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Socialism: The Opiate of the Corrupt and Ignorant

socialism-venezuela-slums-povertyThe overarching message of “The Opportunity Cost of Socialism”—a study recently released by the President’s Council of Economic Advisers (CEA)—is that the advocacy of socialism cannot reasonably be based on policy preferences; its attraction has always been grounded in a combination of wishful thinking and ignorance. For example, the new CEA study shows that the socialist approach to “single payer” health care advocated by many on the left would cost much more and deliver much less, resulting in the significant worsening of mortality and morbidity, not just higher taxes and reduced economic growth.

One prominent opinion page editor described the CEA study’s conclusions to me as too obvious to warrant mention. That reaction reflects the problem the study seeks to remedy. Obvious facts about socialism are not discussed enough. Few people are willing to read 50-page studies like the CEA’s, and there has been very little media coverage of it—journalists or politicians who could summarize the CEA findings haven’t seen sufficient reason to do so (or may themselves be among the uninformed advocates of socialism). That is too bad because the ignorant advocacy of socialism is currently a significant threat to our democracy.

Socialism has existed in many forms which lie on a continuum, from the central planning nightmare of the USSR, to the Scandinavian democratic experiments of several decades ago. The idea that unites the various embodiments of socialism along that continuum is that economic freedom is counterproductive to the aspirations of humanity. It would be far better and fairer, socialists argue, for the state to distribute scarce resources rather than letting the market allocate goods and services by itself. Socialism seeks control of economic decisions, either through central planning or through expropriative taxation and regulation, in the interest of the common man.

The difference between market-based and socialist economies is not the presence of redistributive policies per se. For over a century, around the world, market-based economies have taxed and redistributed wealth, and provided a host of services such as public education and care for the poor, sick, and elderly. The difference is that in market-based systems taxation is regarded as an unfortunate burden, which is employed out of necessity to ensure that other priorities are achieved. In contrast, in socialist regimes, taxation is not regarded as an undesirable consequence, but as a means to prevent individuals from counterproductively controlling their collective economic destiny.

Socialism’s appeal has always been its false promise to create wealth better than capitalism can. Advocates of socialism promise great economic achievements, which they argue are worth the price of reduced individual economic liberty. It is worth remembering that Karl Marx regarded socialism as an economic necessity that would emerge out of the ashes of capitalism precisely because capitalism would fail to sustain wealth creation. Marx made many specific, and erroneous, predictions about capitalism, including its declining profitability and rising unemployment. His analysis did not consider permanent economic growth in a capitalist system to be a possibility. And his “historical materialist” view of political choice claimed the rich and powerful would never share power voluntarily with their economic lessers, or create social safety nets. Writing in the mid-19th century, Marx fundamentally failed to understand the huge changes in technology, political suffrage, or social safety net policies that were occurring around him.

Not only has socialist theory been wrong about the economic and political fruits of capitalism, it failed to see the problems that arise in socialist governments. Socialism’s record has been pain, not gain, especially for the poor. Socialism produced mass starvation in eastern Europe and China, as it undermined the ability of farmers to grow and market their crops. In less extreme incarnations, such as the UK in the decades after World War II and before Margaret Thatcher, it stunted growth. In most cases, socialism’s monopoly on economic control also fomented corruption by government officials, as was especially apparent in Latin American and African socialist regimes. The adverse economic consequences of socialism led the Scandinavian countries to dial back their versions of socialism in the past decades. If the United States had imitated Scandinavian-style socialism, the CEA study estimates that our GDP today would be 19% lower.

Socialism has been abandoned in virtually all of the developing world. Countries today do not seek to emulate the disasters of North Korea, Cuba, or Venezuela. They also avoid high taxation of the rich. That reflects the recognition that countries compete with each other for capital. Expropriating the rich tends to make them leave, and when they leave they take their wealth with them.

This philosophical shift in the developing world is a major change since the 1980s when socialism was still fashionable among some. The shift away from socialist thinking was grounded in the growing body of empirical evidence about the kinds of policies that produced growth and poverty alleviation—that is, policies that used markets as a lever of economic development. Now developing countries such as Mexico, Brazil, Colombia, Chile, India, China, South Africa, Vietnam, Thailand, and Indonesia are known as “emerging economies,” a description that recognizes their need to emerge from state control of their economies through privatization, free trade, and the creation of viable private financial intermediaries to promote growth and poverty alleviation. All around the developing world, socialism is understood as a false promise, an ideological opium that repressive elites use to retain and expand power. Capitalism, in contrast, is seen as the force that has lifted over a billion people out of poverty worldwide since 1990.

To historians, that was obvious long before the 1980s. Socialism has never conquered poverty. It has never competed with capitalism as a means of effectively allocating resources and promoting sustainable growth. Over the past half century, scores of economic historians have sought to explain the factors that produced the economic progress that Europe and some of its offshoots enjoyed in the 18th-20th centuries. This group of scholars, which includes Angus Maddison, Joel Mokyr, Eric Jones, David Landes, Deirdre McCloskey and Douglass North, tend to hold quite diverse political preferences, but they universally agree on the facts: Government policies that safeguard a combination of personal economic freedom, secure property rights, and the ability of individuals to gain personally by participating in markets have promoted the effort and innovation that conquered poverty and promoted growth through the ages.

