Sunday, September 11, 2016


In “The Problem with Socialism,” economist Thomas DiLorenzo, writes:

·       A 2016 Pew Foundation poll found that 69 percent of voters under the age of thirty expressed “a willingness to vote for a socialist president of the United States”

DiLorenzo is clearly troubled by our acceptance of a system that has consistently failed:

·       Socialism in all its forms has always been poisonous to economic growth and prosperity. This is not because the “wrong people” have been in charge of socialist regimes, and that “better” or smarter people could somehow make socialism work, or that all that is missing is democracy. Socialism is economic poison for several fundamental, inherent reasons. In other words, it is impossible for socialism to be anything but impoverishing as an economic system because of the very nature of socialism.

DiLorenzo, in his very readable short volume, provides many examples of this:

·       Hong Kong was one of the freest economies in the world under British rule with a modest, flat income tax and very little government regulation of business. That recipe made Hong Kong, with no natural resources to speak of except for a large harbor, one of the most prosperous countries on earth. By contrast, socialist China experienced the usual economic stagnation and backwardness that is the hallmark of all socialist economies.

·       The Soviet economy was so dysfunctional, thanks to seventy years of socialism, that by the time the entire system collapsed in the late 1980s it was most probably only about 5 percent of the size of the U.S. economy.

·       Argentina, which embraced socialism in the late 1940s during the Juan Perón regime. Perón restricted international trade, imposed wage-and-price controls, seized private property, nationalized some industries, and spent lavishly, much of which was financed by the government simply printing more money. The predictable result was economic ruination and hyperinflation that led to Perón’s ouster in 1955 by military coup. Argentina, however, remained socialist. Its economy continued to stagnate and, several coups later, by the late 1980s, it was suffering from 12,000 percent inflation from years of trying to cover up the failures of socialism by printing money to pay for all the socialist programs. 9 In 2001 Argentina defaulted on its obligations to foreign lenders in the then-largest public default in history. It defaulted again in 2014. Argentina was once the world’s tenth-largest economy, but by 2016 it was barely ahead of Kazakhstan and Equatorial Guinea.

According to DiLorenzo, even the failure of the first American settlements are attributable to socialism. He also challenges the examples of the Scandinavian countries which have been touted as socialistic success stories. For example, he explains Sweden’s apparent success with socialism was a result of its accumulated capital which had, cushioned her for many years from the socialistic drain of the economy. In an interview, DiLorenzo explained:

·       Sweden, for example, was one of the wealthiest countries in the world in the late 19th and early 20th centuries thanks to its large degree of economic freedom and a culture of entrepreneurship and capitalism.  It produced many great inventors and entrepreneurs such as Alfred Nobel, the inventor of dynamite, the people who created Volvo and Saab automobiles, and much more.  Sweden enjoyed the highest per-capita income growth in the world from 1870 to 1950.

·       But Swedish politicians began experimenting with fascism in the 1930s and then socialism, with the nationalization of many industries, a large welfare state, super-progressive income taxation, and onerous regulation and regimentation of private industry.  Sweden began “eating up” its accumulated capital, created by previous generations of capitalists, so much so that according to the Swedish Economic Association, Sweden did not create a single net new job from 1950 to 2005.

·       Because of this economic destruction the government resorted to printing massive amounts of money in an attempt to bail itself out, resulting in 500% interest rates. That in turn led to a Thatcher-like revolt that reduced marginal tax rates, privatized many industries, deregulated bank lending, retail, telecommunications, and airlines, and imposed deep spending cuts.  But fifty years of Swedish socialism is hard to recover from: the Swedes still have a per-capita income level that is lower than in Mississippi, our lowest-income state. (

Well, what’s the big deal? It’s only money, isn’t it? Not according to DiLorenzo:

·       The main problems with socialism is that it will destroy your economic future – and your children’s future; it creates an unjust society where a small political elite enriches itself by imposing a regime of equality of poverty and misery on most everyone else; it has been associated with the worst crimes in human history, as documented in The Black Book of Communism, among other places

·       The socialist welfare state also harms the poor by destroying their work incentives, crowding out private charities, and causing family break-ups where fathers are replaced by government checks; and it destroys personal freedoms by using governmental force in pursuit of “equality.”  That’s just for starters.

Are our youth listening?

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