Socialism Back in Style

When discussing a controversial subject – which socialism most certainly is – it helps to explain at the onset exactly what the term actually means. It’s not an easy task in this case, as it means different things to different people … and not benignly so. Its origin, dating back to the 1789 French Revolution, unleashed a worldwide animosity that to this day creates instant hostilities between many diverse groups.

Let’s start our analysis with a non-biased definition. I can think of no better source than Webster’s Dictionary. socialism 1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods. 2 a: a system of society or group living in which there is no private property. b: a system or condition of society in which the means of production are owned and controlled by the state

We’ve just seen socialism defined in a pristine manner no one will find objectionable; it’s now time to get into the real world where nothing but invective will be heard. An article recently appeared in a major California newspaper where members of the Inland Empire Democratic Socialists of America extol the virtues of socialism, and as you might expect, they too define it … although in somewhat different terms than Webster.

Depending upon the advocate speaking, socialism may be “a classless society undergirded by an economy in which production and the fruits of production are shared by all.” It’s also “the ability of the working people to resist the private tyranny of the firm and its owners.” Yet another proponent merely maintains it’s a system “connoting equality for everyone.”

With the definitions now behind us, let’s take a look at how a reputed socialist society actually operates, so we may compare it with the United States. To be as comparable as possible, I’ve not chosen a totalitarian regime such as Cuba, North Korea, or Venezuela. Rather, let’s view the workings of Sweden, a nation which two avowed socialists, Senator Bernie Sanders and Congresswoman Alexandra Ocasio-Cortez, laud as an example of enlightened socialism.

Between 1870 and 1950, Sweden had a free economy, low regulation, and ample wealth, being among the richest countries in the world. However, in the 1960s they began to redistribute wealth. The practices they engaged in included establishment of an elaborate social safety net, the granting of free education, a largely tax-funded universal healthcare system, and a program of extensive public pension plans.

By the mid-1990s, the country experienced economic problems as it continued to redistribute wealth it neither collected nor created. At this juncture many of its wealthier citizens, more prosperous businessmen, and talented entrepreneurs began leaving the country. Sweden found itself rapidly becoming insolvent.

In 1994, Sweden began implementing measures designed to reverse this trend. These included reducing regulations and government spending, reform of welfare programs, and reducing the size of government. For the past quarter century they’ve managed to attain a modest rate of growth, but not nearly as robust as pre-1960 levels. Sweden continued on this path these past 24 years, but its economy falters due to government taxation remaining high. Personal income is taxed at a rate of 61.85 percent, plus a 7 percent social security tax rate for employees. On top of these charges, Sweden also assesses a 25 percent consumption tax.

Despite the economic problems bedeviling Sweden, where Ms. Cortez, in her Jan. 6, 2019, 60 Minutes interview with Anderson Cooper, says she “models her socialist policies,” the socialistic concept seems to be alive and gaining adherents as the 2020 elections grow ever closer.

The two programs, “Medicare for All” and the “Green New Deal,” designed to deliver massive regulatory authority and taxpayer funding to the government, are now endorsed by five of the leading Democratic presidential hopefuls, Senators Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.), Kamala Harris (D-Calif.), and Bernie Sanders (I-Vt.).

As for the probable costs of these programs, the left-leaning Urban Institute estimates Medicare for All will come to $32 trillion over 10 years. The center-right American Action Forum places the price of $93 trillion on the Green New Deal over the same time period. Inasmuch as this latter program calls for the removal of all gasoline-engine cars in favor of electric vehicles, as well as government expansion into energy, housing, farming, transportation, and other industries, the estimated cost doesn’t seem to be an exaggeration.

For a sense of scale, the combined $125 trillion cost for these 10 years will be double the $60 trillion projection for all government spending during that period. The question to be asked is: Where will this money come from?

These two programs, seemingly endorsed by the spokespersons of a major political party, raise a crucial question. Are the proposals merely being idly floated because phrases like “single-payer” and “free health care,” which have a seductive ring to them, are excellent vote-getting devices? But more importantly, would the proponents advocating such projects actually attempt to institute them if elected? Possibly more to the point, are there electable politicians who’d willfully destroy the economy of the world’s most vibrant nation should they be in a position to do so?

Irrespective of the program’s cost, I foresee a serious problem if Medicare for All comes to pass. In our current Medicare system, the healthcare of 77 million persons is now financed by 330 million residents. Even so, it’s becoming increasingly costly while a growing number of Americans can’t afford it. The result: Businesses are ridding themselves of employees and transferring their assets outside our borders, beyond the reach of regulators and tax collectors. And lastly, the effective tax rate on a middle class working American is nearing 50 percent. There’s little slack.

My question is this: What will be the result when 330 million persons must have their healthcare financed by 330 million residents? I believe I know the answer. It will not be Medicare for All; instead, we will have instituted Medicaid for All. Welcome to your government HMO; any V.A. recipient will tell you what it’s like.

Before we conclude this article, you deserve a brief look at what, on Feb. 11, 2019, the Green New Deal proponents guaranteed for everyone within our borders. A family-sustaining wage; medical leave; paid vacations; retirement security; high-quality health care; safe and adequate housing; economic security; healthy and affordable food; 100 percent of the nation’s power to be from zero-emission energy sources; repair of the nation’s infrastructure; upgrading all existing buildings to achieve maximum energy efficiency, safety, comfort, and durability; overhauling the transportation system to eliminate pollution and greenhouse gas emission; and elimination of pollution and greenhouse gas emissions created on farms and ranches. They only omitted promising a lottery jackpot and life after death.

A final consideration: Many critics of socialism direct their faults toward its political nature, often at the existing socialist states. Libertarians tend to disparage its passivity while focusing on the more competitive dynamics of capitalism. Some economists claim it creates distorted price signals, resulting in reduced incentives and prosperity. Others maintain socialism is vital in that the government’s role is to determine output and pricing levels. There must be thousands of reasons to favor it or condemn it … obviously some are correct and some are not.

My fundamental objection to socialism relates to its collectiveness as opposed to the inherent vitality of individual accomplishment. Rewards for the completion of a task should go to the person(s) accomplishing the task. When this is not the case, the task is less likely to be attempted or completed. Abject failure is the logical result of a society in which the rewards rightly deserved by the producers are allocated to the non-producers.

Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. You may view them on http://www.roadwaytoprosperity.com

al@beachcomber.news