themselves frightened them so that they ran into the streets and started burning things in protest.  The state had no problem keeping these people from escaping their country.  Unable to take care of themselves they were afraid to leave.  But the people with the jobs, and those who created the jobs, that’s a different story.  They could leave.  And a lot did.  So the state made it as difficult as possible for their money to follow them.

You may be able to Escape the Socialist Welfare State, but your Money may Not

New York City is the financial capital of the world.  For now, at least.  It costs a lot to live in the city.  Cost of living is high.  And the taxes are higher.  Way higher.  Which was never a problem for rich people.  Or rich companies.  Rush Limbaugh did his radio program out of New York City for awhile.  But he left because of the excessive taxation.  Went to Florida.  Where there is no income tax.  But every time he traveled to New York City he was required to pay income tax on his earnings for those days in the city.  The New York tax authorities put him through incredible hurdles to prove when he was out of the city.  Showing in multiple ways that he was, in fact, living in Florida.   With receipts.  Phone bills.  Etc.  They put the onus on him.  Said he owed the tax unless he could prove otherwise.

Then came the subprime mortgage crisis that gave us the worst recession since the Great DepressionWall Street income fell.  As did New York City and New York state tax receipts.  People moved out of the city.  Out of the state.  Worked out of their homes.  Some did no work in the state but still kept a vacation home on Long Island.  Desperate for money and unable to keep these people from escaping the state, the taxing authority went after their income.  Said if they spent any time in the state they owed income taxes for the entire year.  Even if you only vacationed for two weeks on Long Island.  While paying the taxes in the state you actually live and work in.  This was worse than taxation without representation.  It was double taxation.  In addition to taxation without representation.

New York City is generous with their social benefits.  Call it socialism-light.  It’s not all out socialism.  But it still suffers from the same fatal flaw.  It doesn’t work well if the people can escape this socialist utopia.  Especially the ones paying the taxes.  As is happening in the social democracies in Europe.  And anywhere where there is high taxation without a secured border.  To prevent the taxpayers (i.e., best and brightest) from escaping.  Like the Soviets did to keep their best and brightest from escaping.  As did the East Germans.  The Czechoslovakians.  The Romanians.  And the Cubans.

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FUNDAMENTAL TRUTH #35: “Not only is ignorance bliss, but it’s a godsend to Big Government.” -Old Pithy

Posted by PITHOCRATES - October 12th, 2010

A Dumb Animal is a Content Animal

We had a customer once across from a slaughterhouse.  The customer is long gone.  But the slaughterhouse is still there.  I remember one cold December day.  It was close to the holidays.  A festive time.  Parked in the street were two cattle trucks.  You could see their breath puffing out through the slats.  They had no idea what was waiting for them once they left those trucks.  They just stood there.  Quiet.  And content.

I had a cat once that lived to a ripe old age.  In his old age, he suffered a stroke in his back end.  His rear legs weren’t that steady.  His feet kind of flopped around when he walked.  He spent most of his days in the basement on an old chair.  His water dish was underneath the chair.  And a litter box was only a few steps away.  We took food down to him.  But every hour or so he struggled up the steps to the food dish in my study.  He ate.  Then I picked him up and placed him on my lap for some petting.  He purred profusely.  After 10 minutes or so he squirmed to get down.  Ate some more.  Then limped back downstairs.  He was a shadow of his old nimble self.  But he was content.  To him, his life was normal.  He couldn’t dwell about what was.  Or what will be.  He just knew when his tummy was empty.  And when he craved affection.

In Gone with the Wind, when Atlanta was burning, Rhett Butler was helping Scarlet escape the city.  The fire panicked their horse, though.  It reared up and refused to move.  So Rhett covered the horse’s eyes and said something like, “You’ll like this better if you can’t see it.”  The horse calmed down.  The fire was still there all around them.  But the horse couldn’t see it.  And they made their escape with Rhett leading the blindfolded horse.

Dwelling on the Fear of the Unknown

Sure, they’re just dumb animals.  But are we really all that different?  Apart from having hands with opposable thumbs, consciousness, an advanced language, our use of tools and our farming and animal husbandry skills to provide an abundant food supply, no.  We prefer to not know unpleasant things.  Especially if there’s nothing we can do to prevent those unpleasant things from happening.  Or think too much about good things.  If there’s a chance we can spoil them.

A pitcher throwing a perfect game (27 up and 27 out) in the major leagues is rare.  It’s great when it happens.  And heart-breaking when batter 27 gets on base.  Whether by a base hit.  Or an error.  As a game moves ever closer to perfection, a deep dread and fear permeates everyone on that team.  They don’t want to be that guy that spoils the perfect game.  And they don’t talk about a perfect game lest they jinx it.  They try to act as if they don’t know what is about to happen.  To ignore the weight of the world crushing down on them.

