Monday, September 17, 2018

How the Government Outsourced Socialism - Part 1 - The Finances

One of the rare times I was listening to Barack Obama he said something I will never forget.  He said that he and the democrat party were not trying to install some socialist regime where they were going to take over the means of production, but were going to redistribute the profits more charitably to make things fairer.  Though I was ideologically opposed to Barack Obama, I believed him.  I did not think he and the democrats were going to take over the means of production, nor did I believe they wanted to install a truly socialist state.

Add to that this video put out by a young Brit named "Burgerkrieg."  In it he makes the very nuanced, but important distinction between "socialist" countries such as Sweden and Norway vs. "SOCIALIST" countries such as Venezuela, North Korea, and the USSR.   The main distinction being that the modern "socialist" European countries of Scandinavia do not have the government owning the means of production, whereas nearly every truly communist country in history did.

But in the minutiae, use, and semantics of the word "socialist" is a very important point to be made.  And both Barack Obama and Burgerkrieg hit on it, albeit unconsciously.  Because if you think about it you'll soon realize that the government, consciously or not, has effectively outsourced socialism to the private sector.

And this is a very bad thing indeed.

The Government Sucks at...Well...Everything

The first thing that needs to be understood is the fact that the government nearly sucks at everything.  It can wage wars pretty well.  It can pay private companies to build roads.  It can put up a legal system better than private hands can.  But beyond that it pretty much sucks at everything.  And the proof is irrefutable.

When the government is truly communist and owns the means of production it fails.  The Soviet Union, North Korea, Venezuela, Cuba - when hard core socialist countries take over EVERYTHING and eliminate private property you are almost guaranteed to have:

empty shelves,
shorter life expectancies,
slave camps,
and millions dying of starvation
...or bullets.

Even if you have democratically elected socialist governments (like modern day Scandinavia, France, Italy, etc.) they may not have been dictatorships, but they STILL sucked at owning and managing the means of production.  Most European governments owned their banking, airline, oil, automotive, and other industries during the 60's, 70's, and 80's and ran them nearly almost always at a loss, requiring perpetual taxpayer bailouts and infusions of cash.  It wasn't until most of Europe went on a de-nationalization program where they sold/privatized these companies were they forced to compete in the real world and become profitable (or go bankrupt).  And even then some countries' governments either maintained a large shareholder positions in these firms or still outright own the companies to this day (for example PEMEX is still owned by the Mexican government).  The point is that even the democratically elected socialist governments of Europe knew the government was bad at nearly everything and decided it would be in the best interests of their countries to sell these industries to the people and let the private sector manage them, resulting in better quality goods at lower prices.

But the state would not relinquish their ownership without a price.

Enter in corporate taxes.

Until Donald Trump lowered the US corporate tax rate, US corporations would have to fork over 40% of their earnings to the state, federal, and (sometimes) local governments.  It stands on average at 26% now, but even in "capitalist America" the government was a 40% shareholder of every corporation.

This pales in comparison though to the United Arab Emirates which is an effective 55% shareholder of all corporations within its land.  Of course it doesn't own any actual shares of the corporations within its borders, but with a corporate tax rate of 55% it might as well have.

The French government, though selling off its ownership in private companies long ago, still demands 34% of all corporate profits.  Socialist Sweden ironically only keeps a 22% ownership in its firms.  And some countries like the Cayman Islands, Bermuda, and the Bahamas have no corporate taxes, ironically (not really) having some of the highest standards of living in the world.

Globally though your average government is a 29% shareholder of all corporations in the fact it simply takes that share of profits from all corporations in the form of a corporate tax.

But It's Not Just Corporate Taxes

The problem, however, with focusing solely on corporate taxes is that it does not account for the totality of the private economy...or private citizens.  Most governments are not happy merely being an unwanted 30% silent-partner in corporations.  They want a piece of all actions, every action, of every transaction.  And thus governments tax quite literally everything.

Gas tax.
Soda tax.
Sales tax.
Airport tax.
Income tax.
Capital gains tax.

