Socialism Defined for Millennials
Recent news claim 43% of millennials support Socialism over Capitalism in poll. That is shocking. How did we come to this? I'm not so sure about the poll and polling in general. Just to be safe, I want to explain what is socialism in case some people have a misconception. By the way, it has nothing to do with social media.
Updated Sept. 2018
What Is Socialism?
Socialism is a variation of Communism, an economic and political philosophy proposed by Karl Marx. The main idea is "From each according to his ability, to each according to his needs." Think about that, it is profound. It sounds so great doesn't it? However, the problem is, it doesn't work! It has been tried for the last 100 years in various form and they have all failed miserably.
Why It Failed?
It failed because it is contrary to human nature. Man does not have the natural instinct to live in communal society. It failed in Plymouth when the first Pilgrims came to America. It failed in the former Soviet Union. It failed in East Germany and Venezuela and Cuba. It is failing in Greece. It failed in the communes of our own country back in the 1960s.
As Margaret Thatcher said famously, "the problem with socialism is sooner or later you run out of other people's money."
A Personal Scenario
Let me explain it another way on a personal level that everyone can relate to. Recently, Bernie Sanders, presidential candidate on the Democratic ticket, proposed 75% income tax for the 1% super rich, and free college education for all.
Just look around you and see how our society functions. We have Doctors and lawyers and engineers and accountants but we also garbage collectors, electricians, plumbers and cooks and dishwashers and a whole range of professions from the highly skilled to the entry worker. They are all needed to keep our society running smoothly. Just assume if we could afford to offer free college to everyone. How will that change the distribution of work? who will want to work as a welder if he can go to college and work in a clean office?
The reason we need a variety of workers is because we have a variety of tasks. Some will require high skills and they will be compensated equally. It is the free market system that ultimately determine the price of labor. Supply and demand works every time.
As regard to tax rates, a higher progressive tax rate will only discourage the high performers to either cut back or seek tax loopholes to minimize their personal tax liability. In the extreme, some have moved out of countries that implement high tax rates. The State will ultimately loose revenue with a high tax rate - just the opposite what they intended. It is simple economics.
French Actor Move to Russia to Avoid Tax
What About Inequality? and Wall Street?
Socialism claims equality for all as the best way. However, that is not what our Constitution guarantees. Our Constitution is based on equality of opportunity, not equality of outcome. That's a huge difference.
I do agree with Bernie Sanders when he charges Wall Street with cronyism. I just don't agree with his solutions. Taxing the rich and the big corporations to pay for social programs that benefit the people is not the solution.
How to Fix It?
The way to fix inequality on Wall Street is by leveling the playing field. The job of the SEC is to crack down on insider's trading. Investment vehicles should be transparent. All people should have equal access to investments. There should not be a special class of investments available only to the rich and powerful. What is proposed by Bernie Sanders of taxing income at 75% rate will not work. It has been tried in France and even the French rejects it. A high tax rate is a disincentive. The rich and powerful will find ways around this and the revenue will not materialize.
In France, they tried raising the income tax rate to 90% above a certain level. Tax the rich was the slogan. It was reported that the French actor, Gerard Depardieu announced his intention to relocate to Russia.
Crony Capitalism at it's Worst
What about Denmark?
Bernie Sanders uses Denmark as a shining example of a Democratic Socialist government succeeding. But here is the truth, Denmark is not a socialist nation. Hear it from the source - the Prime Minister of Denmark. He explained Denmark has a free market economy.
The Constitution and Conservatism
The solution is very simple. Our Constitution of limited government and free enterprise is the best path to prosperity. It is not a perfect system but it is the best among all current systems. Conservative principles are the best to address many of our societal problems. Unfortunately, many of our schools today do not teach basic civics as they should.
Here is a simple math explanation using pies. It is a simple illustration of economic systems.
In ideal Socialism, suppose there are 100 pies and 100 people. Equal distribution will mean each person gets 1 pie. (group A)
In practice, socialism has a ruling class (B) and the masses (C). Assume 10% are group B and 90% are group C. The 90 people in group C will each get only half a pie while the 10 people in group B will get approx. 5 pies each.
In Capitalism, because of the profit motive and incentives, the pie is bigger. Let me just use 400 pies as an example. The same 100 people can be divided into 2 groups D and E. D is the risk takers and capitalist who create the businesses that build things people want. Group E are the consumers and the working class. In this scenario, assume there are 1 D and 99 E. Each member of E will get 0.5% which is 2 pies, while D gets 200 pies. Talk about income inequality. In addition, members of group E are free to become member of D by taking risks and working hard and inventing new ideas...(free enterprise)
In summary, which group do you want to be in?
