The Problems with Socialism

The first problem with socialism is that it means different things to different people. For some people, an image of the Union of Soviet Socialist Republics (U.S.S.R.) comes to mind where dissenters were sent to concentration camps in Siberia. For others, the failed states of North Korea or Venezuela with their dictators in full control of the economy, come to mind. The other day, I was reading a book that quoted Sir John Templeton, a famous international investor, as having said, “Avoid investing in those countries with a high level of socialism or government regulation of business. Business growth depends on a strong free-enterprise system...Governments should stop interfering with what people want to do.” Clearly, in his mind, socialism exists on a sliding scale with some countries being more socialistic than others. This quote also suggests that socialism refers to the ownership/control of assets by governments, as opposed to mere regulation of business. Some people simply think of socialism as a perversion of the law; i.e., when the law takes property from all the people and gives it to a few. Examples include: tariffs, government-granted monopolies, anti-trust laws, Medicare and Medicaid, Social Security, foreign aid, progressive taxation, public schools, government jobs, bail-outs, minimum wages, disaster relief, subsidized credit to purchase homes, government subsidized school loans, government research grants, gratuitous wars, food stamps, flood insurance, unemployment compensation, union privileges, and licensing, to name but a few encroachments into the private economy.

If we look at Bernie Sanders, an avowed socialist and aspiring Democratic candidate for President of the United States in 2020, we see someone in favor of raising taxes on the rich, and giving more money to the poor people for education, health care, and housing. A very noble cause until you consider that he wants to take the money to pay for these things either from others through taxation, or by simply printing more money and making everyone’s money/purchasing power worth less (worthless). Besides, the U.S. Government is already doing all these things, Bernie just wants to do more of the same. The problem is that when you take something from someone without giving them anything in return, you kill their incentive to continue supplying their goods/services. How does that help the country? It seems to me that with fewer people working, the country will become poorer, not richer.

The second problem with socialism is that people always want more (we live in a world of limited resources and unlimited wants) and it’s easier to vote into law a higher tax or handout than it is to work harder or be more productive. The voters become addicted to taking from those who have and giving to those who vote. At some point, when chaos ensues, a strongman is voted into power and he/she determines who gets what (think Hitler). That means his trusted supporters and he get the best of everything. Production stops and it becomes “us” against “them.” The name of the game changes from supplying more to seeing who can get a bigger piece of the existing pie, because the pie isn’t getting bigger any more. See how Maduro behaves in Venezuela, or how Robert Mugabe behaved in Zimbabwe.

The third problem is that once you throw out the property rights of the minority (property owners), it’s hard to know when to stop taking from the “haves” and giving to the “have nots.” Creativity is stifled and people spend more time trying to hide/retain their wealth than they do trying to make more. Why put forth the effort to make more if it’s going to be taken away anyway? As Margaret Thatcher, former prime minister of Great Britain, once said, “the problem with socialism is that you eventually run out of other peoples’ money.”

In the United States, I know a number of people who, faced with the opportunity to earn a little more money, prefer to go fishing instead of being pushed into a higher tax bracket. I, myself, resent paying taxes to such a profligate government and have spent too much time learning about the tax laws and how to legally reduce my tax bite rather than working to make this a better world.

The bottom line is that the more government we have in a country, the less productive we become.

With so much leeway in the meaning of socialism, it can be confusing. Without a clear-cut meaning, many people who just want “change” are now calling themselves socialists when really all they want is to have their school loans forgiven.

Robert F. Sennholz

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