Inflationomics

The Rise and Fall of Socialism

Socialism is a social system where the means of production is owned by government.  Ownership can be acquired either through force (civil forfeiture, for example) or through purchase.  If acquired through purchase, depreciating currency that is required to be accepted for all debts public and private is used.

In the United States, the federal government is expanding its role in the economy primarily through purchases of assets and voters who are becoming ever more dependent on the government’s spending.  In fact, U.S. government spending is now approximately 40% of GDP.  As the U.S. government grows, so does socialism.  The trend, at this time, is clearly in favor of socialism.  Furthermore, to be in favor of socialism is to be politically correct.  In other words, being politically correct will lead to socialism at some point.

Being a victim in the United States is politically correct.  Consider how the U.S. government subsidizes the poor, the disabled, and the victims of natural disasters, through payments, government “insurance” or guarantees, or tax breaks.

Being poor in the United States is politically correct.  Consider how the U.S. tax system is set up to favor poor people with lower tax brackets.  In fact, according to the Tax Policy Center, 46.6% of Americans now don’t pay any income tax.

Losing money in the United States is politically correct.  Consider that the U.S. government has bailed out large corporations that lost money (too big to fail!) and is on the verge of raising taxes on financially successful people. (And then there’s Europe and the IMF wanting to bail out Greece!)

In the long run, if victims are encouraged to be victims, taxpayers are encouraged to be poor, losing money is good, and earning a profit is vilified, taxed away, or sued away, then profit-making enterprises and individuals will have to go elsewhere (where their effort is appreciated), and the socialistic countries will be left with their victims intact.

In a world of ever-faster computers, money will be able to find those capital-friendly places much faster and move there more quickly.  Investment in capital-friendly (politically incorrect) nations will give rise to a new system—a capitalistic system.

Socialism (and its poor victims) will become bankrupt, as it did in the U.S.S.R, much faster today and ensure the rise and fall of socialism more quickly in years to come.  Instead of lasting 69 years as it did in the U.S.S.R., people will come to realize that socialism is a bankrupt system from the beginning, with its inability to calculate costs, arrive at a (market) price that allocates scarce resources, and its government-motivated priorities.  When there are more people working for unproductive governments than there are working for profitable companies, the populace will begin to see how unsustainable socialism really is.  And when people’s standards of living, which stem from the capital invested in their jobs, drop off a cliff, they will realize that money is not the same as capital and that profitable businesses are more important than government bureaucrats and mandates. Priorities will change and so will the social system—from socialism to capitalism.

Robert Jackson Smith

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