The facts about socialism and capitalism may shock the young people of America, many of whom lionize Bernie Sanders, an unapologetic socialist who honeymooned in the USSR, as the new conscience of our nation—and many of whom, 51% according to Gallup, now have a positive view of socialism. Only 45% have a positive view of capitalism. That represents a 12-point decline in young adults’ positive views about capitalism in just the past two years.  Many of these young people are thoughtful and intelligent—but they are also ignorant about the history and economics of the systems they favor or condemn. This is the main reason why they must read this important CEA study.

Reprinted with permission from Economics21 - by Charles W. Calomiris

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Army Vet

Socialism/Communism in any form is the political form of cancer: government that keeps growing uncontrollably with the cells at its center being corrupted until they poison and kill the whole living organism, or country by stifling every life sustaining function.

John P

REDUCE PROPERTY TAX. These past 80 years, I have yet to hear a politician say, they will reduce property taxes on a continuing schedule. Why should I be penalized because I realized my American Dream and bought a house. Politicians are paid too much to search for new ways to spend money, instead they need to discover ways to reduce spending. REDUCE PROPERTY TAX ON A CONTINUING SCHEDULE.
John
Catonsville Maryland

Herb Lieberman

excellent, Excellent, EXCELENT ARTICLE…..This MUST be taught in our Halls of “Education” by “Educators” and not Socialistic Brainwashers…Thank you…

Burton Pauly

Sad to say that those who seek to get all they need or desire by the government giving to them is just asinine.The gov. can’t do anything that is good by subsidizing those who won’t earn their bread by the sweat of their brow. If this nation doesn’t get off it’s rear and run this Republic like it should there will be civil disorder like we’ve never seen before. Free loading is Passe. Go to work, and pay your cotton picking way through life.

michellem8082

Great article. Not sure what errors PaulE is referring to except it must be from revisionist history. …There’s something in our humanity that needs to actually feel the pain first before letting go of a bad idea or habit. There doesn’t seem to be much interest in learning from other countries. So I’m very pessimistic about the future in the hands of our engineered children. Socialism is the most discredited economic system ever and yet we can’t get out of the way of capitalism. Great point in article about Marx’s inability to foretell the future and missing some obvious dynamics. One other important point that needs to be concisely framed is that you cannot judge capitalism by what we’re experiencing here in the US today. We have bastardized it with regulation beyond recognition. People really need to study “unintended consequences” of regulation. Every single regulation has unintended consequences and the… Read more »

Garla

Socialation would be the downfall of the greatest nation earth. American people do not have to look very far to see what results would be. Many have tried it Go to Canada and ask why their comming to USA for health issues

PaulE

The first sentence in the article is the most accurate description of the appeal of socialism. After that, the rest of the article contains a number of obvious errors related to a most of the countries mentioned. Which is a shame, since the underlying comparison between capitalism and socialism and their much different outcomes for both the individual and society as a whole is so important for our young people to understand.

Juniper

The biggest problem with Socialism is that they eventually run out of other peoples’ money.

Kevin

Obama was all in for Socialism, not for the benefit of the people, but for himself and his cronies. Hillary would have keep us down the same path of destruction. Like Trump or not, he stopped it in it’s tracks. It’s true the media doesn’t have a clue, Hollywood and academia has always been socialist leaning as they benefit from it. If we are not careful these uninformed elitist will destroy the great USA that most of us have come to love.

John P

Notice the (poor me), group of people wanting this. Note who would pay. They will riot and protest until they get it.

Silas Longshot

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.
Winston Churchill

David Campbell

“That is too bad because the ignorant advocacy of socialism is currently a significant threat to our democracy.”

Wrong. Our Republic. Socialism wins if everybody thinks we are a democracy.

Rebecca Drummond

Socialism/communism seems to always end up with dictatorship. Dictators seem to end up as murderers of their own citizenship. Those pushing for it all picture themselves as heading up the government from the ground floor; not having to face the lack of food and housing; enough “coal for the furnace;” the dacha in the country; controlling what the citizens are allowed to see, hear, read, and who to worship; have servants to care for their every need in their well-appointed home. You object? Well, then you can be eliminated by the lower echelons in place for that purpose. How exciting for those with no say in anything to have the likes of Barack Obama, Hillary Clinton, George Soros, and their ilk strutting around telling the rest of us how it is and “shut up” and do what you’re told! We had a little bit of that from the senator from… Read more »

Rexford O Ames

Excellent article. Issue: If you can’t read. The article will never been seen. High school teaches the requirement , for students to read , required reading only , in order to go to another level. In other words. Learn nothing.

James Carter

Disarming citizens is necessary for implementing socialism, since socialism relies on lies, force and coercion to work.

Sam Campano

They are all failed systems. Capitalism may seem to be successful but it’s rotting from the inside and requires that we buy into the idea that scarcity is a fact. Truth is there is enough of everything for everyone. The few truly wealthy at the top need us to buy into the idea of scarcity to maintain control and ownership of most of the wealth on this planet. Take energy for example. There is a way to provide free electricity (energy) to everyone anywhere in the world. It would empower all people. Providing free energy to everyone everywhere is socialistic in concept and implementation. Once implemented, the rewards offered to society by the more enterprising, hardworking and innovative people would be rewarded with a greater proportion of the added value provided. Same thing with health care. Instead of the present system that takes 80-90 cents of each dollar for administration,… Read more »