In America, we see places like Detroit that should stand as lessons on why Socialism does not work, and yet they seem to go ignored. Detroit has been under staunch Liberal control for decades. It has been turned from one of the strongest American cities with a population of 1.8 M into an urban wasteland with a population of less than 800 thousand. Houses go for a few thousand each, but no one dares to buy because they know the city will swoop in to extract any taxes they can if any money flows into the city.
The issue with Socialist plans is that they ignore fundamental economic principles. You create the most wealth when most people are working. The way you get most people to work is to require them to so in order to get basic necessities. The more people who are working, the more there is to go around. Because Socialists ignore these principles, they end up making things worse for everyone except for, ironically, the very wealthy. (The very wealthy generally have enough wealth to continue living as they were or they have enough influence to get favors from government officials.)
Here are these basic economic principles, which are self-evident. For any economic system to succeed, it must take them into account and build. Ignoring them is like trying to fly by ignoring gravity. When politicians ignore these principles it results in a fiscal mess and undesirable outcomes. The best course at that point would be to stop and try a different approach that observed the principle. Instead a politician’s nature is to try to make things better by enacting new policies, usually causing more problems. It is like a person trying to clean up a mess with a dirty rag, where the more they do the worse it gets.
1. A business cannot, on average, pay employees more than they produce.
2. If everyone produces as much as they can, you’ll have more than if only a few people are producing.
3. Rewarding people in proportion to what they produce will result in more production because you align their self-interest with the interests of society.
4. Providing for people without requiring effort from them will result in a lot of able-bodied people not working.
5. Few people will produce more than they need if there is no reward for doing so.
6. People who gain experience and improve their skills can produce more.
7. The more production there is, the easier it is to take care of those who cannot take care of themselves.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.