The Dangers of Socialism

As far as I was ever concerned, an article of this type was no longer necessary. “The Dangers of Socialism?” Really? Is there anybody out there who doesn’t think socialism is dangerous? Perhaps in the 1970s or 1980s you would see an article like this, when the great ideological battle was still being waged. In the 1990s you probably definitely wouldn’t see an article like this because the dangers of socialism were still very real in many people’s minds, with the collapse being so recent.

So why an article now? I have become very disheartened by what I am reading in the newspapers and the blogosphere. It seems people have forgotten just what socialism actually is and, therefore, the dangers that come along with it. Does this view prevail because socialism has been so thoroughly defeated and it’s been 20 years since we’ve seen true socialism that people no longer see it as a real threat? Have people become so lax in our freedom that socialism actually looks like a viable alternative?

I have heard and read that socialism and democracy can exist side-by-side because socialism is an economic system, while democracy is a political system. These people say that the necessary pairing doesn’t have to be capitalism and democracy, but that we could have democracy paired with socialism, because then everybody is free, yet society is more equitable and just. I don’t buy it.

It is statements like these that illustrate just how dangerous socialism is – the danger is that people don’t perceive it’s dangerous. I’m reminded of the old quote, “The greatest trick the devil ever pulled was convincing the world he doesn’t exist.” Socialism is backwards from both an economic standpoint and a liberty standpoint. It doesn’t work economically and it doesn’t work politically. Or rather, it works much too well politically – for those in power.

Let’s start at the beginning and deconstruct socialism and its consequences. John Locke wrote that we have ultimate property in ourselves. That is, we own our own body and we have the right to protect it. Nobody can take away our property right to our own body, not other men, not society, and certainly not government. For, according to Locke, the only reason man forms government is to protect his body, his property. In the state of nature, man owns his body, and consequently, whatever he produces with his labor. For example, if he finds four apples on the ground, and he bothers to pick them up, he has mixed his labor with nature and the apples become his property. Nobody has a right to take away his apples. But man is unprotected. How can he stop another who is stronger than he from taking his apples? How can he guard against being murdered for his apples? He can’t by himself.

So, man leaves the state of nature and forms government. The government’s power comes from the people and the people give government the power to protect individuals’ property. Notice the direction of causation here. It is the people who give power to the government, not the other way around. Government has no rights of its own and it certainly cannot “grant” rights to its citizens. The right to private property, and to defend that property, is inherent - it is unalienable. It is neither granted by nor can be taken away by government.

Locke continues by saying that if anybody tries to take your property, he has declared war on you and you have the right to defend yourself and your property. Similarly, if the government tries to take your property, it has ceased being a legitimate government and the people no longer vest their power in it. If the government tries to seize your property, the people not only have right, but a duty to protect themselves and defend their property. Revolutions have been justified in such ways.

This is where we get into socialism. A socialist government has failed in two key areas. First, it is not a legitimate form of government because it fails in its most important duty – protecting private property. Second, it is exercising power that it does not have. As such, the people have no reason or obligation to follow. It quite simply lacks the authority to nationalize private property.

Putting aside the political argument for a moment, let’s look at socialism from an economic standpoint. Economically, socialism fails because it provides the wrong incentives. When the state owns the means of production, and when it sets mandates on what and how much to produce, it creates the incentive to not produce, but if you must, it creates the incentive to provide poor quality.

For example, pretend that you own a shoe factory. In capitalism, people come along and pay you for your shoes. If the quality is poor, nobody will want to buy them. If the price is too high, they will buy their shoes from the competitor down the street. Profit is directly related to quality, and as such, producers have the incentive to produce the best quality product possible, at the cheapest price possible, otherwise they won’t get any business at all. The customer is an asset. The more customers you have, the more money you make.

Contrast this with socialism. Again, pretend you have the same shoe factory. Only now, the state owns the factory and every other shoe factory. The state tells you that you must produce 1000 pairs of shoes and sell them for $10. The money from your sales doesn’t go to you, but to the state. For your efforts, the state will pay you $1,000. Now the incentive is to produce the shoes in the cheapest way possible. Quality doesn’t matter because the money you receive for producing is not tied to quality. The only thing that stops you from collecting your $1,000 is if you don’t produce 1,000 shoes. Thus the incentive is to use the cheapest materials and methods possible in order to maximize your profit. If you produce 1,000 shoes for $600, then you take home $400. If you spend $1,000 producing shoes, you take home nothing. Why would any person spend the extra time and effort to produce a quality shoe when it will actually cause them to lose money?

