Capitalism Will Save Us -- If Only We Let It

Steve Forbes

This story appears in the May 31, 2019 issue of Forbes. Subscribe

HARDLY A DAY goes by without some eminence from business or finance proclaiming with furrowed brow and seeming sorrow that capitalism is in crisis and must be overhauled if it is to survive and not be replaced with some variant of socialism. Inequality, climate change, obscene levels of corporate profits, stagnant wages, soaring healthcare costs, crushing levels of student debt, rampant Wall Street greed, high-tech monsters and much more are all laid at the feet of an allegedly heartless, unresponsive capitalistic system.

It ain't so. Contrary to all this highbrow hand-wringing, the problem is bad government policies and, worse, a fundamental misunderstanding of free markets. It's time for a reality check regarding this much-maligned system.

Capitalism, free enterprise, free markets--whatever you label our system--is moral because one succeeds by meeting the needs and wants of other people. An entrepreneur tries to discern needs people don't know they have until a product or service is introduced to the market. Think Steve Jobs and the iPhone and iPad. Businesspeople try to persuade you to buy what they offer. Unless the government gets involved, there is no coercion. Countless people are trying to come up with ways to make everyone's lives better. If they succeed, they might (gasp!) get rich, but we are all better off.

Ever more sophisticated supply chains rise up, which work precisely because no tsar or central planner is in charge.

Government mistakes--not inherent flaws in free markets--are at the root of every economic crisis in modern times.The Great Depression was triggered by the draconian Smoot-Hawley Tariff Act, which imposed higher taxes on thousands of import items, triggering a global trade war that devastated economies. This felony was compounded when countries--Germany, Britain and the U.S. were the worst offenders--substantially raised taxes in the teeth of a sharp downturn.

The terrible inflation of the 1970s was the result of the Federal Reserve and other central banks repeatedly printing too much money. The crisis of 2008–09 sprang from the U.S. deliberately weakening the dollar, which set off a flight to hard assets such as housing.

High taxes are growth-killers. Taxes are a burden. Countries that keep the burden light do better than those that don't. After it recovered from WWII, Europe had growth rates comparable to or even better than those of the U.S. But in the 1970s the weight of taxation became heavier and heavier with the imposition of VATs and higher effective income tax rates. Result: microscopic paces of expansion.

Every time the U.S. has enacted big tax cuts, its economy has blossomed. The economy's post-Obama pickup came from the 2017 tax reduction and deregulation.

Excessive regulations hurt. Regulatory expert Philip Howard cites a typical example: An upstate New York apple orchard is subject to 5,000 rules from 17 different programs. Regulations cost the U.S. some $2 trillion a year. On average, a manufacturer pays $2,000 to $4,000 in annual taxes per worker; its regulatory burden is $20,000 to $35,000. Is it any wonder that manufacturing has suffered until recently?

Don't blame student debt on free enterprise. Government is the villain. With the best intentions Washington created programs to help people pay for college, primarily Pell Grants and student loans. Studies from the New York Fed and others confirm that the more money colleges collected via these schemes, the more students were charged.

High-priced healthcare is not a failure of capitalism. Free markets are the solution here, not more government control. Ours is a third-party healthcare system: government (primarily Medicare and Medicaid), insurance companies and large employers, not consumers. Hospitals' revenues depend on how well they negotiate with third parties, not on how well they please their patients. What a drug company charges for a medicine is far smaller than what you see reflected on a hospital bill. A big chunk of the price charged goes to pay pharmaceutical benefit managers. Discovering in advance what a procedure might cost is a Herculean effort.

In normal markets, if you make an advance in productivity, competitors will likely follow suit quickly. Not so in healthcare or higher ed.

The Surgery Center of Oklahoma posts all of its prices online. It has topflight surgeons; its overhead is low, by industry standards; and the cost of an operation is a fraction of that charged at traditional hospitals and clinics because patients pay the entire amount in advance. (Prices are higher if a patient wants the center to file their insurance claim.) Yet it has few imitators. Why? Because there is no consumer market. Since third parties foot most of the bill, most patients have no incentive to compare quality and prices, and would be hard put to do so even if they wanted to.

Take electronic records. Every dry cleaner and gas station has had them for 20 years. But not healthcare providers: There was no competitive advantage. Then Washington decided to mandate them but did so destructively, in a manner worthy of the defunct Soviet Union.

Purdue University president Mitch Daniels has frozen tuitions since he took office in 2013. He has enacted numerous efficiencies, so that to attend this prestigious institution a student today pays less than a student did six years ago. By the way, Daniels has boosted the number of Purdue's tenured professors.

But just as with the case of the Surgery Center of Oklahoma and other hospitals, there's no stampede of colleges and universities urgently following Purdue's example.

Free markets reduce poverty. Real incomes per person have risen over 50-fold since we achieved independence. Before the Industrial Revolution, which capitalism made possible, individual incomes in the world grew imperceptibly. Today, despite all the economic policy mistakes, poverty is plummeting. Over the past 20 years, 1 billion people have escaped abject poverty.

Free markets always turn scarcity into abundance, today's luxuries into tomorrow's common products. Among countless examples is the handheld phone. The first cellphone of the early 1980s--which could only make calls--was as large as a shoe box, weighed as much as a brick, had barely an hour of battery life and cost $3,995. Today there are billions of cellphones, and most have the capability that a supercomputer had a couple of decades ago.

The same happy phenomenon of getting more for less would happen in healthcare if certain free-market reforms were enacted, such as nationwide shopping for medical insurance and removing restrictions on medical savings accounts.

Inequality? Wages, until recently, had stagnated since the financial crisis of 2008, and they hadn't been improving much in the decade before then. Once again, the problem was faulty government actions.

Investment is the sine qua non for progress, and more investment takes place when money has a stable value. Until the 1970s the dollar had been fixed to gold, and the U.S. economy had grown as no other nation's ever had before. But since then our average growth has declined 25% or more. And guess what: Income growth hasn't been as robust as when we were on the gold standard, either.

