Continuously opining, intermittently publishing.

Why Socialism Fails

Posted by oshane | Leave a comment at the end of this post.

Stillborn from the Beginning
A truly free market works precisely because it relies on the self-serving desires of most people acting as a manifold of countervailing forces against all the other self-serving desires in the system. Everyone acting in his own self-interest with a baseline of standards (no theft, no fraud, etc.) ensures that the average wealth per capita is raised. That is, while self-centeredness is ignoble, it is the reality of the human condition, and any economic system which pretends that this can be changed outwardly in, i.e., by external forces (read: government) pressing an ideal onto human lives, only works to create and increase misery, because it is based on fantasy. Communism and its attenuated form, socialism, are noble ideals but are fatally flawed for three major reasons.

First Reason: Perversion of Incentive
Communism and socialism do not just hope for, but rely on the good of mankind in aggregate to work. In fact, apropos to a previous discussion, all political purveyors of socialism/communism are selling hope and the value received is far less than the value paid out by the buyer. Believing in the current goodness of mankind, or rather in the goodness of every individual such as to expect that he will act in the best interest of others is rank madness. Socialism wrecks the ability for people to appropriately measure value for themselves by robbing them of incentive. When the fruits of labor are taken from a person in order to redistribute them in aggregate to everyone else, including him, he resents the theft of his labor but also comes to reliance upon the redistribution.

Jamestown and Plymouth
In Thomas J. DiLorenzo’s book, How Capitalism Saved America, he recounts the story of two early colonies in America, Jamestown and Plymouth. In both, the settlers were required to function in socialism; private property was not allowed and the settlers were required to toil for the “common good.” Within six months of the founding of Jamestown,

all but 38 of the original 104 settlers were dead, most having succumbed to famine. Two years later, the Virginia Company sent 500 more ‘recruits’ to settle in Virginia and within six months, a staggering 440 more were dead by starvation and disease.

He also recounts an example: if 1 out of 20 people refuses to work but can take as needed from the “common wealth,” he will still be able to maintain 95% of his “income” on average while 19 out of 20 people do their jobs. Once too many people realize they can game the system and do less work for more food at the expense of their fellow man, the system fails, and starvation ensues.

Thankfully, in 1611, a governor traveled to America and realized that the incentive structure for the English colonists was the culprit for the previous death and failure. He instituted private property with a small tax on the fruits of their labors. The people could (only) realize the full fruits of their own labor, and the colony began to thrive, because everyone, self-servingly, worked as much as they needed and desired.

Nature’s stochasticity is a far more potent motivator than government’s contrivances.

Socialism cannot possibly work, because it is axiomatically flawed on the notions that people should be selfless and government is the correct actor to ensure selflessness. Thus, in order to effectuate the schemes of the noble cause of “from each according to his ability, to each according to his need,” violent force is justified as a necessity to make men noble. This brings us to the second fatal flaw: socialism relies on force to make it work. By definition, because humans are amoral in aggregate, force is required to effectuate wealth transfer, because rational actors, on the whole, do not voluntarily give away money without value in return.

The Legal Tangent
In fact, our Anglo-Saxon legal system, particularly in the Law of Contracts, at a fundamental level (modulo all the reforms of the modern era), reflects an innate belief that individuals should receive value for value exchanged. The doctrine of consideration, quid pro quo, a bargained-for exchange of something received for something given, mandates that for a contract to be enforceable, it must have the element of consideration. Courts do not like to weigh the relative values of the “something given” for the “something received” because value is entirely relative to the circumstances of individuals in their own situations, and judges do not usually believe their purview is to monitor or value private contracts. An iPhone may be worth $600 to an early adopter, but only $300 to a later adopter or not worth any expense to someone who does not want one. If there is no consideration, the promise is often viewed as a gift, which is always legally revocable unless the promisee reasonably relied on the promise.

Inherent in the doctrine of consideration is that there must be an exchanged that was bargained for. Bargaining, as a legal term of art, does not mean wrangling, dickering or heavy negotiation is required. What it means is that there is an intention of both parties to exchange things of legal value to which both parties assent. By contrast, a contract forced upon one person by another, i.e., using duress, is voidable by the coerced party later.  Why? Because there was no bargaining. There was an exchange, and it might even be of relatively legal value, but the mere act of force makes the contract voidable by the party who was wronged by the lack of free will. It is not usually discussed in this manner, but duress is really the antithesis of consideration.

Second Reason: Socialism is Violence
Force, of course, is a form of duress, and though the United States now has a long history of employing force to get what it wants from its constituents and other peoples (starting, really, with Alexander Hamilton’s policies of excessive and overwhelming national power), the augmentation of the use of force to transfer wealth is still total anathema to our natural law notions in Anglo-Saxon society of what a fair and right contract is. We should all recognize that force to take wealth away from another person, while justified at a governmental level, is still theft on an individual level. So, while socialism might be noble in its thrust to ensure the welfare of other people, it is pragmatically reliant on the evil of violence to make it work.

