Why Socialism Would Never Succeed in the United States
While American citizens still overwhelmingly favor a free market system, advocacy for socialism (whether by ending the free market system or creating a system of social ownership of the means of economic production) is on the rise in the United States. Socialist-leaning Bernie Sanders generated significant support among Democrats during the 2016 presidential campaign. Democratic socialist Alexandria Ocasio-Cortez recently unseated incumbent Joe Crowley for a Democratic congressional seat nomination. And recent polls suggest that millennials have an increasingly positive view of socialism. But is socialism really a good idea for the United States? Here are a half dozen reasons to be doubtful.
A general problem with socialism is that it creates resentment, since such a high percentage of the earnings of those who are most productive are redistributed. This problem would be especially severe if socialism is implemented in the United States because of our long history of free market enterprise and the right to keep what one earns. When, in 1944, Franklin Roosevelt unilaterally raised the top tax bracket to 100% for all earnings above $25,000 per year, even his Democratically controlled Congress thought that was a bit high, and reduced it to 90% where it remained until the Kennedy tax cut brought it down to 70%. When the Reagan tax cut brought it down to somewhere in the 30% range, the economy recovered from the recession, remaining strong well into the Clinton administration. This reflects on the Laffer Curve argument that high tax brackets discourage work in favor of leisure. Microeconomic theory, using utility theory, argues that there are two “goods”: consumption and leisure. This explains why, under Roosevelt’s tax hike, many top executives, having earned their $25K relatively early in the year, donated the rest of their year as the “dollar-a-year men,” volunteering their organizational skills within the government for the war effort.
Socialism in the U.S. would kill the incentive to work. And where there is less incentive to work, there is less productivity. Where there is less productivity, there is less revenue. And less revenue means economic failure. In the 17th century Plymouth Plantation, these devout pilgrims decided to own the land collectively (because of the sheer difficulty of having to clear the land). They nearly starved that year. Some of them feigned not feeling well and let the others do the work for the community. The next year the land was divided by families. Those who didn't work didn't eat. That was the year they celebrated Thanksgiving, acknowledging God's blessing on their lives and work. As for today, even the current welfare program kills the incentive to work. Some people would rather watch television than work for a living because the government provides food stamps, etc. Although welfare programs help many who are genuinely in need, this act of governmental compassion also panders to those who’d rather live off of federal assistance than work. Welfare payments have to be made from the taxes that workers must pay, thus creating resentment as well.
All supposedly successful socialisms in the world today (e.g., Denmark, Sweden, and Norway) are only successful to the extent that they have capitalist aspects to their systems which provide the incentive and thus revenue necessary to sustain their economies. In Sweden, the income tax is paid based on what each individual worker earns, not on the combined family incomes as we have it. Thus, with the tax brackets quickly approaching 70%, there is more after-tax family income if one spouse (having a high salary because of his/her position within a corporation) stays home to take care of the kids while the lower-paid spouse works, because there is more after-tax income from the latter than from the former.
There are demographic reasons why socialism seems to work in Scandinavian countries. First, they all have very small populations (5-10 million) compared to the United States (330 million). Thus, federal social programs are far more easily implemented in those countries than in the U.S., where the track record for efficiency in social programs is already poor. Secondly, Scandinavian countries don’t have significant defense budgets like we do in the U.S. so they can devote a larger portion of their national spending to social programs. U.S. military spending constitutes 15% of our federal budget. But since most of that goes toward defending the rest of the free world, including Europe, we can’t slash our military spending to devote to social programs. This is a significant problem. By contrast, Germany spends just over 1% of its federal budget on defense. And the U.S. subsidizes the costs of NATO agreements. Under the Obama Administration, we did cut back fairly significantly on military expenditures. The current administration is having to increase present expenditures to make up for that policy.
In a socialist system, there is no rational way to determine how goods and services should be redistributed. As Ludwig von Mises and F. A. Hayek demonstrated decades ago, in the absence of a free market price system there is no means of calculating the value of goods and services, so any sense of “just” redistribution is lost. This is why socialism invariably leads to a lower standard of living. The more socialistic an economy is, the lower the standard of living. The post-World War II socialist governments in Britain led to a decrease in their standard of living, and the examples of Cuba and now Venezuela, are powerful illustrations of this point. That famous satellite picture of the Korean peninsula shot at night (with North Korea almost entirely dark and South Korea well lit up) is another good illustration. Also, the reason why mainland China is rapidly growing is the liberalizing of their markets and private investments. However, the political challenge is how much economic freedom to allow before it reduces the political power of the Communist government.
Socialism is dangerous and demonstrably inclined to oppressing the very people it is supposed to help. As Jason Jewell has said, “no institutional structures have caused more death in the past century than socialist ones through both violent purges of class enemies and the progressive decapitalization and impoverishment of their societies.” While often hailed as an economic system which respects human rights, the track record of socialist systems in the past hundred years suggests that it is more likely to be aggressively oppressive than respectful or helpful.
All of these points suggest that increasing support for socialism in the United States is not justified by the economic facts. While a federal safety net for those citizens who are truly in need is certainly appropriate, ending the free market system or creating a system of social ownership of the means of economic production would have devastating consequences for this country.