Another factor: relentlessly rising medical costs. Employer-provided insurance counts as part of an employee's compensation. Even though compensation has risen, the cash part has lagged. Not helping, either, has been the surge in federal payroll taxes, labeled "FICA" on your paycheck stub. With a regime of low taxes, a trustworthy dollar and a patient-oriented healthcare system, cashwages would rise very nicely.

Profits are essential. They are moral. Without them, the economy stagnates and regresses. The economist Joseph Schumpeter famously coined the phrase "creative destruction." Vibrant economies need enormous amounts of new capital to move forward. Change constantly destroys old capital--look at what the internet did to the value of legacy newspaper and magazine publishers--which must be replaced. Capital is needed to finance startups (most fail) and expansions as well as the productivity improvements of existing businesses. Capital comes from profits and savings. In that sense profit is a cost of doing business.

More and more young people want to work for outfits that are not "just" business. This is one of the great virtues of capitalism: The system seamlessly adjusts to people's wants and expectations. Wise companies quickly pick up and respond to these changes. Forbes has written frequently about these companies and the individuals pioneering their efforts.

Some people in business do bad, amoral or unethical things. Yes, they do, but that's not something unique to capitalism. People were guilty of bad behavior long before Adam Smith penned his capitalist classic, An Inquiry into the Nature and Causes of the Wealth of Nations, in 1776. Moreover, in an open, free-market and democratic system, the bad ones are usually flushed out, unlike in authoritarian or socialist regimes.

Socialism never works. It always leads to blood, tyranny and tears, as can be seen today in Venezuela, Cuba and North Korea and in the recent past in the Soviet Union, Maoist China and communist Cambodia (where, in less than four years, the regime slaughtered more than one fourth of the population).

What about the "socialism" of Scandinavia and Europe?They are not socialist in the sense that the government owns and runs the economy. Many of these countries have elaborate welfare programs, restrictive labor laws and overtaxation. But all this is beginning to change.

What self-styled American socialists overlook is that countries like Sweden have been scaling back government. Sweden has been cutting taxes. It has no inheritance tax, and it allows school choice, which is anathema to Bernie Sanders and his ilk. As for the rest of the EU, the average rate of economic growth since the crisis of 2008 has been minuscule, less than half that of the U.S.

More to the point, capitalism creates the wealth that makes welfare states possible. That's why more and more Europeans are looking at pro-capitalist reforms, such as low taxes, to gin up their economies.

Canada: A High Price for Free Healthcare

  So, to summarize:

• Since care is 'free', patients have no incentive to moderate their use of medical services or shop around to secure the best prices
•  The only way to keep costs down is to ration care, creating long waiting lists and delays
• Canadians face a media wait of 5 months for specialist treatment after referral
• Patients awaiting care suffer lost wages, which are not factored in to cost estimates
• Why would we want this system in the US?  The benefits are clear for those who cannot pay, but it would be unwise to destroy the system to benefit only those who cannot pay. 

  Canadians Pay A High Price For Free Health Care

SALLY C. PIPES
8/14/2018

Senator Bernie Sanders and his army of supporters of government-run health care evidently believe that American workers could use a pay cut.

That's the natural consequence of single-payer health care, as a recent analysis of Canada's healthcare system illustrates.

Last year, Canadian patients forewent $1.9 billion in wages while waiting for medical treatment, according to a report from the Fraser Institute, a Canadian think-tank. Canadian patients face some of the longest waits for care in the industrialized world due to their government-run system's strict rationing.

If progressives successfully install single-payer here in the United States, Americans will pay for the privilege of waiting in line.

In Canada, the government covers the cost of most healthcare services. Patients don't pay directly when they visit doctors or emergency rooms -- though they do indirectly, in the form of high taxes.

But because the cost of their care is hidden, they have no reason to moderate their consumption of medical services or shop around for treatments and providers that provide the best value.

To control spending, the government requires hospitals and clinics to adhere to strict budgets. Doctors and hospital administrators have to ration care to stay under budget. So patients face grueling treatment delays.

Last year, Canadians faced a median wait of more than 21 weeks to receive treatment from specialists after obtaining referrals from their general practitioners. That's double the median wait time of 25 years ago.

Patients in some parts of the country had it far worse. The typical patient from New Brunswick had to confront a median wait of nearly 42 weeks — about ten months. Nationwide, for the first time, more than 1 million Canadians are waiting for treatment.

A recent analysis of health systems in 11 wealthy nations found that Canadians faced the longest wait times — and not just for specialist care. Delays for family care and emergency room treatment were also the longest among peer nations.

These treatment delays can injure or even kill patients. Long wait times were a factor in 44,000 Canadian women's deaths from 1993 to 2009.

Patients waiting for surgeries and other procedures often can't work. They may be in pain or have limited mobility.

Even if they can work, they're generally far less productive and are forced to stay home sick more frequently. According to the Fraser Institute's new analysis, on average, every patient waiting for care lost $1,800 in foregone wages.

And that figure is actually a conservative, charitable estimate of the negative impact of single-payer's waits. It only factors in hours lost during an average workday; it doesn't place any value on the non-work hours that patients spend suffering in pain.

When all hours of the week are accounted for — excluding time for sleep — Canadian patients actually lost a combined $5.8 billion, or almost $5,600 per person, playing the waiting game.

Even that higher estimate doesn't account for the financial burden on friends and family who take time off to care for waiting patients. Nor does it factor in the expenses incurred by roughly 60,000 Canadians who travel to another country — often the United States — to seek non-emergency medical care each year.
Single-Payer: Health Care Fool's Gold

Americans have long opposed Canadian-style health care. But public attitudes are changing. Just over half of Americans support single-payer health care, according to a Washington Post-Kaiser Family Foundation poll from earlier this year.

