RULE #1: Socialism leads to economic ruin and serfdom.
RULE #2: No amount of lying changes RULE #1.
The lie called “democratic socialism is all the rage”–again.
Listen to the Democratic candidates, and they’ve all created some brand of socialism, of varying degrees of execution.
Do not, of course, try branding them as socialists. They’re too smart for that. They all seem to know that folks like me, well-versed in the history of socialism–its path to economic ruin, and its deadliness–so they re-brand the beast as so-called Democratic Socialism (evidence that this sleight-of-hand re-naming doesn’t mask the failure of socialism in the often-cited Nordic countries here, nor does is it new–the moniker has been around since the 1800s), hoping to mislead those who don’t know the game.
They are succeeding.
Masses of young people, especially, jump on-board this future train wreck. Socialism means free education! Socialism means everyone has healthcare! Socialism means police and fire protection, and roads to drive on! Socialism means everyone has a home to live in, and nutritious food to eat!
Democratic Socialism means we take care of each other!
Who but the most evil, selfish, nasty people would oppose such a Shang-Ri-La?
Only those who have bothered to do the hard work of becoming educated about economics, and know the deadly consequences of socialism.
As my momma used to say: No matter what kind of shine you try to put on shit, it’s still shit!
“But we need to take care of people!” you shout at me. “What kind of monster wants to see people go without medical care, or without housing, or without food? Don’t you know that people are starving?”
So I point to Venezuela, and Cuba, and the Soviet Union, and anywhere that socialism has been tried, and failed horribly. In Venezuela, voters democratically elected Hugo Chavez on promises of “free stuff for everyone!” Now, twenty years later, inflation is expected to reach 8,000,000 percent (not a typo! That’s eight-million-percent!). People eat their pets while the president, Nicolas Maduro, tells them to eat rabbits (see here), people work overtime at multiple jobs and can’t feed their families, the electrical grid is failing everywhere, and so are municipal water systems. What passes as Venezuelan government has become nothing more than an organized crime enterprise.
How many millions of people need to suffer and die before socialism loses its appeal?
I can probably answer that question: Many millions more because, once folks who don’t prosper start to imagine an abundant life without the trouble of working, and failing, and trying again, and failing again, and learning and searching for solutions while starving and then…finally…making it, the way it has always been done where all of humankind has prospered, achieving levels of wealth and leisure unimagined even 300 years ago for the majority of human beings on the face of the earth. Those for whom the easy way out holds the most appeal will lunge toward socialism like a starving dog toward a chunk of maggot-covered meat.
But who wants to go to all that trouble of finding a source of income that makes sense, given the skill set and the enterprise of the person who needs that income? Who wants to try building something, or trading something in exchange for money, and find that nobody wants to buy it? Or, they can buy something better, perhaps at a lower price.
Now that person in need of income must come up with another idea. And maybe that idea fails, too.
And so it goes: Come up with an idea, test to see whether a market for that idea even exists, Fail. Come up with a new idea. Test. Fail again. But each time I do that, I refine my knowledge of what doesn’t work, as well as what might work. Or, I abandon that market altogether, and look for a new one. All the while educating myself, and refining my skills (if I’m wise) so that I increase my chances for success each time.
“But starving, homeless people can’t do this,” you whine. “Those who are less fortunate need some help. They deserve to be treated like human beings, not animals. Where is your heart?”
So yes, I do agree that human beings should not suffer the degradation of having inadequate shelter,and lack of nutritious food to eat. And many people give substantial amounts of money to charity to solve such problems.
I disagree, however, with the contention that all human beings deserve to be handed those basic necessities of life. I believe that those who are unable, for various reasons, to take care of themselves should be furnished with at least the basic necessities of life–the elderly come to mind, as do children whose parents can’t or won’t provide for them. Those who are mentally or physically disabled also come under that umbrella.
For those competent folks who face only the problem called “find your way or starve,” and no other obstacle but their own lack of industry or creativity, sometimes hunger and embarrassment are the best motivators.
