Tuesday, October 21, 2008

Why Socialism and Communism Fail?

I didn't write this article, below - but found it to be insightful, I wanted to include most of it on my blog. You can find it at: http://www.sythe.org/showthread.php?t=370752

"Why Socialism (and Communism) Fails and why our society is being destroyed?"

Communism is an ideology that claims every man on the planet owns every item of value on the planet in joint ownership, including one another. That is to say: All matter and the lives of others are owned equally by everyone.

Now there a several flavours of communism, but they tend to amount to the same thing. All advocate the eradication of the 'social classes', they aim to make every man equal, regardless of his talent and ability.

The reason communism is a fallacy is simple: People cannot jointly own one another. The concept is fallacious. How can one man be a slave to another, when the other is a slave to the first?

The second reason communism is a fallacy is the statement 'communism destroys the social classes and makes everyone equal'. This is fallacious because public assets must be controlled, and therefore owned, by a small group of people. Mass ownership could never work, because there would be too many divergent opinions as to what the asset should be used for (6.5 billion divergent opinions to be exact.) So, in order to have public assets, you must now elect a group to manage those public assets. And that group needs to be paid to do their job. And once that group is elected in their cushy jobs they won't want to leave. Low and behold you have just created a new ruling elite. The exact thing you were trying to destroy in the first instance.

So, we have explored why communism, as an ideology, is a fallacy. But now let us examine why it fails when put into practice.

In a free society man is free to own his assets, work has hard as he pleases, employ whoever he pleases at whatever price they will accept. A man is free to buy property and build industrial facilities thereon. He is free to grow his business. All of these activities create wealth. The innovative nature of the entrepreneur is that he sees what could be, not what is. A worthless piece of land, some iron ore, the unemployed. He adds his energy and capital and turns these worthless things into a factory, or an institution, something of great value. And furthermore, the thing he has built continues to produce value in its day to day operations.

This is where wealth comes from. It comes from the innovative middle class. The capitalist and his fresh ideas, his understanding of markets and economics, and his freedom to pursue his own goals.

Now, communism, on the other hand rejects the man's right to own land, build a factory, it rejects his right to employ people and pursue his own goals, and thus rejects his right, and ability, to produce wealth.

Communism instead holds that everything must be centrally planned by the government (or what is essentially the government). This group does not create wealth. They have no economic interest in industrial projects. Their job is to sit in a room and put marks on paper. If the project fails they do not go broke, and if they are blamed they can shift the blame elsewhere. So, rather than creating wealth, the government destroys wealth by stealing it from those who create it and wasting it on projects which make a loss, not a profit. A negative sum game.

So what have you here? You have enslaved man and forced him to remain docile, rather than going out and creating wealth as his instinct demands of him. AND you have a huge wealth consuming entity called the government, or central planning committee. It gets its wealth through taxation, stealing it from the people. The people have no wealth because they have been forced to stop creating wealth by their enslavement.

What you get is immense poverty, to the point of cannibalism (which did occur in Soviet Russia). And that is why communism fails.


Socialists are similar to communists but they consider the free market to be a 'necessary evil' -- how anyone could see the process of wealth creation as being evil I'll never know.

Socialists maintain that large government is needed to 'keep the public safe' 'for their own good'. These are the people who advocate the socialisation of industries such as schooling, health, transportation. And so: we have public schooling, public health and public transport. All of which are complete failures in every country they have ever been attempted in.

Now the problem with socialists is they too, like the communists, don't understand the free market. They have one objective 'help the people who are worse off than themselves' and this in itself is morally correct. But because of their ignorance they end up actually hurting the underclass, and the rest of the nation.

In order for the government to be able to afford public institutions it must raise taxes. In doing so a number of things happen.

To have taxes at all wastes a week of every business man's time every day of every year to begin with. So straight out of the gates you are wasting their money, because time is money in business. You force them to register their business, keep books and so on.

Now here we hit our first disincentive. If I have to pay the government one thousand dollars, every year, just to hold a legal business in my ownership, how likely am I to actually want to start a business, especially if I am uncertain of its prospects, and how far it will go.