Yes you may "own" your house...except you have to rent it from the government in the form of "property taxes."

It's impossible to individually measure each and every individual tax to find out what percent of your life, property, and labor is your own, but there is an easier top down way to do this - take total government spending (which is what it taxed you at and borrowed from you) and divide it by the nation's salary - GDP.  If you do this you get a true picture as to how much the government owns you, your life, your property, and your labor.

And though the font may be small, in the US you can expect the government to take a 38% cut in EVERY aspect of your life.  Nearly 40% of your labor is own by the US state, federal and local governments.  But don't complain, you could be Finland where your the governments' bitch 55% of your laboring hours.

The Most Brilliant Thing Socialists Ever Did

The trick though is one of MASTERFUL brilliance. And I'm not joking when I say that.  This is literally one of the most MASTERFUL things ever done in human history.  So masterful I doubt Barack Obama knew what he was talking about, but at some level there must have been a smart socialist knowing what s/he was doing.

In looking at the horrifically appalling performance of countries where the state did take over the means of production, or even looking at the lackluster performance where democratically elected governments did, somebody must have realized that the government should get out of the business of business.  And instead of running a bakery, running an airline, running an oil company, or running a toothpaste factory, they would instead take a much more hands-off and mafioso approach;

You could certainly run and own your own business.
You could certainly own and operate your own firm.
You could certainly buy and own your property.

But you would owe the government protection money.  And that protection money adds up to on average 45% of all your income and property for the OECD (read - First World) countries.

You would think this was a bum deal.  In the land of the free and home of the brave, or certainly "the free world," its people would reject this deal and fight for more.  But what's brilliant about this is....


And not only did the vast swathes of sheeple buy it, they worked infinitely harder at slaving away for the state.

The brilliance in this move was to give the guise of ownership, without giving up total and complete financial ownership in the assets, private companies, transactions, and personal labor of the country and its citizens.  Yes, you have the deed to your house, but you have to pay property taxes to the county.  Yes, you "own" that car, but you had to pay sales tax and registration fees.  Yes, you "made" $100,000 in Silicon Valley, but you have to give half of that to the US Federal Government and the State of California.  But what is arguably doubly brilliant was hiding the true level of taxation/government financial ownership in the economy through literally hundreds of different taxes, as well as having a "pay as you go system" instead of cutting one single check on April 15 for income taxes.  Alas, in "telling" the people they "own" their shares of stock, the deeds to their house, and the car in their garage, while nickle and diming them on every transaction in their personal lives, people actually thought they were 100% owners in their lives and their futures, and worked like it.

And this was a BOON to the socialists.

Where Socialism Succeeded

In effectively becoming a 45% owner of all people's labor and production, while fooling them to work at a level where they thought they were 100% owners of themselves, government revenues increased exponentially.  The socialists may not have "owned the means of production," but the profits being generated by the work horse of deluded workaholics and the state's commensurate 45% take meant more money for socialist programs than socialists could ever dream of.

And it shows drastically.

If you look at government spending per person between socialist countries that do NOT own the means of production and "SOCIALIST" countries that DO own the means of production, it's not even close.

Cuba is around $5,200
Venezuela is around $4,300 (if that money bought anything)
And stubborn North Korea doesn't even produce $1,300 in total GDP per capita, let alone spend that much on its people.


Norway spends $40,900 in government spending per person (though a lot of that is due to oil)
Sweden is at $26,800.
And the evil "capitalist" US is at a "paltry" $11,040.

An ever so rough average of 8 TIMES MORE GOVERNMENT SPENDING PER PERSON, and all of this by simply outsourcing something that is NOT your core competency, while fooling people into thinking they own and determine their futures. 

The Silver Lining?

