Tag Archives: Innovation

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

College of the Ozarks offers students tuition-free degrees – if they work part-time

This article from the Wall Street Journal has been the #1 editorial for much of the last four days.


Looking for the biggest bargain in higher education? I think I found it in this rural Missouri town, 40 miles south of Springfield, nestled in the foothills of the Ozark Mountains. The school is College of the Ozarks, and it operates on an education model that could overturn the perverse method of financing college education that is turning this generation of young adults into a permanent debtor class.

At this college the tuition is nowhere near the $150,000 to $200,000 for a four-year degree that the elite top-tier universities are charging. At College of the Ozarks, tuition is free. That’s right. The school’s nearly 1,400 students don’t pay a dime in tuition during their time there.

So what’s the catch? All the college’s students—without exception—pay for their education by working 15 hours a week on campus. The jobs are plentiful because this school—just a few miles from Branson, a popular tourist destination—operates its own mill, a power plant, fire station, four-star restaurant and lodge, museum and dairy farm.

Some students from low-income homes also spend 12 weeks of summer on campus working to cover their room and board. Part of the students’ grade point average is determined by how they do on the job and those who shirk their work duties are tossed out. The jobs range from campus security to cooking and cleaning hotel rooms, tending the hundreds of cattle, building new dorms and buildings, to operating the power plant.

[…]”We don’t do debt here,” [School President Jerry C.] Davis says. “The kids graduate debt free and the school is debt free too.” Operating expenses are paid out of a $400 million endowment. Seeing the success of College of the Ozarks, one wonders why presidents of schools with far bigger endowments don’t use them to make their colleges more affordable. This is one of the great derelictions of duty of college trustees as they allow universities to become massive storehouses of wealth as tuitions rise year after year.

In an era when patriotism on progressive college campuses is uncool or even denigrated as endorsing American imperialism, College of the Ozarks actually offers what it calls a “patriotic education.” “There’s value in teaching kids about the sacrifices previous generations have made,” Mr. Davis says. “Kids should know there are things worth fighting for.”

He says a dozen or so students will be taking a pilgrimage to Normandy in June to commemorate the 70-year anniversary of D-Day and the former College of the Ozarks students buried there. Amazingly, four of the school’s graduates served as generals in the U.S. military during the Vietnam War.

[…]Nearly 90% of graduates land jobs—an impressive figure, given the economy’s slow-motion recovery.

“If I were an employer, I’d take our graduates over those at most any other schools,” says Mr. Davis. “The kids at these East Coast colleges strike me as being a little spoiled. Our graduates don’t expect to come into the company as the CEO.” But they certainly join a company knowing the value of work.

I am always encouraging young people to steer themselves to STEM degrees, and away from debt. If you did a STEM degree at College of the Ozarks, then you would really have a leg up on life. It’s not a good time now to follow your heart and do what you like. Now is the time to dig in and do what you have to do to pay your own way later on. It’s going to get a lot harder to have even the same standard of living as what your parents had.

American health care: does it cause poor life-expectancy and high infant mortality?

Probably one of the best health care policy experts writing today is Avik Roy, who writes for Forbes magazine.

Here is his latest column, which I think is useful for helping us all get better at debating health care policy. (H/T Matt from Well Spent Journey)


It’s one of the most oft-repeated justifications for socialized medicine: Americans spend more money than other developed countries on health care, but don’t live as long. If we would just hop on the European health-care bandwagon, we’d live longer and healthier lives. The only problem is it’s not true.

[…]If you really want to measure health outcomes, the best way to do it is at the point of medical intervention. If you have a heart attack, how long do you live in the U.S. vs. another country? If you’re diagnosed with breast cancer? In 2008, a group of investigators conducted a worldwide study of cancer survival rates, called CONCORD. They looked at 5-year survival rates for breast cancer, colon and rectal cancer, and prostate cancer. I compiled their data for the U.S., Canada, Australia, Japan, and western Europe. Guess who came out number one?