Democrats are trying to capitalize on that swing in public opinion. They've introduced no less than a half-dozen plans that would ratchet up government control of the U.S. healthcare system to varying degrees — with the eventual goal of fully socialized medicine.

Senator Bernie Sanders's "Medicare for All" plan is the most radical. He's modeled his scheme on the Canadian system. During a trip to the country last fall, he asked rhetorically, "How is it that here in Canada, they provide quality health care to all people . . . and they do it for half the cost?"

But as the evidence from Canada shows, "free" single-payer health care is actually quite expensive. Americans needn't learn that lesson the hard way.

Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The False Promise of Single-Payer Health Care" (Encounter). Follow her on Twitter @sallypipes.

Who Knew That 'Free' Could Cost So Much?

Democratic Socialism: Who Knew That 'Free' Could Cost So Much?

Socialism: Since the Democratic Party took a turn for the worse toward so-called democratic socialism, the party's leading lights have laid the promises on pretty thick. Free Medicare for all! Guaranteed income! Guaranteed jobs! Subsidized housing! Free college! Universal pre-school! Wow, and all for free.

Well, not exactly. In a devastating piece that appeared on the left-of-center web site Vox (to its credit), Manhattan Institute fellow Brian Riedl went through the simple math of what free actually costs. It's a lot.

It's not just the free aspect, but the fact that the democratic socialists have made so many promises that must be paid for that will make it so tough to swallow for most voters.

Riedl looked at the 10-year costs of all the various promises made by Bernie Sanders, Alexandria Ocasio-Cortez, and other self-described democratic socialists. He was as generous as could be in his estimates, often accepting the democratic socialists' cost estimate even when it was patently and absurdly too low. It's quite a laundry-list of promises with enormous costs: "Free college" ($807 billion); Social Security expansion ($188 billion); single-payer health care ($32 trillion); guaranteed jobs at $15 per hour plus benefits ($6.8 trillion); infrastructure ($1 trillion); student loan debt forgiveness ($1.4 trillion).

Net cost: about $42.5 trillion over 10 years, give or take a few hundred billion. To paraphrase the late, great Republican Sen. Everett Dirksen: "A trillion here, a trillion there, and pretty soon you're talking real money."

As it is, current federal estimates expect about $44 trillion in tax revenues over that same period, with a deficit of roughly $12.4 trillion. Remember: All this democratic socialist spending comes on top of what we're already spending.

Long-term, the fiscal picture grows progressively (forgive the term) worse.

"The 30-year projected tab for these programs is even more staggering," wrote Riedl. "New proposals costing $218 trillion, on top of an $84 trillion baseline deficit driven by Social Security, Medicare and the resulting interest costs."

Today, Riedl notes, total federal spending typically swings between 18% and 22% of GDP. But with the democratic socialist agenda in place, it "would immediately soar past 40% of GDP on its way to nearly 50% within three decades." If you include state and local government, the total cost for this federal fantasia would equal 60% of GDP — more than any country in Europe.

Even after massive cuts in other programs, such as slashing defense by half, or adding in phantom savings from supposed cuts in state health spending and anti-poverty programs, you still come up $34 trillion short over 10 years.

To raise $34 trillion, Riedl calculates, would require "seizing roughly 100% of all corporate profits as well as 100% of all family wage income and pass-though business income above the thresholds of $90,000 (single) or $150,000 (married), and absurdly assuming they all continue working."

Or, he said, you could go to a VAT tax — a national sales tax on all goods and services. But it would have to be huge: a tax of 87% on everything you buy. Oh, and by the way, that still doesn't pay for the $12.4 trillion deficit that's already estimated and that we discussed above. So you'd need even more taxes.

Those number are scary enough. But we're not even raising the issues of: a.) massive cost overruns in these programs, which are inevitable; or, b.), whether these programs will work as described or instead end up ruining our free-market economy.

Not surprisingly, in public socialists say they won't ruin free-market capitalism. They'll save it!

Wrong again. As Meagan Day, a member of the Democratic Socialists of America, wrote (also in Vox): "Here's the truth: In the long run, democratic socialists want to end capitalism. And we want to do that by pursuing a reform agenda today in an effort to revive a politics focused on class hierarchy and inequality in the United States."

Americans should know that these are the very ideas that have destroyed the economies of the USSR, Cuba, Nicaragua, most of Africa, North Korea and, as we're now seeing, Venezuela. And they're not "democratic" at all. They're just socialism.
Danger: Socialism Ahead

The bigger point is, these utopian ideas are not fiscally sane. And we mean that literally. They are a bizarre fantasy that should be discarded immediately by any reasonable person interested in an economically prosperous future.

That some believe that replacing capitalism with socialism makes you better off shows the profound failure of our nation's education system. Because it's something that has never happened in the history of mankind. And young people, who are among socialism's most ardent fans, don't seem to even know this.

The great economist, social thinker and professor Walter Williams recently summed up the struggle between capitalism and socialism: "Capitalism doesn't do well in popularity polls, despite the fact that it has eliminated many of mankind's worst problems, such as pestilence and gross hunger and poverty."

To vote for socialism is to vote for national bankruptcy, a loss of freedom, a lower standard of living and an end to innovation. And be forewarned: As Venezuelans, Zimbabweans and Nicaraguans are now discovering, once socialists control things, they never give up power peacefully.

Socialism for the Uninformed

By Thomas Sowell
May 31, 2016

Socialism sounds great. It has always sounded great. And it will probably always continue to sound great. It is only when you go beyond rhetoric, and start looking at hard facts, that socialism turns out to be a big disappointment, if not a disaster.

While throngs of young people are cheering loudly for avowed socialist Bernie Sanders, socialism has turned oil-rich Venezuela into a place where there are shortages of everything from toilet paper to beer, where electricity keeps shutting down, and where there are long lines of people hoping to get food, people complaining that they cannot feed their families.

