Capitalism or Socialism (Economics 101)

03/30/2021

Every time the country transitions from one administration to another we all go through a period of adjustment where some of us experience heartburn and others are overjoyed at the potential we hope it represents.  The bigger the philosophical differences between the administrations the more that feeling is intensified.  This past transition is arguably the most significant change in modern history.  Even more so than the transition from the Obama administration to the Trump administration.  We’ve heard more about Socialism this past year than during all the McCarthy trials of the 50’s and seen more riots concerned with breaking down the basic structure of our representative government than all the riots against the Vietnam War in the ’70s. Where does this all lead too and what are the real differences between the last 3 administrations? 

The Bush administration was a “Status-Quo” type of administration.  Some cutbacks in spending, some increases in taxes, just enough to balance out the economy after the horrific attack on 9/11.  The Obama administration came in with promises of racial equality and new social programs designed to help some ill-defined group of people out of a problem that no one was aware of until the administration told us it was criminal how badly they were being treated.  Up until this point in time, we operated definitively as a capitalist society where the government provided support for a generally free-market economy.  With the attempted takeover of our medical industry and the significant increase in government size, coupled with new social programs defined as a human right, we’ve seen a big move away from the free-market economy and the largest increase in government debt this country has ever experienced. 

As if in response to the progressive culture incubated by the Obama administration the majority of Americans elected Donald J. Trump instead of continuing down the progressive path with its single payor medical system and income for all.  If people thought they had problems with Bush after Clinton they were in for a real experience going from Obama to Trump.  Trump was a real enigma, not a republican according to Republicans, not a democrat according to Democrats.  He believed the wrong ideas to be considered a supply-side economist and yet the Keynesians wouldn’t claim him either.  No one knew what to expect once he took office so there was some real heartburn for those who wanted the status quo.  Now, after 4 years of an exploding economy and a subsequent 3 months of a polar opposite administration, we are looking real-time at the differences in free-market economics vs socialism.  Within the socialist ideals, you’ll hear how the free marketeers are just plain greedy whereas the socialists want everyone to be uplifted and no one should feel put down.  Great ideals and I really enjoyed watching as each episode of Star Trek demonstrate how this was possible.  Practically speaking is that how it works?  Are the free marketeers the greedy ones who only think about themselves at the expense of others?  Are the socialists the philanthropic members of society who do the real work of helping others out?  The answer to that is an emphatic no but let’s review this idea.

Listening to our “esteemed and righteous” press you learn that greed is a bad thing and anyone who practices greed is an outright evil person worthy of scorn.  Therefore the Capitalist is an evil person.  Is this really the case or just a made-up narrative intended to influence people to believe a specific idea?  Every one of us tends to look out for what is best for our families and ourselves before we look out for others, but once we’re comfortable that we and our families have a certain level of security and comfort then and only then, do we direct our efforts to others.  This is true whether you believe in Socialism or Capitalism.  The definition of greed is the excessive selfish desire for more beyond what is needed or deserved.  Who decides what is needed or deserved?  The fact that we, as a society, reach out to help more people around the world than any other people, at any other time, tells you our motivations are not based on greed even though we are capitalists.  It does depend on what that level of comfort and security individuals and families are searching for, but once we reach that capacity most of us jump at a chance to extend our efforts and personal resources to help others.  Working with the definition assigned by the press the free-market capitalism is greed but history has demonstrated the US is not now nor have we ever practiced greed.  We arguably are the most generous country in the world over time even though we have a free-market capitalist economy.  Most of us understand that by helping others succeed you help yourself even more.  This is the beauty of our economic system, because we have the freedom to act on our own we are able to create value in ways the government cannot imagine.  This in turn makes it possible for more people to share in more resources.  The Democrats talk about limited resources and some people have too big of a piece of the pie so it’s up to the government to redistribute the wealth for the equity of everyone.  When you look past the negative emotional rhetoric thrown out there to make you feel guilty you can easily see this this will bring everyone down to the lowest common denominator which isn’t the middle class.  What will actually happen, as seen in China, Korea, Russia, and Venezuela to name a few, is a two-class system, Those who have and those who have not.  It’s interesting how those who have are always affiliated with the government.  

Over the previous 4 years, there has been a significant increase in our market as seen by the expanding DOW, growing from 18,000 to 30,000, a continually growing GDP, overall job participation rate increasing, and unemployment among the minorities and women dropping to new lows.  The money supply saw a year-over-year increase of 26% and along with that, the value of the dollar has remained strong.  We experienced a resurgence in manufacturing as companies moved their business back to the US while service industry jobs began leveling off.  These are all signs of a strengthening economy.  How did this happen?  There were a number of changes but the main indicator is an increase to $130 trillion of household net wealth.  People are able to keep more of their own money and more people are working, creating wealth, and creating a bigger economic pie that more of us can share more of.  This is the impact of a capitalistic society.  The more the government steps back the greater the incentive for individuals to work hard and create value for themselves and their families.  This results in our society as a whole improving. 

