Obama: No Difference Between Capitalism and

Communism
affluentinvestor.com /2016/04/obama-no-difference-capitalism-communism/
Prof. Reuven Brenner
Prof. Reuven Brenner | On April 15, 2016
Barrack
Hussein
Obama II, 44th
President of
the United
States of
America
Hard to know
what is more
shocking: A
president of the
United States
stating in a
Buenos Aires
speech last
week that there
is no
difference
between
capitalism and communism, choose whatever works (see video link in the endnote) or the fact that this statement
has not received coverage.
How can a president of the US get it so wrong? And just 30 years after communism fell? Or without so much of
correcting himself saying: Though remember, Germans believed that fascism worked for the German tribe for a
while, and communism had its Gulags and starved millions, and dont forget all the people who disappeared under
Latin American dictatorships, communist or other, or radical Islamism, for that matter. So perhaps I misspoke. No,
there is no such correction in his speech. Obamas statements make Bernie Sanders success and repeated call for
revolution before screeching crowds more comprehensible. The lack of outcry is actually deafening.
The last time political leaders were this confused was after WWI and during the 1930s: People were uncertain about
the model of society they should emulate, as none of the countries then set clear example worth striving for. The fact
that the sad state of affairs had to do with compounding domestic and international mistakes that actually violated
principles of capitalism, or of democratized capital markets, (as I much prefer defining the main feature of this
ism,) disappeared from sights and most minds. The result was that people ended up betting on devastating ideas,
disastrous political systems, with long term consequences communism being just one of them.
Recall the 1920s and 1930s: Hyperinflation in Germany, Hungary, Austria, and Italy destroyed their middle classes
and financial markets, consequence, in part, of the devastating Versailles treaty imposing onerous debts. With
financial markets in shambles and peoples savings eroded to nothing, governments and central banks became the
main, often unaccountable, financial intermediaries and that means having much increased powers in their hands.

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Austria, following the large credit expansion during and after WWI, and later the collapse of its largest deposit bank,
Credit Anstalt, became insolvent. Though Austria first kept the schilling linked to gold, investors realized that this
could not last, and capital left the country, and in 1931 the schilling was delinked from gold. These events
precipitated the United Kingdoms own exit from the gold standard in that same year, after it mistakenly re-linked the
pound to gold in 1925 at the pre-WWI level, in spite of the high inflation the UK experienced during the war. This
resulted in predictable deflation and high unemployment. As a result, neither Austria, nor UK capitalism appeared
worth emulating.
France learned from the United Kingdoms 1925 mistake. Raymond Poincar, French premier in 1926, stabilized the
franc at the proper level (at roughly in the ballpark fraction of pre-WWI level), capital flowed back to France, credit
expanded, and France boomed without inflation or unemployment. A model to emulate, it would seem. But the UK
perceived French monetary policy as competitive devaluation, and the disagreement quickly destabilized the brief
international monetary calm. By 1928, the short-lived international cooperation Benjamin Strong, head of the Fed at
the time, engineered with parts of Europe, fell apart. From then on, the mazes of monetary and political errors
compounded rapidly ending in Europes devastating political bets that led to WWII.
This post-WWI sequence of events: Russia betting on communism,; Western Europe on a range of mistaken fiscal
and monetary policies and bad international treaties; the US doing its own share after 1929 with the market crash
and unemployment in the 20-30 percent levels all ending with the middle class falling far behind and the
destruction of democratized capital markets preventing them from rising, destroyed all visibility what model of
society should Europe and the rest of the world strive for.
With savings and access to financial markets thus evaporating, people turned to the two remaining institutions for
accessing capital: government and crime the latter in a broader sense of the word, referring to wars too, on both
foreigners and citizens redefined as foreigners too in particular (Jews, that is). People always seek
rationalizations for the new trends, increased roles for government, central banks and military in this case.
Intellectuals are always ready on politicians shelves to offer promptly such rationalizations. Thus predictably, the
1920s and 1930s also saw socialism and communism rationalizing governments expanded roles in some countries.
In others, theories about public works and, eventually, the Keynesian framework rationalized the permanent
increases in governments and central banks roles, raising and allocating capital.
Yet closer inspection of these events does not lead to Obamas capitalism-communism-whatever view of the world.
Rather, the sequence of events shows how important it is to put obstacles in place so governments and central
banks cannot centralize too much power, become unaccountable. The historical reminders also show how important
international agreements are, those sustaining stable exchange rates in particular.
This should not surprise: prosperity happens when talents are matched with capital, holding all parties accountable:
the talent, the capital, and the matchmakers. This is easier said than done building and sustaining the layers of
institutions to keep matchmakers accountable, in particular.
Every society, no matter where or when, has five sources of capital: inheritance/resources; savings; access to
financial markets; government; and, last but not least, crime, through military power in particular. After WWI, the
series of monetary blunders and lack of international cooperation decimated peoples savings and the Versailles
Treaty kept resources captive. These events destroyed capital markets and international trade, and the fact that
restoring stable currencies was a requirement for trade to be restored faster, got forgotten in the confusing state of
affairs.
What about today?
Societies are as uncertain now about which model of society to strive for and how to repair the global monetary
systems as they were after WWI. Surprisingly, the president of the US is (mis-)leading the way, even though the US
has the longest experience with democratized financial markets. True, a series of grave political and regulatory

