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What is the difference between capitalism and socialism?

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Over 100,000 Venezuelans pouring into Colombia from the Venezuela in order to buy food
Over 100,000 Venezuelans cross into Colombia in order to buy food

(This photo H/T Prager University)

One country that has done a good job of implementing socialism is Venezuela.

Here is an article from March 2013 from Slate, a web site that strongly favors socialism. The headline is “Hugo Chavez’s economic miracle: The Venezuelan leader was often marginalized as a radical. But his brand of socialism achieved real economic gains”. The author is “a senior writer for the International Business Times”.

He writes:

Chavez became the bugaboo of American politics because his full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results. Indeed, as shown by some of the most significant indicators, Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving.

What did Chavez do, precisely, that caused the Venezuelan economic to boom? Well, he nationalized private industry and redistributed wealth from job creators and entrepreneurs to the poor.

As The Week correctly put it, while “Chavez’s policies of redistribution and nationalization of oil assets endeared him to Venezuela’s working class” and produced many laudable results, the country’s “oil-centric economy has taken away resources from other areas that are badly in need of development.”

OK, so that’s pretty much what the Democrat party wants to do in the United States as well. Nationalize the energy sector, nationalize health care, etc. Let the government take over the private sector industries in order to eliminate “inequalities”. Raise taxes, and redistribute the money to the low income people via social programs, also known as welfare.

So, how does it work? Is socialism really an “economic miracle”?

Here is the latest from Venezuela, as reported by CNN Money. (H/T William)

Excerpt:

Venezuelans cried at the sight of fully-stocked supermarket shelves in Colombia.

Pregnant women, children and even elderly Venezuelans crossed into Colombia on Sunday after the border was temporarily reopened, allowing them to buy basic foods and toiletries — rare commodities in their home country.

Tearful Venezuelans had gone weeks without basic food items like milk, flour and toilet paper. It’s a sad but common part of daily life today in crisis-ridden Venezuela, a country that has the world’s largest proven reserves of oil. Colombian officials estimate that about 100,000 Venezuelans crossed the border.

Venezuela is expected to dive deeper into the abyss this year, according to new projections published Wednesday by the International Monetary Fund.

The IMF forecasts Venezuela’s economy will shrink 10% this year, worse than its previous estimate of 8%. It also estimates that inflation in Venezuela will catapult to 700% this year, up from the earlier guess of about 480%.

“Venezuela’s economic condition continues to deteriorate,” says Alejandro Werner, chief Latin America economist at the IMF. The estimates for growth and inflation are the worst worldwide.

The numbers are just the tip of the iceberg. Venezuela is deep into a humanitarian crisis — people are dying in ill-equipped hospitals and many live without basic food items. Venezuela can’t pay to import goods because its government is desperately strapped for cash after years of mismanagement of its funds, heavy spending on poorly-run government programs, and lack of investment on its oil fields.

[…]It’s all even more tragic given that despite Venezuela’s oil abundance, its state-run oil company, PDVSA, is broke. Venezuela’s oil production fell to a 13-year low in June, according to OPEC, of which it’s a member.

That’s what you get when you let the government take over the free enterprise system, or even when you just stifle the free market with burdensome regulations and high taxes. That’s what socialists in Venezuela did. That’s what the Democrat party would do. They’re  two sides of the same coin.

Dennis Prager

Dennis Prager put out a good video recently explaining the problems with socialism:

Why would anyone prefer a system that encourages some people to feel entitled to what other people create and earn? We want a system that is focused on serving your neighbor – not stealing from them.

Arthur Brooks

If you would like a very brief introduction to capitalism, also known as the free enterprise system or the free market system, then you can watch the videos below, featuring Arthur Brooks, president of the American Enterprise Institute.

Here is the first one, which explains the myths that most Americans are taught about capitalism in school and in the culture:

An important advantage of capitalism is that it lifts people out of poverty. The poorest people in America live much better than the wealthy in Venezuela.

And the second video explains what capitalism offers to individuals for their fulfillment, which socialism does not:

Earned success makes people happier, which is at least as important as the wealth benefit.

We can compare the results of each system by looking at where it’s been tried. Capitalism lifts people out of poverty – all the people in the society who are willing to work are lifted out of poverty. Even the people who can’t work in a capitalist society enjoy the benefits of charity from their neighbors – when people do well, they give more money away. Socialism drives those who work and those who don’t work into poverty, and eliminates charity. No one has anything to share when everyone is poor.

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New study: the longer people live under socialism, the less moral they become

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From Values and Capitalism blog. (H/T Amy Hall tweet)

Excerpt:

The longer people live under socialism, the more their value system erodes. So concludes a recent study of 259 Germans randomly picked to play a simple dice game.

Researchers from the University of Munich and Duke University asked participants to throw a die 40 times and write each result down on a piece of paper. Those with the highest totals received winnings of up to $8. The twist was that each participant had to commit to picking the top or bottom number before rolling the die. They didn’t have to tell anyone beforehand which side they favored, giving them the opportunity to lie when they saw which way the die had turned up.

If no one had cheated, there should have been a roughly equal assortment of rolls from one to six. Instead, when researchers studied the results, they saw disproportionately more high rolls than low. Players were saying they’d picked in advance more fours, fives, and sixes than should have been possible. In short, many were cheating.

