June 28, 2022

How Socialism Discourages Work and Creates Poverty

Socialism diminishes people’s incentive to work to improve their circumstances by depriving them of the fruits of their effort.

Advocacy for “socialism,” which the Socialist Party USA defines as a “social and economic order in which workers and consumers control production,” has made a comeback in American politics in recent years. Public figures such as Vermont Senator Bernie Sanders sing its praises. But the truth is that socialism deeply undermines people’s ability (and motivation) to improve their own living conditions. The misery socialism has caused for millions of people refutes its promises—horrifically.

Socialism, advocates claim, will bring prosperity and better living conditions for everyone, a claim also made for communism, in which the government controls the means of production and the distribution of the results. British philosopher Bertrand Russell wrote that socialism is “calculated to increase the happiness, not only of proletarians, but of all except a tiny minority of the human race.” As have its advocates throughout history, the now-defunct Socialist Labor Party of America depicted socialism as utopian, writing: “Under socialism our farmlands would yield an abundance without great toil; the factories, mines and mills would be the safest, the most modern, the most efficient possible and productive beyond our wildest dreams—and without laborious work.” The website doesn’t specify how such magic would occur.

The website further insists that socialism would improve virtually every aspect of life, stating: “Our natural resources would be intelligently conserved. Our schools would have the finest facilities and they would be devoted to developing complete human beings, not wages [sic] slaves who are trained to hire themselves out for someone else’s profit. Our hospitals and social services would create and maintain the finest health and recreational facilities.”

But socialist policies, when enacted, have catastrophic effects on the lives of the people living under them. To enforce such policies, governments must take control of people’s property—whether by fully nationalizing businesses, mandating what and how much a company must produce, or seizing and distributing their products—thereby violating people’s right to the product of their own effort. The victims include entrepreneurs who have built or purchased businesses, landlords who maintain and manage properties, and everyone who earns a wage, from construction workers to artists.

By violating these rights, socialism diminishes people’s incentive to work to improve their circumstances by controlling or taking away the results of their effort. However hard you work, whatever you achieve, whatever value you create—it won’t be reflected in your earnings.

The novelist Ayn Rand dramatized the effects of such a doctrine in her magnum opus, Atlas Shrugged. In the novel, a small town factory enacted Marx’s slogan “From each according to his ability, to each according to his need” as policy, so that each person’s pay depended on what managers considered as their level of need compared to their colleagues’. They did this based on such factors as the number of children the employees supported, family members’ illnesses, and so on. People began to spend more time sharing their woes with the management than working, and many of the best employees left the company entirely. Within four years, the factory closed. One character explained the hopelessness the policy created: “What was it we were supposed to want to work for? For the love of our brothers? What brothers? For the bums, the loafers, the moochers we saw all around us? And whether they were cheating or plain incompetent, whether they were unwilling or unable—what difference did that make to us? If we were tied for life to the level of their unfitness, faked or real, how long could we care to go on?”

He explained that the company had once been a thriving one that people were proud to work for, but now hard times were the status quo: “We were beasts of burden struggling blindly in some sort of place that was half-hospital, half-stockyards—a place geared to nothing but disability, disaster, disease—beasts put there for the relief of whatever whoever chose to say was whichever’s need.”

This story, although fictional, points to an important fact about human nature: If people can’t change their situation, they won’t try to. Knowing the outcome in advance, they will feel no motivation to make Herculean efforts for miniscule or nonexistent rewards. As economist Ludwig Von Mises put it:

To make a man act, uneasiness and the image of a more satisfactory state alone are not sufficient. A third condition is required: the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness. In the absence of this condition no action is feasible. Man must yield to the inevitable. He must submit to destiny. [emphasis added]

Socialist policies severely restrict individuals’ ability to improve their conditions, so productivity suffers and living conditions plummet. Historical examples of socialism, as well as modern-day Venezuela and North Korea, show the misery that results.

In Soviet Russia, the government attempted to distribute the results of sixty years of steady GDP growth equally by seizing personal fortunes and dictating wages. But buying power for the average person dropped sharply, and whether a person could actually spend his or her wages was largely dependent on knowing the right people. Economist Mark Harrison explains: “The distribution of consumer goods and services was characterized by shortage and privilege. Every Soviet adult could count on an income, but income did not decide access to goods and services – that depended on political and social status.”

People who lived under the Soviet regime and now live in modern Russia appreciate that they have more opportunities to improve their lives than they used to. Back in 2007, interviewers asked Russians about their memories and opinions of life under the Soviet regime; many of them recalled that the USSR had “fewer possibilities.” One respondent explained, “Now there are so many chances. You can earn enough money even to buy an apartment. Certainly it is very, very difficult, but possible.” Another participant elaborated, “Now I can earn money and there are many ways of doing so. . . . In the Soviet Union, engineers and other technical employees of middle and high rank did not have [a] right to a second job. People who had the time and energy and wanted to provide more for their families could not do it.”

In other words, people were willing to work extremely hard to improve their conditions—but weren’t allowed to.

In Venezuela, socialism has driven a once-prosperous country into the ground. University professors juggle multiple jobs to keep food on the table. Others try to escape a desperate situation; more than six million have fled in recent years, and in 2017 the suicide rate was nearly double the global average. Venezuelans are willing to work to improve their circumstances—but the socialist regime’s oppression and economic destruction consistently frustrate their efforts.

North Korea was conceived as a communist nation following the Second World War, but formally switched to a form of “self-reliant” socialism following the Korean War. The leadership of the Worker’s Party of Korea has brought widespread misery in the form of horrific rights violations, including torture, severe censorship, forced labor, and arbitrary detention. Their policies have also led to nearly half the country suffering from inconsistent access to food and water—in stark contrast to their far more capitalist neighbor, South Korea, which has flourished in recent decades.

Advocates of socialism protest that historical examples of socialism were not “true socialism” or “the right kind of socialism.” But it is socialism—people giving government control of producing things—that undermines people’s ability and willingness to produce and provide for themselves in all these examples.

With free markets, by contrast, people are free to own private property and run businesses without the government dictating production or distribution. People are rewarded for their hard work and ability. By innovating, excelling at work, and creating more and better products or services, they can make more money, which they can use to pay for better living quarters, education, electronics, travel, or other life-improving goods or services produced by others. Hence, in mostly free and capitalistic countries, such as the US, the United Kingdom, Ireland, and Hong Kong, people have enjoyed massive economic growth, which has corresponded with a major increase in average living standards.

When human beings struggle, create, and innovate, but their efforts do not improve their own circumstances, they burn out or give up. Marx, Russell, Sanders, and other proponents of socialism and communism claim that their preferred systems are “for the people”—but the truth is that they work against the nature and needs of human beings.

This article, How Socialism Discourages Work and Creates Poverty, was originally published by the Foundation for Economic Education and appears here with permission.  Please support their mission.