socialism makes a comeback

[Welcome to our annual Guest Writer Series! Meet PJM, Guest Writer #1 (of 12). GW#1 has spent significant time in both the public and private sector. He has also been someone I have long learned from…]


Throughout his political career, Ronald Reagan would say some variant of the following:  “Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.”

I remember Reagan saying this in the 1980’s and thinking, “Don’t worry, Ronnie, Americans aren’t going to give up their freedoms anytime soon.” Yet here we are, a little more than a generation later and a recent survey from the Pew Research Center shows that 42% of American adults have a positive impression of socialism. Of those age 18 to 29, the figure was 50%.

I found these statistics alarming, but I guess I shouldn’t have been surprised. Reagan was right.  Despite socialism as an economic system being thoroughly debunked with the fall of the Berlin Wall and break-up of the Soviet Union 30 years ago, we have to proactively convey those lessons to the young. It doesn’t happen automatically.

So what is socialism? The textbook definition says it is where there is “collective ownership of the means of production.” In other words, the government decides how much to make of what and how to distribute it. This is in contrast to market capitalism where there are private owners who voluntarily determine the quantities and prices of what they make and sell.

A driving force behind socialism is a desire for equality. Even within a single American city, one can find those living in large opulent homes not far from those with no home at all. The disparity does not seem fair. When Bill de Blasio says, “There’s plenty of money in this country, it’s just in the wrong hands,” he is expressing a sentiment held by many.

Setting aside the question of whether it is moral to confiscate that which legally belongs to someone else, the primary case against socialism is that it simply doesn’t work. There is not a fixed amount of wealth that can be divvied up like a pie. Wealth is expanded as producers add value by creatively generating new goods and services, incentivized by the opportunity to retain that increased wealth. Conversely, the amount of wealth contracts if producers are not able to keep the fruits of their labors. The only way to full equality is for everyone to have nothing.

Socialists ignore this trade-off when advocating for redistribution. Clearly it is better for some to have more than for everyone for have less. Arguments for socialism are always couched as choosing between Joe having two and Fred having zero, or Joe and Fred each having one. In reality, the choice is between Joe having two and Fred having zero, or Joe and Fred each having zero.

We don’t have to look back 30 years for an example of a failed socialist state. Venezuela is a modern day illustration. Prior to the election of dictator Hugo Chavez in 1998, Venezuela was a prosperous country, albeit with uneven wealth. Under Chavez’s and his successor Nicolas Maduro’s socialist policies, the country is now an economic disaster with basic necessities running in short supply for rich and poor alike. (American socialists will suggest other factors are to blame, but are you going to believe me or your lying eyes?)

On the other hand, in the 21st century alone market capitalism has lifted nearly a billion people out of extreme poverty worldwide. Those situations in which capitalism is criticized for suboptimal outcomes are often places where the free market is not at play, in industries that are either monopolies (telecommunications), heavily regulated (education), or both (health care).  Do we have societal issues that need addressing? Of course we do, but market capitalism is the engine that provides the resources to tackle those challenges. Turning toward socialism would be like killing the goose to get to the golden eggs inside.

I am encouraged by one facet of the Pew survey mentioned above. Most (about five-eighths) of the 42% who view socialism favorably had a positive impression of capitalism as well. What this tells me is that these respondents don’t understand what socialism is. Socialism and capitalism can’t co-exist. They are polar opposites. You can only have one or the other, and only one of them works. In the words of Margaret Thatcher, “The problem with socialism is that you eventually run out of other people’s money.”