This likely will not be my most liked post, but I do think it is a topic that deserves our consideration.
Socialism is becoming more popular with younger Americans. Don’t believe it? Do a web search.
While I am strongly in the capitalism over socialism camp, I do find it interesting. With so many younger current and soon-to-be voters feeling this way, I can’t help but think we’ll see some changes.
What’s the Difference?
My wife was born in socialist Cambodia during the Khmer Rouge. Socialism did not go well for Cambodia. Lots of killing. Watch The Killing Fields. The summary says it all. Or read more here.
A good friend of mine lived in the Netherlands. Socialist policies seem to be working fairly well. Taxes were very high but he felt that the country did a good job taking care of its people.
A Different Socialism?
According to MSNBC:
Equality
This is the word that comes up more than any other as I read about young American’s desire for socialist policies.
And one of the key catch-phrases is tax the rich!
How can we have poverty, debt and homelessness on our streets while Musk and Bezos have more money than they could spend in 100 lifetimes?
America
So how did we get here?
Literally, not figuratively.
My wife and I spent a few days in Plymouth, MA. We went to see the rock. Not this one.
And while the rock itself (both?) was unimpressive, I couldn’t help but admire the folks who left their home country over 200 years ago, got on a small and pretty flimsy sailing vessel, and sailed for 10 weeks to reach an unknown land.
That’s ballsy.
There is no other word. Can you imagine the courage that took?
In an earlier post, I wrote about a TV show I watched called The Men Who Built America. Banking, Railroads and Oil. Men who took huge risks – and were largely hated during their lifetimes – to build the infrastructure that enabled us to get where we are today.
Looking back at our country and the people who came here and who helped America prosper, it isn’t hard to see why capitalism is fairly well entrenched.
Neither is Perfect
Capitalism has left some behind. And socialism has been no picnic in many cases.
And for me, the overriding principle is that I want less government control, not more.
For those advocating for socialism, how do you think they’d react if the government said “OK, we hear you. We’ll give all the wealth and power to the President and we’ll let him decide how to divvy it up.”
I’m guessing it’s not what they imagined.
And while the MSNBC article claims that it’s not about government control, someone or some entity needs to enforce the rules. That’s government.
Tax the Rich
This is the one that drives me the most nuts.
First of all, who are the rich? And who decides?
And taxes are like crack – never tried it but I’ve heard stories. Once the government gets a taste, they’ll want more and more. Tax the billionaires today, the millionaires tomorrow, and then anyone who drives a car that costs more than $50,000.
Where does it stop?
Equity
Bezos and Musk are ridiculously rich. But they don’t have piles of cash sitting in a vault. Their net worth is largely made up of their share of the companies that they’ve built. The value of their companies change throughout every trading day.
CNBC delights in telling us how much Elon loses in net worth when Tesla stock pulls back 5%.
How do you tax that?
And riches and lavish weddings aside, Musk, Bezos and other entrepreneurs founded and grew successful companies. Are they not entitled to ownership of the companies they’ve built?
My wife has a huge garden. She works tirelessly in it every day. We’ve got a bumper crop of Swiss chard this year. Some have none. Should they be entitled to take the fruits of my wife’s labor?
It’s a slippery slope. Something needs to be done but I don’t see how taxing the rich is the answer.
And don’t get me started on giving more control to our elected officials – any of them.
Defense…
I suppose some of this was a defense of capitalism, but let me get back to my original point.
Looking at Musk and Bezos, and Buffet and Gates and Jobs and Phil Knight of Nike, or even Ray Kroc of McDonalds, these are people who sacrificed to chase a dream. Working endless days, sleeping on the shop floor, pouring their own money into the company, borrowing to keep things afloat…it goes on and on.
Success stories like this seem to happen more often in America than anyplace else.
But back to the fairness thing, I was thinking about this in terms of Musk and Bezos. In America, they had the opportunity to build their companies.
But capitalism and the US capital markets gives each of us the opportunity to profit from their success. Musk’s Tesla and Bezos’ Amazon are both publicly traded companies.
Amazon went public on May 15, 1997. If we bought shares on that day, our investment would have grown by 224,833.61%. A $10,000 investment would be worth $22,493,360.57 today.
Tesla went public on June 29, 2010. It’s up 27,701.22%. A $10,000 investment would be worth $2,780,121,81 today.
Wrap Up
I find the new love for socialism fascinating. I understand the desire for a better life for all of us. I just don’t see how turning control over to our elected officials is a solution.
I’ve seen no evidence that they’re the right folks to solve these problems. I think they’ve had their chance and failed many times over, and I think the potential government shut-down that is looming once again is just more evidence that we need less government control.
Capitalism is flawed and we need to do better. But that said, I’m glad to live in a country where people can start a business and grow it without the government taking control.
And it’s a nice benefit that our capital markets provide us the opportunity as investors to participate in the wealth generation of some of our favorite companies.
Investment is a risk. Founders like Musk, Bezos, Buffet, Gates, Jobs, Phil Knight of Nike, and Ray Kroc took tremendous personal risk. They risked their livelihood. We don’t need to. We can simply buy a few shares.