The argument could be made, however, that this mixed-market economy where the government is merely a hands-off shareholder has worked wonders.  No doubt letting people have a modicum (even if delusional) ownership in their land, time, labor, and futures incentivizes them to work more, harder, longer, and smarter than at the end of a whip in a gulag or political prisoner camp.  The resulting increase in economic production more than offsets the 55% ownership the government forfeited when it "privatized" the means of production and allowed for private property.  And who is to say free health care, free education, BGI, and socialist programs are bad if they're paid for?  It is without a doubt that "silent-partner socialist" countries that do NOT own the means of production are better than the centrally planned dictatorial "SOCIALIST" ones.

But there is a drawback that most do not think about.  An enormous risk when the government outsources its socialist goals to the private sector.  For "socialism" is not just about money, but social behavior as well.  Behaving a certain way, thinking a certain way, and having the correct opinions.  Democratically-elected socialism may start off with the government merely owning 45% of your life's production, but socialism and socialists never stop at finances.  They need to get into people's personal lives, no matter how much they claim to value social freedoms and liberties.  The money is never enough.

And if you realize that the private sector made socialism 8 times more profitable than the government ever could, you're going to soon realize the private sector will make socialism 8 times more tyrannical when it comes to your individual social liberties and freedoms.

Which will be the topic for part 2 of this series.
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PBAR said...

Exactly! The Democrats don't want true Socialism as they have come to realize that if they (i.e. the government but I repeat myself) own the means of production, then they will take the blame when their asinine policies (transgendered bathrooms, socially responsible investing, etc.) wreck said means of production. Rather they are all for Fascism as under Fascism they still get to dictate all of their pet policies to the means of production and when those are ruined by said policies, they can blame greedy CEOs or capitalism.

A Texan said...

Many years ago after about 4 to 6 months living in a state with an income tax, I sat down and documented every tax before and after my check I could find listed. My phone, electric bill, groceries (some states have sales tax even on fresh vegetables), gas, fed, state, SS, etc. I did not count stuff on an airline ticket; I'm talking all necessities. I came up that about 4.5 months of my yearly labor I was a slave to city, county, state, and federal governments.

I'm guessing it was probably more like 6 months if one could quantify the tax and regulatory burden in every product you buy, so we really pay as much taxes percentage (probably close to 50% in most of the US) as any European. But thanks to the wonders of what is left of the free market, we may not feel it as bad in some ways. I certainly did not feel rich and wondered whether I should have just went to work somewhere out of highschool.

And this was a very low $40k's salary and with paying health insurance and a modest 401k. Depressing to say the least. This made me want to work harder and 'share the wealth' of course.

A Texan said...

Remember, under socialism, the government owns the means of production.

Under capitalism, the means of production own the government.

doctor_kaz said...

The essence of socialism is not the government owning the means of production, but rather "from each according to his ability and to each according to his need". Once you accept that premise then the rest is minor detail. Our government adopted the role of wealth redistributor and has long since abandoned the model of governing to keep the peace and provide the rare service that the private sector can't provide better.

David said...

My god; with sincerity….you are a genius. I have never ever seen anyone, anywhere characterize the current system so clearly. PPP Socialism?

Bezzle said...

Stefan Molyneux, Reader's Digest version.

Alt London said...

Dude, Burgerkrieg is GERMAN.

He was born in Cologne in Germany and he lives in Kiel in Germany.

I don't know where he got his English accent from, but he is German.

Mike said...

And they call this "democratic socialism".

Dan said...

Very insightful. Thank you. I always thought if it as part-time or soft slavery.

Joe BLow said...

That is certainly an interesting take on it. The government outsourcing Socialism to the private sectro through endless taxes. Ièd be interesting to compare this to what the Fascists were doing just before WW2. Mussolini and that other guy we won't name. They did not intend to won the means of production, but they did, to my knowledge, set and limited profits and had a measure of control...

Mike said...

Brilliant as always, Cappy!

Turkey said...

" some level there must have been a smart socialist knowing what s/he was doing."

Maybe so. More likely is socialist-minded people realized they could do a little of this here and a little of that there and eventually we developed this system.

The profit incentive provides unplanned organization in non-free markets too.