ANALYSIS: On Socialist Death Spirals

By Published on July 10, 2015

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.

Read the article “ANALYSIS: On Socialist Death Spirals” on manhattancontrarian.com.

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