Thursday, June 28, 2012

Socialism Is Good, or Really Not That Bad

The title comes from a phrase the extreme left-leaning Marxist acquaintance typed on his Facebook timeline. Of course, he did so in response to my presentation of facts that proved his opinions baseless and unfounded. His idea of presenting facts in rebuttal was to cite rhetoric from Op-Eds that contained no data, just emotive verbiage. He then threatened me, resorted to using expletives and name calling, then deleting my comments and blocking me. [Notice, my life doesn't revolve around who "friends" me on Facebook.]

After doing so, he continued the usual type of "new tone" conduct you'd expect from those who debate in such a manner. He referred to me as "ultra-conservative". Most people who know me will state that I lean libertarian on many issues. I prefer the label of "Alt-Con" for the most part. However, the last party card I held said "US Libertarian Party" on it. Of note, since the Sept. 11, 2001 terrorist attacks, I am no longer apart of any party, though I am registered "Republican" on the voter rolls in Arizona. He also referred to stating facts as being part of some "conspiracy theory crowd". This from a guy who holds to outdated and limited data on global warming to justify his empathy towards climate-change Chicken Little impersonators. However, according to him, any facts, history, mathematics, economic formulas, and hard, empirical data are "conspiracy theory".

That exchange, due to which I am still chuckling, prompted this little essay.

Socialism has worked very well, hasn't it? It really can be a good thing, right?

Let's take a brief look at history.

Germany from the late 1930s through 1945 was a socialist country under Adolph Hitler. 11 million people were murdered. The German Economy still collapsed. The Mark was hyper-inflated by the end of the war making even a loaf of bread a costly commodity. Sure, socialism worked well, there. The facts demonstrate it didn't.

The story of Italian Fascism during the same time period is much the same.

The USSR lasted about 75 years. By the time it dissolved, the unemployment rate had remained in double digits for decades. McDonald's had finally opened a franchise in Moscow. The price of a single Big Mac was more than a day's wages. If you didn't join "the party", you were lucky to have a job from day to day. People fled in droves (or were killed in the attempt). I was in Berlin when the wall fell. I was there for German Reunification day. The infrastructure and standard of living in East Berlin was so low it was disgraceful. The only reasons they didn't have open rebellions were that the people were denied weapons and they were malnourished. The people who thrived were those among the organized crime syndicates. Most of them were also members of "the party" and had government jobs as well. Those are facts.

The former Yugoslavia is a great example of socialism. Tito ruled with absolute tyranny. After he died, the country fell into civil war, breaking into several countries. They still have ethnic violence there. The countries on the map today are Serbia, Bosnia, Macedonia, Montenegro, and Croatia. Radovan Karadzic and Slobodan Milosevic went on campaigns of genocide. Rad is still pending trial on 10 of 11 separate counts. Yes, I served in the Balkans at the height of the violence and saw it first-hand. Isn't socialism grand? 

North Korea is a wonderful example of socialism and its benevolence. The people are starving. Unemployment is in the double digits. People had guns pointed at their heads as they were ordered to cry over Kim Jong-Il or die (or have their kids killed) for treason. Sure, socialism is benevolent and works well there too.

Vietnam has transitioned to a more capitalist system. When the NVA took Saigon, thousands of refugees jumped into boats and headed to Australia, Thailand, and the US. People flee from tyranny, not liberty. Socialism worked well there, too.

Greece! Greece is the historic birthplace of "one citizen, one vote" democracy. The country's socialist programs have failed and the country is bankrupt. Socialism worked well there, didn't it?

Iraq under Saddam Hussein was a form of National Socialism. To own a business, a citizen had to have two forms of permission. First he had to have the blessings of his tribal sheik (whom he usually had to pay tribute) and from the government. If Saddam or his bratlings, Uday and Qusay, didn't like the sheik, the business stood a much lower chance of being allowed. Saddam was the ultimate collectivist. He administrated everything based upon tribe and how well the sheiks kissed his behind. Even that didn't always matter as he'd take a good rump-licking, defecate on the sheik, then still say "no, I don't feel like it". Granted, much of the tribal violence was reduced under Saddam. That was because he ruled with terror, not leadership. I watched capitalism rebuild in that country from the days of the initial invasion through my last tour (ended in 2010). People took control of their own businesses. It seemed the majority of them were doing very well when I left. I remember the street vendors who started businesses, without government interference, right after Baghdad fell. But, the restrictions and whims of the socialist regime under Saddam's Ba'ath Party were so loved by the majority of the Iraqi citizens. Socialism under that tyrant was wonderful.

