![]() ![]() We end up losing both our freedom and our security. The temptress of socialism is constantly luring us with the offer: “give up a little of your freedom and I will give you a little more security.” As the experience of this century has demonstrated, the bargain is tempting but never pays off. Socialism fails because it kills and destroys the human spirit–just ask the people leaving Cuba in homemade rafts and boats. #Define carpe diem fullBy their failure to foster, promote, and nurture the potential of their people through incentive-enhancing institutions, centrally planned economies deprive the human spirit of full development. The failure of socialism can be traced to its neglect of these three incentive-enhancing components.ģ. The strength of capitalism can be attributed to an incentive structure based upon the three Ps: (1) prices determined by market forces, (2) a profit-and-loss system of accounting and (3) private property rights. Socialism is based on the theory that incentives don’t matter!Ģ. By failing to emphasize incentives, socialism is a theory inconsistent with human nature and is therefore doomed to fail. A centrally planned economy without market prices or profits, where property is owned by the state, is a system without an effective incentive mechanism to direct economic activity. Under socialism, incentives either play a minimal role or are ignored totally. Capitalism is based on the theory that incentives matter! Market prices, the profit-and-loss system of accounting, and private property rights provide an efficient, interrelated system of incentives to guide and direct economic behavior. In a capitalist economy, incentives are of the utmost importance. The failure of socialism in countries around the world can be traced to one critical defect: it is a system that ignores incentives. Socialism does not work because it is not consistent with fundamental principles of human behavior. Likewise, collectivism is unsustainable in the long run because it is a flawed theory. In the long run, socialism has always proven to be a formula for tyranny and misery.Ī pyramid scheme is ultimately unsustainable because it is based on faulty principles. It is the initial illusion of success that gives government intervention its pernicious, seductive appeal. But any accomplishments quickly fade as the fundamental deficiencies of central planning emerge. In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, socialism may show early signs of success. Equality was achieved only in the sense that everyone was equal in his or her misery. While it promised prosperity, equality, and security, it delivered poverty, misery, and tyranny. Socialism is the Big Lie of the twentieth century. Here’s are some excerpts of my 1995 essay “Why Socialism Failed”:ġ. And that’s because it’s a flawed system based on completely faulty principles that aren’t consistent with human behavior and can’t nurture the human spirit. ![]() Venezuela, see photo above), and c) will always fail. Given the recent resurgence of socialism, especially as it is now being embraced by young Americans, I thought it might be a good time to re-visit my 1995 essay to review why socialism: a) failed in the 20th century, b) is failing in the 21st century (e.g. #Define carpe diem freeNote that the title of the article (“failed”) implied the past tense, as if I perhaps assumed the failures of socialism were so apparent and obvious (I called it the Big Lie of the 20th century) that it would be forever considered only as a discredited system of the past, and never as a viable option going forward into the future! Of course, at the time many parts of the world were moving away from collectivism and central planning and towards free market capitalism – the Soviet Union collapsed in 1991, the Berlin Wall came down in 1989, and China was opening up its economy and re-established the Shanghai Stock Exchange in 1990, etc. I think it was the first essay or op-ed I wrote for a general audience following graduation in 1993 from George Mason University with a Ph.D. Slightly more than 20 years, I wrote the article “ Why Socialism Failed” and it appeared in 1995 in The Freeman, the flagship publication of the Foundation for Economic Education. ![]()
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