Second disincentive: taxation, and increases in taxation. Real taxation in most countries (Australia especially) is about 50 - 70%. Take into account income tax, fuel tax, import tax, capital gains tax, sales tax, stamp duty, inflation tax, and all the rest. How much incentive do I have to make money knowing that 70% will be stolen from me by the government? I have very little incentive to put in 10 times the effort and build a business. Why not just work a dayjob and make the same money doing one tenth the work?

Third disincentive: public subsidies. If I want to go into business providing water, electricity, transport, education or health to people. I am automatically put into competetion with government services. Now while the government services are undoutably shitty, the fact is people have already been forced to pay for them. They've already been forced to make a choice from the aviable choices. True, they could pay a second time, but most people only want to pay once. So they use what they have already paid for, the public system. Now, the government can't go broke, you can't undercut their market; so they naturally hold a monopoly on such things.

Forth disincentive: labour laws. If I want to employ people to do a job, then I want the reserve the right to stop paying them if they fail to do the job for which they were employed. This seems natural, right? But the law does not permit me to do this. When I employ someone I must give him days off, I must only have him work between certain hours, and so forth. And, if I do not feel he is doing a good job, I need to be able to justify that feeling to a court in order to get rid of the bastard, as he would no doubt take me to court over unfair dismissal laws. So why should I bother? Why should I bother owning a business when I know I can't get good people to do the jobs I need done; and if I make a mistake in employing someone they can feed off my business and run it into the ground.

Fifth disincentive: zoning and other regulations. A new law is passed virtually every day. There are so many laws that it is impossible to be obeying the law from minute to minute. Something as simple as crossing the street in the wrong fashion is illegal thesedays. For business it is much worse. You can only build certain things in certain places. You can't mine land you own unless you have a permit. You can't broadcast radio unless you buy an hideously expensive license from the government. You need a licensed electrition to wire your building. You need a licened plumber to do your pipes. You need a licened book keeper to keep your books. The regulations are a huge waste of time and money and are a huge disincentive toward building a business.

There are many other disincentives, but in the interest of time lets briefly explore why socialized industries always fail.

When an industry (such as health) is first socialized it is generally found to be very promising, very good. Then as the next generation of professionals (doctors, teachers, etc.) come through, it's not so good. By the third generation is in an advanced state of disrepair and everyone is running around asking how this could have happened. Further; throwing money at it doesn't seem to help, it is perpetually broken.

The answer is simple. When the industry was first socialized the government took professionals out of the free market to work in the socialized environment. In the case of health this would have been private doctors, in the case of schooling, private school teachers, and so on. So for a while the socialized industry is really very good because these professionals have developed their service skills in the free market and are used to losing customers if they are rude or make misjudgments, or are unable to fulfill their requirements.

The next generation that comes through has not had free market experience. They come straight into the job and the first thing they notice is that they get paid the same amount regardless of how much work they do. So straight out you have slackers out of university who's income does not depend on their service and who have no free market ethics. Suddenly the system is a lot worse. But at least the old guys are still there to keep it running properly.

The third generation is where it comes crashing down. These slackers from the second generation get into management positions where they do little or no work with little or no idea about how to manage anything or anyone. The whole thing turns into a microcosm of communism and no one does any proper work, the few who do are completely overworked, the whole industry implodes.

And that is why socialism fails. Because it screws over the wealth creators and promotes lazy public servants to leech off the public wallet."

Imagine if we were all free to run a business unimpeded. Without all the disincentives provided by socialism virtually everyone would be interested in running their own business. If you are good at something, turn it into a business. Sell your art, sell your software, sell your services as an engineer. Build your business, plow the profits back into it; Compete with others for market share. Everyman would be truly free to pursue his own goals in harmony with everyone else, free to create wealth; and no man could consume the wealth of others.

America was a very rich country for a long time because of their freedom. The American experiment was to create the smallest, most tightly controlled, government of all time. The result was the largest empire of all time. Why? because government feeds off the free market; And America had a long time to grow, its dynamic powerful free market producing untold billions. The government now steals this wealth and used it to its own ends; to grow, to conquer.

The Government shouldn't decide our fate, we are free, we need to be free to pursue science, to pursue wealth, to pursue our own goals, and finally, to pursue happiness.

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