Socialism Sucks Read online

  PRAISE FOR

  SOCIALISM SUCKS

  “What a captivating idea Socialism Sucks embraces! A worldwide tour guide written in plain English by two high-end economists. An invasion of the world’s most highly regulated hot spots where they can’t even efficiently produce or distribute something as simple and lovable as beer. A down-to-earth, almost fable-like lesson showing socialism’s failures for all the world to see. And it even has some sidesplitting hilarity thrown in. I knew these guys were great; but I didn’t know this side of them. Buy this book. Give it to your children and grandchildren, and to anyone who touts the nonsense—now fashionable in some American circles—that government power somehow produces more happiness than personal liberty.”

  —JUDGE ANDREW P. NAPOLITANO, senior judicial analyst for Fox News

  “Every country that enters socialism gets more miserable; every country that leaves it prospers: that’s the lesson of history so far. Robert Lawson’s and Ben Powell’s light-hearted book drives home this message in a refreshingly readable way. From Venezuela’s immiseration to Georgia’s liberation, the authors sample every socialist, ex-socialist, semi-socialist and supposedly socialist experiment, beer by beer.”

  —MATT RIDLEY, author of The Evolution of Everything

  “Professors Robert Lawson and Benjamin Powell do a yeomen’s job in proving that socialism sucks, the apt title for their new book. They show why there’s no stampede into countries like Venezuela and Cuba and other socialist darlings of the U.S. leftists. What’s more, over a couple of drinks, Lawson and Powell prove that Sweden is not as socialistic as portrayed by our leftists.”

  —WALTER E. WILLIAMS, professor of economics, George Mason University

  “In theory, socialism sucks and economists know why. Here are two economists who ventured far beyond the ivory tower to discover that in practice, the theory is right. This is the tragic story of mass suffering in the name of an insane idea, told with sympathy, insight, and no small amount of black humor. Read it and weep; read it and laugh; read it and learn.”

  —STEVEN LANDSBURG, professor of economics, University of Rochester, and author of the Armchair Economist

  “What is ‘socialism’? And do countries that overindulge in it wake up with bad hangovers? You bet they do. Robert Lawson and Benjamin Powell give you the hair-of-the-dog cure. They provide a dose of political economy knowledge mixed with an understanding of the benefits of economic freedom, add a strong dash of humor, and top it off with a cold beer. Have a Bob & Ben Eye-Opener and you’ll feel like (and live in a place where you can make) a million dollars!”

  —P. J. O’ROURKE, author of #1 New York Times bestseller Parliament of Whores and Holidays in Hell

  For Tracy, Lisa, Keri & Raymond

  In appreciation for your patience with our travels

  FOREWORD

  In 2013, Venezuela was the poster child for socialism.

  It was the standard against which celebrities and politicos alike measured the United States’ economy, which they found wanting.

  At Salon, David Sirota let us know that yes, this was socialism, and yes, it should incite envy in Americans. Venezuelan president Hugo Chávez, said Sirota, with his “full-throated advocacy of socialism,” had “racked up an economic record that . . . American president[s] could only dream of achieving.”

  Fashionable opinion couldn’t say enough about Venezuela and its president. Sean Penn, Danny Glover, Oliver Stone, and Michael Moore were the tip of the iceberg.

  And then, by 2017, Venezuela—the very country these commentators had been lecturing everyone about, and which Sirota had praised for its “full-throated advocacy of socialism”—suddenly became not real socialism, even though nothing about it had changed.

  Well, I guess at least one thing changed: by 2016 nearly three out of four Venezuelans lacked a diet that researchers considered optimal (that’s a generous way of putting it), and nearly 16 percent had resorted to eating garbage.

  Oh, we don’t want Venezuela, say our “democratic socialists” today. Why, we want Sweden!

  This kind of claim might be more believable had so many of the people making it not cheered Venezuela right up to the moment that starvation and chaos were everywhere.

