FUNDAMENTAL TRUTH #39: “Socialism is easier said than done.” -Old Pithy

Posted by PITHOCRATES - November 9th, 2010

Capitalism vs. Socialism

Socialism as a political/economic theory is pretty involved.  With an involved history.  And if you’re suffering insomnia one night I recommend reading some of it with a glass of warm milk.  Should put you right to sleep.

Let me simplify it a bit.  To begin with, by ‘socialism’ I mean any form of collectivism (socialism, communism, fascism, statism, social democracy, etc.).  They’re all similar.  Just variations on a theme.  And they all suffer the same defects.  Three of which I summarize here:

  • Public (instead of private) ownership of the means of production, distribution, and exchange
  • Put the common good before individual wants or desires
  • Equality of outcomes

That’s not everything.  But it’s the 3 big reasons why socialism fails.  Basically, socialism is the opposite of capitalism.  In fact, socialism was created to defeat capitalism.  The East-West rivalry during the Cold War was the final showdown between the two systems.  And we know how that turned out.  (In case you don’t, capitalism won).

Public (instead of private) ownership of the means of production, distribution, and exchange

Mikhail Gorbachev asked the great Margaret Thatcher how she fed her people.  Her reply stunned him.  She did nothing.  The Soviet Union was struggling to feed her people with their socialist command economy.  And they couldn’t do it.  They who had great tracts of some of the most fertile farmland in the world.  And yet they still had to import grain from their arch nemesis.  The United States.  To keep famine at bay.  The free markets of capitalism didn’t have to struggle to feed her people, though.  The United States had food to spare.  And even though Great Britain is an island nation that had to import much of her food, there were no famine fears in Great Britain.  The socialist just couldn’t understand how that was possible.

One of the problems with socialism is that it ignores market forces.  And perverts the economic decision making process.  In a free market, market forces maximize the use of scarce resources that have alternative uses.  The market does this through the laws of supply and demand.  And prices.  Things high in demand but low in supply have high prices.  This ensures there is enough of that supply available for those who really need it.  Anyone who pushed a car to the gas pump during the gas shortages in the 1970s understands this.  When the Nixon administration kept prices artificially low, everyone bought and used gas until the supply ran out.  If we had let prices rise to their true market price, those who didn’t absolutely need gas would have cut back on their purchases, leaving gas available to those who really needed it and were willing to pay a high price for it.

When the state takes over the economy, politicians make economic decisions for political reasons.  They ignore the ‘invisible hand’ of the market place.  In the Soviet Union, the state boasted about its industrial output and filled stores with tractor parts no one wanted to buy.  Meanwhile, people stood in line for hours in hopes of buying soap or toilet paper.  And no matter how hard they tried they just couldn’t increase the yield of some of the world’s most fertile farmland.

Put the common good before individual wants or desires

Doing what’s best for the common good sounds noble.  And easy to do.  We all agree our children should be safe.  And should have enough to eat.  And that our schools should serve them breakfast each morning.  And teach them about contraception.  Well, okay, it’s not that easy to do.  Because different people want different things.  And different people think different things are better for the common good.

This is the problem of putting the common good before our individual wants or desires.  Few can agree on what the common good is.  We know our own wants and desires.  But we have no idea what other people want or desire.  Unless we ask them.  But does that even help in determining the common good?  Get a group of your friends and family together.  Make it at least 10 people.  Now get the ten of you to agree on a movie to see.  You know what will happen?  First of all, you’ll waste a lot of time saying, “I don’t care.  What do you want to see?”  Then people will start suggesting movies.  And for every one suggested, someone will vote it down.  This will go on until you finally arrive at a movie that no one wants to see.  But because it’s the movie everyone hates the least, everyone’s willing to settle for it.

Now imagine that little exercise with a thousand people.  The agreeing process will be even more difficult.  In fact, it may be impossible.  It is very unlikely that one thousand people will agree to anything.  And if they try they will waste an enormous amount of time in the process.  No.  Someone will have to decide for the group.  Someone will have to weigh everyone’s opinion and decide what is best for the common good. No matter how many people disagree with this one person’s decision.  F.A. Hayek wrote a book about this.  The Road to Serfdom.  He said socialism ends in dictatorship.  Because there’s no efficient means to determine what’s best for the common good.  He predicted this would happen in Germany with their creeping state socialism.  And Adolf Hitler proved him right.

