The Curse of Socialism

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. – Winston Churchill


Saudi Arabia has an estimated 269 billion barrels of crude oil reserves ready to be extracted. They used that oil to turn a desert full of nomads into a player on the world stage. Despite having almost no other valuable industry, Saudi Arabia has used it’s oil exports to make it the 15th wealthiest country in the world, sitting two spots above Canada. That is what oil can do for a somewhat well managed country even while virtually ignoring all other industries. Venezuela has the largest proven oil reserves in the world with an estimated 300 billion barrels of crude, yet it’s economy is in free fall.

3,000 miles to our south, a country that should be prosperous is falling apart. At this point, some Venezuelans cannot even join bread lines, instead they line up outside bakeries for the chance to dig through the trash. Everyday items like toilet paper or eggs are nearly impossible to find in some places. The fortunate few who can find these items need to bring stacks of Venezuelan bolivars because inflation is through the roof. The Venezuelan economy is in shambles. But why? Why is a country rich in natural resources so broken that millions of its people take to the streets to protest their starvation?

Because years ago, socialists took power and began to faithfully implement their ideology.

What is socialism?

Socialism is a word that more often than not is used incorrectly.

Most Americans have traditionally known that socialism is bad, even if they didn’t exactly know why. Because of that, it has been politically useful for those of us on the right to smear everything the left proposes as socialist. Most of the time, Democrats were proposing an expansion of the welfare state, not socialism. The welfare state is bad enough and may be a step towards socialism, and I plan to write a post on that in the future, but when discussing socialism it is important to separate the two.

And not just for the sake of academic clarity. While socialism may have been a useful cudgel, a significant portion of the country likes and supports the welfare state. When we kept telling them wanting a higher minimum wage, extended unemployment benefits, or higher taxes on the rich was socialism, some of them started thinking maybe they are socialists. The welfare state is economic folly, but it’s not socialism. Now, with the meaning of the word broken, 40% of the country say they prefer socialism. Most of them likely mean they prefer the welfare state, but they are now open to embracing the most disastrous economic system ever devised.

Rather than government handouts, socialism is about the centralized control of the economy. In the welfare state, the government imposes high taxes so it can distribute benefits to the people. Under socialism, the government skips the middleman by setting wage and price controls, or even further by nationalizing sectors of the economy. This is a whole new level beyond the welfare state and has ruined economies everywhere it has been tried.

Why is socialism bad?

To put it bluntly, even the altruistic socialists who genuinely want to help the people just are not smart enough to direct the economy; no one is. The economy is comprised of an unknown number of unknowns. Certain aspects of the economy can be measured to a reasonable degree: how many people are in the country; what is the average salary; how much of a given product is produced domestically and how much is imported, etc. But there is so much more to the economy that can never be measured because it is not static.

Did the price of a carton of eggs drop 15 cents compared to last year because of a government policy to subsidize egg farmers, because the media reported a new study that says eggs are unhealthy and drove down demand, or because an unusually favorable summer led to a surplus of grain and therefore cheaper poultry feed that incentivized farmers to raise more chickens which increased supply? The answer is likely all three, along with several more factors. But how much of a role did each part play? Without the government subsidy, would the price only have dropped 13 cents? 12 cents? Would it have still dropped 15 cents regardless of governmental action?

These questions are impossible to answer because economics, like all social sciences, cannot be measured and tested the way hard sciences can. Physicists can test their theories in a lab with experiments that can be repeated by other physicists until their theory is proven correct or incorrect. Not only can economic theories never be proven with repeatable experimentation, they cannot even measure or observe all of the relevant data. To imagine the economy can be centrally directed is the pretense of knowledge. Yet socialists ignore this warning and attempt to control the economy from on high.

Capitalism is a recognition of reality. Prices are determined by the competition between supply and demand. What people want, and what they are willing to give up to get it, is the motor that runs the economy. As a rejection of capitalism, socialism rejects reality. Under socialism, one man or a collection of people are arrogant enough to believe they can overrule the wants and needs of not just everyone in their own country, but everyone in the world their country trades with.

Socialists, arrogant in the belief of their own wisdom, attempt to not only direct the economy, but to correct human nature as well. Socialists may believe they know the correct price everyone should pay for eggs, but if the farmers, store owners, or consumers disagree, there will be no more eggs sold. This is what happened in Venezuela when the government declared that eggs would cost 30 cents. This price was not high enough for suppliers and distributors to make a profit, so a week after the government’s decree, there were no more eggs on the shelf.

Socialists may or may not have noble intents, depending on the socialists involved, but no one has the knowledge or foresight to centrally direct the economy. Disaster is inevitable for those who try. If you don’t believe me, just ask the Venezuelans waiting in line to sort through trash for their daily meal.