Socialism vs. Capitalism - Seriously, Scott?

We keep hearing how the Democrats want to force Socialism on us, and how that will destroy American. They point to Venezuela as an example of how Socialism destroys a country.

But they are LYING to you.

They are trying to confuse you by comparing Social Programs to Socialism. Those are two very different things. So let’s talk about the differences between Socialism, Social Programs, and Capitalism,.

SOCIALISM

Socialism is an economic model where everybody works for the government. All businesses are owned by government. There are no corporations. There are no small businesses. There is no stock market. There is no Wal-Mart or Amazon. Nobody has ever suggested that here in the United States. Anytime you hear a politician claiming the Democrats want Socialism, they are lying to you!

Socialism sounds good, but in practice it fails miserably, because it does not factor in self-interest. When everybody receives the same reward regardless of effort put in, people lose motivation to work hard.

Socialism is a flawed economic model, and will eventually fail.

Those who are lazy will simply do the minimum amount of work required. This is in their nature, and socialism does nothing to challenge this.

Those who are ambitious will have no motivation to work harder than the lazy, since they will get the same rewards as do the lazy. Why should they work harder than others if they are going to get the same rewards regardless? The result is that society produces only enough for each person to survive. There will never be any surplus. Everybody gets the same reward, and that reward is bare survival.

But that’s not the sad end. The reality is that the truly lazy will not do even the minimum amount of work required. But they still receive the same rewards. Because they are not contributing enough to cover their own survival, and no one else is contributing more than is required for bare survival, that meets the pot will eventually reach a point where there is not enough to distribute equal quantities sufficient to allow even bare survival for everyone or anyone. At that point, society breaks down, and this leads to revolt and a new regime.

SOCIAL PROGRAMS

Social Programs are not an economic model at all. They have nothing to with who owns a business, or who you work for. They do not control the stock market.

Social Programs provide a benefit or service to citizens, and are funded by the government. Some social programs are available to everybody; some social programs are only available to those who meet certain qualifications.

For example, social programs that are available to everybody include our public school system, police departments, libraries, fire departments, to name a few. The building and maintaining of our roads and other public infrastructure are also social programs. None of these has anything to do with who owns a business, or who you work for.

Examples of social programs that are available only to those who qualify include Social Security, Medicare, Medicaid, Food Stamps, and other such programs. None of these has anything to do with who owns a business, or who you work for, either.

So, the next time you hear a politician complaining about the Democrats wanting to impose Socialism on the United States when a new social program is proposed, you can see how they are lying to you!

Be sure to read our positions on Education and Health Care.

CAPITALISM

Capitalism, on the other hand, takes the opposite approach: Each person reaps rewards consistent with the amount of work they do. Those who work harder receive more rewards than those who do not. The same Human nature, which killed Socialism, propels Capitalism.

The lazy will still do the same minimum amount of work necessary to survive. And bare survival will still be their reward.

But the hard-working will do much more. In return, they will be more richly rewarded for their efforts.

It’s this extra work that leads to the innovations that advance society.

The Dark Side of Capitalism

But Capitalism has a dark, dirty, underbelly. While hard working rightly are reaping the ample rewards of society, they are also gaining the means to corruptly influence and control the free market. When the free market is controlled, it is no longer free.

Without the Free Market, Capitalism will fail. The absence of a free market will lead to class divisions.

The Free Market is what allows the hard working to reap larger rewards. Without the free market, larger rewards cannot be reaped regardless of the effort put in. Without the ability to reap larger rewards, motivation to work harder will disappear, just like it did under Socialism. Instead, those rewards improperly go to the ones with the ability to manipulate or control the market. Once those gain this power, they no longer need to work hard to receive the higher rewards. Instead, they reap the rewards from others who have done the work.

Of course, this is part of the very concept of Capitalism: Work hard, build a company, hire workers, and reap part of their rewards. This is perfectly normal, and perfectly acceptable when the free market exists. For the free market will require the company to properly reward its workers or they will find work elsewhere. It’s when the free market no longer exists that companies gain the power to reward their workers based not on their work contribution but based on their inability to find work elsewhere.

The Game of Monopoly

Let’s take a look at the game of Monopoly. It represents pure capitalism. But how does the game end? It does NOT end happily. ONE person ends up with ALL of the money, and everybody else ends up with nothing. How does this happen? Let’s compare it to the scenarios I described above.

During most of the game, when everybody has similar amounts of money, strategy and luck combine to allow one to purchase properties and earn more money. This money can be used to pay rent on other properties or invested into new properties. This is the fun part of the game. But, sooner or later, there comes a point when one person gains control over enough properties that it is impossible for anybody else to collect enough rent from their remaining properties to pay rent when they land on the soon-to-be winner’s properties. At point, the only question is how many turns will it take to wipe them out? Winning is no longer an option. Only losing.

How many of us actually play it out to the very end? Don’t we usually stop when the end becomes obvious and inevitable?

This is the point where Capitalism fails and revolt leads to regime change, just like it did in Socialism.

SO, WHAT’S THE ANSWER?

Well, let’s look at it this way. Socialism is doomed from the start because Human Self Interest works against it every step of the way. Since Human Nature cannot be changed, Socialism will always fail, so it will not be our solution!

