Recently in Barnes and Nobles I picked up a book called The Case For Socialism by Alan Maas.  It started with the unfortunate story of people who had a job at the Huffy bicycle company but lost the job because Huffy in order to compete moved its operations to China where it could hire people who would work for $20.00 a week.  In the mean time the CEO of Huffy made a lot of money. 

There is no question that capitalism creates disparities of wealth.  In this case Chinese were working for a pittance while the CEO of Huffy made millions.  The solution for this problem as seen by Alan Maas is socialism yet socialism has problems too.  History teaches us that communist and socialist countries instead of spreading the wealth, spread the poverty and misery.  We can understand why when we consider that socialist governments redistribute the wealth.  This takes investment money away from companies, that would use the money to generate more wealth and products that people want to buy.  Socialism saps the will of people to work hard and create wealth since others who hardly work will be paid the same amount. In fact sometimes people who don't work wind up better off than people who do.  Socialist entitlements creating ever increasing demand for those entitlements.  Redistribution of wealth is done by governments which as distributors of wealth become very powerful.  These governments give in to the demands of groups receiving entitlements in order to stay in power even if that means borrowing or printing money which ultimately leads to economic disaster.  The United States and Europe both have huge debts because of socialist entitlement spending.  These debts are growing at an alarming rate and could well lead to economic collapse. 

     If redistribution of the wealth is not the solution to the income disparities in companies such as Huffy, what is?  I don't think there is a solution.  We live in an imperfect world in which solutions create problems of their own and sometimes those problems are worse than the problems the solutions were implemented to solve.  Although there are no perfect solutions there are probably optimal solutions.  To find the optimal solution to capitalisms problems we need to realize that capitalism is not all bad.  Capitalism makes it possible for anybody to become rich and benefit others by doing so.  Many of those who have become rich started with a dream to create a better world.  Bill Gate's dream was to make it possible for everyone to have a personal computer.  John MacKey's dream was to create a store where all the food would be healthy.  That dream has resulted in Whole Foods Stores from sea to shining sea.  Personal computers have helped a great many businesses become more efficient and generate more wealth than they would have otherwise.  John MacKey's stores have benefited many people as well.  In an interview Mr. Mackey explained “Capitalism is creating value for customers, creating value for employees by providing jobs creating value for society by taxes creating value for investors, it’s creating prosperity.   It’s wonderful.” 

 What about a hybrid socialist/capitalist system.  That is basically what we have in the United States.  Corporations are taxed and a large part of that money goes to the government which spends a large part of that money on buying support with that money with aid to the poor and elderly and so on.  The government passes lots of regulations and laws to win votes and in some cases those laws make things better and in other cases make things worse.  One example of laws that made things much worse were laws that forced financial institutions to give housing loans to those unable to pay for them. 

One problem with reaching the optimal compromise is opposing parties may not wish to do so.  Parties want to get elected and so have a strong incentive to make each other look as bad as possible to the public.  If a Republican governor wants to make necessary cuts in spending the Democrats are likely to accuse him of lack of caring for the poor and elderly instead and to interfere with his efforts to make those necessary cuts.  Instead of working together to reach an optimal compromise these parties often demonize each other and create governmental paralysis. 

 


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