Equality of Outcomes

If a business has a good year, they tend to be more generous at the holidays.  Let’s say a business owner wants to give out some Christmas bonuses to thank her employees for all their hard work.  She goes to her accountant.  Asks what’s the maximum she can give out without giving herself any cash-flow problems at the beginning of the new year (taxes, insurance, etc.).  The accountant crunches some numbers and says $50,000.  If she has 15 employees, that’s about $3,300 each.  Which should make for a pretty Merry Christmas.  Now, let’s say she has 125 employees.  That works out to a $400 bonus per employee.   Which won’t be quite as merry.

The lesson learned?  The more people included in the getting of something, the less each one gets.  And so it is with socialism.  The only way to get equality in outcomes is to give everyone less.  Sure, we can afford to give Congress people a Cadillac health insurance plan.  But we could never afford to give the same coverage to everyone.  To be able to give coverage to all the people, each person will have to get less.

And they will continue to get less.  As costs go up, it is difficult to maintain the same level of government benefits.  Eventually, they’ll have to raise taxes to cover the higher costs.  And when they can’t raise taxes anymore, they’ll have to reduce the amount of benefits.  Or, in other words, they’ll have to ration benefits.  A bureaucrat will have to decide who should get what.  Which could easily turn health care into politics.  A political opponent needs an expensive cancer treatment?  So sorry.  We’ve already reached our quota this year.  Try again next year.

Socialism is Slavery

What it comes down to is this; socialism really fails for one reason.  It goes against human nature.  It only works when we sacrifice our wants and desires so that others may have their wants and desires.  It’s not trying to keep up with the Jones.  It’s helping the Jones get ahead of you.  It’s living your life to serve others.  And there’s another word for that.  Slavery.  Hence the title of Hayek’s book.  The Road to Serfdom.  For socialism to work, the state must become a dictatorship.  And we must become its slaves.  But few willingly volunteer for servitude.  So, given the choice, we will ultimately choose to make socialism fail.

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FUNDAMENTAL TRUTH #13: “If you were to live under the socialist maxim ‘from each according to his ability to each according to his need’ you would find yourself surrounded by needy people with no ability.” -Old Pithy

Posted by PITHOCRATES - May 11th, 2010

“WHO IS JOHN GALT?”  If you can’t answer that I’m guessing you don’t like reading 1,000-page novels.  Or that you went to public school and had no conservative friends or family.

The book is Atlas Shrugged by Ayn Rand.  John Galt worked at the Twentieth Century Motor Company.  An engineer.  A pretty brilliant one at that.  He’s the hero of the novel.  The plot is the eternal struggle of individualism versus statism.  Private entrepreneurship versus state economic planning and control.  ‘Leave me the hell alone’ versus the all encompassing nanny state.  Good versus evil.  You know, the usual stuff.

Dagny Taggart is the heroine.  She’s the vice president of operations of Taggart Transcontinental Railroad.   If you like your women intelligent, strong, independent, feminine and sexual, then Dagny’s for you because she’s all that and a bag of Skittles.  She doesn’t take sh*t from anyone.

Anyway, Galt and Taggart do some brilliant things separately.  They have some mutual acquaintances.  They later meet.  Yadda yadda yadda, big climax and that’s the story.  I could tell you more but I wouldn’t want to spoil it for you when you do read it.  And you should read it.  When people put together lists of books that have influenced lives, the Bible often lands in the #1 spot.  Atlas Shrugged often lands in the #2 spot.  A must read.  And when you make it through the 50+ page speech near the end, why, you’ll have some bragging rights.  Those of you who have read it are probably nodding your heads as you recall your own perseverance in reading that speech and your will to finish it.  But fret not, casual readers.  The other 950 or so pages are a breeze.

FROM EACH ACCORDING to his ability to each according to his need.  Great philosophy.  If you’re one of the needy.  Kinda sucks if you’re one of the able, though.  Big time.  Here’s how.

Let’s say there’s a husband and wife who are both brilliant doctors.  He’s a neural surgeon.  She works in the field of infectious diseases.  They are among the best of the best in their respective fields.  They are literally saving lives where people once had no hope.  They worked long and hard to reach this point in their careers.  And they continue to work and study.  They contribute greatly in research.  Workaholics both.  Being so dedicated in their careers they chose not to have children.  They felt the work they were doing was that important.  As did others.  Between the two, they earn in excess of $500,000 annually.  Talent like theirs is just so rare and oh so valuable.

