Elon Musk – billionaire entrepreneur and founder/CEO of SpaceX – recently tweeted:
By the way, I am actually a socialist. Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm. True socialism seeks greatest good for all.— Elon Musk (@elonmusk) June 16, 2018
True socialism is a deeply flawed economic system that causes harm to all except the government planners and leaders. Here are 10 reasons why it doesn’t work over the long haul:
- Socialism is a government-controlled economic system.
There are different degrees of socialism and different amounts of government control in most national economies…
In a purely socialistic country, the government owns the means of production – the companies that manufacture products – and the distribution of all goods and services. Privately-owned businesses don’t exist. Bureaucratic central planning replaces the free market.
The U.S. economy is partially a free-market economy and partially a socialistic, government-controlled economy. Over the last 50 years, socialism has replaced free-market capitalism in certain sectors of the economy. Here are some examples of creeping socialism:
- Federal and state minimum wage laws
- Price controls over commodities such as gold and silver, oil, gasoline and electricity
- Rent control
- The U.S. Postal Service
- The U.S. health care system under the Affordable Care Act (Obamacare)
To summarize … When prices and wages are controlled by the government, market forces are prevented from allocating goods and services properly and efficiently … and you end up with shortages and poverty – just like we see in Venezuela and other socialist countries.
- Socialism is a wealth-transfer economic system.
Socialism takes money from those the government defines as “rich” and gives it to those the government defines as “poor.”
The U.S. progressive income tax is one of the largest – if not THE largest – wealth transfer system in the world:
- About 44.4% of American wage-earners (76.4 million) will pay no federal income tax for 2018.
- The top 0.1% will pay the equivalent of 39.2% of their income to the IRS.
- The bottom 20% will have a negative tax rate – they will get back more from the government in the form of “refundable” tax credits than what they paid to the IRS in the form of payroll tax withholding.
Very few Americans are aware that there are over 80 federally-funded – that means taxpayer-funded – programs that provide cash, food, housing assistance, medical care, social services, training and targeted education aid to Americans with low or no income.
Last year the federal government spent $740 billion in taxpayer dollars for wealth-transfer payments. The 6 largest federal welfare programs are:
- Temporary Assistance for Needy Families (TANF)
- Supplemental Nutrition Assistance Programs (SNAP) – also called Food Stamps
- Supplemental Security Income Program (SSI)
- Earned Income Tax Credit and Child Tax Credit
- Housing Assistance
When Barack Obama was running for president in 2008, he had a widely-publicized campaign-stop conversation with a small business owner who came to be known as “Joe the Plumber.” When Joe complained that under Obama’s proposed tax plan, he would be punished with a higher tax rate if he succeeded and built up his business, Obama said everyone benefits when you “spread the wealth around.”
This is the essence of socialism: spreading the wealth around – with the government mandating how it should be done … and using legalized theft to do it.
- Socialism requires government-mandated behavior.
When the government mandates how people spend their income, it stifles – and then kills – their ability to make voluntary free-market economic decisions. Consider two examples:
Example One. The socialistic progressive income tax system – which funds socialism’s wealth-transfer programs – is mandatory, not voluntary. Because of this, it discourages hard-working Americans from making voluntary donations to charitable organizations that feed the poor and provide health care and other needed social services.
They may want to give to a social program run by their church … or to another non-profit organization that is helping sick or disabled or homeless people. But they may have little left over after paying their taxes and their own living expenses.
And if they do, they will often rationalize: “I’m paying taxes. Let the government take care of these social problems in my community.”
Example Two. If I want to start a new business, there are a myriad of regulations I have to follow. The government sets fees for licenses, permits, business name registration, and so forth.
It tells me how much I have to pay my employees (via minimum wage laws), what benefits I have to provide in the health care plan I chose, etc., etc., etc. My free-market economic decision-making options are going to be severely limited in a socialistic economy.
- Socialism requires massive government bureaucracies – which by nature are wasteful, inefficient and ineffective.
Whenever you have a society that believes it is government’s responsibility to solve social problems, you have a society that is moving toward socialism.
Government has two goals:
- Perpetuate itself
- Expand its “reach” – its sphere of responsibility – and increase its power and control
Neither of these goals is compatible with solving problems.
You see, if government actually solved problems, it would put itself out of business. Federal departments created to solve housing problems, health problems, economic problems, energy shortages, etc., would be shut down because they would no longer be needed. Government employees would be furloughed (laid off) permanently.
But that never happens…
Instead, problems assigned to government agencies increase. More government employees are hired. Bureaucracies expand. Rules and regulations, along with their forms and paperwork, snowball.
A federal, Washington, D.C.-based top-down approach to solving social problems can never match the efficiency and effectiveness of an entrepreneurial, free-market approach.
Bureaucrats sitting behind desks in large office buildings aren’t going to care as much about people suffering in crime-ridden inner cities or in poor rural communities than the entrepreneurs and companies that actually live among the people…
Plus, there is no incentive for government bureaucrats to fix or solve problems. All they care about is collecting their fat paychecks … and their taxpayer-funded health care benefits.
- Socialism kills entrepreneurship, innovation and technological progress.
As mentioned previously, in a purely socialistic government, private business doesn’t exist. There are no entrepreneurs like Elon Musk or Steve Jobs to develop new technologies and engineer and manufacture new products.