Here is the raw data:

Health care outcomes
Health care outcomes by country and type of treatment

Click here to see the larger graph.

So, what explains this?

The article continues:

Another point worth making is that people die for other reasons than health. For example, people die because of car accidents and violent crime. A few years back, Robert Ohsfeldt of Texas A&M and John Schneider of the University of Iowa asked the obvious question: what happens if you remove deaths from fatal injuries from the life expectancy tables? Among the 29 members of the OECD, the U.S. vaults from 19th place to…you guessed it…first. Japan, on the same adjustment, drops from first to ninth.

It’s great that the Japanese eat more sushi than we do, and that they settle their arguments more peaceably. But these things don’t have anything to do with socialized medicine.

Finally, U.S. life-expectancy statistics are skewed by the fact that the U.S. doesn’t have one health-care system, but three: Medicaid, Medicare, and private insurance. (A fourth, the Obamacare exchanges, is supposed to go into effect in 2014.) As I have noted in the past, health outcomes for those on government-sponsored insurance are worse than for those on private insurance.

To my knowledge, no one has attempted to segregate U.S. life-expectancy figures by insurance status. But based on the data we have, it’s highly likely that those on private insurance have the best life expectancy, with Medicare patients in the middle, and the uninsured and Medicaid at the bottom.

I know that my readers who like to dig deep into economics and policy will love the links at the bottom of the article:

For further reading on the topic of life expectancy, here are some recommendations. Harvard economist Greg Mankiw discusses some of the confounding factors with life expectancy statistics, citing this NBER study by June and Dave O’Neill comparing the U.S. and Canada. (Mankiw calls the misuse of U.S. life expectancy stats “schlocky.”) Chicago economist Gary Becker makes note of the CONCORD study in this blog post. In 2009, Sam Preston and Jessica Ho of the University of Pennsylvania published a lengthy analysis of life expectancy statistics, concluding that “the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.”

The funniest thing I have found when talking to people from countries with socialized health care systems, like Canada and the UK, is that they are woefully uninformed about American health care. They literally do not know about free emergency room care, which is free for anyone regardless of insurance – including illegal aliens. They do not know about our expensive Medicaid program, which helps people who cannot afford health insurance. And our very very expensive Medicare program, which provides health care to the elderly – including prescription drugs. I get the feeling that foreign critics of American health care are getting their views from amateur documentaries produced by uneducated Hollywood propagandists, or maybe from TV shows on the Comedy Channel. They certainly are not getting their information from peer-reviewed studies by credentialed scholars from top universities, like the ones cited above.

I have literally spoken to Canadians who think that people in the USA without insurance do not get treatment and just die in the streets from stab wounds. They don’t know about the emergency room rule, or about charity care, or about Medicaid and Medicare. There is a lot of ignorance up there – wilful ignorance, in some cases. And keep in mind that the average Canadian household is paying over $11,000 a year for this substandard health care! They are paying more for less, and that’s not surprising since a large chunk of the taxes that are collected for health care go to overpaid unionized bureaucrats. Naturally, when their left-wing politicians need treatment, the first place they go is to the United States, where they pay out of pocket for the better health care. But that doesn’t stop them from denouncing American health care when they are talking to voters.

Higher infant mortality rates?

One of the other common arguments you hear from uninformed people outside the USA is the higher infant mortality rates argument.

Here’s an article by Stanford University professor Scott Atlas to explain why the argument fails.


Virtually every national and international agency involved in statistical assessments of health status, health care, and economic development uses the infant-mortality rate — the number of infants per 1,000 live births who die before reaching the age of one — as a fundamental indicator. America’s high infant-mortality rate has been repeatedly put forth as evidence “proving” the substandard performance of the U.S. health-care system.

[…]n a 2008 study, Joy Lawn estimated that a full three-fourths of the world’s neonatal deaths are counted only through highly unreliable five-yearly retrospective household surveys, instead of being reported at the time by hospitals and health-care professionals, as in the United States. Moreover, the most premature babies — those with the highest likelihood of dying — are the least likely to be recorded in infant and neonatal mortality statistics in other countries. Compounding that difficulty, in other countries the underreporting is greatest for deaths that occur very soon after birth.

