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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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Happy Independence Day 2016!

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The Stars and Stripes
The Stars and Stripes

The Declaration of Independence

Here’s the complete text of the Declaration of Independence here.

And now let’s take a look at an article at The Federalist which talks about what the Declaration of Independence tells us about the character of America.

It says:

The Declaration of Independence, Thomas Jefferson famously wrote, was “intended to be an expression of the American mind.” Although not intended as such, it was also an expression of the American character. Woven throughout the text are insights into the minds and virtues of those Lincoln called the “once hardy, brave, and patriotic, but now lamented and departed race of ancestors” who fought for the independence we still enjoy.

This aspect of the Declaration of Independence receives scant attention from scholars and citizens, yet it must be understood. The theory of government elaborated in that text presupposes the existence of citizens who know how to govern themselves and are willing to assert their rights. The American character is the unstated premise of the argument, without which the theory, though still true, doesn’t work in practice.

So, what’s the American character?

What sets us Americans apart is that we do not merely declare for liberty. We staunchly stand for it. To be an American is not only to know that you are born free, it is to have the courage to defend your freedom. This admirable aspect of the American character is evident in the fifth grievance the Declaration levels against the king.

It reads: “He has dissolved representative houses repeatedly, for opposing, with manly firmness, his invasions on the rights of the people.” The king acted as monarchs are wont to do. Our forefathers, although they were subjects, did not take his abuses passively. They resisted—with manly firmness.

Today, King George III is long gone. Our representative houses are no longer dissolved at will (although they have unconstitutionally been declared to be in recess). Our rights, however, are still encroached upon, whether by the U.S. Department of Health and Human Services or the Environmental Protection Agency. Thankfully, courageous Americans still push back, like the Green family, who challenged Obamacare’s abortifacient mandate, or the Sacketts, who fought the EPA’s effective seizure of their property.

No charter of liberties or Constitution—not even one handed down by God himself—could ever, on its own, protect the rights of the people. James Madison, the father of our own Constitution, was not so foolish as to place his trust in mere “parchment barriers against the encroaching spirit of power.”

In Federalist No. 57, Madison takes up the question of “what is to restrain the House of Representatives from making legal discriminations in favor of themselves and a particular class of the society?” His answer: “the genius of the whole system; the nature of just and constitutional laws; and above all, the vigilant and manly spirit which actuates the people of America—a spirit which nourishes freedom, and in return is nourished by it.”

The 56 men who signed our Declaration of Independence set the example for their fellow countrymen and for future generations. They did not simply proclaim the universal rights of man. They also pledged “to each other, our Lives, our Fortunes, and our sacred Honor.” And they meant it. Twelve served as combat commanders during the Revolutionary War. Five were captured and imprisoned by the British. Seventeen lost part of their fortunes.

America is not a country for servile men and women. We not only have a right to be free, but a duty to be free. For “when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.” Free as we are, we have no liberty to choose despotism—even if it is sugarcoated, as it is today, with material comfort and license.

[…]Two centuries later, the American character endures, battered and bruised though it may be. It has been corroded by the Progressive faith in government, the sixties ethos of “if it feels good, do it,” and the mindlessness and vulgarity of pop culture. But we can still readily discern among many Americans the habits of mind and the virtues of a free people. For this, we should be grateful on this Fourth of July.

To love liberty means to be willing to stand up for liberty, and that can mean something as simple as 1) not voting for bigger government just because they are handing out money to you and 2) not voting for bigger government because they are letting you do immoral things.

Standing up for liberty means standing up for your own personal responsibility. It means looking primarily to yourself for earning a living. It means choosing to behave morally so that you don’t create a situation where you need the government to bail you out of your own immoral decisions with someone else’s money.

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If Sweden and Germany became US states, they would be among the poorest states

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Lets take a closer look at a puzzle
Lets take a closer look at a puzzle

There seems to be a lot of talk among Democrats and native young people to the effect that European countries have less “income inequality” thanks to bigger government, higher taxes, and more social spending. Is there a downside to this?

The Mises Institute takes a look at it:

The battle over the assumed success of European socialism continues. Many European countries like Sweden have gained a reputation as being very wealthy in spite of their highly regulated and taxed economies. From there, many assume that the rest of Europe is more or less similar, even if slightly poorer. But if we look more closely at the data, a very different picture emerges, and we find that the median household in the US is better off (income-wise) than the median household in all but three European countries.

[…]Using the BEA’s regional price parity index, we can take now account for the different cost of living in different states…
[…]We now see that there’s less variation in the median income levels among the US states. That makes sense because many states with low median incomes also have a very low cost of living. At the same time, many states with high median incomes have a very high cost of living.

Now that we’ve accounted for the low cost of living in Mississippi, we find that Mississippi ($26,517) is no longer the state with the lowest median income in real terms. New York ($26,152) is now the state with the lowest median income due to its very high cost of living.

This has had the effect of giving us a more realistic view of the purchasing power of the median household in US states. It is also more helpful in comparing individual states to OECD members, many of which have much higher costs of living than places like the American south and midwest.  Now that we recognize how inexpensive it is to live in places like Tennessee, Florida, and Kentucky, we find that residents in those states now have higher median incomes than Sweden (a place that’s 30% more expensive than the US) and most other OECD countries measured.

Once purchasing power among the US states is taken into account, we find that Sweden’s median income ($27,167) is higher than only six states: Arkansas ($26,804), Louisiana ($25,643), Mississippi ($26,517), New Mexico ($26,762), New York ($26,152) and North Carolina ($26,819).

We find something similar when we look at Germany, but in Germany’s case, every single US state shows a higher median income than Germany. Germany’s median income is $25,528. Things look even worse for the United Kingdom which has a median income of $21,033, compared to $26,517 in Mississippi.

Meanwhile, Colorado ($35,059) has a median income nearly identical to Switzerland ($35,083), and ten states (Connecticut, Iowa, Maryland, Minnesota, New Hampshire, North Dakota, South Dakota, Utah, Virginia, and Washington State) show higher median incomes than Switzerland. Luxembourg ($38,502), on the other hand, shows a median income higher than every state except New Hampshire ($39,034).

None of this analysis should really surprise us. According to the OECD’s own numbers (which take into account taxes and social benefits, the US has higher median disposable income than all but three OECD countries. Sweden ranks below the US in this regard, as does Finland and Denmark.

The fact that the median level in the US is above most OECD countries thus makes it no surprise that most of these countries then rank below most US states. The US states that have income level above the median US level will, not surprisingly, outpace many OECD countries by a considerable margin.

What’s going on here? Well, it turns out that when you have fewer regulations on business, lower business taxes, and an emphasis on working rather collecting welfare, that people have more money in their pockets and a better standard of living. The trouble with Europe is that too many able-bodied people can get by without working. In the United States, we put more emphasis on making your own way, earning your own pay, and spending or saving your money as you please.

In America, the system is geared towards equipping each person to serve their fellows in the private sector workplace. More people working means more wealth is produced, and more wealth produced means that people have a higher standard of living. You wouldn’t have a higher standard of living in a country where most people didn’t work, and just relied on the few who did work. There isn’t enough to go around in society where most people don’t work.