With national income going down, and prices going up under triple-digit inflation in Venezuela, these complaints are by no means frivolous. But it is doubtful if the young people cheering for Bernie Sanders have even heard of such things, whether in Venezuela or in other countries around the world that have turned their economies over to politicians and bureaucrats to run.

The anti-capitalist policies in Venezuela have worked so well that the number of companies in Venezuela is now a fraction of what it once was. That should certainly reduce capitalist "exploitation," shouldn't it?

But people who attribute income inequality to capitalists exploiting workers, as Karl Marx claimed, never seem to get around to testing that belief against facts -- such as the fact that none of the Marxist regimes around the world has ever had as high a standard of living for working people as there is in many capitalist countries.
 
Facts are seldom allowed to contaminate the beautiful vision of the left. What matters to the true believers are the ringing slogans, endlessly repeated.

When Senator Sanders cries, "The system is rigged!" no one asks, "Just what specifically does that mean?" or "What facts do you have to back that up?"

In 2015, the 400 richest people in the world had net losses of $19 billion. If they had rigged the system, surely they could have rigged it better than that.

But the very idea of subjecting their pet notions to the test of hard facts will probably not even occur to those who are cheering for socialism and for other bright ideas of the political left.

How many of the people who are demanding an increase in the minimum wage have ever bothered to check what actually happens when higher minimum wages are imposed? More often they just assume what is assumed by like-minded peers -- sometimes known as "everybody," with their assumptions being what "everybody knows."

Back in 1948, when inflation had rendered meaningless the minimum wage established a decade earlier, the unemployment rate among 16-17-year-old black males was under 10 percent. But after the minimum wage was raised repeatedly to keep up with inflation, the unemployment rate for black males that age was never under 30 percent for more than 20 consecutive years, from 1971 through 1994. In many of those years, the unemployment rate for black youngsters that age exceeded 40 percent and, for a couple of years, it exceeded 50 percent.

The damage is even greater than these statistics might suggest. Most low-wage jobs are entry-level jobs that young people move up out of, after acquiring work experience and a track record that makes them eligible for better jobs. But you can't move up the ladder if you don't get on the ladder.

The great promise of socialism is something for nothing. It is one of the signs of today's dumbed-down education that so many college students seem to think that the cost of their education should -- and will -- be paid by raising taxes on "the rich."

Here again, just a little check of the facts would reveal that higher tax rates on upper-income earners do not automatically translate into more tax revenue coming in to the government. Often high tax rates have led to less revenue than lower tax rates.

In a globalized economy, high tax rates may just lead investors to invest in other countries with lower tax rates. That means that jobs created by those investments will be overseas.

None of this is rocket science. But you do have to stop and think -- and that is what too many of our schools and colleges are failing to teach their students to do.

No, Bernie Sanders, Scandinavia is not a socialist utopia

No, Bernie Sanders, Scandinavia is not a socialist utopia


By Jeff Jacoby Globe Columnist October 15, 2015

When Bernie Sanders was asked during CNN’s Democratic presidential debate how a self-proclaimed socialist could hope to be elected to the White House, he gave the answer he usually gives: Socialism has been wonderful for the countries of Scandinavia, and America should emulate their example.

“We should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people,” Sanders said. When the moderator turned to Hillary Clinton, she agreed that America has to “save capitalism from itself” and that, yes, Scandinavia is great. “I love Denmark,” declared Clinton. It was the only time in the debate a candidate uttered the verb “love.”

Liberals have had a crush on Scandinavia for decades. “It is a country whose very name has become a synonym for a materialist paradise,” observed Time magazine in a 1976 story on Sweden. “Its citizens enjoy one of the world’s highest living standards. . . . Neither ill health, unemployment nor old age pose the terror of financial hardship. [Sweden’s] cradle-to-grave benefits are unmatched in any other free society outside Scandinavia.” In 2010, a National Public Radio story marveled at the way “Denmark Thrives Despite High Taxes.” The small Nordic nation, said NPR, “seems to violate the laws of the economic universe,” improbably balancing low poverty and unemployment rates with stratospheric taxes that were among the world’s highest.

Such paeans may inspire Clinton’s love and Sanders’ faith in America’s socialist future. As with most urban legends, however, the reality of Scandinavia’s welfare-state utopia doesn’t match the hype.

To begin with, explains Swedish scholar Nima Sanandaji, the affluence and cultural norms upon which Scandinavia’s social-democratic policies rest are not the product of socialism. In “Scandinavian Unexceptionalism,” a penetrating new book published by the Institute of Economic Affairs, Sanandaji shows that the Nordic nations’ prosperity “developed during periods characterized by free-market policies, low or moderate taxes, and limited state involvement in the economy.”
For example, Sweden was a poor nation for most of the 19th century (which helps explain the great wave of Swedish emigration to the United States in the 1800s). That began to change as Stockholm, starting around 1870, turned to free-enterprise reforms. Robust capitalism replaced the formerly agrarian system, and Sweden grew rich. “Property rights, free markets, and the rule of law combined with large numbers of well-educated engineers and entrepreneurs,” Sanandaji writes. The result was an environment in which Swedes experienced “an unprecedented period of sustained and rapid economic development.” In fact, between 1870 and 1936, Sweden had the highest growth rate in the industrialized world.

Scandinavia’s hard-left turn didn’t come about until much later. It was in the late 1960s and early 1970s that taxes soared, welfare payments expanded, and entrepreneurship was discouraged.

But what emerged wasn’t heaven on earth.

That 1976 story in Time, for example, went on to report that Sweden found itself struggling with crime, drug addiction, welfare dependency, and a plague of red tape. Successful Swedes — most famously, Ingmar Bergman — were fleeing the country to avoid its killing taxes. “Growing numbers are plagued by a persistent, gnawing question: Is their Utopia going sour?”