  There’s plenty to say regarding Sweden: (1) its “socialist” policies were made possible by wealth created under an essentially capitalist economy (as recently as the 1950s, remember, government spent less as a percentage of GDP in Sweden than in the U.S.); (2) Swedes earn about 50 percent more in the U.S., in our supposedly wicked economy; and (3) since Sweden’s explosion of social welfare spending there have been zero jobs created on net in the private sector.

  No, thanks.

  In recent years, sympathy for socialism in the U.S. has grown rapidly. No doubt one reason was the financial crisis of 2008. Critics felt certain that this episode revealed a profound sickness at the heart of American capitalism. Yet the crisis would certainly not have happened without the twin evils of government policy and Federal Reserve intervention, both of which are something like the opposite of capitalism.

  And there’s another, more fundamental reason: it’s an easy argument to follow. (1) Those people over there have lots of money. (2) You would like some money. (3) We are happy to facilitate the transfer.

  “The rich,” meanwhile, are caricatured and despised as a matter of routine. And while it’s true that some people have come by their wealth in disreputable ways, made possible by government, socialist critics are not making fine distinctions like this. It is wealth per se, no matter how acquired, that is to be condemned.

  Not a moment’s thought is applied to wondering what the rich might actually do for the economy. We are to believe that they roll around in their cash until it sticks to their sweaty bodies.

  Not a word about investment in capital goods, which make the economy more physically productive and increase real incomes. Nothing about capital maintenance, which keeps the structure of production up and running. Nothing about saving at all, since most popular critics of capitalism appear to think consumption is what really contributes to economic health—as if simply using things up could make us rich.

  From this standpoint, socialism seems to make sense. There are no unintended consequences of government intervention worth thinking about. We have rich people over there, and things we’d like to do with their money over here, so what’s the problem? If there’s an outcome we want, why, we simply legislate it into existence! Want higher wages? Just pass a law!

  If this were true, poverty could have been conquered anytime, anywhere. We ought to call the folks in Bangladesh and let them know: poverty is over! You just need to pass some laws!

  Now were we to impose the American regulatory apparatus, and American labor laws and wage requirements, on Bangladesh, virtually the entire country would become instantly unemployable and poverty would only intensify.

  It’s almost as if there’s something other than regulation and redistribution that accounts for economic progress.

  Among the great merits of Socialism Sucks are that it’s short, engaging, and easily digested—which is precisely what the anti-socialist, pro-freedom side needs right now.

  Your guides on the tour of the unfree world you are about to embark upon could scarcely be better chosen, I might add. Bob Lawson, who has done extensive research on the economic freedom of the various countries of the world, has important insight into what works and what doesn’t. Ben Powell’s book on sweatshops, published by Cambridge University Press, explains what needs to be done (and what needs to be avoided) for the developing world to prosper—as well as the various ways that ignorant, if sometimes well-intentioned, Westerners retard that process.


  Turn the page, and your journey begins. The good news: when it’s all done, you can close the book and be back in semi-capitalist America.

  At least for now, that is.

  Tom Woods

  TomsPodcast.com

  INTRODUCTION

  NOT SOCIALISM: SWEDEN

  SEPTEMBER 2009

  “If I’ve got one major bitch about Sweden,” I said as I sat across the table from Bob at the Duvel Café in Stockholm, “it’s the alcohol prices.”

  The Duvel Café isn’t a dive, but it’s not a swanky, high-end bar either. Behind its plain, black, street-front exterior is a five-seat bar with high-alcohol Belgian beers on tap, a few booths, and the uncomfortable wooden window seat that was causing a major pain in my ass. Yet, despite the relative geographic proximity to Belgium, our Belgian beers cost far more than what we were accustomed to paying in the U.S.

  “Fucking taxes,” he answered. “Sweden has to pay for its welfare state.” He was right. Sweden taxes alcohol at rates higher than most countries. In fact, Sweden taxes everything. A lot.

  Sweden is the first stop on our tour of socialist countries, even though it’s not a socialist country. Wait. What? You heard Sweden was an example of how socialism works? Though lots of people believe Sweden is a socialist country, and some of our politicians try to use that misunderstanding to advance their own agendas, we’re going to present evidence to the contrary. But first, let me give you a little background about Bob and me, so you’ll know where we’re coming from.