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mistakes combined with lack of accountability in the financial sector brought about the recent subprime-induced
crisis.
But how can anyone compare the no doubt huge costs of this crisis with the impact of communism in Russia or
China, with millions killed or condemned to Gulags, and millions starved and millions others forced into death
marches? And by a person with pretension to being a constitutional scholar too, having gone through Columbia,
Harvard, and lecturing at University of Chicago law school on, according to colleagues, Constitution, race, and
gender?
By equating capitalism with communism it does not appear that Mr. Obama grasped the essence of the US
constitution namely, dispersion of powers.
Without such dispersion that only access to independent sources of capital offer, votes and beautifully written
constitutions are little more than pieces of paper as his Latin American audience can attest.
The 1920s and 1930s offer warnings to them, and even to the US, with a president this ignorant and confused.
The link to the Obama speech: http://www.infowars.com/obama-theres-little-difference-between-communism-andcapitalism/

The opinions expressed in this column are the authors own and do not necessarily reflect the view of Asia Times.
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Originally posted on Asia Times.

Prof. Reuven Brenner
Reuven Brenner holds the Repap Chair at McGills Desautels Faculty of Management, serves on
the Board of the McGill Pension Fund and is member of its investment committee.
He worked with Bank of America, Knowledge Universe, EEN, Bell Canada, Repap Enterprises
and with investors in Canada, Mexico, the US and Europe. He has been involved in the private
equity markets as partner in Match Strategic Partners, has been investing in start-ups across
Canada, as part of an angel group, and also created his own start-up, e-mortal.com. He has also been serving on
boards of companies and institutions.
He was expert witness in cases covering anti-trust, bankruptcy and financial matters. In other spheres, Quebecs
government asked him in 1995 to be member of a commission whose mandate was to examine all aspects of
Quebecs possible separation. He was also asked to testify before US Congressional Commissions and Canadas
Senates Banking and Finance Committee, and worked with Polands central bank during the recent crisis.
His recent books are A World of Chance (2008) and Force of Finance (2002). His regular columns appeared in
Forbes, The Wall Street Journal, Asia Times and other financial press around of the world. Forbes journalists put
two of his earlier books in their all time recommended list, and Forbes Global dedicated a cover story, titled
Leapfrogging, to his works and endeavors. Brenner also received the Killam Award (1992), the Royal Society
elected him as Fellow(1999), and he received a Fulbright Fellowship Grant (1976).
Brenner was born in Rumania and immigrated to Israel in 1962. He served in the Israeli army between 1966-69,

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during the Six-Day War, and again during the 1973 Yom Kippur War. The Fulbright fellowship brought him in 1977 to
Chicago, after completing his PhD at the Hebrew University and working at the Bank of Israel, where he received the
First Prize from Israeli banks (for work with Saul Bronfeld, designing indexed securities). He lives in Canada since
1980. He is fluent in English, French, Hebrew and Hungarian.

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