ANALYSIS: On Socialist Death Spirals
Here in the world of capitalism, we are accustomed to the idea that the economy grows every year. Sometimes the growth is 4 percent in a year, and sometimes it’s only 1 or 2 percent, but it is rare to have actual economic shrinkage that goes on for longer than a couple of quarters before growth resumes. What’s going on is that hundreds of millions of people, all seeking to better themselves, and working under the incentives of a (relatively) free marketplace, each year find many small ways to work a little more effectively or efficiently.
In a world of public ownership, government handouts, and “each according to his needs” — that is, in a world of socialism — the incentives are the opposite. Where most of the economy is government-controlled, then for most people, the immediate way to improve your economic condition is to qualify for more handouts; and the way to qualify for more handouts is to become less rather than more economically productive. For fully or substantially socialized economies one would expect to observe long-term gradual economic decline, and the more fully socialized the faster the decline. Call it the socialist death spiral.
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