4 Reasons Why Socialism Fails
The new “democratic socialists” want to make their followers believe that one could redistribute wealth and income and socialize a large part of the economy without harming production and productivity. They claim that a comprehensive control of the economy by the government would bring more justice and more prosperity. The democratic socialists want more planning and less market. Yet this postulate ignores that socialism does not fail by accident or circumstance. Socialism fails because it suffers from four fundamental design defects.
- First, socialism eradicates private property and markets and thus eliminates rational calculation.
- Second, socialism allows soft budgets, so there is no mechanism in place to discard inefficient production methods.
- Third, abolishing private property and replacing it by the state distorts the incentives.
- Four, the socialist system with its absence of private property and of free markets inhibits the economic coordination of the system of division of labor and capital.
