Why Does Socialism Always Fail?
In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.
Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.
And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing.
- Vladimir Putin, Prime Minister of Russia, February, 2009.
Socialism is the 20th century's greatest tragedy. Although its evangelists promised equality, prosperity and security, it was only responsible for misery, poverty, and absolutely 100% of the time ended up in tyranny.
Actually, it is interesting to note that socialism in the 20th century did achieve a form of equality after all, but only in the form that all people in socialist countries were equal in their misery and poverty. Having spent considerable amounts of time in actively socialist countries, I have seen the anguish of its proletariat with my own eyes... although I never thought that I would live to see the Kremlin lecture Washington on the dangers of socialism.
Just like Madoff's Ponzi pyramid scheme initially showed staggering success but then collapsed like the house of cards that it was, socialism demonstrates signs of success in its early stages. The essential problem is that all of the gains, real or imagined, fade rapidly as the basic and inescapable deficiencies of the policy of central control of an economy emerge.
I remember a gardener years ago discussing a particular way to over-fertilize a plant. That process would lead to a swift growth spurt and early blooming. Unfortunately, the plant would succumb to the excessive nutrients in the soil and would never bear fruit before it withered and died. That is an excellent metaphor for the life cycle of socialism.
The promoters of this appalling and loathsome grim joke on humanity unanimously point to the initial stages of any socialistic system where progress is made on a wide range of social issues, including universal health care, affordable housing, and guaranteed welfare. However, they unfailingly begin to suffer from amnesia when the mid to late stages of socialism arrive: Collectivism is impossible to support over a term of more than a few years due to the fact that it is based on a theory which is completely and absolutely erroneous.
Why does socialism always fail? Socialism is incompatible with the most basal and rudimentary principles of human behavior. Just like an animal has to be trained to perform a particular behavior through positive reinforcement, humans will generally not perform any act of labor unless there is acceptable incentivization. Incentives are central to a free market system: indeed the entire essence of the free market economy is to provide an elegantly interconnected infrastructure of incentives to drive and direct the socio-economic framework of the nation.
These incentives are based upon the essential human drive to possess. Under the free market economic model, individuals are enabled and empowered to gain tangible value from the fruit of their labor, and be able to build lasting security through wealth. One of the major keystones of this security is to be seen in the right to privately hold property. Permanent shelter is a fundamental human desire, and many individuals in a free market system have stated that the happiest day of their lives, after their wedding or birth of their children, is the day they burned their mortgage and thus owned their homes free and clear.
There are many other forms of value, whether it is the ability to possess entertainment, sports, leisure, professional, or convenience accessories, or to be able to invest wisely in order to ensure that children are secure while retirement comes early and is comfortable. The free market system is based this inalienable right to possess within a lattice of market-set pricing and profit-and-loss accounting. It is impossible to understate the importance of these incentives and their unparalleled power to shape the economy of a nation.
Incentives under socialism are virtually non existent. When you have a nation where all property is owned by the government there is no way for the common person to build security in any way. Individuals soon recognize that they are serfs of the state, and since they are subject to the whims of the politburo of the day, have no possibility for self determination. The only way to pull yourself out of the mire is to attempt to become one of the handful of Party authorities, who are able to live in the luxurious decadence of the top capitalists.
I know an Eastern European family whose 19th century ancestors built a lovely stone villa in a magnificent panoramic location overlooking the sea. It served as their ancestral home for over a century until the new socialist rulers of the nation served them an order to vacate. Their entire family of eleven was to be relocated to a two bedroom apartment in a Stalinist concrete block building next to a toxic chemical plant, as the villa had now been allocated to a high ranking local Party member.
This family not only received no form of compensation whatsoever, but was escorted from their ancestral home at gunpoint, to spend the rest of the century in that squallid, cramped, crumbling apartment in the core of a smog-laden, grimy city. It was only after the Fall of the Berlin Wall that they were able to engage in an expensive and draining five year long court action to restore their rightful property rights and regain the deed to their villa, which by now had fallen virtually into ruin as fifty years had elapsed.
Socialist centrally planned economies invariably fail due to their inherent and integral failure to encourage, develop, and nurture the essential potential of its people by lack of incentivization. Socialism is a failure because it suppresses the human spirit. Why else have so many thousands of people lost their lives in attempts to clandestinely escape their socialistic bondage and reach nations which embrace free market economies? In comparison, how many people have willingly left free market economies to move to socialist countries?
By its inability to foster, promote and develop the potential of people through incentives, centrally planned economies deprive the human spirit of ambition, aspiration, enterprise, determination and industry. What happens to the aspiration of a human being when there is essentially no reason to do anything? Nothing gets done.
Thus lies the core flaw of collectivist economies: When you inform a laborer that it is essentially irrelevant whether they produce one wicket a day or a hundred, and that it is also irrelevant whether those wickets are quality crafted or thrown together, as they will live in the same government owned apartment, shop at the same meagre stores, and be stuck in the same droning, monotonous job for the rest of their lives... their productivity falls steadily until almost nothing is produced. Multiply that effect by virtually every laborer in the nation, and you soon see why socialist economies are marked by long queues outside stores when the word gets out that they have soap, or bread, or eggs that day. Nobody is producing anything, thus nobody sells anything, thus there is nothing to buy.
At a time when the fault lines of capitalism are becoming exposed through the recent financial seismic shocks, it is a knee jerk reaction for the closet socialists to come out of the closet, dust off their tired rhetoric, and give it one more shot to convince the world to sing "L'Internationale" in unison. The reason why each proponent of this deficient ideology, from Vladimir Lenin, to Mao Zedong, to John Lennon has failed is due to the barren wasteland which exists within the seductive allure of socialism to the poverty-stricken masses of the world. The chimera of being able to "share the wealth of the state" is extremely tempting to those who toil in drudgery while the upper classes are whizzed by in their chauffeured limousines.
What they don't understand is that the state cannot create wealth, it can only administer it. Thus, the essence of socialism is one of universal impoverishment where even the hope that the lower classes can escape their poverty vaporizes along with the rest of the the nation's productivity.
We in the free market world are currently undergoing a severe economic adjustment. It would be fallacious to lay the blame for this convulsion on free market ideology or capitalistic structures. The current upheavals are due to the failure to enforce existing financial regulations thus letting blind greed and rampant megalomania run wild. That is not what a free market economy is all about. Just like a state cannot exist without just laws, a capitalistic system cannot function without adherence to fair and reasonable regulation. This recession was triggered by a myopic and incompetent gaggle of politicians, not by any inherent fault of the free market system.
The genius of capitalism, and the basic reason why it succeeds where socialism fails, is contained within its core tenet that the free and unfettered market determines profit and loss. Every citizen is empowered to design and market a better mousetrap, provide a better service, or implement a better idea, and let the free choice of the consumer decide to reward them. The potential success of the individual is limited only by their ambition, drive, and intellect, not by slavish adherence to a collectivist Five Year Plan.
It is at a time like this that we cannot afford to be hypnotized by the siren song of socialism, and the deleterious, titanic evils of nationalization, central planning, and government control through financing of private corporations. It is a time when we must refresh and renew our free market structures, allowing individuals the freedom and liberty to create wealth so that the rising tide will raise all boats once again. Some well known, salt of the earth companies and brand names will disappear forever, but they will be replaced and refreshed by unforeseen, startling new entities which will bring the nation new economic vitality and vigor. The United States of America is a land where ingenuity, innovation, and imagination are literally imbued in the lifeblood of the nation and its people. It has only ever existed as a framework in order to Let Freedom Ring, and none of its citizens must ever be enslaved to any degree of socialistic peonage, no matter how limited, or coated in an illusion of necessity.
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