“Democratic socialism is legalized theft in the name of the people against the vilified few. It is a battle against income inequality by means of collective immiseration. It is the subjugation of private enterprise and personal autonomy to government power.” – Bret Stephens
“To be a socialist is to submit the I to the thou; socialism is sacrificing the individual to the whole.” – Joseph Goebbels
In yet another move of socialist brilliance, the Venezuelan government of Maduro announced the seizure of the General Motors plant located in Valencia. GM immediately announced the layoff of the division’s 2,700 workers. Venezuela has seized more than 1,400 companies since the socialist rise to power in 1999 under Hugo Chavez. Almost all seized companies have ceased operation.
As noted by Ana Quintano, “forty years ago, Venezuela was the fourth richest nation, per capita, in the world. Today, its economy is collapsing. Such are the wages of Chavismo.”
Ironically, some look at Venezuela and see the problem not as a failure of Socialism but rather an incomplete transition to Socialism – a premise put forth by Gabriel Hetland of The Nation:
“If socialism is understood as a system in which workers and communities (rather than bureaucrats, politicians, and well-connected entrepreneurs) exercise effective democratic control over economic and political decision-making, it would appear that Venezuela is suffering not from too much socialism, but from too little.”
Unfortunately, Mr. Hetland misses an important point. He fails to see that there can never be a state of true socialism.
Then we have Amanda Gardner’s take in her defense of Bernie Sanders:
“Democratic socialism is not Chavism. Simply because Venezuela’s government labels itself “socialist” does not mean that the government actually follows the true principles of socialism. Simply calling a dictator a socialist does not a socialist make.”
Again, Ms. Gardner misses the true point – although she hits closer to the mark then does Hetland. She fails to see that Socialism inherently lends itself to dictatorial rule.
Mr. Hetland and Ms. Gardner had one thing right. Venezuela is not truly Socialist. There has never been – nor will there be – a truly socialist society. This would entail a classless, moneyless mode of production – with “free” utilization of all products, by all citizens, as needed or required. Add in “stateless” and you have pure communism. Neither exist. Nor will they. Opportunistic forces always intervene before true states of either ideology can be achieved.
I earlier provided some basic definitions in The Globalism Threat – Socialism’s New World Order. They are listed below:
Capitalism – an economic and political system in which all property is owned by private owners for profit, rather than by the state.
Socialism – a political and economic theory of social organization in which all property is owned by the state on behalf of the workers. In Marxist theory – a transitional social state between the overthrow of capitalism and the realization of communism.
Communism – a political theory advocating class war and leading to a society in which all property is owned by society and each person works and is “paid” according to their abilities and needs.
The most obvious problem inherent to Socialism – and Communism – starts with incentives. Capitalism implicitly recognizes the power of the properly motivated – incentivized – individual. Socialism completely ignores incentives – or assumes they arise from a sense of communal spirit. Yet, we are all subject to incentive. Our very acts of obtaining food and shelter are effectively means of rewarding our internal drives for hunger and warmth. To ignore incentives is to ignore human nature. This is one reason why socialism is fatally incompatible with human nature. And one reason why socialism fails. But that’s the easy answer.
Like it or not, people act according to their own self-interest – even if they are unaware of doing so.
My favorite illustrative story on Communism comes from a factory that produced camping gear for tenting and backpackers. As time went by, utilization of the factory’s products fell. When the matter was looked into, authorities found that plant personnel were making their products bulkier and heavier in an attempt to meet production quotas – quotas based on the amount of raw materials utilized by the factory. In an attempt to meet projections, factory managers completely ignored the needs of the final consumer, creating pots and pans that were too heavy to be used for their intended purpose – backpacking.
And yet, one could argue that these factory managers were acting rationally. They responded to external pressures to meet quotas. They acted with self-interest.
Bruce Yandle gives us some further insight. Yandle is dean emeritus of the Clemson College of Business and Behavioral Sciences and was executive director of the Federal Trade Commission (FTC), and senior economist on the President’s Council on Wage and Price Stability. He also developed the economic theory of Bootleggers and Baptists.
Yandle noted that “public policies tend to be supported by “bootleggers,” who saw their incomes increase as a result of a particular policy (as bootleggers did under Prohibition and under Blue Laws), and “Baptists,” who supported public policies for moral reasons (Baptists tended to support prohibition and Blue Laws because they believed that alcohol was evil). The theory holds that for a regulation to emerge and endure, both the “bootleggers,” who seek to obtain private benefits from the regulation, and the “Baptists,” who seek to serve the public interest, must support the regulation.”
From Yandle’s article:
“In my studies of the relationships between governments and business, my attention was first attracted to the unbelievably costly things that governments do when attempting to control businesses. It seemed, as Murphy might have said, that if there was a wrong way of doing something, the regulators would adopt it. I found countless cases where rules and regulations imposed tremendous costs while delivering little if any benefit. Not only does government rarely accomplish its stated goals at lowest cost, but often its regulators seem dedicated to choosing the highest-cost approach they can find.
