In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, socialism may show early signs of success. But any accomplishments quickly fade as the fundamental deficiencies of central planning emerge. It is the initial illusion of success that gives government intervention its pernicious, seductive appeal. In the long run, socialism has always proven to be a formula for tyranny and misery.
A pyramid scheme is ultimately unsustainable because it is based on faulty principles. Likewise, collectivism is unsustainable in the long run because it is a flawed theory.
Socialism does not work because it is not consistent with fundamental principles of human behavior. The failure of socialism in countries around the world can be traced to one critical defect: it is a system that ignores incentives.
In a capitalist economy, incentives are of the utmost importance. Market prices, the profit-and-loss system of accounting, and private property rights provide an efficient, interrelated system of incentives to guide and direct economic behavior. Capitalism is based on the theory that incentives matter!
Under socialism, incentives either play a minimal role or are ignored totally. A centrally planned economy without market prices or profits, where property is owned by the state, is a system without an effective incentive mechanism to direct economic activity. By failing to emphasize incentives, socialism is a theory inconsistent with human nature and is therefore doomed to fail. Socialism is based on the theory that incentives don’t matter!
Let take Europe for example, there is a contagion of madness in Western Europe right now. It is not merely the preemptive conciliation that afflicts politicians who are ready to subordinate Christian civilization to Islam; it is the wholesale program to promote socialism, even if it leads to economic ruination.
While over-extended socialist Europe faces collapse from Spain to Greece, overtaxed Sweden is eager to instruct immigrants on how to get free benefits from the government much like Obama does in the United States.
Here is an unvarnished version of the plan that is destroying Europe and soon the United States if Obama get his way. The idea that you can obtain these government benefits without a cost is absurd. There is no such thing as a free lunch even if Socialist challenge that idea. Someone has to pay and the extortionate tax rate in places such as Sweden indicates someone is paying.
The problem, of course, is that the high taxes, which serve as a transfer payment, stifle innovation and relegate a portion of the population into shiftlessness. While the cradle-to-grave welfare state has an appeal to economic tyros who believe money grows on trees, the lessons of welfarism are coming home to roost in the form of insolvency and contractual failure.
For years American socialists cited Sweden as the nation we should emulate and now Barack Obama seems to agree. But as Margaret Thatcher once noted socialism fails when you run out of other people’s money. Alas, the unfunded liabilities in Sweden and the United States serve as a vivid reminder that at some point you must pay the piper.
The mounting debt across the European continent is weight on the shoulders of every resident. But apparently the Swedes are either blind to their predicament or choose to avert their gaze. How else can one explain proselytizing new immigrants so they request their government goodies?
The socialists tell us that Sweden was without slums and without poverty. Sweden had government health care and government education for all much like Obama plans for the United States. The government took care of everything. Wouldn’t it be great if WE could be like Sweden? BUT they forgot one important factor -incorrigible, unmanageable, unchanging human nature!
Wherever and whenever socialism has been tried it has failed! The only successes which can be credited to socialism have been as the doorway to a police state. What appeared to be the successes of socialism in Sweden were being paid for by the productivity and momentum of the non-socialized part of the economy. In Sweden, and as everywhere else, sooner or later the weight of the welfare state crushes the producing part of an economy. By the mid 1970s the sad results were already beginning to appear.
In August, 1972 American newspapers carried reports that Swedish socialism was failing. They were having to import laborers even as unemployment figures rose. Patients were having to wait long periods to get treatment in the government hospitals. Factory production was falling rapidly and industries were leaving the country at an accelerating rate. Taxation for the average wage earner was up to at least 41% of direct income and on top of that they had to pay a 17% value added sales tax on every thing they bought. (Remember, this is Sweden in 1972, NOT the U.S. today as it is shockingly similar!)
The temptress of socialism is constantly luring us by the push from Obama and him liberal followers.: “give up a little of your freedom and I will give you a little more security.” As the experience of this century has demonstrated, Obama’s bargain is tempting but history shows us is never pays off. We end up losing both our freedom and our security.
Programs like socialized medicine, welfare, social security, and minimum wage laws will continue to entice us because on the surface they appear to be expedient and beneficial. Those programs, like all socialist programs, will fail in the long run regardless of initial appearances. These programs are part of the Big Lie of socialism because they ignore the important role of incentives.
Socialism will remain a constant temptation. We must be vigilant in our fight against socialism not only around the globe but here in the United States.
Capitalism should play a major role in the global revival of liberty and prosperity because it nurtures the human spirit, inspires human creativity, and promotes the spirit of enterprise. By providing a powerful system of incentives that promote thrift, hard work, and efficiency, capitalism creates wealth.
Due to Socialisms failure in Sweden when it suffered a painful financial crisis, the Scandinavian country has deregulated key industries (such as airlines, telecommunications, and electricity), lowered its overall tax burden, established universal school vouchers, partially privatized its pension system, abolished certain government monopolies, sold a number of state-owned enterprises (including the parent company of Absolut vodka), and trimmed public spending. Several years ago, it eliminated gift and inheritance taxes.
In 2006, the center-right administration of Prime Minister Fredrik Reinfeldt has reduced income and corporate taxes, repealed a longstanding wealth tax, tightened unemployment and sick-leave benefits, they are going toward capitalism again, and its working!
Social-democratic ideas are losing their grip on Sweden, and they are getting more and more individualistic.” Indeed, the country is a far more market-friendly place today than it was 20 years ago. They learn the lesson the hard way, must the USA go down the same path with Obama at the helm?