Photo by u0421u043fu0438u0440u0438u0434u043eu043d u0412u0430u0440u0444u0430u043bu0430u043cu0435u0435u0432 on Pexels.com
" data-orig-size="1880,1250" data-image-title="light city street building" data-orig-file="https://smallivy.files.wordpress.com/2023/07/pexels-photo-12255034.jpeg" data-image-description="" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-medium-file="https://smallivy.files.wordpress.com/2023/07/pexels-photo-12255034.jpeg?w=300" data-permalink="https://smallivy.com/2023/07/16/no-virginia-the-ussr-was-socialist/pexels-photo-12255034/" alt="" class="wp-image-23398" data-large-file="https://smallivy.files.wordpress.com/2023/07/pexels-photo-12255034.jpeg?w=723" />Photo by u0421u043fu0438u0440u0438u0434u043eu043d u0412u0430u0440u0444u0430u043bu0430u043cu0435u0435u0432 on Pexels.comThere is a lot of false information going around about socialism. Some of the salesmen make it sounds pretty good – saying we’ll have all of the same opportunities, but no one will be poor because of safety nets:
“Wages will be a lot higher for entry-level workers and there will be strong safety nets for healthcare, housing, food, and other necessities. Some very wealthy people will just pay a little more in taxes, but middle-class life really won’t be much different. And if you want to work your way up and become wealthy, you still can.”
But socialism in the real world has never worked out this way. If you point out all of the times socialism has resulted in starvation, corruption, and tyranny, you’ll be told “that was communism, not socialism. It’s communists that shoot people and put them in work camps, not socialists.” The language is being changed to act like we’ve never really tried socialism before and the suffering and tyranny that resulted every single time it was tried really wasn’t socialism.
I hate to break it to you, but the USSR was the United of Soviet Socialist Republics. They were socialists, it’s right there in the name. They never making it to communism as Karl Marx and Lenin had wished and there is good reason – once you concentrate power in a few hands, those who weild the power never want to give it up. Vietnam, Cuba, and Venezuala are aso socialist, not communist.
Socialism as an economic system is fundamentally flawed. In the least will result in much lower standards of living for most people. The current middle-class would find themselves working just as hard but they would be living with the resources the poor in America are currently living at best, while the poor would remain where they are and not see there lives improve at all. At the worst it would result in corruption, abuse, and tyranny. In fact, socialism is a favorite tool of tyrants because it lets them control people without needing to use a lot of physical force, so conversion to socialism is normally done as a tyrant seizes power in a coup or revolution. In this article, we’ll look at what socialism really is, why it can never work, and what the results really are.
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What is socialism, really?
The terms “socialism” and “communism” were defined by Karl Marx. His goal was to bring about communism, but saw socialism as a pathway to go from free enterprise capitalism to full communism. It was a stepping stone on the path, not a destination. What are these economic systems?
Total socialism is where the government owns all businesses and resources and controls all economic activity. Government appointed boards run the companies (with usually one large company operating in each market area since there is no competition) and make all of the decisions. As is typical of government agencies, decisions are typically made by a board or committee rather than single individuals as is done in private companies because this spreads out the responsibility, makng no one ultimately responsible. There is typically “the committee” on one level making all of the decisions (and getting more than their share of the wealth) and everyone else (the workers) on a lower level.
Bureaucrats also decide how the resources that are produced are given out. Once again, there would be committees to make these decisions. The actual action of giving out goods would then fall to lower-level bureaucrats. These individuals would have the direct interface with the public and make decisions at the street level, giving them some level of power despite having no official authority. The public would be expected to meet whatever requirements and perform whatever actions were needed (fill out forms, stand in lines, etc…) to secure the goods from the distribution points and take them to their homes.
Because central groups in the government oversee everything and are able to coordinate activities, theoretically this should lead to great efficiencies and fairness. There would be no competing industries with associated waste. Central planners could ensure whatever resoures are needed are produced in a timely manner and distributed where needed. In general goods are distributed based on need and work is allocated based on ability. In actuality the system would contain numerous flaws and inefficiencies and enterprising bureaucrats would take advantage of these flaws to get bribes and favors from members of the public.
Marx’s idea was that once socialism was established and things were working smoothly, the government could then just melt away. The system would run itself organically. Communism, where everyone owns everything, would be the result. Under communism you would be assigned a job based upon your skills and desires and do your part for the community. Everyone would produce goods and services based upon their capabilities. In general people would just figure out what they wanted to do and what was needed and do it. There would probably be some cummunity meetings to discuss needs as required. Your production would go into a communal pot with everyone else’s.
You would be provided a home, food, clothing, and everything else you needed by the society from the communal pot. There would be public resources like parks, hospitals, libraries, and vacation resorts that could be used as desired. You wouldn’t own anything but have everything you needed available to use when you needed it. You’d walk out the door and grab a bike, jump on a bus, or maybe get into a car if you needed it for transportation. At the lake there might be boats sitting in a marina for use. Sounds great, right?
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How the new socialism is just the old socialism
The definitions and concepts presented above are from Marx’s writings. Many today will say that the definition of socialism has changed and that what I’ve described is no longer the vision. In actually, the “new socialism” and “the “old socialism” are one and the same in function and where it matters.
