“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” — Winston Churchill
A few weeks ago I gave a lecture at Hillsdale College on “How to Get Rid of a Bad Idea (Democratic Socialism): With a Better Idea — Democratic Capitalism!”
In this talk, I wrote on the blackboard Karl Marx’s famous line, “From each according to his ability, to each according to his needs,” and asked the students, “How many of you agree with this statement as an ideal policy to follow in society?”
Even though Hillsdale students are taught conservative principles of the free market, I was surprised that half the students raised their hand in support of this statement.
What’s wrong with it? Simply, it encourages bad behavior. Those who work hard don’t get to keep the fruits of their labor beyond “needs.” The system amounts to a 100% marginal tax rate if you earn more than a basic income. Suppose your basic needs are $50,000 a year. If you earn more than that, it is taxed away and put into a central fund, to help the needy.
And for those who earn less than $50,000, their income is subsidized up to meet their “needs.” In short, there’s no incentive to work harder.
No wonder socialist utopias never last.
After going through this exercise, I wrote on the blackboard an alternative statement, this one written by Jack London:
“From each according to his ability, to each according to his deeds.”
Jack London’s statement is much better because it encourages industry, thrift and prudence in a society.
Winston Churchill’s clever statement above summarizes the difference between the two systems: Democratic socialism is all about sharing the poverty, while democratic capitalism is all about sharing the wealth.
What Do I Mean by ‘Sharing the Wealth’ Under Capitalism?
Democratic capitalism is much better than socialism. By democratic capitalism, I mean companies that offer profit sharing and stock options. Henry Ford was the first to pass along some of his record profits in 1914 to his workers who manufactured Model T cars. He more than doubled their wages over night.
In more recent times, Bill Gates gave his workers stock options in Microsoft. Today more 12,000 employees are millionaires. Other companies have followed suit.
Senator Rand Paul Writes a Book on Socialism
Last week, my wife and I attended a book party for Senator Rand Paul. (See photo below.) He has written a full-length critique, “The Case Against Socialism.” He has done a great job exposing the failure of socialism, demonstrating it’s all about incentives. Interfering with the free market only makes matters worse.
Jo Ann and I visit with Senator Rand Paul in New York City.
He has two excellent chapters on Scandinavia, which Bernie Sanders points as an ideal socialist state. But Senator Paul demonstrates that “Sweden’s riches actually came from capitalism,” and Sweden has been moving away from socialism since a monetary crisis occurred in 1992. The Swedes cut taxes, privatized government programs, converted their social security system to a defined-contribution plan and introduced school choice. Sweden has been booming ever since.
Senator Paul also has some good chapters on the benefits of capitalism. “Capitalism is the more moral system…it benefits the middle class…and the poor are better off under capitalism.” You can buy the book here: https://www.amazon.com/Case-Against-Socialism-Rand-Paul/dp/0062954865
Marx vs. Mises: It’s a Rap!
This week the revitalized American Institute for Economic Research (AIER) has released the clever rap song, “The March of History: Marx vs. Mises.” It’s similar to the highly popular “Keynes vs. Hayek” rap song that garnered nearly seven million views on YouTube. I’m sure the Marx vs. Mises will do even better.
It’s nine minutes long, but keeps your interest the entire time, and does a great job of presenting a fair and balanced view of both Marx/socialists and Mises/capitalists. Watch it here: https://misesvsmarx.aier.org/
I agree with this strategy. The best way to teach students the benefits of democratic capitalism is to present both sides in a fair and balanced way. It’s also a great way to introduce Ludwig von Mises, the great Austrian economist, professor and author, and make him equally famous to Karl Marx.
‘The Book the Socialists Fear the Most’
That’s why my book, “The Making of Modern Economics: The Lives and Ideas of the Great Thinkers” has been so successful. It has entire chapters on both sides of the socialist/capitalist debate.
On the capitalist side, it has chapters on Adam Smith, the French laissez-faire school of Say and Bastiat, the Austrians like Mises and Hayek and the Chicago school of Milton Friedman.
On the socialist side, it has chapters on Karl Marx, Thorstein Veblen and the Institutionalists and John Maynard Keynes.
I explain the pros and cons of both sides, and most students ultimately come away seeing the superiority of Adam Smith’s “system of natural liberty,” the heroic figure of my book.
My chapters, “Marx Madness Plunges Economics into a New Dark Age,” and “The Keynes Mutiny: Capitalism Faces its Greatest Challenge” have been called “the most devastating critique of Marx and Keynes ever written.”
“The Making of Modern Economics” does not feel like a textbook — it has pictures, lots of stories and even music selections for all the great thinkers.
John Mackey, CEO of Whole Foods Market, writes, “Skousen’s book is fun to read on every page. I have read it three times. I love this book and have recommended it to dozens of my friends.”
Roger Garrison, professor of economics at Auburn University, writes, “My students love it. Skousen makes the history of economics come alive like no other textbook.”
The book is now in its 3rd edition and won the Choice Book Award for Outstanding Academic Excellence. The publisher Routledge charges $49 for the paperback, but you can get it directly from me for only $35, and I pay the postage and will autograph each copy. For orders outside the United States, contact Harold below for additional charges.
To purchase a paperback copy of “Making of Modern Economics,” go to www.skousenbooks.com, or call Harold at Ensign Publishing, 1-866-254-2057. The book is also available in hardback ($85), e-book or audio book (see Amazon).
You Blew it!
The Worst of Times or the Best of Times?
David Leonhardt, a columnist for the New York Times, is at it again. In today’s NYTimes Book Review of “Transaction Man,” he claims:
“The four decades of the Transaction Man economy have not been good for most Americans. Wage growth has been slow, and life expectancy has stagnated. The public mood is sour….Today, we have powerful, self-interested corporations that benefit relatively few people.”
Self-interested corporations have benefited few people? Say that to Google, Facebook, Amazon, Apple and Microsoft, which have billions of customers around the globe!
Wage growth has stagnated? Actually, when you include benefits such as health care, paid and medical leave and retirement programs, total compensation continues to rise in the United States.
And don’t forget all the new and improved consumer goods and services over the past 40 years — cars, television, computers, clothing, entertainment, you name it. Even the poor have these things in abundance. Americans have more leisure time than ever before. And air pollution in the United States is at an all-time low.
Life expectancy has increased dramatically over the past 40 years. It has stagnated in the past four to five years, due to overdoses and suicides, but those who are avoiding these negatives are living longer.
Not surprisingly, the stock market has increased 10 times over the past 40 years. And interest rates are at all-time lows.
For all the good news, see chapter 1 of my book “The Making of Modern Economics.”
David Leonhardt has his head in the sand.
Good investing, AEIOU,
P.S. I believe it should be every American’s RIGHT to become independently wealthy (not to take from others, but by creating it on their own). What’s more, there’s an overlooked investment that I believe is the single greatest way Americans can build their wealth — one month at a time. Click here for my full research.
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