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Why is socialism becoming so popular? Why is socialism becoming so popular?
by Joseph Gatt
2019-08-14 07:51:48
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I've identified three types of socialism. Type 1: the government owns everything and makes every single investment. Type 2: the government taxes the population like crazy to “give to the needy.” Type 3: The government does not invest or tax like crazy, but heavily legislates, and laws are meant to “protect the needy.”

Let me break these three down for you, before I discuss why each type is popular.

Socialism Type 1: the government owns everything

social01_400This type of socialism was tried out in Eastern Europe and several other countries. The government makes almost every single investment (some exceptions being made for some merchants) and owns all the property and finances. All workers work for the government and are paid by the government. Countries that used this type of socialism claim that “it protects workers, gives them free housing, free education, free healthcare, and in some cases, free food, free water, free electricity, free gas, free transportation, and free access to entertainment.”

Now there are a few problems with the countries that used this model. First, all countries that used this model had powerful government structures where any hint of dissent was repressed. Second, all countries used indoctrination where you had entire courses on the benefits of socialism and communism. Then you had economies where the leaders often did not take economic advice from anyone, and their economic ideas were often bad ideas.

But the biggest problem is. Aside from the Gulags and the political prisons are reeducation camps and corruption and hypocrisy and all that. There is no “economic manual” for socialist states. I've looked around and did not find much of a literature on how to implement a healthy economy in a country where the government owns everything. I'm probably never going to write a guidebook of that sort, because I don't believe in governments owning everything.

Socialism type 2: the government taxes very heavily, to give to “the needy.”

France and Scandinavian countries have run out of ideas on what to tax. Alcohol and cigarettes, check. Businesses, check. Gasoline, check. Property, check. Business transaction, check. Financial transactions, check. The air you breathe, check.

Let me illustrate this with an example. In France, my good friend Said gave me the keys to a two-bedroom apartment and told me I could do what I wanted with it. Said owns the place, and a couple of other places. Now when I told Said, thank you, but why don't you rent the place? Said was like “well if I rent it I'm going to have to deal with the a**holes in the administrations, and they're going to tax the sh*t out of me, and I'm going to end up losing money. So if I rent it I will have to rent it for around 1,500 Euros to break even, so as for now, I'd rather allow you to stay there.”

Now Said is a friend and gave me the place. Said could have rented to place under the table, but if he got caught, he'd be in trouble with the law. So in France and Scandinavian countries, people would rather give up stuff than sell it. Other example. In 1999 in France, there was a huge excess of milk production. Milk producers suggested donating the excess milk to poor countries, but they had to be taxed for that. So milk producers were left with the only option of sprinkling milk in the fields.

True, education, healthcare is free in France and Scandinavia, and housing is very heavily subsidized. You also get allowances if you have children, free day care centers and kindergartens, and you can get food stamps and other forms of subsidies. Struggling businesses are allowed all kinds of subsidies.

However, here's the catch. College professors are considered government employees and make a flat 2,000 to 3,000 Euros a month their entire career, no matter how brilliant. That means the brilliant ones move to the US or Canada, and for 2,000 Euros a month, you know what kind of education you're getting. Hospitals are great, but for complicated surgery or procedures, you're going to have to raise money and get treatment in the US. And if you start a business, even if it's selling clothes at the market, you're going to pay between 30 and 50% tax on your income. That means selling that t-shirt double what it's worth just to break even.

Rags to riches stories are rare in France and Scandinavia for a very simple, almost stupid reason. When you start a business, if sales shoot way up in France or Scandinavia, your reflex, a reflex most don't have, is going to be to set up a tax account and to put around 75% of your revenue in that account. First of all, most tycoons forget to do that, and spend all the money on hiring and on private jets to Ibiza, and when you get the tax bill, you have to borrow money, and the vicious cycle goes on and on. Second, with 75% taxes, you're left with 25%, which is a pretty tight budget which won't really allow your business to grow that fast.

Problem is in France and Scandinavia, change the system, and you're getting riots.

Socialism type 3: Don't tax, but put forward all kinds of legislation to “protect the needy.”

That's what Moon Jae In has been doing in South Korea and what Bernie Sanders and Elizabeth Warren want to do in the US. Some could say that's what the Canadians and Australians and New Zealanders do.

So you're going to have minimum wage laws, job security laws, healthcare laws, fair trade laws, and you're going to try to break down businesses like Facebook, Twitter or Amazon and Google.

Here's the problem with that. American, Canadian, Australian etc. laws are mostly what's called “tort laws.” A tort is basically damage done. So in the US, you only face a judge if you are believed to have caused damage. If you harass your employee, your employee has to get medical treatment, the judge is going to have to assess whether the abuse is what caused the medical condition, and is going to have to give some kind of punishment for the bully or compensation for the victim.

But in the American legal tradition, individuals and businesses are not really told what they are supposed to be doing. So if you break down Facebook or Twitter in the name of anti-trust or anti-monopoly laws, it's not fair, for a simple reason. I can go ahead right now and try to set up a social media network. Anyone can. And there are a ton of dormant, dead social media websites. And what about all those dating websites? I would define those as social media.

As for all those minimum wage and fair-trade laws, in the US, no one prevents anyone from competing with anyone. I can set up a business and compete with anyone I want. As for minimum wage earners, no one prevents them from applying to higher-paying jobs. With minimum wage laws, what a lot of businesses, large and small, do, is simply, suppress the post. If you had two receptionists, you're only going to have one receptionist, or you'll fire both of them and ask your secretary to do receptionist work. That simple.

So Socialism type three is demagoguery in my opinion.

Why these ideas are popular, very briefly.

Socialism type 1 is very popular among idealistic students who tend to believe they don't want to be “anyone's slave.”

Socialism type 2 is very popular among students who run a lot of student debt and who envy free healthcare and education in Scandinavia. In my opinion, if they want free education, a lot of Scandinavian universities have programs in English, free, and accessible to any student of any nationality. So you can apply there. But, you'll have to deal with the excessive rent, but still a bargain when compared to universities in the US. Germany has tuitions of about 1,000 a year, some programs are completely in English, and, like a few of my friends did, India has free tuition, and some universities are really good.

Socialism type 3: very popular among some people who are exasperated with “corporatism.” People who think the world is driven by “money” and who want more “humanism” in this world. Often cynical people, the kind who never get any of my jokes and who keep whining all night, and who get aggressive when they've had a drink too many. 

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