It is not the role of government, however, to solve those problems. In fact, it has been proven over and over again that government is the very worst vehicle by which to help people. (For an excellent article about government waste of taxpayer dollars, click here.)
Those who tout socialism as the solution to every social and economic ill seem to think that government holds the magic formula for solving all of life’s problems. (For a rundown on how Venezuelan “socialist” strongman Hugo Chavez broke his promises, click here.) Somehow, individual people pursuing their own interests in a free market (aka, capitalism) don’t possess the wherewithal to solve our most pressing social problems. But one genius, or a group of well-meaning geniuses, climbing by cunning to the top of the sociaist heap, will know all the answers, and be able to direct resources ably and efficiently (and unselfishly) so that all of us will live in, if not abundance, then with enough so that everyone is happy.
Even if that wholesome, holy, super-intelligent person were to magically appear–and s/he never does–what happens when they die? What guarantees that the vast government machinery required to make this all work will be able to hire an entire workforce of similarly able, intelligent, prescient, and honest people to staff the bureaucracy?
Corruption is the Number Two killer of socialism.
So what is the Number One killer of socialism?
Short answer: The lack of market signals.
And here all the eyes roll. We’ve heard all this folderol about markets before–it’s just another ploy by greedy capitalists to convince us to give them all our money to hoard. Capitalism is dead, they claim (without evidence). It may have been a solution at one time, but now it’s a tool of greedy people who want all the wealth for themselves. So say the would-be socialists.
First, let’s try to find some agreement that the economy we experience today is not capitalism. At its base, it might be. But if capitalism is free markets functioning freely, without government interference, then we do not have a capitalist economy, and have not had such a thing since FDR, and even before that, when Hoover was interfering with tariffs and interest rates, and before that when Woodrow Wilson was pulling the strings that he was able to pull. Some economic historians pin the blame all the way back to Teddy Roosevelt.
But FDR, in the interest of an “emergency,” was able to pull off the biggest heist up until possibly today, when the criminal Donald Trump was able to manipulate his way into the Oval Office. (For an overview of how executive orders and “emergencies” have been abused by past and present Presidents, here is an excellent overview.)
It’s beyond my purview to lay out the history of the interference of governments in the United States of America with markets at every level, municipal, state, and federal. You’ll find many excellent books on the subject.
My purpose here is to show how well-intentioned government interference in a market makes that market worse, not better.
And that so-called Democratic Socialism lies.
Destroying The Health Insurance Market
Let’s take the health insurance market. This market is fraught with government interference that made that market wholly dysfunctional for many years. Health insurance companies have been abusive and unresponsive to market demands, due wholly to the protection afforded those companies by government regulatory bodies.
To understand this, let’s examine what happens when Company A in a free market no longer responds to that which the market demands.
In a healthy market, Company A finds competition from Company B. Company A didn’t hire enough customer service reps to answer the many phone calls coming in from customers, who waited for long, time-wasting minutes for help with a problem, and then encountered rude reps. Company B came into the market promising, and delivering, fast and courteous service to customers calling with inquiries.
Eventually, Companies A and B, both now bloated with success and run by greedy bosses who skimp on customer service budgets to maximize profits and pay themselves bloated salaries and bonuses, ignore complaints from customers about lousy customer service.
Along comes Company C, eager to take a share of the health insurance market away from Companies A and B, offering better customer service than the two current players in the market.
Companies A and B, seeing the threat from a new player threatening to take away market share, appeal to friendly government officeholders to find some way to keep Company C from entering the market. Up until that point, nobody had seen fit to regulate this market, because it had been functioning well on its own, with few complaints.
But the leaders of Companies A and B mount costly public relations campaigns, cooking up non-existent but self-serving “threats” from insurance malpractice, because they are the only players in that market so far, and consumers are easily manipulated, as proven by Madison Avenue.