Contrast the doctrine of consideration, required in Anglo-Saxon legal systems, with contract laws in civil countries, which do not necessarily recognize the need for consideration. It is not surprising, therefore, that in cultures without a long history honoring the notion of bargain to ensure the satisfaction of parties exchanging value, communism and socialism took root faster, even with our early forays into forced socialism. See Jamestown, supra. Because these political theories are fundamentally based on oppressive force–in contrast to force being used in the name of liberty here, even though liberty does not require it–the doctrine of consideration as an innate part of our culture has been a silent bulwark to such force. Unfortunately, the Pacific and Atlantic oceans seem to not be wide enough . . .

Ironically, the Jamestown/Plymouth colonies are poignant examples from our own history of why a modern socialist government relies on force to effect an economy. The perversion of incentives leading to low production are evident to even the most mindless pro-government drone, which is why modern governments employ force to ensure the “health” of the socialist state.

Of course, labor at gunpoint does not comprise a worthwhile society; it is a Prison.

Vitiating the Counterexample
Naive proponents of socialism correctly point out that the apostolic community of believers in Yeshua (“Jesus”) was the first successful manifestation of communism. I suppose the inherent argument is that if it was good enough for Jesus . . .

The surprisingly overlooked flaw in this counterexample is that the association of believers was entirely voluntary, because at no time did Yeshua command his followers to preach the good news to convert by force. I believe it is a hallmark of Good for people to voluntarily associate and combine their assets and incomes in a manner to synergetically benefit one another. But it is the voluntariness (the “cheerfulness” in scriptural semantics) that makes it noble and good, not the sharing by itself.

Let each one give as he purposes in his heart, not of grief [grudgingly] or of necessity [compulsion], for Elohim loves a joyous [cheerful] giver.

2d Corinthians 9:7 (The Scriptures, Inst. for Scripture Research 1998)

Third Reason: The Corollary of Correct Valuation
Correct valuation of labor in the form of goods and services can only be appropriately calculated by the parties to their own contract. This is definitely a corollary to the observation that incentives remain healthy when individuals have control over their own labor. Only you know what you really need. Only I know what I really need. If we are friends, we may be able to effectively negotiate on behalf of one another and trade for value in a way that satisfies the other person. Of course, we run the risk of not doing so. Why? It is as simple as the fact that we cannot read one another’s minds and perfectly understand one another’s goals.

Multiply that by the billions of transactions that occur daily. Is it even fathomable that a central planner (especially a bureaucratic committee prone to inaction and inefficiency, detached from the reality of life and the harshness of nature) can correctly value the effectuate transactions between hundreds of millions of people? No, such a proposition is patently absurd.

The market is not a controllable system: it is simply the sum-greater-that-its-parts of all value exchanges between the actors in a population. It is more organic than technical, and it is only predictable on an individual level where we can spend time imperfectly analyzing how actors might negotiate and trade value. If you know all about me, you, again, can probably predict how I would want to transact business and for how much money. Of course, that requires time, patience and astute observation to get it right.

Thought Experiment
Let’s assume a central planning committee has the resources to observe each person constantly and to get to a point where it can accurately predict the appropriate value exchange for each person. Let’s assume this observational analysis only takes one minute one time for each person in the country. Let’s also assume each person enters into five transactions daily. For 327,000,000 people, it would require 3,111 man-years to accomplish the analysis to ensure the central planner could have the information necessary to direct the economy. The assumptions for the experiment are prima facie conservative in favor of the theory socialism, of course, and the result is, nonetheless, literally incredible.

One alternative is that the central planning committee simply fails to do what it believes its job is. It is doomed to failure, because “getting it right,” i.e., ensuring maximum wealth in a centrally controlled manner for each person, is impossible. Because no one appropriately small subset of people can correctly evaluate economic incentives for hundreds of millions of people, the wealth transfer is guaranteed to be lopsided and ineffectual. The plight of the Soviet, Chinese, Cuban and several southeast Asian peoples from the twentieth century are evidence of this.

Socialism promotes misery, starvation, violence and murder. The worst that can be said for capitalism is that it allows for poverty due to nature and poverty due to laziness, both of which decrease over time in a free market. All examples of non-voluntary socialism in their stated quest to eliminate poverty only increase it.

The true alternative is that we can simply allow for each person to transact for himself freely. Liberty is the hallmark of a workable economic system. As flawed as capitalism is for relying on man’s self-centered nature, it is paradoxically this reason that makes capitalism pragmatically perfect.

28 Responses to “Why Socialism Fails”

  1. Chevas says:

    I love this post. This so amazingly describes what I haphazardly, but somewhat effectively, try to explain to people around me. Socialism is theft of my labors, Socialism is only possible through the government’s use of force, and therefore, Socialism is violence towards humanity…beautiful.

  2. roland says:

    I am only partially through this and wanted to comment anyway. I should not be amazed at all that you and I have such similar thoughts–but I could not put it down on paper anyway near as well as you have. Hope you don’t mind but I will be giving you a more in depth comment later. If you read basic Marxist principles, you can see that much of what is happening right now is straight from his twisted thinking.