  Bob grew up in Cincinnati, Ohio. His background is working-class, and he’s a lifelong fan of Cincinnati’s subpar professional sports teams. While earning his PhD at Florida State University in the early 1990s, Bob became involved in a project analyzing quantitative data that would finally settle a question that has long been a point of disagreement among social scientists: whether a more capitalist government or a more socialist government creates conditions that translate to a better quality of life for its citizens.

  The idea for Bob’s economic freedom index, published in the Fraser Institute’s annual Economic Freedom of the World report, started with Milton Friedman, the Nobel Prize–winning economist, and Michael Walker, the executive director of the Fraser Institute in Vancouver. Since the mid-1990s, Bob has worked with Professor James Gwartney of Florida State to put out the Fraser Institute’s annual economic freedom index. We’ll talk about the index a lot in this book. Bob was a professor at Shawnee State and Capital University, both in Ohio, and Auburn University in Alabama, before he landed his current gig in Dallas where he is the director of the O’Neil Center for Global Markets and Freedom at the Cox School of Business at Southern Methodist University.

  I come from a similar working-class background in Haverhill, Massachusetts, about thirty miles north of Boston, and remain an avid fan of Boston’s decidedly superior sports franchises. Our differing allegiances don’t hurt our friendship. In fact, Bob’s a loyal enough fan of his Bengals to bet me a bottle of liquor, without the benefit of a spread, each time they play the Patriots. I’ve enjoyed drinking those bottles, though I suspect he’s regifting me the booze he’s won from another friend of his who insists on rooting for the Browns.

  I earned my PhD at George Mason University and went on to be a professor at San Jose State University in California and Suffolk University in Boston before taking a position as an economics professor and director of the Free Market Institute at Texas Tech University six years ago.

  Bob and I became friends at a Mont Pelerin Society meeting in Salt Lake City in 2004. The economist Friedrich Hayek founded the society in Mont Pelerin, Switzerland, in 1947, bringing together accomplished academics from around the world concerned with the spread of socialism and totalitarianism. Over the years, eight members of the Mont Pelerin Society have won Nobel Prizes, including Hayek and Friedman. Today, the society has more than five hundred members—not just academics, but business, political, and intellectual leaders—who share a commitment to defending freedom.

  Salt Lake City was dry back in 2004, except for “private clubs,” essentially bars that sold short-term memberships as a cover charge. Bob and I became members and drinking companions at one such club near our hotel, and we climbed our first mountain together in the nearby Wasatch Range. We’ve since shared countless drinks, attended dozens of economics conferences, and climbed many mountains.

  Bob and I also share a devotion to freedom and free markets. But our devotion is not mere ideology, it is also informed by economic theory and evidence. Nobel prize–winning economist James Buchanan believed understanding economic principles allows “the average man . . . to command the heights of genius,” but that without these principles “he is a jibbering idiot.”1 In many ways we’re fairly regular guys, but our training in economic theory and our analysis of economic data allow us to see, understand, and explain the world a little differently than most people—and, we hope, help us to avoid being “jibbering idiots.”

  This book is a truthful accounting of our travels, and so includes our sometimes excessive drinking, low-grade misogyny, and salty language. We are white, middle-aged, American males who are not “woke” and don’t even know what “intersectionality” means. If that offends you, you can put this book down and read one of our boring academic journal articles instead. It will make the same points but without the local color.

  In this book, though, we’re aiming for a popular audience that will appreciate not just our economic insights but our down-to-earth honesty. We wrote this book because too many people seem to be dangerously ignorant of what socialism is, how it functions, and its historical track record. We also wanted to get drunk in Cuba, and this was a great way to write off our expenses.

