Posted on 10/26/2018 5:54:26 AM PDT by RoosterRedux
Executive Summary
October 2018
Coincident with the 200th anniversary of Karl Marx’s birth, socialism is making a comeback i n American political discourse. Detailed policy proposals from self - declared s ocialists are gaining support in Congress and among much of the electorate . It is unclear, of course, exactly what a typical voter has in mind when he or she thinks of “socialism . ” B ut economists generally agree about how to define socialism, and they have devoted enormous time and resources to studying its costs and benefits. With an eye on this broad body of literature, t his report discusses socialism’s historic vision s and intent s , its economic features, its impact on economic performance, and its relations hip with recent policy proposals in the United States.
We find that historical proponents of socialist policies and those in the contemporary United States share some of their vision s and intent s . They both characterize the distribution of income in market economies as the unjust result of “exploitation , ” which should be rectified by extensive state control. The proposed solutions include single - payer systems, high tax rates (“from each according to his ability”), and public policies that hand out much of the N ation’s goods and services “ free ” of charge (“to each according to his needs”). Where they differ is that contemporary democratic socialists denounce state brutality and would allow individuals to privately own the means of production in many industries .
In assessing the effects of socialist policies , it is important to recognize that they provide little material incentive for production and innovation and, by distributi ng goods and services for “free , ” prevent prices from revealing economically important information about costs and consumer needs and wants. To this end, as the then – prime minister of the Unite d Kingdom , Margaret Thatcher (1976), once argued , “Socialist governments . . . always run out of other people’s money , ” and thus the way to prosperity is for the state to give “the people more choice to spend their own money in their own way.”
Whether socialism delivers on its appealing promises is an empirical question. We begin our investigation by looking closely at the most highly socialist cases, which are typically agricultural economies , such as Maoist China, Cuba, and the Union of Soviet Socialist Republics (USSR). The i r n ondemocratic governments seiz ed control of farming, promising to make food more abundant . T he result was substantially l ess food production and tens of millions of deaths by starvation. Even if highly socialist policies are peacefully implemented under the auspices of democracy , th e fundamental incentive distortions and information problems created by large state organizations and the centralized control of resources are also present in industrialized countries , as is currently the case in Venezuela . L essons from poorly performing agricultural economies under socialist regimes carry over to government takeovers of other modern industries : T hey produc e less rather than more .
These countries are examples of a more general pattern of socialism’s negative output effect s . Such outcomes have also been observed in cross - country studies of the effect of greater economic freedom — quantified as an index of taxation and public spending, the extent of state - owned enterprises, economic regulation, and other factors — on real gross domestic product ( GDP ) . This literature finds a strong association between greater economic freedom and better economic performance. It suggest s that replacing U.S. policies with highly socialist policies , such as Venezuela’s , would reduce real GDP at least 40 percent in the long run , or about $24,000 per year for the average person .
Although they are sometimes cited as more relevant socialist success stories , the experiences of the Nordic countries also support the conclusion that socialism reduces living standards . In many respects , the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism. For instance, t hey do not provide healthcare for “free” ; Nordic healthcare financing includes substantial cost sharing . Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the U nited States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes. The Nordic countries also tax capital income less and regulate product markets less than the U nited States does . However, the Nordic countries do regulate and tax labor markets somewhat more ; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies . Living standards in the Nordic countries are at least 15 percent lower than in the U nited States .
It may well be that American socialists are envisioning moving our policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with economists’ traditional definition of socialism. We estimate that if the U nited States were to adopt these policies, its real GDP would decline by at least 19 percent in the long run , or about $11,000 per year for the average person .
The Nordic and European versions of socialized medicine ha ve been viewed as so desirable by modern U.S. socialists that they have proposed nationalizing payments for the healthcare sector ( which makes up more than a sixth of the U.S. economy ) through the recent “ Medicare for All ” proposal . This policy would distribute healthcare for “ free ” ( i.e., without cost sharing) through a monopoly government health insurer that would centrally set all prices paid to suppliers such as doctors and hospitals. We find that if this policy were financed out of current Federal spending without borrowing or tax increases, then more than half the entire existing Federal budget would need to be cut. Or if it were financed through higher taxes, GDP would fall by 9 percent , or about $7,000 per person in 2022, due to high tax rates that would reduce incentives to supply the factors o f production . Evidence on the productivity and effectiveness of single - payer systems suggests that “ Medicare for All ” would reduce both short - and long - run longevity and health despite increasing somewhat the population with health insurance.
Free download from the Mises Institute.
For example, sentences like the following...
Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards .should be rewritten like this...
Vikings say socialism take dollars away from Billy, Suzie, LaWanda, and DeVon.
To sum up this long detailed article : Socialism sucks.
Explains things fairly well.
Easier to read at the source.
Exactly. Furthermore, it denies individual variance. Proponents might actually cite that as a feature with respect to varying production capability, but what about preference? What if the things that make person A happy cost money and he's willing to work harder or in a more lucrative position to get them, while person B values relaxation or contemplative time more and so ideally works less? Socialism forces redistribution, not just of wealth, but at least as importantly, of values, priorities and aspirations. Humans aren't cogs, no matter how convenient it is for socialists to act as if they were.
Thanks for posting.
Good for President Trump! It’s important to tackle socialism in print. Ideas matter. We should also deal with our colleges, universities, and individual classes and profs that indoctrinate socialism.
Bump
ping
Just yesterday I saw a clip of Oswald Moseley (British Fascist leader) in his old age. He was asked if he were still a fascist or if he had any regrets. He answered carefully and made a point that the British Union of Fascists failed to recognize the importance of human freedom. They basically compromised on that issue because they were interested in transforming society and the economy in a way that they considered beneficial. But he had come to realize that compromising human freedom was a fatal mistake.
Hayek saw this. Almost no one else did.
Moseley is quite an interesting character. I won't defend him, but his arguments against Globalism were true in the 1930s and they are just as true today. Personally, I would strictly avoid any talk of "Jewish Bankers" (and Moseley wasn't much of an anti-Semite) but I do think that hidden money men (from many cultures around the world) are pulling the strings and trying to handicap countries like the USA. That Globalist Elite is the great enemy. Mosely was wrong about a lot of things. But he was right about Globalism.
A 72 page document I saved and will read later. Too bad millenials have the attention span of 20 seconds and can only read 140 characters at a time.
I read an article a while back that said the problem with China’s ability to create instead of stealing is the inherent lack of incentive in their communist system. Not until they get rid of all the communist mechanisms in their economy and government will the citizens have the trust that is necessary for innovative enthusiasm.
Agreed, despite the fact that he has been consigned to the role of historical buffoon. A tip of my hat to you this morning for bringing OM up in this particular thread.
One aspect that could have been included, however, is that despite the enormous failure of socialism, and its massive wipeouts of farmers and anyone who is perceived to be bourgeois, it has more mythic power than Capitalism. Socialism, packaged differently as Globalism, Global Warming, Green Energy, etc. is compelling to many because it reduces alienation (a point that even Marx made). Many people don’t want to be alone and can’t stand to be an individual apart from tribe, clan, caste, class or cult that modernization brings about. So they want fake individualism and conformity of wearing tattoos, bright colored hair, being part of the counterculture, or joining in social movements that gives their life fake meaning (postmodernism). Capitalism, for all its successes, does not have the mythic power of Socialism, especially to those who don’t want to live a hard life of Capitalism with competition, profit making and entrepreneurialism. Thus, a rational appeal against Socialism won’t work unless it addresses the mythic power of Socialism.
Excellent post, CCg .. thanks !
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