My views began to change after I joined the Council on Wage and Price Stability in 1976. To my surprise, many regulators knew quite a bit about economics. Even more surprising was that industry representatives were not always opposed to the costly rules and occasionally were even fearful that we would succeed in getting rid of some of them.
That marked the beginning of a new approach to my research on regulation. First, instead of assuming that regulators really intended to minimize costs but somehow proceeded to make crazy mistakes, I began to assume that they were not trying to minimize costs at all – at least not the costs I had been concerned with. They were trying to minimize their costs, just as most sensible people do.
- The cost of making a mistake. Simple rules applied across the board require fewer decisions where mistakes can be made.
- The cost of enforcement. Again, simple rules requiring uniform behavior are easier to monitor and enforce than complex ones, and they also have a false ring of fairness.
- Political costs. A legislator is likely to be unhappy with regulators who fail to behave in politically prudent ways-who fail, in the legislator’s view, to remember the industries and the workers in his area.
What do industry and labor want from the regulators? They want protection from competition, from technological change, and from losses that threaten profits and jobs. A carefully constructed regulation can accomplish all kinds of anticompetitive goals of this sort, while giving the citizenry the impression that the only goal is to serve the public interest.”
It was this observation that led Yandle to his Bootleggers and Baptist theory of regulation. It tells us much about our current regulatory environment but it is also highly illustrative of the flaws inherent in Socialism.
Yandle was writing about regulatory reform in the United States – not socialism. But his observations are insightful on several levels. Regulation and regulatory bodies – by their nature – are often only an arm’s-length away from socialist tendencies. When regulators – or socialists – are not subject to direct economic ramifications from decisions – their incentives change. What becomes most important is minimizing harm to themselves – avoiding personal costs while making decisions that impact others. Socialism removes property rights and in doing so completely distorts market responses. Decisions are not made on an economic basis – they are made on a political basis. Hence the seizure of GM’s factory – in a vain attempt by Venezuelan dictator – oops, President – Maduro to boost his flagging popularity.
It is this exact process that has led to leadership by regulation at the socialist-minded European Union. And it is what will lead to their demise. I will say it yet again, the European Union is doomed. Brussels is finally beginning to grasp the threat, but they cannot bring themselves to change. And it’s probably too late if they did. But I digress.
Let’s examine the true goals of socialism. Vladimir Lenin once said “The goal of socialism is communism”. Perhaps, but while every communist is a socialist, not every socialist is a communist.
Ayn Rand had a slightly different take:
“Socialism is the doctrine that man has no right to exist for his own sake, that his life and his work do not belong to him, but belong to society, that the only justification of his existence is his service to society, and that society may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good.
The essential characteristic of socialism is the denial of individual property rights. No human rights can exist without property rights. Since material goods are produced by the mind and effort of individual men, and are needed to sustain their lives, if the producer does not own the result of his effort, he does not own his life. To deny property rights means to turn men into property owned by the state.
Socialism is not a movement of the people. It is a movement of the intellectuals. There is no difference between the principles, policies and practical results of socialism—and those of any historical or pre-historical tyranny. Socialism is merely democratic absolute monarchy—that is, a system of absolutism without a fixed head, open to seizure of power by all corners, by any ruthless climber, opportunist, adventurer, demagogue or thug.”
And there it is. In the act of denying property rights to individuals, the individual loses control and is subsumed by the many. In the eyes of would-be socialists, losing control makes all equal to the other. But economic power is not gone. It has just been placed up for the offering of those who would claim it – “open to seizure of power by all corners, by any ruthless climber, opportunist, adventurer, demagogue or thug.”
Socialism throws the doors of political opportunism wide open to those worst equipped to wield the power it brings. It is a sad truism that those with keen and ruthless political skills are often the least equipped to govern what they have gained.
Socialism inherently creates a vacuum of power – one that begs to filled. It creates a reward system for those who can seize power by means other than individual control of property. It promotes political opportunism. It promotes seizure of power through seizure of government. Those that can garner support of the people win control of the government – and government controls the property. It is this facet that guarantees there will never be true socialism. Someone will always move to take what is offered.
In this ruinous combination of characteristics – loss of economic incentive, distortion of decision-making, denial of human rights through the denial of property rights, sacrificing the individual to the whole and consolidation of wealth at the state level – lies the guarantee of socialism’s failure.
Someone will always reach for the carrot.
For those who are tempted to cite the Scandinavian countries as models of socialist success, I invite you to read Scandinavian Unexceptionalism – Culture, Markets and the Failure of Third-Way Socialism by Nima Sanandaji. It is a lengthy but enlightening read. There is also an informative four page summary starting on page fourteen of the pdf file.