How Governments Take Ownership Of Industries By Burying Them In Regulation.
Socialism is now woker than a two-for-one Che Guevara T-shirt sale, with Bernie Sanders leading the Democrats’ presidential primary polls and Alexandria Ocasio-Cortez dominating the party’s imagination.
In a rare calling-out of this bogosity, JPMorgan CEO Jamie Dimon warned shareholders this month that “socialism inevitably produces stagnation, corruption and often worse.” He was echoing Winston Churchill’s observation that socialism allows for “the equal sharing of misery.” Why is it only capable of generating misery?
Because under socialism, politics rather than productivity drives employment. Technological innovation is suppressed. Long ago, an Israeli explained to me that under socialism—Israel’s economic system until 1985—you would always hire two workers to do the job of one.
Of course, there is a spectrum of socialism. The textbook definition is government ownership of the means of production, as in the communist-run Soviet Union or Cuba, or the state-owned factories of China today. But socialism can also mean “owning” an industry by burying it in regulation (see education, Medicare, the overregulated auto industries and so on).
Socialists are modern-day Luddites, destroyers of technology to preserve jobs. Article 4 of the current postal-workers’ union (sweetheart) contract states that “any new job or jobs created by technological or mechanization changes shall be offered to present employees capable of being trained to perform the new or changed job.” It’s one reason, even with automation, we still have 500,000 postal workers when the right number is zero. Similarly, Detroit was slow to use robots. It’s only recently that United Auto Workers union contracts did away with job guarantees.
Workers at the Port of Oakland went on strike to protest the use of RFID tags on shipping containers because it would kill lucrative clipboard-toting jobs. Productivity be damned.
And that phantasmagoria, the Green New Deal? It’s a productivity pallbearer, with its federal job guarantees and a new mechanism to support those “unwilling to work.” Where do I sign up for that?
The grand hypocrisy is that these same lazy-thinking Luddites use cutting-edge technology to propagate their myths. We have Bronx bartenders streaming on Instagram asking “Is it OK to still have children?” and a “Hear the Bern” Facebook page claiming you’ll have “freedom of choice” under Medicare for All.
An economic system is about raising the standard of living of its participants. The best way to do that is to lower costs of goods and services so that profits and capital are freed up to be reinvested in future life-enhancing products. Those who succeed in improving our lives deservedly get rich, but then earn the socialist’s scorn that “every billionaire is a policy failure.” C’mon. Technology is our best cost-chopper, but those gung-ho for government gunk the gears of progress.
Productivity drives profits, which drive prosperity, even though to nuevo-millennial socialists “profit” is a bad word. Rising stock prices—the sum of expected future profits—enable companies like Apple to spend more than $10 billion a year on research and development. They enable GlaxoSmithKline and others to fund research on potential cancer vaccines. Sagging stocks resize companies.
Socialism is about maximizing power, not maximizing profits. Government doesn’t make profits, has no incentive to show profits, wouldn’t know a profit if it hit it in the head. Inside government there are no markets or price mechanisms to act as a divining rod finding hidden productivity. Socialism handcuffs Adam Smith’s invisible hand.
Productivity is wealth. Sure, technology and markets might destroy two jobs, but they turn around and create three safer, higher-paying and more fulfilling jobs. To spend beyond a basic level for goods or services because of socialism’s political “make work” imperative destroys wealth.
How dumb. Socialists like Bernie Sanders love to spend money on “free” education and Medicare for All but have no policies to make money in the first place. Their socialist construct of technology-ignoring, job-guaranteeing claptrap seems like the only way not to fund all those freebies.
Technological progress is the only way to raise living standards over the long run. If you hire two workers to do the job of one, you kill the very productivity needed to fund the promised worker’s paradise. Without productivity, societal wealth eventually disappears and socialism spirals into decay and the stagnation and corruption that Mr. Dimon warns us about. Socialism rots from within.
Andy Kessler is the author of Inside View, a column he writes for The Wall Street Journal on technology and markets.