Let’s say they cook up a scheme to require health insurance companies to maintain exaggerated reserves of cash, necessary ostensibly to pay settlements in case of some future catastrophic loss. The existing insurance companies have no trouble meeting this artificial requirement for entry into the market.
New players such as Company C will find it difficult if not impossible to overcome this barrier to entry into the market for health insurance. And this, quite simply, is how government regulation is born, and used to the advantage of existing players in a market to keep new players and the lower prices and innovations that competition brings out of that market, much to the detriment of customers.
Let’s take an example from real history.
When Obamacare was being debated, one of the key features of this non-solution to the health insurance market problems was the ability to keep your children on your policy up to age 26, with some exclusions. This made it possible to cover your children for as long as they were continuing their educations. It was a popular feature of Obamacare.
That very same feature could have been offered by any insurance company that found through market research that such coverage would be popular with customers, and, if offered, would capture a significant portion of the health insurance market.
But the nature of the regulatory environment in health insurance in the country pretty much guaranteed that no upstart would be able to enter the market to offer that feature to those who would buy it. I don’t know whether regulators would have prevented a company from offering that, but I’m betting they did–or, at the least, going through the regulatory process to add that benefit to a policy offering would have been prohibitive.
The pity of Obamacare, the reason its implementation infuriated so many free market adherents, is that it prevented any real solutions to the problems in the health insurance and healthcare markets. Instead of removing barriers to the entry of competition, which always solves the problems encountered by customers in any given market, the interference of government in these markets only put off the Day of Reckoning.
And that Day of Reckoning will surely come, because Obamacare is socialized medicine and, in the long-term, socialism kills markets.
To illustrate how socialized medicine kills markets, let’s take another example.
As a preface, let’s look at the single biggest deficit of socialism: The inability to decide the price of a product or service. (For an excellent explanation of the importance of price, see here.)
If the market isn’t signaling price, how do you know how much to charge?
And if you aren’t getting any price signals, how do you know what the market demands?
The Shirt Off My Back
I sell t-shirts in five colors: red, blue, yellow, green, and orange.
When I begin selling the shirts, I make an equal amount of them in each color. But I find that the red shirts are selling better than all other colors, and I run out of them quickly. My capital–that is, the money I use to make t-shirts–is limited, so I can’t afford to make more red shirts and keep all of the colors, so I drop the orange, which didn’t sell well, and I make more red shirts. The other three colors sell enough to justify continuing to sell them.
The next time I go out to sell shirts, I sell out of the red shirts once again. So the next time I make shirts, I make an extra amount of red, because my profits are such that I now have the capital to make a few more, but I take another step as well: I begin charging more for the red shirts than for the other three colors.
I don’t sell quite as many red shirts, but they still sell better than the other three colors combined. I find that I can raise the price of the red shirts even more, until I reach a price point where the demand for red shirts drops below a comfortable margin, and the blue shirts begin to increase in popularity.
If the increase in the demand for blue shirts increases to the point where I am making the same profit as before they became more popular, then I can maintain pricing as is. If I want to recapture the part of the red shirt market that I lost, I can simply reduce the price on them again, and profits rise.
This is simply the Law of Supply and Demand.
Raise the price of red shirts until demand drops, then back it down until demand increases to previous levels: I have found the ideal price point.
The same simple principle works in the healthcare market.
A Better Image
Let’s look at the market for medical imaging technology.
When I was a kid, we had x-rays for looking inside the body to see what had broken. The imaging was limited–it couldn’t see soft tissue. If nothing could be detected by the x-ray, then a surgeon had to cut you open to look inside and see whether s/he could find something.
X-rays were expensive.
Today, x-rays are surprisingly cheap. When my doctor orders imaging, it’s either a CAT-scan or an MRI, and even CAT-scans are coming down in price because they’re no longer the cutting-edge of imaging technology.
The lack of demand means that an x-ray can be had for around $35, whereas an MRI can cost anywhere from $400 to thousands of dollars.