In a partial socialistic, partial free-market economy, entrepreneurship and innovation are stifled because of heavy business regulation, high taxation, and other obstacles created by government overreach that discourages the risk-taking that’s required to develop new technologies.
In 2015 after socialist Bernie Sanders announced he was running for president, he did an interview with CNBC in which he said, “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.”
What he doesn’t seem to understand is that more product choices mean more wealth.
Because multiple choices of products support more jobs than a single choice of a product does. Without those 23 choices of underarm deodorants and 18 choices of sneakers, even more children would be hungry.
- Socialism destroys individual freedom.
The more the government controls business and the economy, the less freedom people have…
Just think about the price of gasoline as one example. When the government – federal, state or local – raises the tax on gasoline by an exorbitant amount, it reduces the freedom of families to take that vacation they were planning … because they now can’t afford the higher cost of filling the gas tank in their car.
Or when government attacks and shuts down a Christian business for violating an anti-discrimination ordinance, it takes away the freedom of the business owner to operate his business consistent with his Christian beliefs … and it takes away your freedom to purchase products from that business – since it no longer exists.
- Socialism crushes economic growth.
An economy never grows rapidly under socialism because there is no financial or economic incentive for workers to succeed – to work overtime … to do more than is required … to increase their efficiency and productivity.
Why should they?
Socialism doesn’t reward going the extra mile…
Socialism strives to “equal the playing field” – to make everyone have not only equal opportunity, but to have equal outcome.
This is not how society works…
It goes against human nature … as we will see below.
- Socialism makes everyone equally poor except for the elite few … and the government planners.
When government takes over an industry and sets prices for a commodity, shortages result. This creates economic upheaval … and personal misery.
What’s happening in Venezuela with utility services – water, gas and electricity – is a good example.
Winston Churchill called socialism “the philosophy of failure,” saying that “its inherent virtue is the equal sharing of misery.”
Thousands of Venezuelans have been protesting that “equal sharing of misery” in the streets of Caracas and other cities…
You can be sure that the government elites in Venezuela are not suffering from a lack of water or electricity!
- Socialism works against human nature.
Regarding this point … consider that people will inherently work harder to support themselves and their families than they will to generate income for the government.
This aspect of human nature was recognized 400 hundred years ago by the Pilgrims who came to America to escape religious persecution by the English government. It needs to be recognized again today…
10. Socialism has failed everywhere it has been implemented: Cuba, North Korea and Venezuela are just the latest examples.
And yet. college campuses teach it … and millennials increasingly favor it over capitalism.
Politicians are embracing it.
The media proclaims it.
And yes, many Silicon Valley and other business leaders like Elon Musk embrace it as well. Or does he?
It’s difficult to know what to make of his tweet.
I say this for 4 reasons:
- As we’ve explained above, socialism by definition involves the shifting of resources – the transfer of money – from the productive (working taxpayers) to the unproductive (the non-working). It’s called welfare.
- Socialism by definition is government ownership of the means and distribution of goods and services. I seriously doubt Elon Musk is in favor of the federal government taking over SpaceX and Tesla and telling him which cars to build and which satellites to launch – and how much to charge customers for his products and services.
- Musk doesn’t define what he means by the “greatest good for all.” Does he mean economic equality for all? If so, why hasn’t he offered to forfeit his billions for the “greatest good for all.”
- Elon Musk doesn’t act like a socialist. He acts like a free-market capitalist.
So is Musk attempting to define a new kind of “socialism” that is really free-market capitalism in disguise? Or is he perhaps just tossing around buzzwords in an attempt to curry favor with the socialist-leaning power brokers in Washington, D.C….
Or perhaps he was smoking marijuana at the time he wrote his tweet…
The last time I saw Elon Musk was at a fundraiser for Conservative Republicans…
I told him the only good thing Obama did as president was that he signed the bipartisan jobs act that helped companies raise money for equity crowdfunding.
He smiled. But I could tell he wasn’t in agreement.
If I talked to Elon again, I’d talk about free markets, creating jobs and creating opportunities for new innovation.
That same night, he had to leave early because one of his rockets had just blown up … and it was quite disturbing to him. But he knew my attack on Obama’s socialist policies was contrary to his own personal beliefs.
Elon is wrong … he is very wrong.
The false promise of socialism is that government can provide endless benefits to citizens at no cost:
- Free health care for all
- Free college tuition
- Free parental leave
- A guaranteed “living” wage for all
But no one who advocates these socialist pipe dreams is able to explain how government will pay for these benefits over the long term.
Margaret Thatcher – Prime Minister of the United Kingdom from 1979 to 1990 – said, “The problem with socialism is that you eventually run out of other people’s money.”
In Chapter 15 of my book, The Deep State: 15 Surprising Dangers You Should Know, I talk about the above 10 reasons why socialism always fails … and leaves economic and personal destruction in its path.
This is the #1 issue today. You must become familiar with the false promises of socialism – and the 10 reasons it’s a flawed and destructive economic system – so you can understand the mantras of the politicians and the media … and communicate the truth effectively to friends and family.
To order an autographed copy at a 20% discount, click here.
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Watch this powerful 4-minute video proving that socialism, not free-market capitalism, produces more selfish people, click here.
What do you think? Email me at [email protected].
Here are the rest of this week’s articles: