Will Some New Form Of Socialism Work?

Old Wisdom

There is an old idea that claims insanity is redoing something and expecting a different result. Like watching a recorded replay of a failure and assuming they wouldn’t be stupid enough to do it again.

Seems we are willing to do it again. Maybe several times.

Like socialism

The current, nearest to complete failure, example is Venezuela. The International Monetary Fund recently posited that inflation there would reach 1,000,000% by year end. At that rate money would be worth 1/10,000 in a year. Pretty good deal for the people who owe money. I suppose it might have an adverse effect on floating interest rates.

If prices doubled about once a month, would you be okay? Probably not. That fine pension would be come useless and investments would behave in strange ways. Practically, there is no defense if you stay in the zone of destruction. Karate sensei’s observation, “The best defense to danger is to be somewhere else.”

But where?

Venezuela was and still is a country with immense natural resource wealth. Their mistake was to assume that nothing need be added to that wealth to make it useful. Natural resources are useless without capital to develop, people skills to engineer and build infrastructure, and skilled labour to operate it once built. Socialism provides disincentives to capital and to skilled people. So, not so strangely, they go away.

So far, they have places to go.

That may not continue. We are presently seeing the rise of “democratic socialism.” Its attributes are the same as the ideologically disproved “socialism.” Names don’t matter. Names are symbols. They are not reality. You cannot rename a cow and create a racehorse.

Socialism has proven itself uniformly harmful everywhere it has been tried. Its 100% failure rate should influence people, but the ones who support it seem blind to reality.

The flaw

Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other peoples’ money.” Her point is that socialism is about distribution of money, not about creation of wealth. If distribution overtakes creation, the failure is certain. People soon grow tired of getting nothing for something.

People and countries avoid the something for nothing trap by valuing work and achievement and cooperation. None of those are common in socialist countries. There, no one can afford to be anything but selfish.

An overview

Despite what Bernie Sanders and others think and say, socialism has never worked. We should be smart enough to avoid it. The capitalist alternative has flaws, but it tends to produce wealth. Some, but not all, of that wealth can be distributed effectively. It’s when socialism’s greedy impulse to distribute all kicks in that we have trouble. The goose and the golden egg lesson.

Hear Winston Churchill,

  1. “Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow they can milk. Only a handful see it for what it really is – the strong horse that pulls the whole cart.”
  2. “Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy. Its inherent virtue is the equal sharing of misery except for those running the government.”

It is smart to use tactics that have been proven to work. Good intentions might not get you where you need to be.

I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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