The latest trend, however, is to move away from this type of economy and move over to the utopia envisioned by Bernie Sanders, otherwise known as socialism.  The problem with socialism is there are no good examples of a successful, profitable, and beneficial socialistic state with the exception of Star Trek.  The Democratic party is moving towards socialism through their massive government spending bills under the guise of a Covid Relief bill and a subsequent Infrastructure bill.  These two bills will result in a significant increase in taxes as President Biden has already outlined and with a combination of cabinet picks and Executive Orders the regulations are already beginning to increase.  Taxes are a direct drain on our personal wealth/value regardless of whether it is corporate tax, personal tax, or inheritance tax.  This reduces the household net wealth which means less money spent on dining out, vacations, and other luxuries around the home.  It reduces our spending to only the necessities which means all those people who just got a minimum wage increase to $15/hr will no longer have a job to go to because no one has the money to spend anymore.  The next issue we will see is the increase in regulations as the Biden administration implements the Green agenda he promised.  This means adjusting the EPA rules, ban the extraction of hydrocarbons, limit the yearly particulate emissions from industrial engines and processing plants.  Drive our oil and gas refineries offshore to other countries as well as the jobs they create and before you know it we’ll have another lackluster economy or likely worse than what we had under the Obama administration.  For any of the companies impacted by the additional regulations, additional money will need to be spent making them compliant with the new regulations.  None of these funds will create any value for the company which means no new jobs or new resources will be created.  The pie will not get larger but the piece of the pie the government gets will get substantially larger, which is the definition of wealth redistribution.  Another benefit of these new regulations is a larger government and the contracts being released for all the new work will go to the companies most closely connected to the government officials which seems to make them wealthy.  Bernie, Maxine Waters, Nancy Pelosi, Hunter Biden, and even AOC seem to be doing quite nicely on government salaries.  Nancy Pelosi does have a wealthy husband but somehow he sure seems to have benefited from a lot of government contracts over the years, and Hunter technically doesn’t work for the government but sure benefits from it beyond his capabilities.

Janet Yellin said we need to raise taxes to fund the infrastructure bill & we need to raise taxes to reduce inequality.  First off the only way raising taxes reduces inequality is by making us all poorer and dependent on the government.  Then the government can implement the minimum income payments Andrew Yang talked about, single payor health care Nancy Pelosi wants, and general welfare payments to supplement the minimum income payments.  By now it’s obvious we’ll need a central planning department because the independent businesses won’t be able to survive since no one will have disposable income for non-essential items.  Perhaps this description is a bit dramatic but a much larger portion of our society will fall into this category than is currently the case.  This represents a philosophical difference between a capitalist free-market economy and a socialist economy.   Another aspect few people talk about is raising taxes takes money away from the individual family and in doing so removes their independence from government dictates.  When we are independent we no longer need the government to make decisions for us.  Remember the phrase a few years ago “It takes a village to raise a child”?  The only time it takes a village is when the government takes so much of our money in taxes, (corporate and personal), we must focus our efforts on acquiring the essentials.  What happens when the government cuts taxes and removes the onerous regulations on businesses?  As we discovered 4 years ago unemployment drops for all Americans, Blacks, Hispanics, and Women.  Job participation rates rose, personal income increases & personal wealth increases.  People have choices for jobs and are free to move to other parts of the country that might suit them better.  However, when this happens the socialists lose power and control over us, we feel free to criticize any stupid, counterproductive ideas and this scares them.  You’ve seen how Pelosi, Newsome, Cuomo, Governor Whitmore, and Mayor Lightfoot covet the power.  They have high tax rates, they’ve prohibited entire industries from functioning in their state in some cases, and currently, they are still under lockdown with mask mandates.  People are migrating to states that are practicing the freedoms we have all come to expect.  When the current administration begins talking about these needs, recognize what the real cost is, don’t depend on the press to delineate these costs, and learn how the politicians are manipulating the current crises whatever it may be at the time.  In short, utilize some Critical Thinking. 

Our founding fathers envisioned a country that was governed for the people and by the people.  They implemented a certain amount of redundancies to help keep in check the government workers who would exercise selfish greed.  Experience with the monarchy’s taught them selfish greed comes from ego and power and it existed everywhere.  One generation might lookout for the people but succeeding generations weren’t guaranteed to follow the same path.  In the above example, I’ve outlined where the greed of a few, who are tied in with the government, is at the expense of others.  Nothing significantly improves because the few people who improve their lot in life do so at the expense of others.  When the government taxes some people and gives it to others they deem as needier they take away the incentive to improve.  Why do more than the bare minimum if someone is just going to take it away and give it to someone else after they take their portion?  Thanks for taking the time to read this article.  I hope it provides a helpful, thought-provoking perspective on some current issues, and please, feel free to comment on what you liked or didn’t like.  Sign up to receive the latest articles, just hit the +follow button at the bottom right side of the current page – Thanks

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