The End of Socialism…

The news for Hillary Clinton doesn’t look good.

According to a June 14th poll from Bloomberg, 55% of Bernie Sanders’ supporters will vote for Hillary Clinton.  Surprisingly, 22% of the economically illiterate say they’ll vote for Trump, while 18% favor Libertarian Gary Johnson.

What is clear in this election cycle is that the political party that doesn’t usually care about moral or ethical character in their candidates suddenly finds itself with a candidate that many in the Democrat Party find abhorrent.

These are strange times, indeed.

Admittedly, it can be great fun to see socialists fighting each other over how to spend other people’s money.  The thing that makes the infighting different this time around is that we’re now witnessing, in the United States and most of Europe, what happens when socialists run out of other people’s money.  Sheer desperation at the prospect of failing to create the ever-elusive socialist utopia – something never before achieved in the history of man – usually begets violence.

Look no further than the economic failures of dozens of socialist dystopias as prime examples of the inevitable failure of socialism.  Of course, this says nothing of the more than 100 million human beings whose lives were literally snuffed out by socialist governments in the 20th Century alone.

Surprisingly, the political elites fundamentally understand that the socialist enterprise will eventually become unaffordable.  The elites instinctively know that socialism is self-destructive in the end.  But like having a tiger by the tail, they can’t let go for fear of being eaten by the millions of voters they’ve convinced that socialism works.

These voters demand ever-increasing portions of other people’s money.  They find it hard to believe that the government can’t just take money from the rich and distribute it to the “poor.”   The very idea that there aren’t enough rich people in any society to provide fat, stupid, and lazy Americans a minimum standard of living seems preposterous to them.  But, math has never been a forte of socialists.

This is where desperation begins…

Once the system gets to the point of unsustainability, the political elite typically try to suspend the laws of economics by passing more and more regulations to forestall the imminent collapse.

This is the position the United States finds itself in today.

To the chagrin of the political elite, suspending the laws of economics is as useful as suspending the laws of gravity.  You may feel like you’ve accomplished something of import, but you’re really nothing more than another of Marx’s famous useful idiots.

Capital Accumulation is the Only Way to Improve Living Standards

As Ludwig von Mises wrote in Human Action:

“It is not labor legislation and labor-union pressure that have shortened hours of work and withdrawn married women and children from the factories; it is capitalism, which has made the wage earner so prosperous that he is able to buy more leisure time for himself and his dependents. The nineteenth century’s labor legislation, by and large, achieved nothing more than to provide a legal ratification for changes, which the interplay of market factors had brought about previously. As far as it sometimes went ahead of industrial evolution, the quick advance in wealth soon made things right again. As far as the allegedly pro-labor laws decreed measures which were not merely the ratification of changes already effected or the anticipation of changes to be expected in the immediate future, they hurt the material interests of the workers.”

In other words, the only thing that can improve the living standards of workers is an increase in the capital invested per worker.  If a politician introduces a law that increases minimum wages above the level that can be supported by the market, that politician simply created institutional unemployment.  You see, less skilled workers will become unemployable, because employing them will produce economic losses.  This explains the extremely high unemployment rates in minority populations – especially in young minorities.

Only governments have ever successfully employed people for any significant time who produce economic losses.  After all, governments can increase taxes to cover the costs of useless employees – something no business could ever do.

In the end, economic interventions that end up restricting production will slow the accumulation of capital and make the success of socialism infinitely more difficult.  But to a great many of the electorate, this isn’t readily apparent.  For decades, politicians have made promises and increased the unfunded liabilities associated with these promises, and the electorate consider these promises inviolable.

But these promises are predicated on continued growth of real economic wealth – not government spending.  And without the real wealth creation through savings and investment, fulfillment of any politician’s promise is a pipe-dream.  In the end, Barack Obama’s tenure as president will be seen as an abysmal failure from a purely economic viewpoint.

The Terminal Phase of the Welfare State

Since the growth of real wealth has slowed dramatically as a result of decades of political  intervention in the economy, politicians have resorted to borrowing ever-increasing sums of money to delay the inevitable, as inter alia evidenced by the deterioration in our public debt-to-GDP ratio.

Central banks are supporting this growth by printing more money – but it should be obvious that neither the one nor the other can possibly solve the problem.  It will only further hamper real wealth generation.

An enduring myth exists that all could be fixed if only more of the wealth of the rich were confiscated and redistributed – but that tactic has failed to bring about any of the desired results everywhere it has been implemented.  This has done nothing to kill the myth, however.

At the end of the day, real economic growth has slowed to a crawl due to the efforts of central bank planners and the political elite to buy the votes of the relatively poor, uneducated, and easily led voters who have been tricked into believing politics solves real economic problems.

In the words of H.L. Mencken, “[G]overnment is a broker in pillage, and every election is a sort of advanced auction on stolen goods.”  Those who elected Barack Obama did so because they expected him to deliver the loot.  The problem is that Obama is running out of stuff to loot.  And Hillary will face an even bigger problem in finding wealth to confiscate – not that she won’t put her best efforts to fulfilling the dream, however.

As stated earlier, there is a fair amount of fun in watching socialists fight over other people’s money.  While the electorate rightly feels betrayed by the political elite, their attempts to finding answers in a bigger government are counterproductive and it makes for great TV.

This helps explain the rise of Bernie Sanders who promised to do a better job of confiscating and distributing confiscated loot to voters.  Unfortunately, the thing that unites their economic programs is utter economic illiteracy.

Sanders’ promises are based on the premise that prosperity can be obtained by political decree.  In fact, most of the elites seem to believe that any country on the brink of insolvency (like the U.S.) just needs to pillage and redistribute money more forcefully.  They simply ignore the idea that the principles that created the wealthiest nation in history are on life support.

Maybe this post is too pessimistic, but there exists no real evidence that the clash between the incompetent political establishment and the increasingly unsatisfied electorate is likely to bring about an increase in economic freedom or even to more sensible economic policies.

The much-heralded mix of socialism and capitalism that was supposed to bring forth a Utopia is spiraling toward insolvency.  What we are going to experience in the United States and in much of Western Europe are increasingly violent confrontations and more and more government repression.

People have become used to the idea that Uncle Sam is their “sugar daddy.”  Unfortunately, many Americans believe that Washington has an infinite stash of resources at its disposal, which it can shower upon voters at will.

The reality is vastly different and will soon become apparent to even the most ardent supporter of socialism.  Maybe even Hillary, too!



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s