Here the market becomes a bit more complicated than mere t-shirts, but the principles work the same, namely, the Law of Supply and Demand.
A healthcare facility, as with any operation, operates according to its Profit and Loss (P&L). If losses overtake profits, the facility becomes unviable, and must close. Earn enough profits, and the facility can afford to use some of that profit as capital, to buy new equipment and upgrade facilities and, if it’s a for-profit facility, distribute the remaining profit to stakeholders.
NOTE: Because of severe regulatory restraints, healthcare facilities cannot operate freely to respond to market conditions–which is why the healthcare market has suffered from ill-health for so many years. (For an excellent explanation of damage done to healthcare by government regulation, click here.) Because they were forced to take indigent patients who couldn’t pay for care, they were forced to make up the difference by overcharging paying customers, usually insurance companies–completely distorting the market, and destroying the effectiveness of price signals to the market.
So let’s assume that the socialists have won control of the government, and they are now directing all healthcare resources bureaucratically. healthcare is free for everyone: Those who pay taxes get the same healthcare as those who do not pay taxes. The more successful you are in earning money and creating wealth, the more you are going to pay for the government bureaucracy that provides healthcare.
With no price barriers to use, everyone who once opted for a cheap x-ray now opts for “the very best.” There may not be a good reason to get a more costly-to-create CAT-scan or MRI, but the patient gets one anyway–because he can.
Fewer people are opting for x-rays, while the demand for the more costly (costly to produce, that is) has skyrocketed. Wait times for those services reflect the increase demands. X-ray machines stay pretty much idle.
Because all healthcare now has no cost at point-of-purchase, there’s no reason for anyone to opt for the less costly option. The cost of operation of CAT-Scan and MRI machines is draining the available funding from the healthcare system. Because people have no reason to avoid using the system–there are no co-pays, and nobody ever sees a bill–folks rush to the doctor for every little ache, and doctors themselves don’t hesitate to order the most expensive test because they don’t care about over-taxing the resources, or they don’t want to argue with a patient intent on wasting those resources with unnecessary imaging, or some combination of both.
So the healthcare system becomes over-used–demand increases beyond capacity. People who wouldn’t have thought to go to the doctor or the Emergency Room when it cost them money directly now go for the smallest scratch, and demand the most expensive care. Without a personal cost at point-of-purchase to force them to be prudent, why should they care?
Under a private ownership/profitability model, healthcare would command the price that the market is willing to pay. Owners of an MRI machine don’t want to lose money on their investment–the objective is to earn a profit, while also serving the noble purpose of keeping their fellow citizens healthy. Many socialists I know presume that every capitalist with a profit motive is a horrible human being who cares nothing for their fellow human beings. That’s all it is: a presumption. They need no proof that this presumption is wrong. Belief is enough to justify their ruinous thinking.
Under the profitability model, the money required for the service does not all become profit. The owner pays for overhead: The cost and upkeep of the facility where the MRI is located, for example, is called “operating cost.” Each use of the machine brings it that much closer to the end of its life–every equipment requires maintenance to keep it running. That is called “maintenance cost.” And every machine has a finite life, so that money must be set aside as capital to be invested in a new machine when that time comes. That is called “capital investment.”
When all other monies are paid or set aside, that which is left over is called “profit.”
All of those money uses go toward determining the ideal price of the service.
If lots of customers use the service at a given price, and that price can satisfy the operating, capital, and profit requirements to keep the facility open and thriving, then the owner must have hit on a good price. Now that owner will experiment with price, raising it to see where usage drops off to the point of harming one or another or all of the financial requirements to keep the doors open and thriving.
To underscore that extremely useful market signal called “price,” let’s look closer at the market for x-ray imaging.
An X-ray still serves as a useful tool for some applications. When I see my chiropractor, he from time to time asks for x-rays to see how my spine is lining up. No more sophisticated imaging is required for that. But when my heart is beating erratically, an x-ray won’t show what my cardiologist needs to see–I need a CAT-scan or MRI for that.