[…]The United States strictly adheres to the WHO definition of live birth (any infant “irrespective of the duration of the pregnancy, which . . . breathes or shows any other evidence of life . . . whether or not the umbilical cord has been cut or the placenta is attached”) and uses a strictly implemented linked birth and infant-death data set. On the contrary, many other nations, including highly developed countries in Western Europe, use far less strict definitions, all of which underreport the live births of more fragile infants who soon die. As a consequence, they falsely report more favorable neonatal- and infant-mortality rates.

[…]Neonatal deaths are mainly associated with prematurity and low birth weight. Therefore the fact that the percentage of preterm births in the U.S. is far higher than that in all other OECD countries — 65 percent higher than in Britain, and more than double the rate in Ireland, Finland, and Greece — further undermines the validity of neonatal-mortality comparisons.

You can listen to a podcast with Dr. Atlas here, from the Library of Economics web site.

If you want to read more about how American health care compares with health care in socialized systems, read this article by Stanford University professor of medicine Dr. Scott Atlas. And you can get his book “In Excellent Health: Setting the Record Straight on America’s Health Care” from Amazon.

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.

Evaluating common criticisms of American health care

Here is a must-read article from my friend Matt Palumbo at the American Thinker. It’s extremely high quality. (I removed the links in my excerpt – but he linked all the sources in his post)


The oft-cited “46 million uninsured” is breathtakingly easy to break down to size.  Keep in mind that there is overlap in the following statistics, as many people listed in them belong to multiple categories.  Around 10 million of the uninsured aren’t even citizens.  Another 8 million are aged 18-24, which is the group least prone to medical problems.  The average salary of a person in this age group is $31,790, so affording health care would not be a problem.  Seventeen million of the uninsured make over $50,000 a year, and within that group, 8 million make over $75,000.  These people are usually referred to as the “voluntarily uninsured.”  Another large group of these 46 million are uninsured in name only, as they are eligible for government programs that they haven’t signed up for.  Estimates on how large this group is vary, the range being from 5.4 million as estimated by the Kaiser Family Foundation to as large as one third of all the uninsured, as estimated by BlueCross BlueShield.  The number of people without care because they cannot afford it is around 6 million — still a large number, but a fraction of 46 million, and no reason to restructure the entire health care system.

Then comes the issue of lifespan.  Of all attempts to discredit the American system, lifespan has been the worst.  Although lifespan gives a good indicator of a nation’s health at a glance, it does have its problems under analysis.  We get a strange paradox when examining two statistics: life expectancy and cancer survival rates.  Estimates vary on how we rank exactly; the World Fact Book showing that we rank as poorly as 50th worldwide.  Even the best estimates in our favor place us far behind most developed nations.  Despite this, the United States excels at cancer survival.  Of the 16 most common cancers, the United States has the highest survival rate for 13 of them.  Overall, the five-year cancer survival rate for men in the States is 66.3%, and 47.3% in Europe.  Women have an advantage too, with a survival rate of 62.9% in the States, and 55.8% in Europe.  So that said, how is it that our system takes better care of us, and doesn’t grant added lifespan to boot?  Quite simply, the lifespan measurement commonly cited doesn’t factor in many variables which shorten lifespan, many of which medical care cannot prevent.  Among these factors are murders, suicides, obesity, and accidents.

He looks at the uninsured number, the infant mortality rate, and other interesting things in the article, showing how the statistics that impugn the US health care system have been misused. There are some good articles linked, like this post from Commentary magazine by Scott Atlas, entitled “The Worst Study Ever?”. Atlas is the same guy who listed out how the US health care system compares to others, which I blogged about before.

You can check out Matt’s blog “The Conscience of a Young Conservative“. Not sure how scalable that blog name is. Because of the “young” part, not because of the conscience or conservative part.