it finally runs out of other peoples money... it finally runs out of other peoples money...The fundamental flaw of socialism is to try to make a god of man.
Consider that feedback loops are a useful way to model national spending and debt. There are reinforcing loops such as more government spending producing more demand for government spending with no slowing of that mutually reinforcing feedback loop. When you add a “balancing” loop that incorporates generation of revenue, you ultimately find your system hits an external constraint, the maximum amount of debt the system can sustain. At that point, the system is damped to a stop. This actually increases pressure on gov’t to spend because lack of additional spending forces pressure from the public who wants more spending. There are lots of other feedback loops that can be connected to this system but like many complex systems, the reinforcing loop found in gov’t spending and public demand is powerful and thus self-organizes to a critical level. This has happened in Greece.
One of the most dangerous characteristics of feedback loop systems is delay. The mere use of debt financing introduces delay into the system and by making unfunded promises, for example, retirement payments current workers, you further delay the system’s reaching of the sustainable debt limit and amplify the negative consequences over the delay period.
Unfortunately, this is a complex system and hard for most people to see. What most people see is that gov’t gives them goodies. They don’t have to pay much for those goodies.
The systems model suggests the end will be very bad. I hope I have overlooked something—does anyone have a model that suggests this system will actually end in sunshine and joy?
Socialism’s big flaw is that...
It’s logically impossible to make it work.
The economist Ludwig von Mises showed in 1920 [1,2] that since a socialist economy destroys price information via government intrusion, the myriad of participants in the economy are unable to make a fully rational calculation about true profit and loss. Any economic activity that operates at a loss cannot be “sustainable”, a concept the left loves to scold us about, yet cannot really grasp.
Taking another approach, the Nobel economist F.A. Hayek showed that a national economy had such an immense myriad of dynamic economic relationships that no single committee or bureaurcracy, no matter how smart or how well staffed, could possibly know enough to direct prices or production levels. His Nobel Lecture [3] was entitled The Pretence of Knowledge. Hayek had previously used this idea as the basis for a very thorough article [4] on the subject, “The Use of Knowledge in Society.”
When these two different withering critiques of socialism are combined, it is easy to see that not only is it dangrously foolish to think that economic decisions can successfully be made by government, but that competing bureaucracies will invariably react to the consequences of intrusions in the marketplace by each other. It would be like trying to control the height of waves on a lake by measuring them from the back of a boat circling in its own wake.
Mr. Keynes’s aggregates conceal the most fundamental mechanisms of change.” —FA Hayek
Socialism is also morally bankrupt, for it demands we accept the premise that we can each live at the expense of others, despite how this violates the Commandments that forbid coveting and theft.
[1] Economic Calculation in the Socialist Commonwealth by Ludwig von Mises
http://mises.org/pdf/econcalc.pdf
[2] Why a Socialist Economy is “Impossible” by Joseph T. Salerno
http://mises.org/econcalc/POST.asp
[3] The Pretense of Knowledge
http://mises.org/daily/3229
[4] “The Use of Knowledge in Society,” American Economic Review, XXXV, No. 4; September, 1945, pp. 519–30.
http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=92