Now let's look at socialism at home. First, economists have studied the impacts of FDR's "New Deal". Economic models based upon a couple of centuries of data indicate that the "New Deal" extended the recovery from the great depression. If the market had been allowed to self-recover, some studies indicate it would have been corrected in less than 4 years. However, the "New Deal" extended the recovery from 1932 until well after World War II. Socialist policies worked great, didn't they? They took over a decade to accomplish what free-market capitalism most likely would have done in far less time. UCLA states the recovery took more than 15 years, a minimum of 7 years longer than a self-correcting cyclical free-market (Adam Smith style) capitalist system would have. Wall Street Journal economist Andrew Wilson wrote this great study about many misconceptions regarding the "New Deal" and the Great Depression.

One "good" thing that came out of the "New Deal" was social security, right? That has to be a great bit of socialism, correct? That is a great debate subject. However, the first thing you have to consider is that Social Security, as it exists now and has since its creation, was not meant to be permanent. It was designed to last as a public trust fund for one generation only. During that generation, the next generation was supposed to establish individual retirement accounts that the government would oversee, guarantee, and protect. That is not what happened. Instead, it was kept a Ponzi scheme.

To catch a glimpse at what it was intended to become, look at the case of Galveston County, Texas. They switched to private accounts as an experiment. The benefits, as opposed to what regular SSI recipients receive in monthly payments, is remarkable. Instead, most Americans are stuck with a bankrupt mandatory retirement fund that cannot afford to pay out what it owes. It is unsustainable.

However, let's use me as a little case study. I started working for a real paycheck with all applied payroll taxes at age 16. Let's say I made $10k that first year. (I made less than that, but the math gets too hard for some people if I quote my actual income). For argument's sake, let's say the SS tax was 10%. So, I put $1k into that "retirement fund" that first year. If I had been given the option to place that $1k into an individual account that yielded an average of 6% ROI over the years from 16 to 66 (50 years), we'll see what that $1k from that first year's work would be worth. An average ROI of 6% will double the principle every 12 years (rule of 72). So, at age 28, it was worth $2k. At 40, it was worth $4k. At 52, it is worth $8k. At 64 (close enough to 66), that first year's investment would be worth $16k. Let's say my second year of work yielded the same income. At age 65, I'd have $32k. At age 18, let's say I worked more hours and doubled my income (therefore my mandatory payments). $2k at age 30 is $4k, age 42 is $8k, at 54, $16k, and at age 66, $32k. So, my first 3 years yielded $64k for my first year of retirement, just on their own.

The successive years of work would then supply the additional years of retirement. My average life expectancy is a realistic 76 total years. So, I'd have to earn 10 years worth of retirement living expenses in 50 years of work. It took my first 3 years to save/invest to earn that first semi-comfortable year. At that rate, I would have 47 years to accrue an additional 9 years of retirement funding. By that rate, I could do 15+ more years. THAT is under a reasonable, average individual retirement account. Of course, that is under the assumption that my income will increase mostly by just annual cost of living adjustments. It doesn't take into account promotions, changing careers to something more lucrative, gaining a degree and going into a profession that starts at an average of $40k a year (double that $20k per year barely-over-minimum-wage-job I held as a teen doing stock work at a local liquor store).

At a 4% average ROI, the principle doubles every 18 years. So it may take 5 years of work to get a first year of retirement at about $40k per annum goal.

By the way, the average monthly SSI payment is $1,233.21 a month, or $14,798.52 a year, currently. That $64k a year goal is over $5k a month. You do the math. I see the private individual account that grants a low 6% average annual ROI as a much better deal. But that socialism thing isn't such a bad thing, now, is it?