Length: 569 Words Reading Time: 2 Minutes + 30 Seconds
I promised to continue to clarify the two opposing economic systems that are the focus of this blog topic: The Free Market System Versus Socialism. I will try to add some clarity for socialism in this post. Remember, the purpose of this blog topic is to facilitate understanding of these two very different economic systems.
Today (July 8), I watched a short video in which Lawrence W. Reed, President Emeritus of the Foundation of Economic Education (FEE) provided a simple definition for socialism. He stated that socialism comprises two central tenets. The first tenet of socialism is the central planning of the national economy by the State. The second is the redistribution of wealth in society to make society more just or fairer. These two descriptive sentences capture the intent and purpose of socialism as briefly as I have ever seen them. That is why I titled this post, “Socialism in a Nutshell.”
Let me offer two thought experiments that I hope will help our understanding. I will use the family in the first thought experiment to illustrate my first point.
Imagine if you will that your great-great-great-great-grandfather were still alive and he has all his faculties and is mentally competent. Because he is the head of the family, your great-great-great-great-grandfather takes it upon himself to direct the lives, decisions, and actions of all his descendants. These descendants would number in the hundreds, and maybe even the thousands. He decides who gets married and when, what each descendant will do in his or her career, how many children each family has, etc. Now let’s also assume that this is a tightly-knit family and everyone buys into this top-down decision-making. Can you imagine how difficult this decision-making would become and the complexity of the communication and the knowledge required to support that decision-making? And, in this thought experiment, we are talking about only one family, albeit six or seven generations. If we were to extend the requirements for decision-making and knowledge to our national economy, we would find the complexity is beyond anyone’s imagination or competence, even with the use of artificial intelligence and supercomputers.
In the second thought experiment, let’s take all the wealth in America, for our purposes, just liquid assets, and then divide that wealth equally among all the adult citizens of the country. As a result of this distribution of wealth, we have total financial equality among adults, at least in terms of liquid assets, that is, cash, bonds, stocks, etc. I believe that if we were able to accomplish this redistribution of wealth, equality would disappear in 24 hours and maybe less. Why would this happen? The simple answer is that some people are foolish and have no control over spending or the use of money. Others would have a much greater financial understanding and would make decisions to increase their wealth. It is just that simple.
From my vantage point, socialism appears to be the solution to many people. When in actuality, it would create more problems than it solves. That perspective is not going to change. The key to understanding socialism is to fully comprehend how much control it would entail in an otherwise free society and how much it would restrict that freedom. Socialism requires a high degree of coercion to make it work, and that is the precondition that is not seen.