Let’s Talk about Socialism


I was having an interesting tweet talk (would this be a twalk?) with a Canadian about socialism when I realized that we were talking about totally different things, sort of. He asked if i was referring to Marxist socialism. I was thinking, “Is there any other kind?”. About then I started to realize that what I mean when I say, “socialism” and what he meant were somewhat different things. I’m doubtful, however, that he realized that what he called “Marxism or communism,” which neither of us want, could easily develop from his kind, benevolent socialism.

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I use the definition of socialism that Karl Marx uses, since he is one of the visionaries who came up with the idea. Marxism is the philosophy that includes both socialism and communism. Marx’s system, which we now call, “Marxism,” starts with socialism and then transitions into his ideal communist society. Both of these are economic systems, but people often confuse and conflate them with political systems. You could have a democracy or a republic that has a socialist or a communist economic system. In fact, many communes are democracies – the idea that everyone shares everything translates into everyone having an equal vote on what should be done and the rules that should exist.

You could also have a dictatorship that practices free-enterprise. That is what England was during the time when kings ruled the land. Individuals would just pay out a high portion of their earnings for protection from the king, whether they wanted to or not, but otherwise they were free to trade among each other.

In total socialism, a collective with a group of leaders, often a government, owns, or has so much control that it effectively owns, the means of production and the disbursement of goods and services out to the people. Theoretically, everyone does as much work as he/she can and the results of his/her work goes into a big pot. Then, the leaders dole out the goods and services produced to the people.

Often the decision is made to give goods and services based on need, rather than based on merit. The main feature of socialism as it is normally sold is that the level that each individual produces is not tied to how much each individual receives, so that everyone receives what is needed, not just those who produce at least as much as they need. This is seen as “fair” since everyone receives what they need, ignoring the fact that some are receiving a lot more than they produce, even if they could produce more but choose not to. So you might work twice as much as your neighbor, but he may get twice as much food because it is determined that he needs it and you don’t. (To sell the idea that it is fair to take from those who produce more and give to those who produce less, it is proposed that those who produce more are actually cheating and producing little or nothing themselves, or they have been given an unfair advantage that allows them to produce more.) Because goods are doled out (or are supposed to be) when people need them, wealth is supposed to get distributed more evenly than would be seen in a capitalist economy, but still there are some who have more and some who have less, not something Marx wanted.

In communism, which is Marx’s final goal, rather than having the government own things, everyone owns everything. Houses and beds would just be available for your use, but you would own none of them. You would just take a car when you needed it, go get the food you needed off of the shelf, and get clothing, iPhones, and whatever else you needed when you needed it. You would do work, but the amount of work you did would have no bearing on the amount of goods you received.

You would work and provide all that you could and then you would receive all that you needed, at least from the goods and services that were available. If you made one-thousand sandwiches during a day but you only needed two, you would receive two. If your neighbor made three sandwiches during a day or made none but needed ten, he would receive ten.

Of course, there would need to be some system and rules to make sure that people weren’t taking more than they needed and that people were doing their “fair share” of the work that needed to be done. If you are talking about three people, or ten people, or maybe even one-hundred people, you might be able to find a system that works without a government. A lot of it would be finding people that were fundamentally good and interested in doing all that they could for the society and would take only what they needed. Certainly you could find ten people who would be willing to do their best work during most days and not take more than they needed from the bounty produced.

When you start talking about thousands or millions, however, you really need some sort of enforcement and control to keep some from taking advantage of the system. You can find enough good people to make it work when you have a very small group, but when the group gets large, people start to realize that they don’t get any more by making more, so they “win” by getting more than they give. They then figure out ways to produce less and get more, causing the amount produced to decline and the amount taken to increase. This is why communism will never work for more than small groups of good people. For this reason, there has never been communist countries. Just socialist ones.

You will also tend to get crooked dictators in control since you are concentrating wealth together. The people in control in socialist societies can give themselves all that they want, making positions of power attractive to those who are greedy. Having the people in charge choosing who gets goods is also attractive to those who want power. If someone needs to come to you for their food and their housing, you can be sure that it would be relatively easy to get them do favors for you in return for your giving them an extra share. Socialism is also an effective economic system if you want to control others since it puts the leaders in charge of the basic necessities of the population. Rather than needing to use force to get people to do what you want, you simply cut them off from food and shelter. They will either do what you want or starve to death, eliminating the issue in either case.

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His Definition of Socialism

His definition of socialism had more to do with how repressive the government was. He saw a country where they have the government take care of essential goods and services, but where most other processes used the free-enterprise model, as socialist. He saw oppressive governments, like those in Cuba, the USSR, and China before they started allowing individuals to own businesses and keep more if they made more, as Marxist or communist.

He saw places like Canada, England, and Scandinavian countries as being socialist since they tended to provide essential services through a government system. He felt that it was important for the government to control these services rather than let a for profit company have control. There is this idea that the government would have everyone’s best interests in mind, where a for-profit company would not. Sure, there are brutal dictatorships where the government employees are just in it for themselves and abuse the people, but somehow there can be other societies where the government employees are champions for the consumer. That makes this form of socialism seductive.

Degrees of Socialism

It is really rare to find a country that is truly socialist or capitalist. These are instead the two extremes of the scale if you accept that government can never fully fade away and a communist society be created at the country level with every country falling somewhere between the two extremes. Every country will have some processes that they do which are socialist and some that are capitalist. When you say that a country is socialist, you’re saying that the majority of their processes use socialism. There will still normally be some aspects that use a capitalist model. Even in North Korea, where socialism is fully embraced, there are capitalist black markets without which the entire country would fall apart because the government fails to provide everything needed.