Sweden’s world-beating growth rate dried up. In 1975, it had been the fourth-wealthiest nation on earth (as measured by GDP per capita); by 1993, it had dropped to 14th. By then, Swedes had begun to regard their experiment with socialism as, in Sanandaji’s phrase, “a colossal failure.”

Denmark has come to a similar conclusion. Its lavish subsidies are being rolled back amid sharp concerns about welfare abuse and an eroding work ethic. In the last general election, Danes replaced a left-leaning government with one tilted to the right. Loving Denmark doesn’t mean loving big-government welfarism.

The real key to Scandinavia’s unique successes isn’t socialism, it’s culture. Social trust and cohesion, a broad egalitarian ethic, a strong emphasis on work and responsibility, commitment to the rule of law — these are healthy attributes of a Nordic culture that was ingrained over centuries. In the region’s small and homogeneous countries (overwhelmingly white, Protestant, and native-born), those norms took deep root. The good outcomes and high living standards they produced antedated the socialist nostrums of the 1970s. Scandinavia’s quality of life didn’t spring from leftist policies. It survived them.

Sanandaji makes the acute observation that when Scandinavian emigrants left for the United States, those cultural attributes went with them and produced the same good effects. Scandinavian-Americans have higher incomes and lower poverty rates than the US average. Indeed, Danish-Americans economically outperform Danes still living in Denmark, as do Swedish-Americans compared with Swedes and Finnish-Americans compared with Finns. Scandinavian culture has been a blessing for native Scandinavians — and even more of one for their cousins across the ocean.

No, Scandinavia doesn’t “violate the laws of the economic universe.” It confirms them. With free markets and healthy values, almost any society will thrive. Socialism only makes things worse.Jeff Jacoby can be reached at jacoby@globe.com. Follow him on Twitter @jeff_jacoby.

Garry Kasparov: Hey, Bernie, Don’t Lecture Me About Socialism. I Lived Through It.

GARRY KASPAROV

Why my rant against the Democratic candidate’s prescription for America went viral.

2016 seems like a strange time to be arguing the merits of socialism in an American presidential campaign. But it’s also strange for the prospective leaders of the free world to be talking about the KKK and their appendages, so clearly this year is not like any other. While the latter topics are, thankfully, beyond my purview, I have a great deal of interest in socialism.

Last week I expressed some of these thoughts on Facebook after hearing a clip of “democratic socialist” candidate Senator Bernie Sanders on Super Tuesday. This was already a rarity, considering how little time the networks have left after their blanket coverage of Donald Trump’s latest outrages. My post on the nature of socialism was 113 words long, a quick response to critics of a cartoon I had posted of Bernie Sanders wearing a baseball cap reading “Make America Greece Again.”

My goal was to remind people that Americans talking about socialism in the 21st century was a luxury paid for by the successes of capitalism in the 20th. And that while inequality is a huge problem, the best way to increase everyone’s share of pie is to make the pie bigger, not to dismantle the bakery. Much to my surprise, my little rant went viral, as the saying goes. Instead of the usual few hundred Facebook shares, this paragraph quickly reached tens of thousands. By the next morning it had reached several million people, more than any of the day’s political posts by the leading candidates. A week later and it has over 3,000 comments, 57,000 shares, and a 9.3 million reach that is in the category usually reserved for photos of pop stars and kitten videos.

My conclusion that “the idea that the solution [to inequality] is more government, more regulation, more debt, and less risk is dangerously absurd” apparently had great resonance, and I think I know why. There is a growing consensus that America has deep troubles, and no one can agree on solutions. Everyone agrees that Washington should change, and some want the government to do much more while others want it to do much less. Many of the traditional economic numbers say that America is doing fine, and yet polls say that Americans—especially Sanders supporters—are angry about the present and fearful about the future.

I often talk about the need to restore a vision of America as a positive force in the world, a force for liberty and peace. The essential complement to this is having big positive dreams at home as well, of restoring America’s belief in ambition and risk, of innovation and exploration, of free markets and free people. America transformed the 20th century in its image with its unparalleled success. American technology created the modern world while American culture infused it and American values inspired it.

In recent decades that storyline has flipped. The tireless work ethic and spirit of risk-taking and sacrifice have slowly eroded. This complacency was accelerated by the end of the Cold War and it has proved very difficult to overcome in the absence of an existential enemy to compete with. The booming innovation engine of job creation has fallen behind the accelerating pace of technology that replaces workers. The result has been slower growth, stagnant wages, and the steady shift of wealth from labor to capital. In such situations many people turn to the government for help and the siren song of socialism grows louder.

I respect and even like Bernie Sanders. He’s a charismatic speaker and a passionate believer in his cause. He believes deeply in what he is saying, which is more than what can be said about nearly every other 2016 candidate, or about politicians in general. I say this while disagreeing vehemently with nearly everything he says about policy. The “revolution” rhetoric of Senator Sanders has struck a chord with many Americans, especially the young voters who are realizing that their own lives are unlikely to match the opportunities and wealth of their parents and grandparents. They are being left behind in a rapidly changing world. It is a helpless, hopeless feeling.

The problem is with the proposed solutions. A society that relies too heavily on redistributing wealth eventually runs out of wealth to redistribute. The historical record is clear. It’s capitalism that brought billions of people out of poverty in the 20th century. It’s socialism that enslaved them and impoverished them. Of course Senator Sanders does not want to turn America into a totalitarian state like the one I grew up in. But it’s a valuable example of the inevitable failure of a state-run economy and distribution system. (Check in on Venezuela for a more recent example.) Once you give power to the government it is nearly impossible to get it back, and it will be used in ways you cannot expect.