Now let’s consider a 19 year old high school dropout.  He works as a bouncer at a strip club and sells a little weed on the side.  Lives in his mother’s basement.  Parties all night and sleeps in till 4 PM.  And he has 10 children by 9 different women.

Now, in the normal world, the doctors would have a nice home and drive Mercedes Benzes.  The bouncer would not.  But in the world where we take from those according to ability and give to those according to need, things would be different.  You see, the doctors don’t have very many needs.  They have no children and work most of the time.  The bouncer, though, has a lot of need.  Ten kids to support.  So can you guess how things would work in this Socialist Utopia?  That’s right.  We take from the doctors and give to the bouncer.  Fair, right?

It depends on your definition of fair.  If you’re just a leech that wants to suck on the teat of society, you have no complaints.  You find the whole thing pretty sweet.  Why, anyone running on that platform, they got your vote.

But what about the ones who spend 8 years in med school, struggle through sleep-deprived internships, residency, continuing education, who work long and stress-filled days and give up a lot of personal pursuits in the process?  What about them?  Shouldn’t we reward that incredible effort and self-sacrifice?  I mean, if we don’t, why do it?  For the good of the people?  Yeah, right.  If it’s all the same, why can’t the bouncer sacrifice for the good of the people?  Why is it always the ones who work hard that have to do all of the sacrificing?  And do.

So there it is, the Socialist Utopia.  Work hard and succeed and get…less.  Don’t work hard and be irresponsible and get…more.  This is the essence of Marxism/Socialism.  In economics, we call this a disincentive to succeed.  Anyone with half a brain will strive to show as much need as possible while showing as little ability at the same time.  Because if you don’t you can see where this ends, can’t you?  You get stuck doing all the hard work.  And if you don’t have a lot of need, you get bupkis for all your sweat and ulcers. 

But it gets worse.  If no one chooses to do those incredibly difficult and stressful jobs, what happens then?  Simple.  If you choose to say ‘no’ someone will simply says ‘yes’ for you.  And what do we call forced labor against one’s will?  We call it slavery.  Or servitude, if you prefer.  As in F.A. Hayek’s The Road to Serfdom which shows the progression from socialism to servitude when someone ultimately has to be the final decision maker in determining what’s best for the common good.

INTERESTING THING ABOUT socialism.  It has a track record.  Not a good one.  Everywhere it’s been tried it has failed.  Why?  It goes against human nature.  Ponder this, if you will.  Let’s say you’re going to dine at a fine restaurant.  There are two ways in.  One through the main entrance where the maître d’ greets you.  The other is through the kitchen.  If you come in through the kitchen, though, you’ll have to do some basic food prep for table 3 and wash the dishes from table 5 before you eat.  Now, which path do you choose?

Yes, it’s a silly example.  But it makes a point.  Only an idiot would enter through the kitchen in this example.  Why?  Because we choose the path of least resistance.  Always.  Even though helping with some food prep and washing some dishes is best for the common good we’re just not going to do it.  At least, not voluntarily.  And that’s why socialism has failed and always will fail.  The natural state for people is NOT slavery.  We don’t volunteer to do more for the same outcome.  People do that only when forced, for the state of slavery can only exist by force.  As Hayek so aptly shows in The Road to Serfdom with the rise of the Nazi and the Italian fascist dictatorships.

THIS IS WHY Atlas Shrugged is so enduring.  It is THIS story.  The eternal tug of war between individualism and statism.  The escalation of force.  Submission.  And breaking points.  Both Hayek and Rand warned of the same dangers and the ultimate consequences of our ‘altruist’ actions.  He by philosophical treatise.  She by narrative.  And one of her characters, Francisco d’Anconia, summed it up well in an exchange with Henry Rearden when he said:

“…if you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders-what would you tell him?”

Rearden didn’t have an answer.  D’Anconia did.  He’d tell him, “to shrug.”  To let go his burden.

And, of course, Atlas is a metaphor for those people with rugged individualism, the entrepreneurial spirit.  And the day they do shrug, we’re screwed.

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