  * * *

  In the spring of 2016, a Harvard survey found that a third of eighteen- to twenty-nine-year-olds supported socialism.2 Another survey, from the Victims of Communism Memorial Foundation, reported that millennials supported socialism over any other economic system.3

  The Young Democratic Socialists of America, which had only twelve chapters on college campuses at the end of 2016, burgeoned to nearly fifty chapters by fall 2017.4 Twenty-year-old Michelle Fisher, the national co-chair of the organization, said, “I think people in my generation—people who grew up post-Cold War—I don’t think socialism is as much a scarlet S as it is for older folks. . . . The taboo for me was never there.”5

  Obviously not. The Victims of Communism survey found that 31 percent of millennials had a favorable view of Che Guevara; 23 percent thought well of Vladimir Lenin; and 19 percent approved of Mao Zedong, so at least two out of ten millennials apparently think that mass murder in the interest of socialism isn’t so bad. That’s one of the taboos that’s fallen.

  But it isn’t just young people who ignore or deny socialism’s pernicious past. In 2017, the New York Times ran a weekly column, “Red Century: Exploring the history and legacy of Communism, 100 years after the Russian Revolution.”6 While the columnists and topics varied from week to week, there was little focus on the intentional mass killings carried out by socialist regimes. Nor was there much mention of the economic insanity of socialist governments that resulted in millions of people starving to death. In an entire year’s worth of columns, only one discussed how socialism led to economic stagnation. Overwhelmingly, the Times treated us to columns about how socialism was merely an advanced form of liberalism, highlighting the allegedly green policies of “Lenin’s Eco-Warriors” and instructing us on “Why Women Had Better Sex Under Socialism.”

  At about the same time, Bernie Sanders, a self-proclaimed democratic socialist, made a strong run for the Democratic Party nomination for president, getting 43 percent of the vote in the 2016 Democratic primaries.

  How can so many Americans view socialism so favorably, when in practice it has led to misery and mass murder? The answer is that, like the New York Times, many people assume that socialism is merely a more generous form of liberalism.

  The Victim
s of Communism survey found that only a third of millennials could define socialism correctly. In the first Democratic Party debate, Sanders was asked how a socialist could win a general election in the United States. He pointed to “countries like Denmark, like Sweden and Norway,” as examples of his version of socialism.7 But those countries aren’t socialist.

  Sweden does have a big welfare state, government-provided health care, and generous unemployment benefits, and the drinks at Duvel Café were indeed highly taxed. But welfare and entitlement programs, however highly prized by socialism’s acolytes, are not the defining components of socialism.

  The economic freedom index that Bob helped create is probably the best way to measure whether a country has a more capitalist or socialist system. The index uses a zero-to-ten scale, with higher scores indicating a more capitalist system. If a country earns a high score on the index, that generally means that country keeps government taxation low, respects private property rights, maintains the value of its currency, lets people trade freely, and keeps regulations to a minimum.

  So how does Sweden stack up? Overall, Sweden gets a 7.54 rating, which is good enough for twenty-seventh place out of the 159 countries in the study. Sure, Sweden taxes the bejesus out of its citizens. Its tax-and-spend score is very low indeed—3.64 out of 10. It regulates labor markets quite a lot (6.81) as well, but overall it does a good job protecting property rights (8.35), avoiding inflation (9.71), allowing free trade (8.28), and only lightly regulating credit markets (9.90) and businesses more generally (8.08). Of the other Nordic countries Comrade Bernie mentioned, Denmark rates 8.0 and Norway 7.62. All three rank in the top fifth of the most economically free countries in the world.

  Bottom line: Sweden is a prosperous, mostly capitalist country. When we were there we could see this with our own eyes. The Swedes were obviously wealthy, their buildings were well maintained, and their beer was good and cold. In fact, what we saw was consistent with the research that uses the economic freedom index to measure the impact of economic freedom on living standards. In a recent review of nearly two hundred academic studies, Bob and his co-author Joshua Hall concluded, “Over two-thirds of these studies found economic freedom to correspond to a ‘good’ outcome such as faster growth, better living standards, more happiness, etc. Less than four percent of the sample found economic freedom to be associated with a ‘bad’ outcome such as increased income inequality.”8