The USSR collapsed because it couldn’t compete over time, despite its massive resources and devout ideology. The Soviets put a man in space before America but couldn’t keep up the pace against an innovating, free-market competitor. My Facebook post went around the world on technology created in America. The networks, the satellites, the software, nearly every ingredient in every mobile device and desktop computer, was invented in the USA. It is not a coincidence that the most capitalist country in the world created all these things. Innovation requires freedom of thought, freedom of capital, and people who believe in changing the world.

Yes, the free market can be cruel and it is by definition unequal. It has winners and losers. It also sparks the spirit of creativity that humanity desperately needs to flourish in our ever-increasing billions. Failure is an essential part of innovation and the free market. Of every 10 new companies, perhaps nine will fail in brutal Darwinian competition. A centrally-planned economy cannot imitate this engine of creative destruction because you cannot plan for failure. You cannot predestine which two college dropouts in a garage will produce the next Apple.

A popular rebuttal is to invoke the socialist leanings of several European countries with high living standards, especially in Scandinavia. Why can’t America be more like happy Denmark, with its high taxes and giant public sector, or at least more like France? Even the more pro-free-market United Kingdom has national health care, after all. First off, comparing relatively small, homogeneous populations to the churning, ocean-spanning American giant is rarely useful. And even the most socialist of the European countries only became wealthy enough to embrace redistribution after free-market success made them rich. Still, why cannot America follow this path if that is what the people want? What is the problem if American voters are willing to accept higher taxes in exchange for greater security in the embrace of the government?

The answer takes us back to all those inventions America has produced decade after decade. As long as Europe had America taking risks, investing ambitiously, attracting the world’s dreamers and entrepreneurs, and yes, being unequal, it could benefit from the results without making the same sacrifices. Add to that the incalculable windfall of not having to spend on national defense thanks to America’s massive investment in a global security umbrella. America doesn’t have the same luxury of coasting on the ambition and sacrifice of another country.

Who will be America’s America? What other nation could attract the brightest students, the biggest investors, the most ambitious entrepreneurs in the same way? Germany? Russia? Japan? China? India? Each may take over leadership in some areas if America continues to falter, but none is equipped to lead the world in innovation the way the United States has since Thomas Edison’s day. None possesses the combination of political and economic freedoms and the human and natural resources required.

The government does have a role in addressing rising inequality. I turn not to Denmark or Venezuela or, god forbid, to the Soviet Union. Instead let us look to the last great battle between labor and capital in America, between public and private power. Just over 100 years ago, President Teddy Roosevelt spoke loudly and used his big stick against some of the world’s largest corporations when they were abusing their monopoly power. His successor, fellow Republican William Taft, continued the antitrust mission, at least initially.

Both men dealt with critics from industry and Wall Street who called their use of government power against them “socialism” and both answered eloquently. In his 1908 State of the Union address, Roosevelt spoke about “the huge wealth that has been accumulated by a few individuals of recent years” being possible “only by the improper use of the modern corporation,” and that these corporations “lend themselves to fraud and oppression than any device yet evolved in the human brain.” He also warned against the accrual of unaccountable political power in the hands of “men who work in secret, whose very names are unknown to the common people.” You can easily imagine Teddy in the bully pulpit today calling for the breakup of the big banks and ending their cozy relationship with Washington.

To give credit, Senator Sanders supports breaking up the giant banking institutions that dominate American finance and politics in a way that would evoke jealousy from John Pierpont Morgan himself. However, Sanders’s socialist policies would replace banks that are too big to fail with a government that is too big to succeed.

Taft warned about exactly this in his 1911 State of the Union. Busting the trusts was to free the market, not to insert the government into it. It was necessary to break up Standard Oil and American Tobacco in order to preserve capitalism, not to institute socialism. Taft said, “The anti-trust act is the expression of the effort of a freedom-loving people to preserve equality of opportunity. It is the result of the confident determination of such a people to maintain their future growth by preserving uncontrolled and unrestricted the enterprise of the individual, his industry, his ingenuity, his intelligence, and his independent courage.”

Bravo! Beautiful words and an even more beautiful sentiment that is deserving of its own Facebook meme! Unfortunately, today’s progressive solution would instead be to raise Standard Oil’s taxes and those of its wealthiest shareholders in order to pay for more services, like free college and health care. It would have been an acceptable choice for many, but the American 20th century would never have happened.


Garry Kasparov is the chairman of the New York-based Human Rights Foundation and the author of Winter is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped.

Capitalism Is Freedom

Capitalism Is Freedom; Socialism Is Slavery
John Hawkins | Feb 16, 2016


  "The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both." -- Milton Friedman

“If there is ever a fascist takeover in America, it will come not in the form of storm troopers kicking down doors but with lawyers and social workers saying, ‘I'm from the government and I'm here to help.’” – Jonah Goldberg

In a time where consumers have almost unlimited choices of music, movies, websites and every product you can imagine in the supermarket, socialism is an outdated economic system that no longer fits with the world we live in. Socialism requires the intervention and control of the marketplace by an overwhelmingly powerful centralized government. It penalizes high achievers, rewards laziness and stifles choice.

Socialism is a government regulation that stops you from creating a successful business. It’s the Bureau of Land Management or the EPA making arbitrary decisions about what you can do with your own land. It’s the IRS taking the money you busted your butt to earn and giving it to people who didn’t work as hard as you did.

Almost every socialist policy requires taking resources from someone who’s earned them and giving them to someone who hasn’t. Even programs that are supposed to be self-funding rarely are because the juice is never quite worth the squeeze. The real reason we’re so deeply in debt is because if the middle class was forced to choose between paying for what our government is spending or dramatically cutting back, our government would already be much smaller than it is – and no wonder.

What does our government do well anymore? Do you trust the IRS? FEMA? Are our borders secure? How does the customer service of the post office or DMV compare to, let’s say Apple or Amazon? Who wants to live in government housing? Who wants a minimum wage job? Who wants to answer to bureaucrats, jump through their hoops and do as he’s told by people who see him as a nameless, faceless slob dependent upon them for his livelihood?