So x-rays are no longer in great demand–therefore, the price for them has dropped. Although I have not done the research into it, I would guess that the price for x-ray machines themselves have dropped as well. When people stopped demanding x-rays, machine usage dropped, which lowered the amount of maintenance required to keep them running, as well as the need to replace them as often as when they were the favored process.
Now imagine an imaging center under socialized medicine. Nobody is paying for the service, at least not directly. They fork over taxes to the government, at least under the model proposed by the “Democratic Socialists.” Under the true socialist model, which would eventually become the Democratic Socialist model once the economy collapses inevitably under the less onerous model, the government owns all the means of production and service. It’s inevitable, because the government will eventually justify that happenstance because paying for everything that the government has promised becomes impossible through mere taxation.
And here is why:
As usage of everything becomes unmanageable and unsustainable, and as the equipment (in our imaging model) begins to break down through over-use, the government agency overseeing such imaging facilities will experience cost overruns, and funds will dry up.
Under the capitalist model, if the price being charged were not keeping up with operating costs, or could not provide that capital necessary to replace the equipment when it had reached the end of its life-cycle, then the price would have been raised in order to keep the facility running.
“But those greedy capitalists wouldn’t think of running the facility without their disgusting profit!” scream the socialists.
The socialists, of course, have no idea what is, or isn’t, a reasonable profit. To some of these, any profit is unethical. But profit puts food on the table of the capitalists (aka, entrepreneurs) who built the facility in the first place. It pays for clothing, shelter, education, charitable giving, and, yes, material goods. But many of the socialists I know get up in arms because someone has more money, or more material goods, than they do.
The coveters (aka, “socialists”) also get up in arms (sometimes literally) over what they call “obscene” (aka, “unjustified”) profits. If companies paying “obscene” salaries had priced their goods/services out of the range that the market would pay, then they wouldn’t be able to pay those salaries and bonuses, because they would now be priced out of the market, and customers would spend their money elsewhere. Perhaps those executives receiving such high remuneration are being rewarded for interpreting the market correctly? Hmmmmm…
The Bottled Water Scenario
This is one of my favorite illustrations, because it’s actually quite simple, even though it got a liberal friend of mine all afluster because…well, she said, “Bert! We’re talking about human beings here!” She never did quite explain why humans being served so well by market forces might be disturbed over this. But she was quite exasperated with me.
So…at the risk of exasperating my liberal friends–if, in fact, they’ve stuck with me to this point–here goes nuttin’:
Let’s suppose a hurricane. A town on the coast–let’s call it “Potavilla”–has been hit hard, between the storm surge and the winds and rain, not much remains to salvage. But people managed to survive, and now they need…well, everything! But their first priority is fresh water for drinking.
Some of those people managed to keep their supplies of bottled water from washing or blowing away. Now this extremely limited supply of fresh water has become extremely valuable. Where it once sold for under one dollar per bottle, sellers find that people are willing to pay five dollars, even seven dollars for a bottle of fresh, drinkable water.
“Price gouging!” my liberal friends scream. And they would be correct.
But do we want to make such pricing illegal?
Because it’s that very “gouging” that signals the market that this town desperately needs fresh water, and that there’s an opportunity to make some money if they can get supplies there quickly enough.
And so greedy capitalists eager to make a killing load up trucks and drive as quickly as they can to that thirsty town and…guess what?
Suddenly, there’s a hell of a lot of drinking water in Potavilla.
If we understand the simple law of supply and demand, while the supply of fresh drinking water was low, and the demand was high, the price followed the demand and rose.
People on the lookout for money-making opportunities heard about those high prices, and rushed to meet the demand with more supply.
But the joke was on them: As the supply rose, and demand stayed the same, the price came tumbling down, and those “killings” morphed into normal profits–until the taps came back on, and demand went…well…into the toilet.
