I heard a joke recently that starkly reflected the reality of socialism. It was unique. I can’t recall any other time that I found the reality of socialism amusing. The joke goes: “How did socialists light their homes before candles?” The punch line: “Electricity.”
Three days later, on the following Friday, Venezuela experienced an unprecedented power blackout. Venezuelans were actually lighting their homes with candles. Socialist dictator Nicholas Maduro blamed an “electricity war declared and directed by the imperialist United States.” Seriously.
This socialist reality is something I hope Congresswoman Alexandria Orcasio-Cortez, D-N.Y., (AOC) and her ilk will take to heart. But, I’m skeptical. Last week, AOC stated that under capitalism “we prioritize profit and the accumulation of money above all else” but under her desired version of “Democratic Socialism” we put “democracy and society first, instead of capital first.” In an Alice in Wonderland moment, she concluded that “it doesn’t mean that the actual concept of capitalistic society should be abolished.”
As AOC notes, the motive in a capitalist economy is profit. But, here’s what she seems to be missing. Capitalist societies create abundance and prosperity by taking our natural desire to improve our lives – to profit – and directing it outward to satisfying the needs of others. This much-berated profit motive is precisely what incentivizes us to meet the needs of others because – wait for it – that’s how you profit.
Whatever your business, you can only succeed in a capitalist economy by meeting other peoples’ needs – your customers. This applies to every business from a roadside lemonade stand to Amazon. The greater the benefits you provide – to others – the greater your success. If you fail to provide benefits to others, you fail, your business dies, and you lose your investment. Period.
Directly contrary to what AOC seems to believe, capitalism represents the truest form of democracy. In fact, we don’t call it “Democratic Capitalism” because democracy” is an inherent element of capitalism. Capitalism can’t exist without democracy.
Under capitalism, consumers – ordinary Americans – vote every day with every dollar they spend on which businesses succeed and which fail. You don’t succeed in a capitalist economy by meeting the needs of a group of government elites or by satisfying the standards – producing the products – they set. You succeed by meeting the needs of ordinary consumers who direct the economy and vote with their dollars on which products entrepreneurs should produce.
Think about your local grocery store or the Amazon warehouse. Each of the thousands of products they offer represents an entrepreneur trying to convince you that they have what you need at a price you can afford. Those who meet your needs will succeed. Those who don’t will fail.
Henry Ford didn’t build Fords for the aristocracy, he built them for ordinary Americans. Steve Jobs didn’t create the iPhone for government elites or to meet some government mandate. He created them for you and me, and if they hadn’t met our needs, he would have failed. Amazon isn’t a government-run distribution system. It is totally and solely consumer driven. It is superior to any government-run distribution system in any socialist nation in history. It stays efficient because, as consumers, if we don’t like it, we won’t use it.
Nor does capitalism ignore what is in society’s best interests, as AOC seems to assume. It simply leaves that decision to the underrated wisdom of ordinary Americans rather than some group of big government elites.
When I ran CKE restaurants, we didn’t sell what I wanted to eat (although I do love hamburgers), we sold what consumers told us they wanted to eat. We spent millions of dollars every year trying to figure that out. I was often asked by those on the left why we sold certain products they considered unhealthful. The answer was that we weren’t the food police, and neither were they. We sold the products people wanted to buy. If consumers wanted lower calorie, lower fat or lower carbohydrate products, that is what we would sell. If they wanted beef-less products to protect the environment from farting cows, that’s what we would have sold.
Like Bernie Sanders before her, AOC misleadingly uses the word “democratic” as an adjective in an attempt to soften the concept of “socialism.” But, in reality, socialists simply don’t trust people to make the right decisions. They really don’t have confidence in what they consider the unwashed masses. If they did, they would be capitalists. This is why socialist governments are, or inevitably become, totalitarian.
They tried the Socialist Nirvana AOC envisions in Venezuela. As recently as 2011, Venezuela was the richest nation in South America. It sits on an ocean of oil. With promises of benefits and social well-being, the Venezuelans elected – democratically – a group of socialist elites to rule them. Consumers no longer voted on which businesses succeeded or failed. As such, entrepreneurs lost the incentive to meet consumers’ needs. They left it to the government elites. The result was want, misery and poverty.
So, last week the lights went out and the candles were lit. Maybe it’s not that funny after all.