Monday, June 1, 2009

What's Wrong with Socialism?

Why are so many Christians opposed to socialism if socialism is designed to help the poor? Aren’t Christians supposed to care for the poor?

Public policy ought to be evaluated not on the basis of intentions, but on the basis of effects. The intention of socialism is a noble one, but its effects are disastrous.

There are at least three reasons why we ought to oppose socialism.

First, it’s unconstitutional. Second, it’s immoral. And third it ends up hurting the very people it’s supposed to help.

First, socialism is unconstitutional. There’s nothing in the Constitution that grants the federal government the authority to take wealth from one segment of the population and give it to another.

And if the Constitution doesn’t authorize an activity the federal government is not to be engaged in it. This is Constitutional law 101. And if this one basic principle were observed, then the size, scope, and activity of the federal government would be greatly reduced, resulting in greater national prosperity and greater personal liberty.

So the first problem is that socialism is unconstitutional.

Second, socialism is immoral. It’s nothing less than state-sponsored theft. This is a rather strong statement, but let me explain. Let’s say I’m not too well off, just barely getting by. But there’s a very wealthy man who lives down the street from me. And let’s say that I gather several of my neighbors together who are in the same predicament as me—people who are just scraping by, finding it difficult to make ends meet, and desiring a better life. And let’s say I successfully talk them into going down the street with me to our wealthy neighbor and demanding that he give us his money. If he refuses, we threaten to take him hostage until he pays up. We’ll imprison him in one of our basements until he forks over the dough.

We would rightfully be considered a criminal gang.

But what if instead I gather several of my neighbors together and I persuade them to vote for a candidate who promises to do the dirty work for us: to pass legislation to tax our wealthy neighbor, with the tax revenue finding its way into our pockets through some government program? What’s the difference? Why is this considered any more acceptable than the other? Is it because threats and intimidation are used in the first case, when I and my friends personally confront our wealthy neighbor and demand his money? Aren't threats and intimidation used in the second case also? If our wealthy neighbor refuses to pay the tax, he’s threatened with fines and imprisonment until he pays.

If we vote for a candidate who promises to tax others so that we may benefit, then we are participating in state-sponsored theft. Basically we are hiring someone to do our stealing for us. The eighth commandment says, “You shall not steal.” It doesn’t say, “You shall not steal, except by majority vote.”

So the second—and biggest—problem, then, with socialism is that it is immoral.

The third thing is that it ends up hurting the very people it’s designed to help. There is (at least at first) an apparent benefit to those at the lower end of the economic system; but there is a very hefty price to pay down the road.

Here’s why. The thing that provides the most help for the poor is low prices on goods and services. If prices are low, goods and services can be afforded by the poor. And what drives prices downward is production. The more goods and services are available, the lower the prices, because businesses have to compete with each other for customers. And the way they do this is by trying to offer better products at lower prices. The result is, everyone benefits.

Say for instance that there is only one pair of shoes in the country, and everyone would like to have them. What’s the high demand for a scarce product going to do to the price? It’s going to make the price very high. If my neighbor offers $20 for the shoes, I’m going to offer $25, and someone else is going to offer $30, and someone else will offer $35. And this will continue until someone who is very wealthy is going to offer a price that no one else can match. Maybe he’ll pay as much as $5,000 for the shoes. The market place is like a huge auction. When something which is in high demand is scarce, people bid up the price, and only the very wealthy can afford it.

Let’s say this pair of shoes fetches $5,000. Some enterprising entrepreneur is going to see an opportunity here for making money. He sees the high demand for shoes and he’s confident he can set up a shoe-making business and sell shoes for a lot less money and still make a nice profit. And so he begins to make and sell shoes at $1,000 a pop...and makes money hand over fist.

Someone else comes along and thinks to himself, “I want a piece of the action,” and so he also starts a shoe-making business. Then there’s a third and a fourth and fifth shoe-making business. The number of shoes is constantly increasing and each shoe-maker is competing with the others for a share of the market. And one of the ways they compete is by attempting to offer shoes for a lower price than their competitors. When there is an abundance of goods, producers bid the price downward to get customers. And they’ll continue to do this so long as they can make a profit.

Enter the tax man. Increased taxes in order to support a welfare state, or a socialist state, end up hurting the poor even when the poor are not taxed directly. Taxes, whether income taxes or sales taxes, or whatever, are a part of the costs of doing business. These costs are passed on to the consumer in the form of higher prices, which of course hurts the poor. Also if taxes are raised high enough, they serve as a disincentive to further production. The cost of doing business simply becomes too high and the potential for profits too low to stay in business. This hurts not only the employees who are out of a job, but also consumers as a whole because now there are fewer goods available for purchase.

The best thing government can do for the poor is to provide the basis for a capitalist, free-market, business-friendly environment.

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