This is what socialism offers.

Socialism will take something from someone else who earned it and give it to you and in return, you will do what socialists want you to do. If you’re irresponsible, lazy, have a habit of making poor decisions or just need a master, this can seem like a good deal. You can work a menial job and get paid more than you’re worth! You can go to college and you don’t have to pay for it! Someone else will give you a place to live, food stamps, welfare and health care! In return, you just have to give up on your pride, your dreams and control of your own life.

People who can take care of themselves don’t need socialism and most of those who have difficulty taking care of themselves would still be better off under a more capitalistic system. The more capitalistic an economy is, the faster it grows. The faster an economy grows, the more jobs and wealth are created.

Eighty percent of humanity lives on less than $10 a day. Meanwhile, 96% of the poor in America have televisions, 93% have microwaves and 81% have cell phones. Ultimately, it’s the economic growth produced by capitalistic policies that has allowed America’s poor to do so well compared to the poor in more socialistic nations. Paradoxically, the more we move towards socialism in the name of “helping” the poor, the less poor Americans will ultimately have. That’s because the more regulations, the more taxes and the more GOVERNMENT a country has, the slower its economy grows.

Socialism requires a gargantuan government so it can confiscate property, control behavior and manage an always growing list of programs to achieve “fairness.” Unfortunately, “fairness” is a will-o’-the-wisp that can never be caught because human beings have different levels of talent, skill and effort.

The factory worker who spent 30 years working his way through the ranks to become regional sales manager should make more than the new guy who just started yesterday. The man who spent 10 years building his own successful business should make more money than his employees. The man who invested every extra dime he had and does well should make more money than the fellow who used all his extra money to buy a bigger car and nicer furniture for his house. Socialists say, “Not so fast. Maybe those guys should make more money, but they’re making too much money. We should control how much they make. We should decide how much of their money they get to keep. We should control how much of their money is given away and to whom.”

On the other hand, capitalism is freedom. Capitalism says you should do what you want to do with your own time and either suffer the consequences or reap the rewards. Sure, we might all cooperate to create a military and a police force along with building sewage systems, roads, street lights and stop signs and a few other necessities, but beyond that, let everyone rise and fall as he deserves.

If you want to get a four year degree in women’s studies at an Ivy League university? Great, pay for it yourself. You want to live cheaply and work a second job so you can save up money? You should be able to do that and someone else shouldn’t get the benefits from your hard work. If you want to spend your twenties as a beach bum, surfing all day and sleeping in a tent at night, you can do that, but no one else should be asked to help pay for your lifestyle.

Having real freedom means you get to make real choices and when that happens, some of those choices will work out better than others. The only way to change that is to build a massive government apparatus that makes everyone poorer in return for reducing the amount of natural inequality that will happen when people are allowed to pursue their wildly differing hopes and dreams.

Capitalism is not perfect, but it won’t bankrupt the country, it doesn’t reward failure and it can’t control you like socialism. To the contrary, in a capitalist system, businesses benefit from voluntary transactions. Do you want to get rich in a capitalist system? Find a way to give people what they want. If you’re just okay at it, you can make a decent salary. If you’re as good at it as Henry Ford or Bill Gates, you can become rich beyond imagination.

Do you want to get rich in a socialist system? Be well connected. Make friends or just pay off people who can give you government contracts. Make contributions to politicians so they’ll change the laws to help you and hurt your competitors. Get the government to take money from other people and give it to you as part of a bailout.

Which sounds more admirable? Which sounds healthier for our country? When you give the government unlimited power to create “equality,” you also give it the power to tilt the playing field towards corrupt businesses that have every incentive to try to take advantage of it.

At the end of the day, socialism is for slaves who are willing to give up their freedom for promises that they’ll be given some minimal level of support no matter what. On the other hand, capitalism is for people who want the freedom to rise or fall based on their own effort. If you know which type of person you are, then you know whether you should be a capitalist or a socialist.

The Lure of Socialism

The Lure of Socialism Thomas Sowell | Feb 17, 2016




Many people of mature years are amazed at how many young people have voted for Senator Bernie Sanders, and are enthusiastic about the socialism he preaches.

Many of those older people have lived long enough to have seen socialism fail, time and again, in countries around the world. Venezuela, with all its rich oil resources, is currently on the verge of economic collapse, after its heady fling with socialism.

But, most of the young have missed all that, and their dumbed-down education is far more likely to present the inspiring rhetoric of socialism than to present its dismal track record.

Socialism is in fact a wonderful vision -- a world of the imagination far better than any place anywhere in the real world, at any time over the thousands of years of recorded history. Even many conservatives would probably prefer to live in such a world, if they thought it was possible.

Who would not want to live in a world where college was free, along with many other things, and where government protected us from the shocks of life and guaranteed our happiness? It would be Disneyland for adults!

Free college of course has an appeal to the young, especially those who have never studied economics. But college cannot possibly be free. It would not be free even if there was no such thing as money.

Consider the costs of just one professor teaching just one course. He or she has probably spent more than 20 years being educated, from kindergarten to the Ph.D., before ending up standing in front of a class and trying to convey some of the knowledge picked up in all those years. That means being fed, clothed and housed all those years, along with other expenses.

All the people who grew the food, manufactured the clothing and built the housing used by this one professor, for at least two decades, had to be compensated for their efforts, or those efforts would not continue. And of course someone has to produce food, clothing and shelter for all the students in this one course, as well as books, computers and other requirements or amenities.

Add up all these costs -- and multiply by a hundred or so -- and you have a rough idea of what going to college costs. Whether these costs are paid by using money in a capitalist economy or by some other mechanism in a feudal economy, a socialist economy, or whatever, there are heavy costs to pay.

Moreover, under any economic system, those costs are either going to be paid or there are not going to be any colleges. Money is just an artificial device for getting real things done.

