Thursday, September 24, 2015

Are we all socialists in practice?

The following was a comment made in response to a post I wrote about Donald Trump and Bernie Sanders.

Commenter 1: We're all socialists in practice--that's a good thing.
Socialism: A political and economic theory of social organization that advocates that the means of production, distribution and exchange should be owned or regulated by the community as a whole.

In other words:
Social Security
Fire Stations
Garbage Collection
Local, state and national agencies that ensure the public welfare
Public Utilities and Infrastructure
Public Schools
Public Hospitals
Public Transportation and Roads
Public Airwaves
Public Housing
Agriculture Support (farm subsidies)
Veterans Administration
National Institutes of Health
Environmental Protection Agency
Law Enforcement
Naturally, I could not let that stand unchallenged.
My reply: You have equated the existence of many things with the necessity that they be done through coercive action of government. Libraries, museums, parks, fire stations, garbage collection, cooperatives, utilities, infrastructure, schools, hospitals, transportation, media, housing, agriculture and law are properly (morally) the product of people working to improve their lives through creating values and voluntarily exchanging them with others. It is only cooperation in a free society that enables each individual to pursue his own happiness and results in a truly peaceful coexistence. All of the things I mention existed before government monopolies and would continue to exist but be better and more abundant in a society where the protection of individual rights was the basis for government.

You mention cooperatives, as if a the government of a free country would act to prevent cooperation of any kind, when in fact cooperation is the only type of economic exchange permitted under capitalism and coercion is banned.

You mention housing, yet the provision of low cost housing is prohibited or at least severely discouraged by the maze of development, zoning, construction, labor and tax rules that make housing less plentiful and more expensive than it would be in a free market, especially for the poorest.

You mention farm subsidies, as if taking money from people who have produced wealth and giving it to those who have not earned it is a proper role of government. This serves to support high cost providers, prevent innovation and competition and make it more expensive for everyone to buy food, damaging the poor the most. Then, when housing and food are made more expensive by government interventions, there is a call for more subsidies to help the poor, causing a further inefficiency, more unintended consequences, higher prices, and so the damage rolls on.

Interestingly, the only proper roles of government are at the very bottom of your list - the roles that an objective government is required to perform to protect the rights of the citizens who have delegated the very specific power of the retaliatory use of force. A government must protect citizens from criminals through the police, protect a country from outside aggression by the military and provide courts to arbitrate disagreements between citizens.

When government instead acts to override the decisions of citizens who are not violating rights, it becomes the worst aggressor - one with the power of force against which, once government has abandoned its role as protector, there is little recourse. For example, consider energy utilities. Private, individual citizens created the industry from nothing. Industrialists brought these ideas to the mass market , brought prices down t affordable levels and built stations, networks, maintenance services, etc. Governments looked at this and saw how important this wealth was, how much value had been created and then seized control of much of the industry. The parts they did not take, they regulated. Now the utilities are in many cases monopolies, facing no competition, bloated by bureaucracy, filled with entrenched unions, lacking innovation and plagued by service complaints. I use the Hydro utility in Ontario as my prime example of this.

Yet, there is not a single aspect of running a hydro utility that can be done more efficiently by a government agency than a free market. Consumers have lost the ability to choose, lost the crucial economic signals provided by a free market, lost the price mechanism that so effectively drives capital investments and service focus, lost the innovations that inevitably come from competition and the quest for efficiencies. Creative and productive individuals who would go into the business if they were allowed to build and own their own businesses are forbidden by the monopoly. The hiring of executives is done more by nepotism and political pull than by merit and ability. In short, a service that is properly run by freely acting citizens that is instead run by government force results in the destruction of human potential and reduces our quality of life. And we never get to see the advances that are blocked, the innovations prevented, the progress made that is stifled. How much better off would Ontario be if we had freedom in energy production instead of a stale and stagnant monopoly? We may never know. I recommend reading 'Economics in One Lesson" by Henry Hazlitt - about 70 years old but still spot on.

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