As a longtime libertarian and free-market advocate, you might think I’d be the last person to extol the virtues of socialism. But after careful thought, there may be a strong case for socialism in America. A case that even conservative Republicans would support. But it may not be what you think. So, make sure you read to the end.
What is Socialism?
“A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.”Oxford Dictionary
- land (all physical resources, including iron ore, timber, gold, etc.)
- labor (all human effort for wages)
- capital (all investment savings, wealth)
- entrepreneurial decision making (what products and services get produced)
In a socialist state, the government decides …
- who owns the land and natural resources
- what products and services are produced
- who gets which jobs and how much they are paid
- who gets loans and at what interest rate
- what prices are charged for goods and services
Citizens work where the government mandates. They then turn over all productivity (wages) to the government in exchange for goods and services.
Doesn’t sound much like freedom. But it does sound like a major power grab for the government “ruling class.” Since the government makes all the economic decisions, many government employees are necessary to analyze and implement the myriad decisions and policies. An army of bureaucrats “guess” at what is needed and what should be “fairly” charged. The problem is, they always get it wrong. That’s why surplusses and shortages are endemic in countries that embrace socialism. If for instance, a bureaucrat sets the price of shoes too low, the first person in line buys all the shoes, then sells them on the black market for the correct price. If the same bureaucrat sets the price too high, the shoes sit on the shelves and nobody buys them.
Worse, making entrepreneurial decisions centrally always leads to vast misallocations of resources. Bureaucrats are constantly producing things people just don’t want, leading to waste. At the same time, they miss opportunities to produce things that people really want, such as double caramel skim macchiato lattes.
What is Capitalism?
“An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.”Oxford Dictionary
Capitalism, by contrast, is the definition of freedom. It’s a natural phenomenon and requires no government force for it to function perfectly. Capitalism is what happens when individuals bargain freely, exchanging one item for another at an agreed upon price
- whether to buy land or resources
- what good or service they will or will not produce
- what is a fair wage for work in question
- whether to lend money and at what interest rate
- what constitutes a fair price
In a capitalist society, millions of people decide daily what to buy, what to produce and how much to pay. Private banks decided who gets loans and at what interest rate. Private individuals decide what products get produced and at what price.
Unlike socialism, capitalism disperses economic power among millions of individuals and private corporations. The price of all goods is fluid. As people consume the things they really want, that demand increases prices. The higher price signals producers to produce more to take advantage of increasing profit margins. Eventually, more producers are enticed into the industry. The increased supply forces prices to fall. The end result is a perfect price equilibrium and total economic efficiency.
Capitalist economies have created more wealth, for more people, than any other form of economy. The United States went from a rural outpost to the most powerful economy in the world in a little over one hundred years.
Neither Capitalism Nor Socialism Exists
An easy way to think about it is to ask the question: “What percentage of our gross domestic product (the sum of all work done and all goods produced in a year) does the government spend every year?”. If you divide what the government spends ($7.1 trillion in 2018(1)) by what we produce – the gross domestic product ($18.9 trillion in 2018(2)), you get a percentage of 37.5% socialist, 62.5% capitalist.
These percentages are interesting. Consider that Sweden, a country widely regarded by leftists as an ideal version of socialism had government spending of approximately $140 billion in 2017. (3) Divide that by a gross domestic product of approximately $538 billion (4), and it calculates to be 26% socialist, 74% capitalist. So ironically, Sweden is actually more capitalist
Whenever the percentage of socialism crosses the 50% threshold, economies begin to crumble. The inherent inefficiencies and misallocation of resources reach a tipping point. There are simply more people “riding on the wagon” than “pulling the wagon”. Worse, once public sector jobs exceed the private sector jobs, you have more voters voting for socialism that voting for capitalism. This leads to a maelstrom of socialist policy which always ends in total economic implosion. Everyone that pays attention to history knows this. The Soviet Union, China, Cambodia, Cuba, East Germany, Ethiopia, North Korea, Poland, Romania, and most recently, Venezuela have all gone “all in” on socialist experiments and suffered catastrophic economic consequences.
So what is the case for socialism in the United States?
The answer is hiding in plain sight, the family. Families are perfectly suited for socialist policy. Since parents understand the needs and capabilities of each child, it’s easy for these “dictators” to implement a Marxist policy of: “From each according to his ability, to each according to his needs.”(6)
Families are also autocracies or oligarchy in that one or two parents hold absolute rule. This is no problem as inexperienced children need rules and boundaries. Children contribute all labor to the collective and get from their parents what they need, not necessarily what they want