Summary

Socialism in much in the news. At first glance, it might sound appealing. Needs driven by inequality will be erased. Everyone gets what they want, and no one is the worse for it.

How does socialism stand up to a deeper dive into what it is and how it works? For the next 10 minutes, we will unpack those two questions: 1. What is socialism? and 2. How does it work?

Transcript

Socialism in much in the news. At first glance, it might sound appealing. Needs driven by inequality will be erased. Everyone gets what they want, and no one is the worse for it.

How does socialism stand up to a deeper dive into what it is and how it works? For the next 10 minutes, we will unpack those two questions: 1. What is socialism? and 2. How does it work?

Firsts, let’s first pause for a mutual goal check. I am assuming that we are all looking for an economic system that simultaneously rewards talent and hard work, while taking care of those who truly need it. Do you agree? (I realize this is thumbnail summary.)

Now, let’s start with some key observations:

Capitalism is the greatest wealth-producing engine the world has ever seen. Some may doubt its fairness, but no one doubts its ability to create wealth on a massive scale.

All societies redistribute wealth. Everyone of them. Example. If all a particular society did was to tax enough to provide roads, some would pay more for those roads than others. Most people are likely to use the roads disproportionately to their tax contribution. Some more, some less; that’s an example of redistribution. The question is not whether to redistribute wealth, but what is the proper level of redistribution.

Okay, let’s add some definitions:

Democratic Socialism: I believe that Senator Sanders and others are talking about something other than the traditional definition of socialism. They are not talking about the government owning the means of production. They are not talking about the government owning and/or controlling entities like Ford and Facebook. Not yet, anyway. However, Senator Warren and Representative Ocasio-Cortez are beginning to introduce those thoughts. Democratic socialists are talking about massive income and wealth redistribution. Even more than we have now. The Scandinavian countries are an example of democratic socialism. Their version of socialism is capitalism with heavy income redistribution.

Traditional Socialism. See above, democratic socialism, with the addition of the government owning entities like Ford, Facebook and most everything else of size. You can keep your ice cream store if you have one. See Venezuela, Cuba and others.

Communism: Traditional socialism with the addition of prohibiting any private property.

Capitalism: A system wherein people, individuals or groups, including corporations, own the means of production and engage in voluntary exchanges of money for goods and services.

Profit: Selling things, taking in income, for more than it costs to make them, drives everything; capitalism, democratic socialism, traditional socialism, communism, no matter what the system is. Here we are not talking about taxes or what you do with taxes; we are talking about how you make the money and wealth that is taxed in the first place. You have to create wealth before you can redistribute it. The gozindas have to exceed the gozoutas or nothing works in any system.

Question: Which economic method or principle, either type of socialism, communism or capitalism, is the best approach to making and selling products and services for more than they cost? Answer: Capitalism. Absolutely no question. Remember, democratic socialism is successful capitalism, capitalism with profits, with heavy income redistribution. Without profit there is nothing to tax,