WHAT IS SOCIALISM?
by Dr. Lawrence Wilson
© February 2019, LD Wilson Consultants, Inc.
All information in this article is for educational purposes only. It is not for the diagnosis, treatment, prescription or cure of any disease or health condition.
Many people believe that socialism means that everyone is taken care of, and that everyone has about the same amount of money as everyone else. This is what is taught in schools and in the media today, but it is completely wrong.
A strict Marxist definition. Socialism means government ownership of the factories, farms and other means of production of wealth in a nation.
Socialism is just a modern word for tyrannical or authoritarian government rule. Communist Russia and Nazi Germany are examples of socialist economies. The word Nazi, in fact, is a contraction of the words national socialism.
To help understand socialism, it is helpful to understand its opposite. The opposite of socialism is called the free enterprise system, the free market system, or capitalism. It involves private ownership of land, factories, farms and everything else. It works very well.
Socialism as an economic system has failed everywhere it has been tried. It does not work well because people have no incentive to work hard. It also fails because it requires a large bureaucratic government that is not as good at figuring out what people need as the people can do themselves.
Unlimited government power. Socialism is unlimited government intervention in the economy or unlimited government in the economic sphere. In this sense, it means tyrannical control of the economy.
A secular philosophy. Socialism is also called leftist or left wing because it is secular or non-religious in nature. In many socialist nations, religion is either banned or discouraged. Religious people are often hunted down and murdered.
An elitist system. Socialism requires a ruling class of people who manage the economy. In contrast, market economies are controlled by consumers.
In a free market nation, the role of government is to protect individual liberty and economic freedom, and not to rule over the people. The United States, for example, was set up as an individual-based, soul-based, society with a small and less powerful central government. The primary role of the government is to protect the rights of each individual, and there is more self-governance rather than governance by a powerful central government.
Today, elitists do not like this type of government so they are trying to change it to an old-style authoritarian, tyrannical government by calling their idea socialism and teaching that it is benign and helpful, when it is not.
Other aspects. Socialism is associated with compulsory government-run schooling for all children, government-run daycare and government-run health care. Alternatives such as home-schooling are usually not permitted.
Socialist democracies – a mixture. This is a description of most European nations, Canada, Japan, South Korea, Taiwan, Israel and many other modern democratic nations. These nations do not value or protect individual rights as much as does the United States. In socialist democracies people elect their rulers, but the rulers rule. This is different from self-rule or self-governance.
Other words that are similar in meaning: Progressivism, communism, and liberalism.
PROBLEMS WITH SOCIALISM
1. Shortages. Socialist nations often develop shortages of various goods and services because no government is smart enough to anticipate the demand for all goods and services in a society.
The planners try to make sure there is enough of basic goods, but because there is little economic freedom to produce what the people want, often shortages occur.
2. Great Inefficiency. This occurs for a number of reasons:
A. The nation must pay for all of the bureaucrats who manage and police the economic system. Socialism requires millions of bureaucrats and technocrats to plan, manage and police the economic system. These are “professional” managers who work for the government, usually in a central location. Supporting them is very costly.
B. Heavy-handed regulation often means less innovation, and therefore old ways of doing things persist.
C. Powerful unions often demand that old and outdated methods of manufacturing, hiring, and other aspects of business remain in force because unions do not want their members to lose their jobs to automation or other updated business practices.
D. Corruption. Socialist economies tend to have a lot more corruption, as described below. This costs plenty of money.
3. Corruption. Corruption is often described as waste, fraud and abuse. Let us consider each of these:
Waste occurs because without prices to evaluate and value all goods and services, money is often invested poorly or inappropriately. Government bureaucrats are often not good at deciding which products and services are needed, so they favor industries and activities and products that are not really needed, and this is very wasteful.
Waste also occurs due to inefficient production, in many cases, and unnecessary regulations and union rules.
Fraud on a big scale occurs because whenever the government controls an industry, it is fairly easy for sharp operators to falsify paperwork and charge the government for products and services were never provided. This is called fraud.
It is a feature of all government programs, and very hard to stop. Reasons for this are that control and policing are from a distance away, so most of the time the government does not have the “police force” necessary to oversee things well. Also, and more importantly, government bureaucrats have little incentive to stop the fraud. If there is not enough money, they just ask their legislators to tax the people more.
Abuse is somewhat similar to the above. However, it is not exactly illegal activity, as is fraud. Abuse includes bribing or otherwise rewarding government officials in return for receiving lucrative business contracts from the government.
Abuse includes playing favorites in other ways, such as when writing regulations, so that one’s friends benefit and one’s enemies are prevented from competing in business. Abuse tends to occur any time a small group of people have tremendous power over the economy.
4. Bad quality products. This is due to over-regulation, an effect of unions that hold back innovation and new manufacturing techniques, lack of robust competition (as occurs in capitalist societies), and a certain lack of caring that often occurs in socialist economies.
This means that people have less incentive to strive for quality in socialist economies. Usually, they will not be paid more for their innovations, and government rules may stop them altogether from implementing better quality.
5. Environmental problems, in most cases. People complain about dumping of toxic waste and other horrors in America. In fact, America is much cleaner than Europe, Russia, Asia and all the socialist nations.
The reasons are that government regulations often prevent technological change that would reduce pollution. Also, some socialist governments such as India, Red China and others just don’t care about the environment.
6. Much less innovation. This is due to strong union influence, over-regulation by the government in some cases, an a kind of couldn’t-care-less attitude that sets in nations with socialist economies.
