“Free goods are always more expensive through waste, abuse and shortage,” wrote economist Mark Skousen in a recent article. He argues that democratic capitalism is not about redistribution but about sharing wealth, urging readers to reject the current embrace of democratic socialism. According to Skousen, there is no need to tax the rich or raise the minimum wage as advocated by democratic socialists. Instead, major corporations are quietly solving inequality problems by offering ordinary employees generous 401(k plans, stock grants and stock options that are making average workers millionaires.
Skousen highlights that Microsoft has been responsible for creating over 30,000 multimillionaires among ordinary employees due to stock options alone. Walmart offers workers the chance to start their 401(k plans and provides stock grants. Most major corporations offer these profit-sharing plans. Even smaller companies have them. AutoZone has created more than 4,000 millionaires, while Nvidia CEO Jensen Huang states that almost 80 percent of his company’s 36,000 employees are already millionaires.
The article points out that breeding millionaires doesn’t eliminate “inequality” (there are still billionaires and others), but it addresses a suppositional mistake Skousen makes. In reality, there can be a hunger problem, healthcare problem, schooling problem, sanitation problem, housing problem, and many other problems. But there is not, and can never be, an “inequality problem.” Why? Because equality tells you nothing about quality.
Skousen outlines why socialism lacks quality and fails. Via an explanation that won’t surprise New American readers, he writes that “free” goods are always more expensive through waste, abuse and shortage. It violates the cardinal principle of economics known as the “accountability” or “user pay” principle. If you benefit, you should pay. If someone else pays — parents, your company, insurance or the government — there is little or no discipline to keep costs down, or to encourage innovation. Populist socialism never works because it lacks the incentives to succeed.
In fact, experience alone informs that socialism doesn’t work — because it has a 200-year history of failure. Just consider President William Taft’s thoughts on socialism, as related in a 1914 news article: “The most notable socialistic experiment, that of Robert Owen, at New Harmony [in 1826], failed as all socialism must fail [after just two years],” said Mr. Taft, “because it found no substitute for the motive essential to arouse and make constant human effort that is furnished by the institution of private property and the shaping of reward by competition and natural economic adjustment.”
Adding one more example, American Thinker tells us: The Red Utopia in the Bronx was an experiment in cooperative housing, with nine cooperative stores and a restaurant, in the 1920s that eventually failed, as always. In contrast, economic freedom inspires wealth creation. Late economist Walter E. Williams would often make this point. As he wrote in 2017, for example, outlining an illustrative correlation: First, list countries according to whether they are closer to the free market or the communist end of the economic spectrum. Then rank countries according to per capita gross domestic product. Finally, rank countries according to Freedom House’s “Freedom in the World” report. People who live in countries closer to the free market end of the economic spectrum not only have far greater income than people who live in countries toward the communist end but also enjoy far greater human rights protections.
None of this is surprising, and a little perspective may drive home the point. Man’s norm for virtually all of history was grinding poverty. In fact, you could say that we started with nothing. After all, how much wealth did Paleolithic (“cave-dwelling”) man have? I mean, I’m sure rocks and clubs might’ve been prized back then, but wealth options were, let’s say, limited. Even much later, such as in biblical times, debt slavery, famine, and the selling of children were recurring realities. Such was the privation.
So where did all today’s vast wealth come from? It was created, of course. This occurs when man takes what is found in and on the Earth — timber, minerals, etc. — and uses it to produce multitudinous wonders that sustain and enhance life and lifestyles. It occurs when people invent, innovate, and industriously produce. And what motivates them to do so? It’s not directives from a central command of government oligarchs that stir the soul of enterprise. Market incentive does that. It catalyzes the creative capacities of the common man by presenting him with an adventure: You can be a creator. You can be a mover and shaker. You can enjoy the fruits of your labors, and who knows how successful you can be? The journey will tell the tale. And, really, what are the other options? Seeking equality? The irony there is that striving for equality doesn’t deliver it. It merely yields continued inequality — only, among those relegated to a much, much smaller, socialism-hobbled pie.
