FUNDAMENTAL TRUTH #66: “In socialism you don’t get what you want. You settle for what you get.” -Old Pithy

Posted by PITHOCRATES - May 17th, 2011

Beggars can’t be Choosy

Imagine if you will some outdoor summer event.  By the lake.  Or the beach.  Someplace nice.  But a long way from any restaurants or stores.  It’s a day of fun and games enjoyed by all.  A rather long day at that.  And the people get hungry.  Lucky for them there’s food.  Over at the concession area there are two lines.  One long.  One short.  At the long line it says free food.  The short line says $250 per plate. 

There are also menus.  For $250 per plate you can get almost anything you want.  New York strip steak.  Crab legs.  Lobster tails.  BBQ ribs.  Corn on the cob.  Baked potatoes.  You name it and it’s there.  The free line is serving watery, lukewarm macaroni and cheese.  And they make it with an artificial cheese product.  One cup per person.  It tastes horrible.  But, hey, it’s free.  And you know what they say?  Beggars can’t be choosy.  Oh, and they run out before everyone is served.

Now everyone would rather have the steak, ribs, crab, lobster, etc.  But not everyone can afford $250 per plate.  Or wants to pay.  Some say it’s not fair.  But the people enjoying their steak aren’t complaining.  The line’s short.  And there’s plenty of food for them.  It’s just those who can’t or don’t want to pay the $250 per plate that complain.  Because they not only want something for free, they want something good as well.  But life doesn’t work that way.  Because everything costs.  And it’s just too expensive to give away steak, ribs, crab, lobster, etc.  But by selling these at a high price allows them to give away the macaroni and cheese to everyone else.  Which allows everyone to eat.  Until they run out.

As an interesting exercise, substitute ‘health care’ for ‘food’ in the above exercise.

The Free Market is most Efficient 

We can get a broad understanding of economics from this example.  In free market capitalism you can pretty much buy whatever you can afford.  Innovation and the profit incentive provide a lot of competition for your money.  Giving you a lot of choices.  There’s always a new company out there saying, “Hey, look at me!  Look at the new thing I have to sell!”  And if we like what we see we just may buy it.  Perhaps making another millionaire entrepreneur in the process.  While making our life better to boot.  Not too shabby.  This would be the ‘short’ line in our example.

Socialism is a command economy.  ‘Smart’ government bureaucrats direct the economy to maximize market efficiency.  And its objective is egalitarianism, not profits.  Because people should come before profits.  So the socialists decide who gets what resources and what prices should be.  Of course, when you do this, ultimately someone has to decide for the masses.  Because you can’t put 60 million people into a room and ask them what they want.  Sports cars or fuel efficient hybrids?  More tractor parts or more toilet paper and soap?  Grain crops used for food or fuel?  So not only do they decide how to do things more efficiently, they decide our choices for us as well.  This would be the ‘long’ line in our example.

In our example, the free market capitalists are happy.  And sleepy after eating a huge and delicious meal.  The socialists on the other hand are not so happy.  The food wasn’t that good.  And they had to ration it at the end of the day to feed everyone.  And yet they still ran out before everyone ate.  And this happened why?  Because it is the free market that is most efficient.  Not the command economy.  The free market is what fills up store shelves with things we want to buy at affordable prices.  Not the command market of socialism.  If you don’t believe me, talk to someone who lived in the Soviet Union.  Ask them what was on their store shelves.  They probably saw more tractor parts (which they didn’t want to buy) than toilet paper or soap (which they did want to buy).

Egalitarianism leads to Low Quality and Rationing

In theory, socialism sounds wonderful.  Egalitarianism.  Income redistribution.  From those according to ability to those according to need.  Sticking it to the rich.  What’s not to like about that?  I mean, if you’re not rich.  And that’s the catch.  Rich can be a relative term.  If someone has more money than you they’re rich and should pay more in taxes.  And those who make less than you will feel the same way about you.  Which, of course, you’ll probably reply by saying something like, “Hey, wait a minute.  I’m not rich.”  But anyone poorer than you would disagree.

So the middle class will only want to tax the ‘rich’ rich.  And the poor will all be for taxing the middle class and the rich.  Ultimately, though, because there are so many ‘poor’, you have to tax the middle class in any income redistribution scheme.  Because even though the middle class is far from being rich, they are far more numerous.  And the numbers add up. 

Besides being taxpayers, the middle class and rich also have something else in common.  Jobs.  The rich provide startup capital for new businesses.  That creates jobs.  And the middle class start up most small business.  And they, too, create jobs.  In fact, small business creates the majority of the jobs.  So high taxes on these people provide a disincentive to do what they do best.  Create.  Jobs.  And things people want to buy.  So higher taxes reduce incentive.  And this reduces economic output.  Less stuff on the market means higher prices.  Lower quality.  Or simply less stuff.

Some People are more Equal than Others

And this is why beggars can’t be choosy.  Egalitarianism sounds nice but there is only one way to achieve it.  You can’t give everyone steak.  It’s just too costly.  So you give everyone watery, lukewarm macaroni and cheese.  Everyone is equally miserable.  And hungry.  But you don’t complain.  Because it is either that.  Or nothing.  Unless you’re part of the inner circle.  The ruling elite.  For them there is always steak and lobster.  For it’s a small price to pay for all the selfless service they do giving us our egalitarian society.  They have a lot of stress in their life optimizing market efficiency.  So they need a little pick me up.  I mean, who could begrudge them fine steak and caviar after all they’ve done for us?

Socialism is not about market efficiency.  It’s about lowering quality (to make things cheaper).  And rationing.  So you can try to spread less stuff around to more people.  But taxing the creators raises costs.  And reduces economic output.  Which means there is less stuff to distribute to the people.  Which means they have to raise taxes to keep giving the people the same stuff.  Or reduce the quality further.  Or ration more.  It’s an endless downward spiral. 

And once you’re in the system, you are dependent on the system.  You beg and plead for less rationing and cuts but to no avail.  Sure, there’s enough steak for the ruling elite, but not for everyone else.  So there has to be fair-shared sacrifice.  By everyone.  Everyone that’s not in government, that is.  For in an egalitarian society, all people are equal.  Only some are more equal than others.  (A little George Orwell there.)

As an interesting exercise, substitute ‘health care’ for ‘food’ in the above exercise.

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