  3. […] Click here to read the entire article. […]

  4. Chevas says:

    Winston Churchill Quotes:

    “Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon.”

    “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

    “We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

    “An appeaser is one who feeds a crocodile—hoping it will eat him last.”

    “The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.”

    “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy.”

  5. […] oshane:blog Continuously opining, intermittently publishing. « Why Socialism Fails […]

  6. lovly2008 says:

    So, are you people saying that you think its better to let the rich continue to rob the poor with exorbant prices for services and goods, while you continue to get richer and richer and they become homeless? I mean, are you saying that socialism is the cause of our current economic downturn? I mean, Im not an economic expert by any means, but it just seems to me that when our country helped the poor and regulated prices and whatnot, that we were such a lucrative country. What the hell happend to us? We stopped giving and got broke? Well what do I know, you guys are the experts.

    • Excellent troll response.

      There are four distinct causes to homelessness:

      1) Natural disaster
      2) Insanity
      3) Laziness or poor choices
      4) Socialism

      Everyone gets richer under capitalism. Everyone, except those doing very big business and those associated with government, gets poorer under socialism. This is a demonstrable, provable, historical fact.

      • lovly2008 says:

        Excellent “troll” response? I just love it when assinine people pretend to know it all and feel the need to put others down to drive home the notion. Ha ha ha. It’s kinda like when you use the word socialism. What a joke! Half of you dont even know what the word means.

      • lovly2008 says:

        Oh by the way, see my response below. Also, have you ever been homeless? I think not, let me tell you what else causes homelessness. Another major cause of homelessness is wealthy business owners, raking in big bucks off the backs of workers who get a sliver of the profits. Then, greedy property owners decide they need more rent, while giving less services and pretty soon you have rents that are too high, for a people who are not being paid for THEIR hard work. Now that is the true cause of homelessness. Oh, and lets not forget that those who are “insane”, dont stand a prayer against this high rent off their little bitty disability checks. Do you think the government will even stoop to help them, heck no. Why? because you smarty arts have complained so bitterly about “I work, others eat of my labor”. God Bless your selfish little hearts.

        • oshane says:

          You, sir, are conflating (mixing together) not wanting to be stolen from by Government and giving voluntarily. You have no knowledge of how much I or anybody else has given to ease the suffering of others.

          Government is not the salvation of the poor, the homeless, the insane or the broken. To believe so is to believe a lie. It doesn’t work, and government programs usually end up doing more harm than good.

          Question for you about “wealthy business owners”: let’s say you are getting a sliver of the profits. What would you rather have, zero? I.e. no pay, because they didn’t hire you? Or would you rather just steal their money because they have it and you don’t. Don’t accuse others of selfishness when you would use the power of the government (read: guns) to take money from others.

  7. Tennessee Vol fan says:

    This has really helped me to better understand what Socialism really is. I thought I knew and as it turns out I was right.I work others eat and live off my labors. Thanks

  8. lovly2008 says:

    First of all, Im pretty sure you know that there will be no socialism in the United states under any President. This is just a word the Republicans have taught you parrots to speak, to further their cause of regaining the White House. Secondly, Im sick and tired of you all trying to pretend you work so hard, because we all know the more money you make the less you work. The United states and all other countries for that matter is full of lazy people, which is why we have some much technology, to keep us from working. The very fact that we have so many gyms and exercise equipment, SCREAMS that fact!

    Does it make you feel good to pretend that your puny labor is really supporting half the United States citizens? And please allow me to ask this question of you hard working know it alls…….When we had the welfare system and we took care of our poor, what condition was our country in? Was it in recession like now, since we’ve been making all the money we want and cutting all the social services programs and calling regulation “socialism”?

    God Bless America? For what?

    • oshane says:

      Is there an argument here, or just a rant filled with conclusions which you believe to be self-evident?

      First of all, if it weren’t for capital owned by someone else being invested, you would be subsistence farming either on your own land or on someone else’s. By investment, I mean risk. Because some rich person was willing to risk loss of a significant amount of money, you are able to use a refrigerator. Similiarly, you are able to buy washing machines, dryers, dishwashers, dish soap, toothpaste and all the other necessities of life that you take for granted. Socialism, collectivism forced upon a mass of people such that they are stolen from to provide for others, did not produce those things.

      Capital provides jobs. Again, without those “puny” people, you would have to find a way to produce everything you need on your own little plot of land. Think Little House on the Prairie: there’s nothing wrong with that life, but it’s a harder life than, I’m sure, you realize. Imagine trying to find a way to clean your teeth from the resources on your own land.

      Why do you begrudge people who have worked hard to accumulate wealth by reinvesting it into labor over and over again? They provide many jobs; they bring good things to the rest of us.

      I submit that you are merely envious and angry and filled with rage that is not only misplaced, but evil itself. You believe that stealing from others to satisfy your own desires is right. It is not.

  9. Ray says:

    Legalize marijuana and hemp, remove the legal status of personhood from corporations, and ban any and all forms of advertising, and that would be a perfect form of capitalism.

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