And what if 1,001 people need shoes? You were told to produce 1,000 pairs. Would you produce the next pair? No, because you wouldn’t get any extra money from it. It would actually cost you money to produce that extra shoe. In the case of socialism, the customer becomes a liability instead of an asset. The incentive is to produce to the fewest number possible in the cheapest manner possible. The result is shortages of very poor-quality products. Clearly a lose-lose situation.

Combine this with the almost comical fact that some factories produce too many shoes (there are less than 1,000 people who need them in the area). This means that in some areas there is a shortage of shoes and in other areas there is a surplus of shoes, with no mechanism for bringing the surplus to the shortage.

In capitalism, prices send signals. If there is a shortage, it means demand exceeds supply and price goes up. If the price goes up, it means money is to be made so people start producing more shoes. In an area of surplus, it means supply exceeds demand. To get rid of the excess, producers will drop the price in the hopes of selling them quickly. If demand still remains low, the producer will shut down business in that area and move to an area where he can sell his shoes for a higher price. Because of prices, the market is self correcting and those who need shoes get them.

In our example of socialism, one factory produces too many shoes and they just sit there on a shelf and collect dust. The price isn’t set by the market so there are no signals telling producers where shoes are needed most.

In capitalism, the incentives work with human nature. Capitalism uses humans’ natural self-interest to provide the best possible outcome. Socialism, on the other hand, tries to change human nature. It tries to ignore or change the fact that humans are self-interested. But remember, human nature always prevails. In both systems humans are simply following their nature and trying to earn the most money possible. In capitalism the incentives are to provide the best-quality, lowest-priced product. In socialism, the incentives are to provide the lowest-quality product without an ounce of extra energy. Socialism, from an economic standpoint, clearly fails.

Okay, so how does this tie in to socialism being dangerous? And what about that whole bit about socialism and democracy existing side-by-side?

To tie this all together, governments know that they cannot gain control if their power comes from the people. If the state owns the means of production, it owns the people. It creates the situation where people are completely dependent on government. The government can, at any time, shut down the factory, thus robbing you of your means of income - and survival. If the government controls the means of production, it controls what gets produced. Anything dangerous to the state – guns, knives, knowledge, hope – doesn’t get produced.

If your wage comes from the state, if your wage is not tied to your own performance, you have no incentive to do better. You have no incentive to seek an education or to become politically aware. Why would you waste your time and money in something that won’t provide any benefits? If the state tells you how many doctors there will be, how many trash men there will be, how many restaurant waiters there will be, how many bricklayers there will be, then what you are is your station in life. There is no reason to try to become something different. If the state sets the wage, why would anybody strive to become a doctor or a lawyer or a university professor? Why would anybody invest their time in something that is a lot of work if there is no extra reward? Again the incentive is created to do as little as possible, to find the easiest job and do the least work, because after all, the wage is the same regardless.

Socialism slowly saps people of their strength, of their hope, of their freewill. This is good for the government because a society that has no hope and no strength is easily manipulated. The society that is kept weak has no power of protest. The government ensures their continued power by keeping the population devoid of any political will. And, once socialism takes hold, successive generations are gradually indoctrinated to complete state control so that eventually the people are completely and totally dependent on the government. Even if they wanted to, even if they knew how, the people couldn’t possibly revolt and throw off their government because they would also be throwing off their very means of survival. Socialism is very good for the politicians, but very, very dangerous for the rest of us.

Are there governments out there in which it’s their explicit goal to oppress and control their population, for no other reason than to attain an ironclad grip on power? Unfortunately there are many situations like that, even in today’s world.

But perhaps more dangerous, and certainly more stealthy, is the gradual, almost unbeknownst, shift to socialism. For without doubt there are benevolent governments that are just trying to do the right thing. After all, these misguided but well-meaning politicians say, it’s the government’s responsibility to provide for the population. How can it be bad if the government ensures everybody has a job? How can it be bad if the government ensures everybody has healthcare? How can it be bad if the government ensures that everybody is able to buy a house? The government has a duty to provide these things! For we, as politicians (they may say to themselves) have a mandate! We were elected to provide people with increasing social welfare! It’s only just that everybody is equal. If only that pesky market stopped getting in the way. If only prices weren’t too high to keep essential services out of the hands of the population. If only greedy executives weren’t concerned with only their own well-being. If only…

Yes indeed the shift can be gradual, with everybody the whole time thinking they are doing the right thing. That is why socialism is dangerous. It is stealthy. It is aesthetically pleasing (if very shallow). It is in the interest of those in power. Once the interests of those in power become different from our interests, government has stopped being by the people and for the people. Democracy is the best political system in the world. It is consistent with liberty and economic principles. It most certainly is not consistent with socialism, however small the steps in that direction…