Another serious problem is the lack of the “hidden hand of the market” in all socialist economies. The “hidden hand” is a term that means that when people are given more freedom, they tend to become more efficient, and they tend to innovate in unusual and unpredictable ways. This simply does not happen as much in socialist economies, and the entire nation suffers as a result.
7. Perverse incentives. This means that the incentives to innovate, produce efficiently, and take pride in one’s work are not present. Instead, the economic incentives in a socialist economy are to slack off, just do what you are told, and work as little as possible.
This occurs because in many socialist nations one cannot be fired easily, so there is no need to work hard. Secondly, due to pay scales and work rules, if one does work hard, there is less reward than in a capitalist or free market economy. Also, powerful unions do not want one worker rewarded more than another, so union rules are another blockage to excellent worker incentives.
8. A discouraged, less caring and more angry population. This occurs in all socialistic nations. One reason is that people like economic freedom. They would like to start their own business, and run it their own way, without interference from the government or the unions. But this is not allowed.
At a deeper level, the intelligence, creativity and know-how of the people is stifled in a socialist economy, in favor of tight controls. This is always depressing and discouraging for people.
9. Less fair and just, although they claim the opposite. Advocates of socialism defend the system, saying that it evens out many of the inequalities that occur in a free market system. For example, no one is allowed to get rich, even if they work hard, because that is unfair, they say.
However, I would suggest socialism is more unfair by restricting the diversity of human creativity and productiveness. People are treated more like caged animals who receive many “government benefits”, but are not allowed to leave the “cage” of heavy government and union regulation.
10. Many fewer product choices. With less freedom, there are many fewer products and services in a socialist economy. The attitude of the bureaucrats is that if people need a car, a few types of cars are often enough, so that is all they allow. The same is true of all other products and services.
This is very different from a market, in which as many companies as possible, often, compete for the business of the people, giving the people many more choices and types of products.
An example from nutritional balancing is that in America, many brands of spring water, distilled water, and other types of water are readily available in even small-town supermarkets. However, when I speak with people in the nations of Europe or Canada, they have many fewer choices.
Their governments do not allow the importation or production of many kinds of water, of they have so many regulations that it discourages many companies from selling their products in these nations.
THE OPPOSITE OF SOCIALISM
To understand socialism better, it helps to consider its opposite. This is a free market or capitalist or free enterprise economic system.
In this system, there is little or no central planning. That is an essential difference. Instead, individuals can start businesses easily, without a lot of blocks in their way. The goal is to respond to the demand for products and services that exist in every area of the economy. If one does this, one can make money, and taxes are kept low so individuals can keep what they earn.
The key to the market system is prices. If everyone wants a computer, and there are not enough of them, the price of computers will rise. In this way, fewer people will decide to buy computers, so the supply and the demand will even out.
Similarly, if no one wants little cars, and there are millions of these cars available, the price of little cars will go down. In this way, more people will decide to buy little cars and the supply and demand will equal out. This is called the law of supply and demand. It is the basic law of economics.
People want homes, cars, food, television sets, babysitters, and so on. In a market economy, people are allowed and encouraged to start businesses and companies to satisfy these demands. There are few, if any, bureaucrats who tell people what to do, how many televisions to make, what they should look like, and so on.
These are some of the essential differences between socialism and a market economy.
ISN’T AMERICA A CAPITALIST NATION?
It was set up as a free enterprise nation or capitalist nation, and this worked excellently for almost 100 years. Then people who opposed America slowly began to destroy the concepts of the founders and this is continuing today. Here is a very brief and simplified timeline of a few of the changes:
1865 – Abolition of the land grant and land patent. When one buys a piece of land, one should receive a land patent. In 1865, this system was done away with. It was replaced with deeds for land.
A deed to a piece of land does not confer true ownership. One knows this because counties and states can tax “your land”, and if you don’t pay their taxes, they take away your land. This would not occur if you truly owned your property.
When one buys an automobile in America, one also does not own the vehicle outright. Few people know this, but upon paying for a car, you do not receive the actual title to your vehicle. This is kept elsewhere.
Instead, the “owner” receives a Certificate of Title. This is not the same. If you received the actual Title to your car, the government could not prevent you from using your car if you do not pay registration and licensing fees. They also could not impound your car, which means to steal it if you do not have a license or proper registration. I am sorry if this sounds blunt, but it is the truth.
1913 – The Federal Reserve. In 1913, a socialist-leaning president, Thomas Woodrow Wilson, signed the Federal Reserve Act. This law illegally turned over control of the money to a branch of the Bank Of England called the Federal Reserve.
Even the name is a complete lie. It is not federal, and there is no reserve. American currency, which used to say “United States Note” was changed to read “Federal Reserve Note”, meaning they own the money.
1934 – Social Security. In 1934, another socialist-leaning president, Franklin Roosevelt, signed into law Social Security. This is the American government retirement program. One of the main effects was to drive out of business the private retirement systems throughout the nation. This occurs whenever government takes over a sector of the economy, in this case the retirement systems.
While there are still some private retirement systems in America, there were formerly many, many more.
1967 – Medicare and Medicaid. In 1967, another socialist-leaning president, Lyndon Johnson, signed into law the American old-age government medical system and the American poor person’s medical care system.
This also put out of business the private medical systems used by the elderly and the poor.
2010 – Obamacare. In 2010, another socialist-leaning president, Barak Obama, signed into law, without any Republican votes at all, the Affordable Care Act of 2010. This greatly increased government control over health care in the United States. It has been a horror that has just raised the price of health insurance and has not improved health care one bit, as was promised.
(NOTE: socialists think all the above are wonderful steps toward socialism).