Those young people who understand this, whether clearly or vaguely, are not likely to be deterred from wanting socialism. Because what they really want is for somebody else to pay for their decision to go to college.

A market economy is one in which whoever makes a decision is the one who pays for that decision. It forces people to be sure that what they want to do is really worth what it is going to cost.

Even the existing subsidies of college have led many people to go to college who have very little interest in, or benefit from, going to college, except for enjoying the social scene while postponing adult responsibilities for a few years.

Whether judging by test results, by number of hours per week devoted to studying or by on-campus interviews, it is clear that today's college students learn a lot less than college students once did. If college becomes "free," even more people can attend college without bothering to become educated and without acquiring re any economically meaningful skills.

More fundamentally, making all sorts of other things "free" means more of those things being wasted as well. Even worse, it means putting more and more of the decisions that shape our lives into the hands of politicians and bureaucrats who control the purse strings.

Obamacare has given us a foretaste of what that means in reality, despite how wonderful it may sound in political rhetoric.

Worst of all, government giveaways polarize society into segments, each trying to get what it wants at somebody else's expense, creating mutual bitterness that can tear a society apart. Some seem to blithely assume that "the rich" can be taxed to pay for what they want -- as if "the rich" don't see what is coming and take their wealth elsewhere.

Socialism

A Socialist Nearly Won Iowa. Will The Media Stop Obsessing About Donald Trump 24/7?
If Sanders had the charisma or talent of Barack Obama, Hillary wouldn’t stand a chance.


David Harsanyi
February 2, 2016

So which Left-wing publication is going to pull together a bunch of liberal intellectuals for an “Against Sanders” issue?

There’s been a ton of concern trolling from Democrats about the chaos and extremism ripping the Republican Party in half. It’s bad for the country, you know? We need two strong and functioning political parties. John Kasich is the only plausible choice to save the GOP and so on. Well, what happens if the GOP ends up nominating some run-of-the-mill Romney-esque Republican or an ambitious conservative from Texas, and the Democrats end up with a socialist? Surely liberals would be deeply troubled by their own party’s hard left turn?

As unlikely as that might seem, a year ago, Bernie Sanders was down 57-5 in Iowa polls to Hillary Clinton. As of this writing, the race is too close to call — which by any measure means that Sanders, who was outspent, can declare victory. It was pretty clear that the party’s energy and passion are centered on a Sander’s candidacy — even if he’s unable to pull it out against the establishment choice.

What are these people so mad about!? Has anyone asked?

Put it this way: Last night, 25 percent of the GOP voted for celebrity populist who gained unparalleled coverage from the media for a half a year. Half of Democrats voted for a once-obscure elderly socialist senator from Vermont who bases his campaign on conspiracy theories and juvenile zero-sum economic theories that were all the rage in the early 1900s. (And the other half went to a candidate that sounds increasingly like him.)

Like him or not, Cruz’s positions, as conservative as they are, are within the philosophical frontiers of the Reagan Right. Maybe you think them antiquated, but they are hardly “radical” — as in representing some extreme section of a political party or movement. Cruz’s ideas would be recognizable to any Republican in 1984 or 1994. But would any Clinton-era Democrat in 1996 embrace the economic positions of Sanders (or Hillary, for that matter)? How about 2008?

Sanders does not believe a free market should determine how goods and services are distributed.

It’s amusing to watch people maintain that Sanders isn’t a genuine socialist because he hasn’t laid out a Five Year Plan or called for the means of production to be transferred to the state. (Last night, for example, CNN’s Van Jones continually referred to Sanders as a “progressive” — which tells us something about socialism and progressivism.) Socialists are always “democratic” when they have no choice. The fun part comes later. So Sanders might inject a measure of nationalism into his brand of socialism. He may fuse his old-fashioned redistributionism and class-warfare with some contemporary political flourishes. He may believe in incrementalism — just as Marx did. But Sanders does not believe a free market should determine how goods and services are distributed.

Moreover, his applause lines are no less scaremonger-y than Trump’s nativist crowd-pleasers. Sanders is no less of a protectionist, appealing to the same fears and anxieties of working class Americans. All the troubles in the world are laid at the feet of greedy billionaires and corporation who function in an imaginary zero-sum economic dystopia, where fairness can only be reinstituted using state force — the guiding light of all decency.

Sanders calls for government control of the energy (to stop global warming) and health-care sectors. And schooling and health care will be “free,” paid for by the fictitious capital of the disreputable speculator. “Where speculation ends — in real life — there real, positive science begins …” wrote Marx.

There is no real battle or uproar among Democrats over the radicalization of the Left.

And I feel entirely comfortable red-baiting Sanders, because he’s a socialist.

Democrats are no longer talking about erecting safety nets to help the poor survive or break free of poverty; they’re talking about confiscatory taxation and redistributing to make life “fair” for the middle class. That might be popular — it is a radical break from traditional policy. “You guys ready for a radical idea?” Bernie asked in his victory speech. “Well, so is America.”

The key difference between the two party’s situations is that intellectual Right is in a fight to save conservatism from what they see as a distortion undermining its historical purpose. (And they may yet lose that battle.) There is no real battle or uproar among Democrats over the radicalization of the Left, probably because Sanders’ positions are an organic result of the rhetoric, obsession over inequality, and its redistributive economic policy. Right now, Democrats are fighting over electability, or how fast they want to move on certain issues.

If Sanders had the charisma or talent of Barack Obama, Hillary wouldn’t stand a chance. Yet, everyone will probably keep obsessing over Trump. “How did journalists miss GOP radicalization?” professional handwringer Norman Ornstein tweeted last week. “No. 1 reason: stubborn insistence on false equivalence.” As Iowa proved, the equivalence is very real. Will any editorial boards ask: “How did journalists miss this Democratic radicalization?” Doubtful. Probably because socialism isn’t a particularly troublesome or radical thought to Democrats or most of the media. Iowa also proved that.