Participants were then asked their age and the part of Germany where they’d lived throughout their lives. Some had spent years behind the Iron Curtain, while others had only known life in a unified Germany. When researchers placed the results of the die rolls next to where and when the participants had been born, they came to a stark conclusion.

Those who hailed from socialist East Germany were twice as likely to cheat as those who’d grown up in West Germany under capitalism. Time also played a factor, for the longer a participant had lived in a socialist system the greater their likelihood for being dishonest. Those who’d lived for 20 years or more in East Germany were 65 percent more likely to cheat than their West German counterparts. And the ill-effect of socialism lingered in people’s values long after its demise. Those born in the east after the fall of the Berlin Wall still showed a greater propensity for cheating than their western counterparts.

You can kind of see how socialism works by look at how Obama is taking the country away from capitalism here at home. When the basics of a capitalist economy decline, it’s less attractive to try to make your own fortune, and more attractive to look to government to give you someone else’s money.

The study offers some reasons for their findings:

Participants were then asked their age and the part of Germany where they’d lived throughout their lives. Some had spent years behind the Iron Curtain, while others had only known life in a unified Germany. When researchers placed the results of the die rolls next to where and when the participants had been born, they came to a stark conclusion.

Those who hailed from socialist East Germany were twice as likely to cheat as those who’d grown up in West Germany under capitalism. Time also played a factor, for the longer a participant had lived in a socialist system the greater their likelihood for being dishonest. Those who’d lived for 20 years or more in East Germany were 65 percent more likely to cheat than their West German counterparts. And the ill-effect of socialism lingered in people’s values long after its demise. Those born in the east after the fall of the Berlin Wall still showed a greater propensity for cheating than their western counterparts.

Interesting to note that under Obama’s leadership, fewer people are starting businesses than in previous administrations.

Breitbart explains:

Startup businesses represent the heart of the American economy, but a new report by the Hudson Institute shows the rate of startup jobs during the last two years has been at a record low.

According to the report, Under President George H.W. Bush, who essentially won Ronald Reagan’s third term, there were 11.3 startup jobs per 1000 Americans. Under President Bill Clinton, there were 11.2. Under George W. Bush, there were 10.8. But under President Barack Obama, there have been 7.8 startup jobs per 1000 Americans.

The study “documents a disturbing weakness in startup job creation,” but “does not explain the cause of decline,” even though “there is anecdotal evidence that the U.S. policy environment has become inadvertently hostile to entrepreneurial employment.”

You can’t argue with those numbers. Higher taxes and more regulations are not good for business.

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Ryan T. Anderson’s commencement speech at Regent University

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The full text is up at National Review. I wanted to highlight a couple of points.

First, the importance of marriage and family for raising children:

As a graduate of Regent University you know that the obligations we have to our neighbors are not dependent on race, or sex, or social class. Neither are those duties dependent on age, or size, or stage of development. Or whether someone is wanted or unwanted, planned or unplanned, healthy or sick, “perfect” or disabled.

This starts with you and me. We need to love our children. Graduating class, if you have a daughter with Down syndrome, love her. If your son is conceived “by accident,” love him. As my late mentor Fr. Richard John Neuhaus explained, we have the responsibility to see to it that every human being is protected in law and cared for in life.

The best care comes from the family. Some of you may have already started your families. Most of you will start one in the next decade. And as you welcome children into this world you will experience firsthand that the best way to ensure that children are cared for in life by the man and the woman who gave them life is to unite that man and woman as husband and wife in marriage.

We are created male and female. And marriage unites a man and a woman permanently and exclusively as husband and wife to take responsibility for their children as father and mother. That’s what marriage is all about. And our marriage policy should respect these truths. So, too, should our churches and our own lives. Graduating class: Live lives of fidelity and service to your spouse and your children.

Your children will be educated in this society. And as mothers and fathers you have the responsibility to care for and educate your children. Government should empower you to fulfill those duties. It shouldn’t interfere or indoctrinate. Nor should it use healthcare laws or anti-bullying programs to promote a sexual ideology at odds with the values that responsible parents try to instill in their children.

Second, the free market and the need for job creation:

Our responsibilities extend beyond our families. One of the best ways to care for our neighbors is by serving them in our professional callings, performing quality work at a fair price. Creating wealth and value for our neighbors. Who among the Class of 2013 will be the next David Green, the founder of Hobby Lobby? Who will be the next Truett Cathy, the founder of Chick-fil-a? Who will improve our lives with new technology or medical devices? Who will create new jobs that pay decent wages? This is your responsibility as future business leaders and entrepreneurs.

We know that the market economy—along with families headed by married couples—has done more to lift people out of poverty and into a flourishing life than any other institution. But it only works if people of good character and upright morals are at the helm. Markets are inert apart from the values that actors bring to them—and you have responsibility for your market action.

Look at leaders like David Green and Truett Cathy. They run their businesses in accordance with their Christian beliefs. There’s a simple reason why: They know that they have duties to serve God—and not just on Sundays, but also on the other six days of the week, when they enter the workforce and marketplace. Remember, you can’t check your faith or morals at the door.

It’s worth a look. The actual speech can be seen here, starting at 41 minutes in.  It goes on for about 19 minutes.