Socialism seems popular again. Bernie Sanders excited large elements of the democratic electorate during the last presidential primary with his socialist message. Seeing Bernie’s success, other politicians have sought to appeal to Bernie’s voters. Many of the candidates that are running for the democratic nomination have been putting forward socialist policies.
Socialism is an economic system where the government owns the inputs in the production process and where the government makes decisions such as the following: what to produce? how much to produce? how to produce it? On a superficial level, socialism is very appealing. The government can identify a problem and hire experts to fix it. The current proposal among some in the democratic field of candidates for “Medicare for all” is a good example. The problem the politicians seek to address is that some people do not have adequate healthcare insurance. The proposal calls on a government program to fix the problem.
I can illustrate socialism’s main problem with a simple analogy. Suppose a town festival has a contest where people throw spaghetti against a wall with the hope of making it stick. The socialist version of this game would have the foremost expert in the country pick up one strand of spaghetti and throw it against the wall. If it stuck, great. If not, we are out of luck. The capitalist version of this game allows anyone who is interested in playing the game to throw his or her own noodle against the wall. With so many noodles being hurled, some of them are bound to stick to the wall. We just do not know beforehand which noodles will remain on the wall.
Socialism is a unique combination of good intentions and arrogance. I believe that most of the socialist politicians have the best intentions of the country in mind. They really want to fix problems. The arrogance stems from socialism’s requirement that the government determine production decisions. Only the government’s approach will be attempted. In contrast, capitalism is a messy free-for-all. Many people are trying to solve a problem, all taking different approaches. Some approaches will be silly, while others will be inspired. The beauty of capitalism is that only the approaches that work will be continued. People, who provide others with what they want, earn a profit, which leads them to stay in business. People, who provide goods or services that no one wants, will lose money, which leads them to find something else to do.
While capitalism allows many different people to offer solutions to a well-defined problem, it also does a good job at discovering needs that a single government provider could overlook. With socialism, if the government does not recognize a problem, it is not addressed. With capitalism, only one person has to recognize a need for it to be filled.
To illustrate, consider a problem that very few people discuss. People in the inner cities do not have access to large grocery stores like we do in the suburbs. Conway’s grocery stores are large and offer a great variety of reasonably priced food. In contrast, the inner cities have small grocery stores, mostly because the cost of buying or renting land in the city is so expensive that a large store is not practical. The smaller grocery stores are not as efficient as the large stores, so consumers in a city get stuck paying high prices for food. Amazon recognized this problem, and it is working on a solution. Until recently, this company had nothing to do with the grocery store business. However, it is the foremost leader in arranging to have products delivered to homes. It hopes to use its expertise to offer city residents more convenient and lower priced options for food. Whether or not Amazon will be successful in its food venture, I cannot say. However, it seems to be a noodle worth throwing at the wall. It may stick. I am certain of one thing; Amazon’s solution for delivering food to city residents is different than the solution that the government expert would have devised were we a socialist country.
Joe McGarrity is a Professor of Economics at UCA. You can reach him at email@example.com.