Did anybody die of thirst? Doubtful. Even a greedy capitalist would probably toss a bottle of water to some poor soul who was suffering from severe dehydration. I’m not sure what it is that makes some liberals think that someone out to make a buck suddenly becomes a monster. Maybe such a scenario haunted the childhood of my liberal friend? I don’t know.
But I’m betting that the beauty of those natural market signals have saved far more lives, and brought more peace of mind, to survivors of disaster than have ever suffered severe harm or death because some heartless capitalist wouldn’t offer a bottle of water to them when they were literally dying of thirst.
And…here’s the irony…how many people will die of thirst, or at least be grossly inconvenienced by the lack of bottled water getting to them quickly after the storm because well-meaning people passed anti-gouging laws that eliminated the very market signals that literally flooded those areas with bottled water that most desperately needed it?
A Broken Milling Machine, A Broken Economy
I will never forget going to El Salvador with a church group composed mostly of people who embraced a vague idea of socialism. They had convinced themselves that they alone knew what “economic justice” should entail. Not one of them knew what “capital creation” or “capital investment” meant. All they saw was people living without all of the amenities that they had back home in the United States, and they thought they knew the solutions.
This church group had, at one time, bought a milling machine for the village inhabited by the members of a church in the village that the American churchgoers had adopted as a “sister church.” The mill was a huge deal for the women of the village–without it, they had to walk six kilometers (about 3 miles) each day with the day’s corn in their aprons, to get it milled into flour at a neighboring village. The mill from the Americans made life so much easier.
But the church group didn’t make any allowance for entropy–the fact that, with each usage, the mill got closer to breaking down, which it did. And the Americans had provided neither spare parts, nor money to buy spare parts. By the time we visited that village, some years after the mill had been purchased, the women were once again marching the six kilometers to get their corn milled at the neighboring village.
This is what will happen to the imaging facility under socialism–even Democratic Socialism: Eventually, the government will see the need to take over the facility completely, with a committee or some other structure to make healthcare decisions for the users of that facility. Because there is always a cost for using a machine, and this committee will be aware that replacing an MRI machine is far more costly than replacing an x-ray machine, they will force most people to use x-rays.
Who will make that decision? Will it be a radiologist who is most qualified to make that decision, or will it be a government accountant who will be aware only of the need to save money?
What other industries will need to be taken over by the government in order to direct funding to where it is most needed? Because socialism is anathema to entrepreneurship and investment, capital will have fled the country long ago to locales where government doesn’t steal from productive citizens. And because it’s not possible to simply move a factory to a more friendly economic environment, the government will have taken over abandoned production facilities and run them into the ground in the same way that they ruined the imaging facility.
Whenever socialism has been tried on a large scale, mass starvation soon follows. The mass starvation in the Soviet Union under Stalin is legendary. Over forty million people died of starvation. Tens of millions of people died under socialism in communist China. People are dying today in Venezuela, once the wealthiest nation in South America, because socialism, and the criminality that it invites, have destroyed the economy and the means of production.
Socialism is now destroying the healthcare system in America. Let’s hope that folks wake up before they vote to broaden this same destructive path in this country.
Socialism is always deadly. Socialism always leads to economic ruin, and serfdom for those under its depravity. Socialism is a lie told to people who
believe that the world owes them something merely for existing–”human rights,” they are told.
No amount of lipstick will make that pig any prettier.
How Do We Prosper?
First, with the recognition that, as many of us were told as children, nothing of value comes easily. We have some hard work ahead of us, no matter which path to success we choose.
- Task One: Self-Discipline
- Task Two: Education, which requires and most often happens simultaneously with Task One.
- Task Three: Learn how capitalism works.
- Task Four: Begin engaging in commerce–the ideas will begin to flow.
- Task Five: Invest, so that you own the capital necessary to participate on a grand scale.
Consider this: I offer coaching and training in how to “work the machine” of capitalism. Send an email in the form below if you’re interested in learning more about that.