Socialism is Destructive

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The biggest advocates for socialism through history have failed to understand that socialistic economies have a failure rate of 100%, and no less. It is provably only possible for socialism to exist as a welfare state inside of a capitalistic society. Socialism creates a divide in society by attempting to create an environment of equality for all. To accomplish this, the state takes it upon themselves to centrally plan every aspect of society from work output, commercial and retail building, and regulations to prices of goods at the grocery store. This type of market environment removes the incentive structure required for innovation by preventing and punishing entrepreneurial enterprise. The state requires workers to more or less conform to a quota style system, treating all materials and labor hours as a homogeneous entity. The socialist state fails to recognize individual human behaviors that define and build capitalistic societies. Since all humans exist in specific unique forms, no 2 work hours can be the same, no labor hours do not accurately represent the input required for the desired societal output.

Specialization can thrive in a capitalistic society. By offering a specialized skill set, the farmer is able to produce goods to sell (for personal profit) to bakeries, grocery stores etc. As the store sources the goods, re-crafts and resells them to the consumer, the business is able to operate at a profit, benefiting the farmers specialized output efforts. Since the farmer is able to set a wage rate for the value of his time spent producing goods, the shop is able to monetize the intermediary action of ‘sourcing it’ from the ground to the consumer. This creates an incentive structure that allows a society to work together in a productive economic way. The consumer is able to achieve their end by determining if the value of a cookie is worth more today than the value of saving that expense for a greater endeavor at a future date. The consumer is incentivized to spend and support businesses that express appreciation to their customers, the business is incentivized to provide service for their customers and provide a fair wage for the goods used in their production, which incentivizes the farmer to continue growing goods. This type of market is a free market capitalism structure. In this type of system price discovery is a naturally occurring part of society. Every individual working in this system values his or her own time and preferences in an individual way, providing competition to the market in form of wage rates and quality of goods produced.

In a centrally planned society, incentives can’t exist. With the central entity planning all prices and rates, no competition can exist. No incentive structure exists because the state values human time input at the same wage rate. Specialization is destroyed in the interest of the central planner, disabling the ability for entrepreneurs to provide any kind of innovation or growth to the market. If all citizens are more or less paid the same, treated the same on paper and unskilled labor appointed to specialized positions, incentives cannot exist to motivate humans to use personal specialized means to achieve their personal preferences, or ends. Insolvent businesses stay in business through government funding. Inefficiencies cannot be discovered in a centrally planned market: there is no way to know how much of what material or stock is worth what to which project or business because all pricing mechanisms (personal preferences and actions) are destroyed in attempting to be centrally planned. When price controls are enforced by the state, the price of money cannot be known because humans cannot individually value things in accordance to their personal preferences. People cannot value their preferences or their time against others willing to offer a trade or those offering the same good or service. Socialism is destructive of human progress in this way. It is the antithesis of freedom in economics, a “collectivist” movement.

The United States in 2020 exists as a fractured welfare state. The government provides for the least ‘able’ in exchange for extracting productivity in the form of tax laws on the most ‘able’. If you contribute more labor to the economy, you will pay more toward the welfare of the US citizens (unless you can afford to outsource tax filing and qualify for exemptions). This incentivizes keeping wealth OUT of America (but not many other countries are better). If you are in the working class in America, you likely know how it feels. It’s entirely possible to see nearly 50% of your earned pay disappear in the form of taxes. Many people will argue taxes are paid as a privilege for living on the land, as permission to use the roads and so forth. While it is true some tax money does go to having the ability to dial 911 if someone breaks into your house, it is not an elective tax. We don’t get to decide we would rather be outside of this system. The promise of tax is the promise of violence or imprisonment from the government. The tax exists to repay the state for the inequality it creates and perpetuates in the interest of those who contribute the least to society (lower and elite classes). Entrepreneurs contribute to society by saving man hours (ex: Amazon) and employing people. The more food you put on tables in households in America, the more successful of a business person you are, and you should be rewarded as such. A good portion of people relying on welfare in America do so by choice: they’ve had children they can’t afford to care for, or they’ve decided a drug habit is more important than getting a job, etc. Unfortunately, separating these types of welfare cases from real, disabled and high risk (elderly) populations that genuinely require assistance is not very easy.

Another form of ‘welfare’ is minimum wage law. These laws were created in the 1900s with intent to pay white working class men a higher wage than minorities. Enforcing this law allows employers to work employees harder and with less hours. When minimum wage goes up, those with specialized skills (higher paying labor work) essentially take a pay cut by losing purchasing power of their regular income. Raising the wage is never raised ‘enough’ – meaning, you can infinitely raise minimum wage and it will never “fix the problem” it seeks to fix. Why is that?

You guessed it, the base of the money supply. In a finite money world, where money has value as money and cannot be created, wage increases cease to exist. Government welfare programs would not need to be available because inflation would not be stripping citizens of purchasing power. In a finite world, prices drop over time and the value of saving money rises – no forced investment has to happen (US stock market) to protect your retirement. You can simply choose to save your money for when you deem something is worth buying at an appropriate price at that current time. By regulating the wages, the money supply, requiring government licensing and patents, etc. the US is effectively locking innovation out of the market and hurting the people in the working class (the real economy). Government programs create inequality and perpetuate the welfare state. Because insurance companies are govern-mentally supplemented, healthcare costs in America continue to rise, and will continue to rise to infinitum, while elective medical procedures that aren’t bothered by government policies continue to become cheaper every year. Technology is deflationary and causes prices on everything to drop over time. As we discover better technology, we are more efficient and require less in the form of human labor to produce the same goods and services. Without increasing money supply, without causing prices to rise, without excessive taxing on citizens, without regulations on every aspect of human economic interaction, humans can live a life that is as naturally equal for the successful as it is for the unsuccessful. By eliminating minimum wage laws, taxes, returning to a gold standard and ending the era of excess credit lending, we can return to a nation that the founding fathers had envisioned. We can get rid of the fractured socialist-capitalistic society that we have in America in 2020 and live in a world of free market economics.

Socialism is the exact opposite of the solution for the problems we are facing in America today.

The next crisis is financial. I hope you’ve bought some Bitcoin.

Courtesy: Mises Institute

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