Wednesday, May 9, 2007

Socialism Doesn't Work

A liberal mis-reading of history courtesy of Minnesota Monitor prompts a response from me. They said:

"A highly socialized system kills initiative, which was proved by the collapse of the Soviet Union. A highly capitalist system doesn't work either, as that can lead to economic stratification, a breakdown of democracy, and ultimately dictatorship, as we saw in fascist Germany and Italy, as well as in numerous Latin American countries in the past."

I said:

Wow. Just wow. This is a mind-blowingly ignorant view of the economic program of Fascist Germany and Italy, and latin America. IN ALL CASES, THEY WERE/ARE NOT CAPITALIST AT ALL.

First, the Nazis were the National SOCIALIST Workers Party. Their economic program was Socialist. government controlled the economy through regulation and bureaucratic controls, while letting industrialist remain as putative owners in a controlled socialist economy. Italy was similar. Mussolini was a socialist (former communist) who evolved fascism as a nationalistic form of socialism. He "made the trains run on time" by controlling both the economy and politics. Alas, Italy's and even Germany's economy really did not fare particularly well, if you look at economic well-being of the people (as opposed to their military output). (source: Shirer's Rise and Fall fo 3rd Reich). Same for USSR. Nazism, fascism and communism were in fact quite similar economic-political systems, with similarly dismal results for economic prosperity.

As for Latin America, these corrupt economies are victims of lack of property rights and mercantilistic controls on the economy that prevent real economic dynamism. They lurched from bad populist socialism (the kind Hugo Chavez is implementing now to the detriment of his country), to corrupt-style authoritarian Governments, who generally do not liberate the economy, but loot it (consider the phillipines version of this style, Marcos).
The exception to this unfortunate trend would be Chile's economic experiment under Pinochet, where significant economic liberalization occured, and as a result significant economic growth occured. Chile succeeded in moving to the top of the heap among latin american countries. (source: "The Other Path" by de Soto)

True property-rights-adhering small-Govt capitalist economies have in the past included Switzerland, Hong Kong, and to lesser extent Japan in the 1960s-1980s and the US for parts of our history (especially 1865-1913). All have had economic growth far above what socialism achieves. From 1865 to 1913 US economic growth averaged 7% per year, fastest in the world at the time, no income tax, strong property rights, and the Federal Govt spent around 2% of our GDP. We became the world's largest economy through that.

Statistics are quite clear. Socialism doesn't work. National socialism doesn't work; Communist Socialist totalitarianism doesn't work; welfare state liberal socialism doesn't work- OECD economies that have higher taxes and more socialism have lower growth rates and lower employment gains.

Half-way between socialism and capitalism is watered-down socialism that deals the economy-deadening impact in smaller doses. But half a dose of poison does not make for a good medicine.

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