Summary

With all of the conversation about capitalism vs. socialism, healthcare and housing being human rights vs. doing things for yourself, and redistributing wealth vs. keeping what you make, there is one thing glaringly missing: Simple, basic economic lessons.

Links and References

Ratchet Effect

Socialism Works

Moral Compass

Contact

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Transcript

Let’s start today’s Economics 101 conversation with two simple truths:

All societies levy taxes and redistribute wealth.

Before there is any wealth to redistribute, somebody has to make a profit.

Let’s take question No 1. All societies levy taxes and redistribute wealth. The basic function of any government, no matter how limited, includes providing for basics like defense, law enforcement and at least some infracture, for example, roads and bridges. And in any country, some people will pay more in taxes than others. If the use of what the government has provided from the unequally collected taxes is more equal than the taxes collected, that is clearly redistribution of wealth. For example, all the people in a given country are equally protected by the same military. Given that payment for that military is unequal, the tax money that goes for the mutual defense of all residents is redistributed. Same thing for law enforcement, infrastructure and fire protection. And so on.

Now for No. 2. Before there is any wealth to redistribute, somebody has to make money, that means somebody needs to make a profit, that is, money, revenue, in excess of all costs. Without somebody or something making a profit, there is nothing to tax. If a business does not make a profit, by definition there is nothing to tax, therefore there is nothing to redistribute. Business revenue by itself is not taxed. At least not yet. And without continuing profits, businesses cannot expand, and hire more people. And without those people, there are no wages to tax. Profitable businesses, and only profitable businesses, pay taxes, and employ people who in turn pay their own taxes. These same profitable businesses buy goods and services from other individuals and businesses, so this cycle of profits and hiring and tax paying and spending can productively go on and on.

Now, let’s look at some definitions:

Capitalism. The voluntary exchange of resources, typically money, for desired goods and services.

Socialism (modern usage). Heavy redistribution of taxed wealth. To the best of my knowledge, and I’d love to hear from others on this topic, this is what Bernie Sanders and others mean when they advocate for Democratic Socialism here in the US.

Socialism (traditional definition). Government ownership of the companies that create the goods and services in that country. Public schools in the US are an example of socialism. Public schools are enterprises that produce a service--education--are taxpayer supported, and government owned and operated. Venezuela gave us another example when Hugo Chavez nationalized the previously privately-owned oil industry in that country.

Communism. Socialism (traditional definition) along with the complete elimination of private property.

OK, now tackle two questions:

Is the US already socialist?

If not, do we want the US to be socialist?

Let’s start answering these two questions by discarding the original, the traditional, definition of socialism and stick with the definition that focuses on the heavy redistribution of wealth without government takeover of the means of producing that...