How to Get Rid of a Bad Idea (Democratic Socialism)

Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

“Avoid investing in countries with high levels of socialistic or government regulation of business. Business growth depends on a strong free-enterprise system.” — Sir John Templeton (quoted in “The Maxims of Wall Street, p. 137)

The great Austrian economist Ludwig von Mises (1881-1973) was once asked, “What’s the difference between socialism and capitalism?”

He answered, “The stock market.” Countries that adopt high levels of socialism and government intervention see their stock markets languish or even disappear.

When communists take over a country, the first thing they do is shut down the stock market. When Vladimir Lenin and the Bolsheviks took over Russia in 1917, they closed the St. Petersburg stock exchange and converted it into an art museum.

There is no stock market in Cuba or Venezuela.

Similarly, the countries that have nationalized their major industries soon see their stock markets disappear. For more than 50 years, the Buenos Aires Bolsa languished due to Juan Perón and the Perónist takeover of Argentina.

Argentina was not able to create the Argentine stock index MERVAL until 1986. Even then, it underperformed the world markets until 2014.

Democratic Socialism Gains Support in the United States

Since the financial collapse of 2008, the appeal of socialism has advanced in the West, including in the United States. Witness the Occupy Wall Street movement, the popularity of socialism on college campuses and the Democratic candidates for president supporting state intervention in the economy.

Howard Schultz, the long-time CEO of Starbucks, considers himself a “progressive” and has been a lifelong Democrat. However, he recently became so disgusted with the direction of the Democratic Party’s move toward outright socialism that he left the party to consider running for the presidency as an Independent.

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He’s also not happy with the current crop of Democratic candidates, who are falling all over each other to see which one can promise more “free” goodies from the government and more killer regulations that could destroy the American way of life.

He asked, “When I hear them espousing free government-paid college, free government-paid health care and a free government job for everyone — on top of a $21 trillion debt — the question is, how are we paying for all this and not bankrupting the country?”

A Better Idea: Democratic Capitalism!

You can’t get rid of a bad idea just by opposing it. You have to offer a better alternative.

And that alternative is “Democratic Capitalism!”

Democratic socialism is sharing the poverty. Democratic capitalism is sharing the wealth, not by confiscatory progressive taxation, but voluntarily through an enlightened stakeholder philosophy.

John Mackey, CEO of Whole Foods Market, calls it “conscious capitalism” and has stated that it is a capitalist philosophy that can benefit both workers and executives.

The Ford $5 a Day Story

The father of democratic capitalism is Henry Ford. In 1914, the Ford Motor Company had record profits from his Model T manufacturing plant in Highland Park, Michigan (right outside Detroit).

Ford made the dramatic announcement in January 1914 that he was more than doubling the wages of his workers to $5 a day. Investors and labor would benefit from the company’s success. It was a revolutionary decision that made headlines around the country.

This week, I’m in Michigan. Yesterday, I visited the original Ford plant where more than one million Model Ts were built yesterday. (See photo.) I wanted to pay homage to the man who changed the world in terms of labor-capital relations for the better. That is, Henry Ford destroyed the Marxist notion that capital and labor were enemies and that capitalism exploits the worker.

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Mark Skousen stands in front of the site of the original Ford plant in Highland Park, Michigan.

Tonight, I’m speaking at Hillsdale College on “How to Get Rid of a Bad Idea (Democratic Socialism): With a Better Idea — Democratic Capitalism!” I’ll have a full report on the reaction of the students in Monday’s Forecasts and Strategies hotline.

If more companies provide incentives to workers through profit-sharing and stock options, democratic socialism will lose its appeal.

Long live democratic capitalism!

By the way, if you’re interested in what could be “the greatest private equity investment of all time,” you’re in luck. I’ve found it… and you don’t need to be an accredited investor to get in. Click here for free access.

Good investing, AEIOU,

Mark Skousen

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