Suppose a planet hurtling in space enters our solar system and begins circulating around the sun. The planet is perfectly habitable for humans. The U.S. government takes 100,000 drug-war prisoners and 100,000 illegal immigrants, along with their families, and forcibly transports them in rocket ships to the planet, leaving them there to fend for themselves on their new planet.
The new inhabitants are dirt poor. All they have are the clothes they wear plus some food and water to last them a few months.
How would American socialists advise the new inhabitants of this planet? They would recommend that they adopt a welfare-state way of life. This would mean that the new inhabitants would organize a government that would immediately begin handing out welfare and stimulus checks to everyone. The elderly would also receive Social Security checks. The minimum wage would be set at $20 an hour.
But do you see the problem? How can the government hand out welfare, stimulus, and Social Security checks when the government has nothing? In order to have money to hand out, the government must first take it from people, either directly through taxation or indirectly through the inflationary printing of money. But in this society everyone has nothing. Everyone is dirt poor. Therefore, the government can’t take anything from them, which means that the government can’t hand out any benefits to anyone. (I am assuming of course that the socialists do not advocate that the government confiscate everyone’s small stock of food and water.)
Moreover, how can anyone who starts a business pay workers $20 an hour? He doesn’t have any money to pay them anything!
This is the blind spot that afflicts every American socialist. They just assume the existence of wealth in a society and then figure out ways for government to tax and spend that wealth. It never occurs to them to ask how it is that such wealth comes into existence in the first place or, equally important, what happens to the wealth once socialism is adopted.
The way that wealth comes into existence is through the absence of socialism. When people are free to engage in economic enterprise without governmental interference and to keep everything they earn, their standard of living begins rising.
At first, the situation is extremely difficult because people are doing everything possible just to survive. But as time goes on, things start to improve. People start saving a bit of their earnings. Those savings go into banks. The banks lend the money to employers, who use it to buy tools and equipment. That makes workers more productive. That generates higher revenues for employers, which manifests itself in higher wages for workers.
Over time, this free-market process builds an enormous foundation of wealth in the private sector, which continues to build on itself. As people save more, more capital comes into existence, which makes people more productive, which means higher wages, which means ever-growing standards of living.
That explains the tremendous rise in the standard of living of the American people from 1800 to 1900. At first, things were difficult, but by the time 1900 rolled around Americans had the highest standard of living in history.
That’s when the socialists strike. They see all that private wealth and cannot control themselves. Consumed by envy and covetousness, they want to take it away from people. They want everyone to have the same amount of wealth. They get government to establish “equality” and “charity” through such welfare-state programs as income taxation, Social Security, Medicare, Medicaid, stimulus payments, public housing, and welfare.
The results are predictable. As the government begins confiscating wealth, the ability of the private sector to continue generating wealth diminishes. Ultimately, the ever-growing weight of the public sector collapses the private sector. Everyone ends up being poor.
That’s the reason that people in Cuba, Venezuela, and North Korea are so poor. But that doesn’t bother the socialist. What matters to him is that everyone is equal.
In other words, suppose you have a society in which the poorest people are earning $30,000 a year and the wealthiest people are earning $1 billion a year. Suppose you have another society in which everyone is earning $1,000 a year. The socialist would pick the latter society as his ideal because everyone would be equal.
Obviously, it would be nonsensical for the people on our hypothetical planet to choose socialism, given that there is no wealth in society for the government to confiscate and distribute. The only system that would give those inhabitants any chance of survival would be a free-market system, one in which people would be free to engage in economic activity, including trading freely with one another, and retain the fruits of their earnings. Since everyone would be starting with nothing, life would be difficult at first but over time, things would begin to improve and prosper. Unfortunately, the socialists would be patiently waiting to strike.