A - 1 pies
B - 5 pies
C - 0.5 pie
D - 200 pies
E - 2 pies
For me, I want to be in group D but will settle for being in group E.
Socialism Described By a Person Who Lived It
The following youtube video is an interview conducted by John Stossel with Gloria Alverez.
A Modern Experience - Venezuela
This oil rich South American country is in turmoil having been led to socialism by Hugo Chavez. Here is their story.
A Self Professed Socialist Without a Clue
A Picture Worth 1000 Words
For the millennials, who thinks socialism is the answer, I would suggest you go back and read our Constitution. It is a simple and short document but it is the right framework to govern a democracy.
The other suggestion is to go back and study some of our history. You will find that the current debate has been fought many times before and Capitalism was the clear winner.
Finally, I suggest reading two important books. George Orwell's "Animal Farm" and Milton Friedman's "Free to Choose." Both will explain how freedom and democracy will win over socialism in all its many forms.
Postscript... Sept. 2018
After reading this piece at my Writers Group, I received some insightful comments. I was told I did not provide enough of my own experience to argue my convictions. Also, I did not provide a balance for the other opinion of socialism principles. I was lecturing the audience instead of presenting both sides so that the reader can draw their own conclusions. Therefore, I have revised this article and added aditional information.
What About Social Security?
Some in our country point to Social Security as a good example of socialism. It provides for a secure pension for everyone over 65. But, here is a difference. Social Security is a form of insurance. It is funded by people who worked all their lives and paid FICA in their paychecks. It is universal but it is not truly a socialist program. A truly socialist program would provide benefits to all regardless whether they pay into it. Also, the payment amount would be the same for everyone. Currently, Social Security benefits is based on a complex formula depending how much the person paid into it.
Is The Public Library Another Form of Socialism?
Some belief our public library system is a form of socialism. After all, it is free and everyone benefits and the local government provides the common resources to fund it and staff it. Not really. The Public Library was proposed by one of our founding fathers. Benjamin Franklin came up with the idea. In those days, books were very expensive. Instead of eveyone owning a copy of a book, it was economical for a central location to house the books and loan it out for citizens to use. It can be shared since most people don’t need a copy on hand. After they read it, it can be used by others. It was a matter of efficiency.
What About Higher Education?
Another point raised is public funded higher education. Isn’t that a form of socialism as well? Yes and no. I attended CCNY back in the late 1960s and early 1970s. I have some personal experience here. At that time, it was one of the few free public supported higher education institution. There were about 10 schools under the CUNY umbrella. If one meets the required scholastic standards, you are accepted to attend one of these colleges. The tuition is totally free and a student only needed to pay a small registration fee and costs of all books and material. It was a great opportunity for poeple like me where our family resources was insuffient to pay for a private or State College. This was a great program and as a result, many graduates went on to become successful citizens with carreers in all disciplines and some even won the Nobel prizes. Because there was an academic standard for entry, it is not socialism. It was based on individual merit.
Something happened to change all that in 1971. Some administrator in New York City decided to open this enrollment to all who wishes to attend college. They believe it to be a matter of fairness. Why only restrict attendance to some when everyone should have the opportunity to go to college and reach their full potential. Who can argue against that? I was a sophomore enrolled in the Engineering program. I was also a member of the Varsity Fencing team. Because of the “open enrollment” policy, CUNY schools were put on probation by the NCAA organization. Their argument was that CUNY schools would have their standards lowered by allowing anyone to enroll and attend whether they meet the entry standard or not. Indeed, over the next several years, the school needed to provide remedial classes in math and English for some of the entrants. As a direct result of this policy, I and my teammates were denied the opportunity to compete in the NCAA tournaments. That was a personal disappointment. Moreover the open enrollment policy was proven to be not ideal for the CUNY schools. Standards dropped, some professors left, cost escalated and in a few short years, the free tuition was no more. This was one of those cases where good intentions lead to some unintended consequences. That was a socialist experiment went bust.
The current system, as of 2018, has reverted back to what it was back in the 1960s. Admission standards are put back. The only exception is that it is not free anymore. The current tuition is lower than the State Colleges. Meanwhile, the quality of the education suffered. The Athletic programs were cut drastically. Physical Education classes were elliminated. The Men’s Varsity Fencing team was dropped in the 1980s as a result of Title IX regulations. The coaching staff were reduced to part time positions without benefits in order to save money.
The moral of the story. Free public higher education for the masses is not sustainable.
What About Obamacare or the ACA?
Healthcare is an important part of all our lives. It is 16% of our economy. Is access to healthcare a basic human right? That is the big question. Prior to passing of the ACA, we had a more or less free market healthcare system. It was heavily regulated by our government including the drug industry, and insurance industry and the medical field. It was thought of as an insurance, just like auto liability insurance and home insurance. You pay a premium to get coverage. You are part of a pool of people either by your employer or part of a union etc. When you get sick and needed hospitalization or treatment or medication, your expenses were covered by the insurance carrier after a minimal deductible. This is an example of a free market solution because the people were given a choice of what insurance they wish to buy. The insurance companies compete for your business and keep the premiums in check.
It was not a perfect system. Some people with pre-existing conditions could not buy Health insurance or they were too expensive. The system we had was complex. It involved not only insurance but our legal system. A big part of medical cost was tied to malpractice and lawsuits that awarded patients that were mis treated or mis diagnosed. Another part of the cost is the expensive drugs and medical equipment like MRI machines which cost millions of dollars. These costs contributed to rising premiums.
The ACA was passed in 2010 by a Democratic majority in Congress. It was an interim solution to the health insurance system. The bill was over 2000 pages which no one read. It was written mostly by lobbyists and technical bureaucrats. It was challenged in the Supreme court as un-Constitutional. It was ruled Constitutional only after the Chief Justice interpreted the wording of the law - a penalty as a tax. This was unprecedented. The court was suppose to rule on the legality of the law and not the intent of the law.
Later, another challenge was the subsidies to the State exchanges. The law clearly stated that States that did not opt in was to loose federal funding. However, the Supreme Court stepped in again to rule in the favor of ACA and basically change the law as written. Again, this is not the job of the Supreme court. They are to rule on the legality of the law and not re-write laws.
The object of ACA was designed to move our country closer to a single payer system and Universal Healthcare down the road. When that happens, we would have a socialist system or socialized medicine. Everyone will be covered from cradle to grave. The cost will be born by all tax payers. This system could work but would require massive overhaul to our current legal and medical industry. Our laws would have to change with regard to malpractice awards. The pay structure of the medical profession would also be affected. Expensive drugs and medical devices and their future development would also be affected. It is unclear to me that we could maintain our current level of healthcare and spread across to all people regardless of ability to pay.
It was the opinion of some that corruption play a large role in how a system succeeds or fails. In their minds, Capitalism and Socialism are equally valid as an economic system and both are succeptible to corruption. That is the reason why some governments fail. That is only partly true. Crony Capitalism is a form of corruption. Socialist dictators like Hugo Chavez corrupts the system they implement in their country with private Swiss accounts while short changing the people.
Here is the difference. In a Capitalist system, there is accountability. When a business or a CEO commits fraud or is incompetent, they are held accountable by their shareholders and may be removed or fired. In a socialist system, there is little accountability. There is no check and balances.
Unfortunately, our federal bureaucracy is acting more and more like a socialist organization. They proposes social programs that are unfunded. When things go wrong, no one is held accountable. They spend and over spend our treasury like there is no tomorrow because it is not coming out of their pockets.
All systems are prone to corruptions, however, not all systems are equal. Some are better than others.
So, what was thought to be a socialism construct is not really. It brings us back to the original topic of defining Socialism. Why are so many people uninformed? Does our current higher education system doing its part in educating our youth? Do they even teach our Constitution? and the free enterprise system? Do they teach the exceptionalism of our founding? And what makes us special?
Sadly, it appears they don’t teach any more.
Milton Freidman on Greed
Some Related Info
- Another Failed Social Experiment...
Europe's first national experiment to give citizens free cash will be scrapped next year, after Finland decided to discontinue its pioneering basic income trial.
- NYT Paul Krugman presenting aruments from the other side.
Minimal government doesn’t remove power from our lives
- Ronald Reagan Explains In 60 Seconds Why Socialism Doesn’t Work | Mark Simone | 710 WOR
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- Get Rid of Capitalism? Millennials Are Ready to Talk About It - Bloomberg
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- Poll: Millennials Pick Socialism Over Capitalism - Breitbart
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- Conservative Principles Defined
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A Simple Poll
After reading this hub, are you convinced Capitalism is better than Socialism?
A great book explaining Capitalism and Why it Works.
© 2016 Jack Lee