Tag Archives: Entrepreneurship

What is the difference between capitalism and socialism?

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)


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.

Related posts

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

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


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.

Ryan T. Anderson’s commencement speech at Regent University

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.

Are people who vote Democrat smarter than people who vote Republican?

Video from Neil Simpson’s round-up.

The Pew Research Center, a liberal organization, actually did a study on this uninformed voter problem.


So Republicans are more knowledgeable than Democrats, contrary to what many would like to believe.

According to whom?  None other than the Pew Research Center, a left-of-center organization.  Moreover, Pew’s latest survey only reaffirms previous surveys demonstrating the same result.

In fact, the results weren’t even close.

In a scientific survey of 1,168 adults conducted during September and October of last year, respondents were asked not only multiple-choice questions, but also queries using maps, photographs and symbols.  Among other subjects, participants identified international leaders, cabinet members, Supreme Court justices, nations on a world map, the current unemployment and poverty rates and war casualty totals.

In a 2010 Pew survey, Republicans outperformed Democrats on 10 of 12 questions, with one tie and Democrats outperforming Republicans on just 1 of the 12.  In the latest survey, however, Republicans outperformed Democrats on every single one of 19 questions.

[…]Those Pew results are confirmed by some surprising other sources.  According to a New York Times headline dated April 14, 2010, “Poll Finds Tea Party Backers Wealthier and More Educated.”  Shattering widespread myths, that survey revealed that Tea Party supporters were more likely to possess a college degree than their counterparts (23% to 15%), and also more likely to have completed post-graduate studies (14% to 10%).  Tea Partiers were also more likely to have completed “some college” by a 33% to 28% margin, and substantially less likely to have not completed high school than non-supporters (3% versus 12%), or to possess only a high school degree (26% versus 35%).

Previously, I posted about how Democrat voters understand very little about economics, whereas Republicans understand more.


Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101.

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents’ (all American adults) answers to eight survey questions about basic economics.

The first question was “Restrictions on housing development make housing less affordable.” The unenlighted answer for that one is “disagree”, since restrictions on development reduce the supply of available housing. Demand stays the same and so there is a shortage, and prices rise. D’uh!

Here are the others:

The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

And the results:

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

It’s true, the majority of Democrat voters are people who don’t work at all, or they “work” for government, or they “work” in education, or they hold picket signs while on strike, or they are in prison, or they are chasing ambulances, or they are Hollywood celebrities. No economics knowledge is required for any of that. Republicans work in private industry, and many of us own small businesses. So we actually have to work to earn money, because we have competitors to watch out for and consumers to please. Many of us are married and many of us have to get along with our spouses and raise children. Republicans don’t need the government, we do fine making our own decisions, and making our own way without help from the government.

UPDATE: I think this ad says a lot about who votes Democrat:

Their great plan is to borrow money from our children in order to provide contraceptives to unmarried college students. Is that something to vote for? Remember the Life of Julia? Their vision is cradle-to-grave government dependency, with husbands and fathers made completely unnecessary.

Arthur Brooks: true fairness means rewarding merit, not spreading the wealth

Arthur Brooks is an economist, a Christian and the President of my third favorite think tank, the American Enterprise Institute. He has been making a push lately to convince conservatives to become more articulate when making the case for the free enterprise system. One of his major ideas is that happiness is not related to the amount of money you have, but it’s related to how well you can achieve your own prosperity and independence by your own labor. His research shows that people are happiest when they feel in control of their own prosperity, even if they have less wealthy than people who depend on the government to take money away from others so they don’t have to work.

Here’s an article he posted on AEI entitled “True fairness means rewarding merit, not spreading the wealth”.


There are two main ways to define fairness: fairness in terms of opportunity, and fairness in terms of outcomes. The first means leveling the playing field, and the second means spreading the wealth around. The first means lifting people up on the basis of merit, and the second means bringing successful people down.

[…]In a 2005 Syracuse University poll, researchers asked a cross-section of Americans if they b14elieve that “everyone in American society has an opportunity to succeed, most do, or only some have this opportunity.” Some 71 percent of respondents said that all or most Americans can get ahead.

This is consistent with most of our experiences. It’s almost impossible to argue that American success is not earned. We can all think of times when our hard work has gotten us ahead or when we’ve been punished at work or in life for making poor decisions. Even if America’s not perfectly meritocratic, we all see how hard work pays off.

Now, of course, America is far from perfectly fair. But that‘s because life isn’t fair. For instance, all other things being equal, taller men and prettier women make higher salaries than their shorter, plainer counterparts. Believe it or not, there are studies that show these things (as if we needed them). More seriously, some people have substandard elementary education or childhood nutrition, which creates a lifelong disadvantage. Worse still, some children are born into families that don’t emphasize the values that beget opportunity: honesty, hard work, and education.

We need to address these inequities. Still, we shouldn’t abandon the idea of meritocratic fairness just because not everybody has completely equal opportunity. But this is what the president appears to be asking us to do.

America is built around the shared values and aspirations of mobility, opportunity, and merit. Even if only, say, half the outcomes in our life are due to merit, that’s still the half within our control. We should focus on increasing the role of merit, not dismiss the idea because it’s imperfect. Without a belief in meritocratic fairness, we have little incentive to work hard, be honest and optimistic, and create value in our lives and the lives of others. Fatalism and envy are simply not American values.

We need to make the case for the free enterprise system now, using moral arguments like this, otherwise we are going to find ourselves treading the path of countries like Greece, where almost no one works and almost everyone depends on the government to take care of them. It’s not sustainable.