Likewise, a country that is capitalist will have the government control some services. The US and Canada are actually about equal on the spectrum, with both using a socialist model for roads, utilities, and healthcare, but using a capitalist model for most other processes. Both employ some degree of socialism in the areas of food and shelter as well with the government providing these goods, or money for these goods, to those that are deemed in need of them. The US is far more socialist today than it was back in the early 1900’s, or even than it was back in the 1960’s or 1980’s, but it is still more capitalist than socialist.

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But wait, isn’t the healthcare system in the US capitalist?

Many in the US and elsewhere point to the healthcare system in the US as an example of a capitalist healthcare system. When there are issues, they say that a capitalist system clearly doesn’t work and that we should go to a socialist system, which they would call a “universal system,” like Canada or the UK. But the US actually has a socialized healthcare system but it pretends like it is a capitalist system, and that is the cause of a lot of the problems.

The US healthcare system actually began a transition into a socialist system during the 1960’s with the auto industry. Before that point, people would pay for medical services just as they would for other goods and services. In the 1960’s, not wanting to pay their workers more, the auto industry came up with the idea of paying for workers’ healthcare costs. This meant that you had the money for health services being produced by everyone in the company, but then being doled out by a central group, originally the auto companies but later companies that were hired to manage the payments, to individuals based on their need. This is socialism.

Once the auto industry started paying for healthcare, other companies followed suit. At first, the company would pay for everything, but as people started to use more and more care (because it was “free”) most companies started to require that employees pay for a portion of their “insurance” and also pay a fee for each service used. While called “insurance,” the company and the employees actually just send their money into a large pool sized to cover the health costs of everyone in the company. To make it easier for the companies, an “insurance company” was hired to collect the money and distribute the payments in exchange for receiving a portion of the funds collected. If the pool ends up being too small one year, the payment company (“insurance company”) might pay the excess out of their fee, but then the amount contributed the next year is just increased to recoup the costs.

And the issues the US sees with healthcare stem from the socialist nature of the health insurance system. People generally like their doctors, like the level of care they receive, and like how quickly they can get in to see a doctor if needed. They don’t like the convoluted system of the insurance codes, they don’t like seeing a huge bill when they go to the emergency room or get a CT scan, and they don’t like worrying about whether they’re in-network or out-of-network. But these are all products of the insurance system, which, like in any socialized system, people pay in their money for healthcare and then the keepers of the centralized pool of money decide how that money is distributed.

Because the system is socialized, the amount you receive is not tied into the amount you pay. It is in people’s best interest to use a lot since it costs them the same amount whether they use a little or use a lot. This drives up costs and causes scarcities. Because people abuse the system, the insurance companies create arcane rules you must follow, making the system difficult to use, and thereby reducing the amount they need to pay out. Because prices get really high since providers can charge whatever they want without worrying about losing business, it gets difficult for some people to afford care, so there are movements to have those who make more pay more to cover those who cannot afford to pay full price. Like all socialist systems, this results in the cost being “all that you can afford to pay.”

To make matters worse, when it comes to prescriptions, the US ends up paying for the research for the whole world. Because pharmaceutical companies get a monopoly in the US for a number of years after a drug is first developed, they can set prices really high to recapture their research and development costs and make a nice profit before the drug becomes generic and subject to competition. Meanwhile, because other countries have price controls, they are able to obtain the same drugs at a lower cost. Because the drug companies are recapturing their costs through US consumers, they don’t mind selling at lower prices to other countries since it is just extra profit for them that they would not receive if they didn’t agree to the price controls.

Universal care would be even worse

Unhappy with the existing socialized medical system, some advocate for universal care. Here, the government would collect money from everyone and then pay providers for healthcare. It is also possible that the doctors would become government employees and receive a salary from the funds collected by the government. Rather than being a solution, the issues seen with insurance provided through companies would just be magnified here. Pulling everything together in one big pile would make it a bigger target for abuse, leading to more corruption than is already seen.

Because you would not even need to be an employee to get medical care through the system, there would be an incentive to not work and receive services for free. This would make the costs for those who were paying to increase, reducing the incentive to be more productive. So, you would have fewer goods produced but a bigger demand. This would lead to rationing and reductions in the quality of medical procedures received, as is seen in other countries with universal healthcare plans.

What would a free-enterprise system look like?

From food, to clothing, to houses, to electronics, free-enterprise has been shown to result in the lowest reasonable prices, efficient distribution of goods, and rapid product innovation. There is no reason the same couldn’t occur in the healthcare industry. But it would take a change in the US system. A free-enterprise system would include:

  1. Direct payment for most medical goods and services by the consumer. This would give the consumer the incentive to get a good price and providers an incentive to work to attract consumers. This could be facilitated through health savings accounts with a mandatory portion of salary directed to the accounts to reduce the number of consumers who end up needing care without money to pay for it. This could build up in the account for big expenses and be used in retirement if one live’s a healthy life.
  2. Insurance for unlikely, expensive procedures like transplants, cancer, car accidents, heart attacks, etc…. This would be real insurance, meaning that it would be priced based on likelihood of an event occurring. Consumers would be able to choose from several national insurance companies truly competing against each other.
  3. Publication of real prices by doctors and hospitals. A doctor or a hospital could run a special, but in general the prices listed would be the prices that were paid, as it is with most goods you buy.
  4. Pre-paid insurance for emergency care, for when you don’t have a choice of where you are going for treatment. Again, this would be priced based upon likelihood of an event occurring and be sold through several competing companies.

Note that there is free-enterprise care in one area – over-the-counter drugs – and very rarely is there a complaint about the availability of products or that products are affordable. One can get hundreds of aspirin at a drug store for the price of one aspirin in the hospital under the socialized system. A free-enterprise system would result in the same level of quality, affordability, and availability for all healthcare.

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