Recently, I’ve been asked what it is I have against socialism. Readers of the Blue Collar Economist may have noticed a large amount of material focused against this most erroneous of economic ideas. For me, it almost borders on a personal matter. It is true that I had, in my youth, certain socialistic leanings. For more than a decade I had lived and worked in Berlin, Germany during the height of the Cold War. From 1981 to 1984 as a mechanic in the US Army and 1986 to 1992 as a truck driver for the Army Air Force Exchange Service (AAFES). It wasn’t until I had realized that the grass is certainly not greener on the other side that even a mixed economy, such as the one in Germany, yields a reduction in liberty.
All of this social spending comes at a cost. For the full-time socialists on the other side of the Berlin Wall, it meant absolute totalitarianism. For the West Berliners on my side of the Wall, a regulated and over taxed burden on our way of life and, as the State would have it, a total dependence on the social apparatus that was provided for the population. Free college, health care, child care, housing, transportation and so on is an extremely expensive way to enslave a population. The East Germans simply ruled by dictate and violence, the West Germans ruled by handouts a la Otto Von Bismark.
It was during those times that I began to see the light. Socialism only works as long as you have enough of the other guy’s money to spend. What happens when it runs out? What happens when the State goes broke and the vast majority of the population are dependent on the handouts? History has shown that governments then turn to their central banks and begin to destroy their currencies by inflating. In so doing, they are also redirecting capital from the poorer of the population up to the well connected. By demanding that the State play the role of the parent in society, the people are unwittingly embarking on their own destitution. As Thomas Jefferson so aptly put it, “It is the natural progress of things for liberty to yield and government to gain ground.”
Bernie Sanders has been the main focus of thought at the BCE during this campaign season. After all, he is the only statist candidate to admit that he is a socialist. They all are socialists to one degree or another. Everyone has a plan for the State to intervene in the economy, the world and our lives in a vain attempt to show that the government knows best. But Bernie Sanders stands out from the rest. He’s a throwback to a lost era. His socialistic recommendations for the struggling economy are something the Europeans are fleeing from. What sounds good on paper doesn’t always translate into good practice.
Let’s focus on Bernie’s promise of free college. In Berlin, there is a university called the Free University (Freie Universität Berlin or FU). There, you can find professional students. These are people who have decided to attend the university for what seems to be most of their adult lives. They stood out in the crowd as they usually wore two sweaters, three scarfs, and dirty colored jeans. On public transportation, they could be seen wearing their student pass around their necks. They frequented the coffee shops and bookstores in groups. Many have multiple degrees in liberal arts. The equivalent in the US would be a degree in something that ends in the word “studies”. They have no real marketable skills and usually end up working for the State or as a professor at the university teaching in one or two of the field of “studies” they degreed in. There, they churn out more professors who decided to make this free higher education a way of life. Wash, rinse, repeat. A huge waste and drain on the taxpayer.
Some economists say this is an example of “tragedy of the commons” where a public good becomes overused or exploited to the point of depletion. An example would be in the fishing industry where certain species of fish have almost been eradicated. But, technically free education doesn’t qualify as a tragedy of the commons. Education is a renewable resource if you will. It isn’t used up like tuna, cod or the buffalo population during the 19th century. More accurately, free education is an example of another commonly known economic principle. That is, what the government subsidizes, you get more of. Moreover, since the government steps in as the single payer, the cost for “free” education increases as the counterparty risk has been removed. Simply put, since the public is on the hook to fund tuitions then the cost for higher education would increase. This is exactly the problem today with government subsidized student loans. Imagine the profits colleges and universities could rake in if the federal government was the only payer of tuitions.
How can something that is declared by the government as being “free” have any cost? Doesn’t free mean free? Not really. Not when it comes to the State. In order for education to be truly free teachers, administrators and a whole host of peripheral personnel would have to work for nothing. That’s the working definition of slavery.The same applies to “free” health-care. When people go to work they expect to be paid. It costs money to keep the lights on. Who pays them when it’s free? If you’ve read the BCE article, “Death By Taxes: The Elites” you would know that taxes are no longer used to finance the federal government. This is where the central bank, The Federal Reserve, comes in. In what is known as functional finance, the central bank is the financier of the government. The promised labor of the population is the collateral. Taxes are just a means to socially engineer society. So, if you can do the math, “free” actually yields chattel slavery for the masses in a type of neo-feudalism. Again, “It is the natural progress of things for liberty to yield and government to gain ground.”
The BCE is trying to sound an alarm in all of this discussion about Bernie Sanders. He is just one example among many in the government who are carbon copies of what I experienced in Berlin. Financially, Germany is in deep trouble. The socialstaat that Otto Von Bismark established over 100 years ago to keep the population dependent on his regime has about run its course. More and more social services are either being privatized or are financed by directly billing the recipients of the service. The other guy’s money is running out for the German government. As human behavior would have it, more and more of the population are becoming despondent. What does the infant do when the pacifier is taken away?
Again, this isn’t a personal hit job on Bernie Sanders. Hillary Clinton isn’t but a fraction removed. The Republican candidates aren’t far behind either. It’s understandable that young people get excited when Bernie Sanders promises them free things. Politicians have been doing that forever. It’s heartwarming to see the energy these young people have when he attacks the multi-national corporations. It’s all platitudes when his campaign accepts their contributions (Google, Microsoft, and Apple). They cheer when he promises that there will be no more bailouts for the big banks. Someone hasn’t done their homework. The Dodd-Frank Financial Regulatory Reform Act of 2010 ensures the banks a bail-in and not a bailout. That is, the banks can now take their depositors’ money the next time they get into trouble. Bernie has been able to touch that feeling in people that something is wrong with the status quo. The problem is, he is the status quo on steroids. He promises to grow the State apparatus by magnitudes unseen in US history through archaic socialistic ideas. His recipe for change is more of the same. More government intervention, more state control, and more debt. He’s been compared to Ron Paul because of his appeal to young people. But Ron Paul represented something new and fresh while Bernie Sanders touts something old and tired.
Rest assured, no matter who gets the nomination, no matter who gets to sit in the Oval Office, the status quo will continue. The brand name of the totalitarian is not important. This country has been on the same road since the Progressive Era and it has been the road to serfdom.