The appeal of socialism

The battle with the oil disaster in the Gulf of Mexico has renewed individual resolve for socialist agendas in the United States of America. Cries and chants calling for the nationalization of British Petroleum (NYSE: BP) or at least the seizing of whatever of its assets fall under the jurisdiction of the United States have lit up social networking sites and comment boards over the last few weeks as it seems progress on curtailing further damage to the environment seems to be a high-odds bet.

Arguably the seizing of BP’s assets can only occur through a properly filed motion with the United States District Court, but that is currently beside the point.

So why is there a huge call for the seizure of BP’s assets? For starters BP reported on February 2, 2010 a "full cost replacement profit" of approximately $14 billion1. The day of the report BP’s stock closed at $55.46 per share on the New York Stock Exchange, down from a 2010 peak of $62.32 on January 19. The stock price closed on Friday, June 18, 2010, at $31.76, a 49% loss in value since the January peak in price, and a 47% loss in value since the BP stock price started a free fall after the stock closed at $59.88 on April 23.

So it can be safe to argue that seizing BP’s assets under US jurisdiction, including oil wells and fields, and nationalizing them has appeal for many Americans. Perhaps they feel that by placing those assets under the control of the government of the United States, those billions in profits will do the country a lot of good. And if BP’s assets were to be nationalized, or the entire oil industry as Congresswoman Maxine Waters [D-CA(35)] has publicly stated2, and the profitability were to remain steady while under the direct control of the Federal government, it could certainly pump a lot of money into a Federal system that is increasingly running massive deficits.

Except one thing that most people fail to realize is that no company placed under the direct control of the United States government has ever consistently turned a profit. The typical trend is that they will run massive losses, need consistent and constant infusions of cash from the Treasury, and be nothing but a drain on our economy. Amtrak is one hell of an example.

But massive profits from giant corporations is nothing new. It seems like every time there is a crisis, the profitable corporations are the ones taking all the blame. After all they must be sucking all the money from the economy and hoarding it for themselves, slowing the economy and bringing it into recession. Isn’t that how the Great Depression started? Giant corporations siphoning cash out of the economy at unheard-of rates and in unheard-of amounts until the economy came to a near-crashing halt?

Uh, no.

It’s easy for the large corporations to become the scapegoats for one simple reason: they have money. It’s the same reason why bashing and bilking the rich has become a popular sport in the political arenas across the United States. They’re hoarding cash and they should be forced to share it by ways of windfall profit taxes and taxes on cash holdings, right?

The appeal of socialism is one simple concept: the generation of wealth that is then shared more or less equally by all who helped to generate the wealth. On the small scale this has a lot of appeal and has the potential to work and work well, but once you start trying to scale this up, you start running into problems. If the "small scale" is a corporation in whose employ you happened to be, there would still be a hierarchy or chain of command, but your salary wouldn’t be driven by your experience, expertise, pay grade, position or seniority, but purely by the ability for the corporation to generate wealth.

On the large scale, however, this concept collapses under its own weight.

A lot of people have the economic concept of socialism confused with communism and the political concept of socialism, and they are not the same. Communism means that those who can generate the wealth will do so, but everyone shares equally in the wealth, regardless of whether they helped generate it or not. Karl Marx summed it up nicely in an oft-quoted statement from his book Critique of the Gotha Program: "From each according to his ability, to each according to his need." The theory and idea of communism has a lot of appeal as well, but in practice it has a lot of problems, and collapses under its own weight and lack of merit.

And in the current economy, both concepts have a lot of appeal to a public that is struggling. Unemployment is still up around 10%, and even as the economy rebounds and more of the unemployed start looking again for work, unemployment will still hover around 10% for a long time simply because of how the unemployment rate is calculated.

But why have both socialism and communism struggled and/or collapsed? One simple reason: greed.

But it is greed that allows capitalism to succeed. Many say that greed is capitalism’s shortfall, but the economic history of the United States shows this to be different. Like natural selection and the struggle for survival, there is a similar natural order of selection that takes place in a market that is allowed to operate. Those who are too greedy, who operate only for themselves and not for the customers that provide them with the revenue to survive eventually die off and whatever market share they had is absorbed by the remainder of the market.

Everyone competes economically for limited resources. It is the failure to observe this concept that is the eventual downfall of communism and socialism.

Many feel that there is an unlimited supply of the resources necessary for survival, and it is in the failure to see the fallacy of that concept that has allowed political socialism and, to a lesser degree, communism to come in and take over. They don’t see just how limited our resources are.

And even when the truth of limited resources becomes apparent, the people are so ill-informed that the appeal of socialism and communism is still bright because of one other simple concept: it’s different. And by being different, the thought gets planted in the heads of the populous that it must somehow be better, right? Change can be good, but you must first understand the kind of change being implemented before you can make that determination.

And time and again socialism has shown itself to fail because it collapses when the people get greedy. And when everyone is supposedly sharing equally in what wealth is available, there is no room for greed.

The appeal of socialism is that everyone shares in the vast wealth that is available, and for those of lesser fortunes how can they say no?

But there is only one means by which the wealth in this country has been generated: capitalism. Without capitalism and the free market, our country would be nowhere near as wealthy as we have become. But the idea of capitalism is that you earn your share of the wealth and you earn your place in the market through competition, and you keep your place in the market by surviving the competition, rather than having it handed to you because you exist.

References   [ + ]

1. British Petroleum. (2010, February 2). "BP Delivers on Promises in “Very Good” 2009 as 4Q Profits Jump 70 per cent"
2. Beck, Glenn. (2010, January 12). "Big Oil vs. the Fed: Double Standard?"