Rather than having the government own businesses for the most part under new socialism, it just controls them through heavy regulations where business owners must present their proposals before boards of bureaucrats and get their sign-offs for some actions. These boards may also set things such as wages and benefits, make requirements on working conditions, make it difficult or impossible to fire or layoff workers, and perhaps even send regulators in to “critical businesses” to oversee the day-to-day operations. There may be blanket requirements that can be waived by a board with the needed justification presented to them. These changes were made since it was found that universally government boards were inefficient and incompetent when it came to actually running companies, so having individuals rise into these positions by merit rather being appointed by politics is more effective. In this way the goverment officials can have the control they desire without needing to actually be responsible for operations and production. the CEOs and officers try their best to make products and get thigns done despite the impediments put in their way by the government bureaucracy.
Rather than having the goods go into a central pot for distribution, governments create enormous taxes on businesses and individuals. Those resources are then sent out by the bureaucracy based on need or other criteria, then the individuals use that money to buy goods themselves from the businesses. It is expected that those who earn sufficient resources through work would simply use the money left over after taxes to buy what they needed, where those more “in need” would gain most of their resources through the government.
For what are deemed “critical services,” government officials may still directly own and provide the services. For example, doctors and nurses may become government employees with medical facilities run by government bureaucrats. Power plants, road maintenance operations, and building construction may also be directly owned and run by the government. Because government employees often lack the skills needed and to provide greater flexibility, contractors may be hired to run operations with bureaucrats providing oversight and holding approval authority.
Note that while the form has changed somewhat, the government still has control over how businesses are run through regulation and oversight. Where things are considered “critical,” they may also use committees to perform coordination, requiring CEOs and company officers to present plans for approval and issuing direction trough dictates as needed. While they don’t tend to hand out goods directly, they control how goods are distributed through high taxes and control of that tax money. Basically everything is the same and it leads to the same issues we’ll discuss next, but the government has removed itself from having any direct responsibility to actually produce or distribute goods and services. Companies and individuals are expected to figure this out on their own while complying with whatever regulations and bureaucratic burdens the government creates.
Why socialism hasn’t worked well
Total socialism is the form of socialism that was practiced in the USSR. All businesses were owned by the state and run by boards appointed by a large government board. (Soviet means “governing council.”) The governing board set up regulations for how things would operate, decided how goods were distributed, and controlled every aspect of the lives of the citizens. The idea was that this coordination of the country would lead to prosperity for all, end poverty, etc….
It was found that the people put in critical leadership positions like the executives in companies were often people who were well connected but that had little ability to actually operate a company. As a result, there was gross incompetence in many areas, leading to waste and shortages. Long bread lines were common. Basic goods like toilet paper were always in short supply. There was usually just one choice for each item and many items were simply unavailable.
Government officials and bureaucrats at all levels took advantage of the control they had and the shortages for power. Those handing out goods would frequently take bribes and ask favors in exchange for preferential treatment or to receive goods at all. Those in the upper levels who had access to large amounts of resources would give themselves and their friends large allocations from the pot under the justification that they “deserved it” as a high ranking official and that the amount they were taking was a small percentage of the whole. Of course, people who were corrupt and who wanted power were the ones who sought and rose into those positions.
The “new socialism” has many of the same issues. It is an improvement to have those that rise through the ranks by merit to be in charge of production, but government officials can still seriously affect operations via regulation and dictates. In a way it is worse this way because bureaucrats can put up all sorts of roadblocks and have no concern about their effects on production because they have absolved themselves of responsibility for actually produccing anything. They can blame the CEOs when things go wrong, deflecting the ire of the public. They can also use their ability to make approvals and make waivers to curry favors and bribes. Incompetent people may also be put into critical positions as favors by CEOs trying to satisfy their government handlers.
There are issues on the distribution side as well. While it is better to provide money and let individuals buy what they need, there is no incentive for individuals to produce more or make sure that needed goods are available where they are needed because there is little reward for doing so. The difference in income individuals receive for producing and selling more items decreases as more items are sold because higher incomes are confiscated through higher taxes, so figuring out where goods are most needed and putting in place the means for their distribution to increase sales is not a priority. As long they are selling enough items and services to cover their basic costs, those running the companies will be satisfied. Rather than spending weekends figuring out how to expand business, they go home at 3 on Friday and go play golf. Political influence can also be used to drive out competition through regulation, so an attitude of “they’ll take what we give them, when and where we give it to them” develops.
Perhaps the most distructive aspect is the thought process of individuals driven by both systems. Earning more results in less and less net wealth as taxes are increased and benefits are decreased. This results in less incentive to work and produce beyond the most basic level, resulting in fewer goods and services to go around. Soon the goal becomes to provide less to the pot than you take out in services and benefits because that is how you “win” in such a system. The attitude becomes “I’ll work the minimum I need to get what I need and no more because doing more doesn’t benefit me.”
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Socialism and tyranny
Tyrants frequently create socialist economies for obvious reasons. If the desire its to control the population, what better way than to control the basic necessities of the population? Rather than needing to send out enforcers to quell any dissent, you can just make it known that anyone who speaks out will lose food, shelter, and other necessities. Having tools like electronic money that can be turned off at any time makes this even easier.
Likewise, the availability of resources allows those in charge to buy favors and motivate enforcers of their dictates. Indeed, many individuals will willingly carry out the abuse of others in the population in exchange for even a meager salary for necessities from the tyrant. Once there are enough people enforcing the dictates, any among the enforcers who step out of line can easily be taken care of by other enforcers. Making an example of those who step out of line can chill any others who may wish to do likewise. Creating an atmosphere of constant suspicion and fear keeps any large groups capable of overwhelming the government forces from developing, so a single individual or a small group can control a much large population.
So, despite what sellers of socialism say, it is the road to tyranny.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