Sometimes it’s not dwelling on the good that might not happen.  Sometimes it’s dwelling on the bad that may happen.  An infantry patrol going out behind enemy lines to snag some prisoners, for example.  It’s dangerous.  There’s a very good chance that some will not survive the patrol.  As your patrol waits for h-hour, you don’t look at your fellow soldiers and wonder who might die.  You don’t talk about it.  You just try to push it from your mind.  You go through the motions.  Machine-like.  Focus on the mission.  And your training.  And the next 5 minutes.  You try not to think too far beyond that because, well, you just don’t.  If something happens, it happens.  Thinking about it won’t make it not happen.  In fact, thinking about it may distract you a fraction of a second when the shooting starts and make it happen.

Sometimes it’s a cough that won’t go away.  Or a lump that wasn’t there before.  You get a sickening feeling when you think about what it may be.  So you try not to think about it.  You ignore it.  You get used to it.  Acclimate to it.  You don’t dwell on it.  Because the reality of it can be so unpleasant.  But resorting to pure animal ignorant bliss may very well kill you.  Sometimes we have to think about the unpleasant.  To dwell about what might be.  For if we do early enough, things don’t have to be as bad as they could be.

Have Food Will Bow

Life was pretty harsh until the British came around.  Their ideas about representative government and capitalism led to a freeing of the masses from a life of drudgery and suffering like no other people did.  From these ideals grew a new nation.  America.  And the Americans inspired an Old World nation.  France.

It is hard for people today to fully understand what life was like for the average person before the ideas of representative government and capitalism.  The average person was poor.  Not middle class.  But poor.  They lived in abject poverty.  They were overworked.  Under paid.  Oppressed.  Malnourished.  Emaciated.  They were miserable, wretched people living miserable, wretched lives.  Quite a difference from today where the average person is middle class and the poor are often overweight.  Even obese.

This life was commonplace when oppressive state powers were commonplace.  As the state’s power grew more limited, the average person’s life grew less miserable.  The poor in pre-revolutionary France, working some of Europe’s most arable soil under an absolute monarchy, suffered from recurring famine.  Meanwhile, over in the tiny island kingdom of Great Britain, a constitutional monarchy, they did not suffer recurring famines.  In fact, they were grain exporters.  That’s why there was no British Revolution to overthrow their monarchy as Europe trembled in the face of Napoleon’s advancing armies.  Life was pretty good on that tiny little island.

People are Just Dying to Get Out of their Socialist Utopias

There are great debates about which is better.  Capitalism or socialism.  People like to point to European socialism as the ideal.  These people are, in general, poor.  When the Beatles got obscenely rich, they fled that socialistic utopia.  As did others who struck it rich.  Why?  To keep what they had earned.

Because the vast majority is poor or middle class, we’ll never solve this debate.  The poor and middle class will feel little pity for the rich and approve of confiscatory taxation.  Until they become rich, that is.  But what about other countries?  Cuba?  North Korea?  The former Soviet Union?  The People’s Republic of China in the days of the great famines? 

Cubans boarded makeshift rafts and risked their lives to make it to Florida.  Those who could in North Korea, like pilots, defected and flew to South Korea.  The Soviet Union had to bribe and hold family members hostage to prevent their spies from defecting once they crossed over into the west.

The Soviet Union would eventually collapse and break out in capitalism.  Communist China allowed some capitalism to prevent a collapse.  Cuba was once a jewel in the Caribbean and now can’t even make a decent cigar.  The North Koreans are still suffering recurring famines and chronic energy shortages.  No, in these hardcore socialist states the message is clear.  Life for the average person is little better than it was in the Middle Ages.  And those who could escape their ‘utopias’ did.

Blinders are Okay if you’re a Horse

The scary thing is that these communist nations started out as people’s revolutions.  They attacked the rich.  Even the middle class.  They promised their people everything (more food, shorter working days, free universal health care, free universal education, etc.).  And, in most cases, failed to deliver.

These nations didn’t become totalitarian states overnight.  It was a process.  A process that went from good intentions to bad to worse.  And here we are in America.  Big Government promising us the same things.  Free food for the poor.  Shorter working days (by empowering unions).  Free universal health care (which is just one public option away).  And free college education for all. 

Should we be concerned?  Yes.  Because these stories always end the same.  After a people votes themselves the treasury, poverty and tyranny typically follow.  It’s like a cancer growing.  And we shouldn’t ignore it.  For if we do, it will only spread further.  And the further it spreads the harder it will be to get rid of it. 

America was the first republic not to collapse.  Can we continue to be that notable exception?  Not by wearing blinders.  As unpleasant it is, we must face this unpleasant truth.

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