On the other hand, that same Human Self Interest is what drives Capitalism. That means that Capitalism is NOT inherently doomed.

So Let’s go back to Monopoly and consider what would happen if we changed the rules a little bit. The goal is to change the rules enough to allow the game to continue while still keeping it interesting and fun to play. We could limit the number of hotels and properties people could own. Or we could limit the amount of rents that could be charged. Or we could limit the amount of money they are allowed to accumulate. The trick is to limit these things only enough to prevent one person from reaching that point where winning is inevitable.

That is also the solution to Capitalism’s fatal flaw. The gap between the rich and the poor must never be allowed to become so wide that the rich are able to use their money to control and eliminate the free market. This can be accomplished by initiating a system that will prevent the rich from accumulating wealth at a rate that increases this gap and/or ensuring that the poor are able to accumulate wealth at a rate to keep the gap in check. When this fails, and the gap gets too large, drastic measures are needed to close the gap.

In the early 1900’s, the gap got out of control. During the Gilded Age, a very few obtained incredible wealth at the expense of the poor. The free market ceased to exist. Teddy Roosevelt instated drastic change by using the Government to bust up the large trusts. Trade Unions allowed workers to band together to demand higher wages. When the big business fought back using violence, the Government stepped in and imposed regulations that mandated many of the unions’ basic demands, including reasonable working hours, minimum livable wages, and needed safety measures.

By the 1940’s, these drastic changes led to more controlled regulation to prevent the gap from expanding. This was accomplished by utilizing the tax system to limit the richest American’s ability to multiply their wealth. The top 1% paid taxes at a rate of up to 90% or more on their truly excessive earnings. The government used this money to build our infrastructure, fund public education, and take care of the poorest and weakest members of our society.

The result was the rise of the Middle Class. It was also what Made America Great. We went from a small, isolationist country at the turn of the 20^th century into the top super power with the strongest economy ever known.

But by the Seventies, regulations made the gap too small, and we lost our drive and motivations. Under Reagan’s tax reforms, the gap started to expand again. Since the 80’s, that gap has expanded at a faster and faster rate, and again we are getting close to point we were 100 years ago.

I grew up during the seventies, and my first exposures to the economy was during the recession of the 70’s. I witnessed first-hand the boost to the economy that was provided when tax rates were drastically cut. This has ingrained on me the concepts that redistribution of wealth is bad and low tax rates are good.

But what we all failed to see is that while those lower taxes DID result in a boost to the economy, (The “Trickle Down” theory), they hid the fact that the gap between the rich and poor was no longer controlled. While some of the money not taxed was reinvested by the rich, much of it was simply hoarded and used to widen the gap between the rich and the poor.

We must remember that they wider the gap, the more control the rich has over the free market. And the more control the rich has over the free market, the faster they can grow the gap.

Capitalism’s Forbidden Dirty Words

As I ponder this equation over and over, I have come to the conclusion that we need to realize, as did Teddy Roosevelt, Eisenhower, and others, that some redistribution of wealth is necessary for Capitalism to survive. This is evident in two ways:

First, the higher tax rates stopped the growth of the Gap, and actually reduced it. This proves that we can control the gap slowly and smoothly through taxes. We can prevent it from reaching the point where drastic action is needed to prevent outright revolt.

Second, without the money from the higher taxes, we have not been able to improve, or even maintain, our infrastructure. Our roads and bridges are falling apart. Our Internet service lags far behind China and other countries. We have neglected our public education system. Our children are no longer the best educated in the world. Not even close. We no longer offer a way to college that does not impose decades of debt on young adults.

Today, every Republican gasps in horror just thinking about any “redistribution of wealth”. But they are wrong. Remember, it was Teddy Roosevelt who busted up the trusts and led to the most drastic redistribution of wealth in our nation’s history.

IT’S CRISIS TIME

We have reached a very DANGEROUS point. The gap between the rich and the poor is growing at its fasted rate ever. But the rich have such a stranglehold on our Government that it is powerless to implement any methods to slow and reverse this growth. Even worse, the rich are actively trying to further reduce taxes, which will result in the gap growing even faster.

We are rapidly reaching a point where violent revolt is a possibility. The people are angry, and rightfully so.

WE MUST REVERSE THIS TREND, and QUICKLY. Here is how:

We must RAISE taxes on the very rich, but not so much that it will cripple the economy. I do not mean raise them back to up to the 50% and 90% rates of the 1940’s and 1970’s. Perhaps raise them 5% on incomes over $500,000 and 10% on incomes over $1,000,000.

Then USE this money to repair and expand our infrastructure. Fix our failing brides and obsolete highways. Ensure everybody has access to high-speed, broadband Internet at a reasonable price. Fix our public schools. Lower college tuitions to the point where one can again work his or her way through college with a summer job. Provide vocational training to those who do not want to go to college. Provide funds to train coal miners and others whose jobs are becoming obsolete in new fields. Provide child care services so that working parents are able to work.

RAISE the minimum wage so that a full-time worker can afford a 2 bedroom apartment, transportation, food, clothing, and health care. But make the minimum wage regional and tied to the actual cost of living in each area. $15 per hour is not enough for Manhattan, but is too much for Mississippi. And make exceptions for students with part-time jobs so long as they stay in school and maintain their grades.