Socialism and Economic Development
How does that work?
There has been a lot of talk in the news about Socialism. In May of 2019, Gallup released poll results showing 43% of Americans think Socialism would be a good thing.
What is Socialism? The Merriam Dictionary defines it as the following:
Definition of socialism
- 1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
- 2a: a system of society or group living in which there is no private property
- 2b: a system or condition of society in which the means of production are owned and controlled by the state
- 3: a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done
No private property and the means of production are owned and controlled by the state.
That means no free market competition. Innovation, striving for excellence, competitive costs, rising quality and service come from free markets. Wealth creation comes from free markets.
Yet, in April of the same year, Gallup released the following response to whether Americans preferred the free market or government to control the following:
Source: GALLUP, April 17-30, 2019
||Free Market %
||Net "free market" pct. pts.
|Distribution of Wealth
|Protecting Consumers' Privacy Online
This seems to show that Americans don’t understand what Socialism really is. You can’t have a free market and
state controlled production and property.
A Washington Post article in 2016 states polls showed millennials in favor of Socialism but not in favor of government control of the economy. The article also states millennials are less in favor of Socialism if it means paying more taxes. The title of the article is “Millennials like socialism — until they get jobs.”
The article goes on to say millennials like the idea of Scandinavia; Denmark for example as providing a lot of social programs. Denmark has clearly stated they are not Socialist but let’s look at couple of things.
Denmark has a homogeneous population of approximately 5.8 million people as opposed to the U.S. heterogeneous population of approximately 331 million. The 2020 Economic Index reports Denmark ranks the 8th freest economy in the world. The economy depends heavily on foreign trade, and the private sector includes many small and medium-size businesses. Property rights and intellectual property rights are respected and enforced. There is little regulation on private enterprise and it is not difficult to fire people. Indeed this does not sound like Socialism. However, there is a large welfare-state component.
The overall tax burden equals 46.0 percent of total domestic income. Government spending has amounted to 51.7 percent of the country’s output (GDP) over the past three years.
It’s been reported Denmark has lowered its car tax to 100%. That means a $30K car will cost $60K. There is a 25% VAT on all purchases. The income tax rate varies between 38 and 50+%. This includes “labour market contribution,” income tax, municipal income tax, church tax and other taxes.
Economic Development has a mission to help create high-wage jobs, encourage friendly business climates, facilitate workforce development, help to retain and attract business and talent, help foster safe neighborhoods and quality of life. Economic developers try to help their communities create and maintain a diverse economy where citizens thrive with opportunities to provide for their families and create wealth which in turn helps to create a robust quality of life.
Owning property, starting businesses, growing businesses, rising in the workforce are all ways to create wealth, provide for family, generate a sense of self-worth and enjoy life. Socialism, by its very definition would prevent that from happening.