In part 1, we tracked socialism’s history, from the socialist ideals practiced by ancient kingdoms and empires to enlightenment-era utopian dreamers to Karl Marx. We discovered that Karl Marx was the first to concretize collectivism, leading to many socialist experiments in the 20th century. Now let’s answer the question: does socialism work, especially in our modern era? Proponents say it can, overlooking collectivism’s track record and advocating for a new kind of socialism: democratic socialism. Critics condemn this view as a lie, a falsehood, claiming that the fact that past failed attempts at socialism prove it is unfeasible, totally unsuited to economic phenomena. So, who is correct? Let’s examine both perspectives and determine which one reality favors.

Benefits of socialism
Those who support socialism argue it provides equality, something sorely lacking in free-market capitalism. While capitalism encourages fierce competition, dividing society between the haves and the have nots, socialism removes the need for competition through complete bureaucratic control of the government. Economics Help points out that this, in turn, leads to increased social harmony, as the class struggle Marx often spoke of no longer exists (it left with capitalism). Furthermore, socialism keeps the free market in check. Things like lobbying and monopolies, which thrive in laissez-faire economics, are nowhere to be found under Marxism due to the strict regulations and bureaucratic control of the government. Finally, socialism encourages altruism. Capitalism is based on greed and money-hungry businesses doing everything they can to maximize profits, even at the expense of others. Socialist societies, on the other hand, prioritize “social cohesion and the common good.” Supporters of socialism argue that the combination of equality, strict business regulations, and altruism make socialism the superior alternative to capitalism.
Most people reading the above would conclude socialism is the superior economic system. Socialism egalitarian principles certainly provide great appeal. But ultimately, it’s a lie. Socialism is incompatible with basic economic principles. Despite Karl Marx’s attempts to concretize it, it is still an incredibly perfectionist system, completely unsuited for the real world. Let me explain why.

Socialism is inefficient
As Encyclopedia Britannica notes, a key problem of socialism is “the [lack of] … effective coordination of production and distribution.” In a capitalist economy, market forces drive the economy and people vote with their dollar. Market prices communicate information about scarcity to the populace, which acts in accordance with their individual needs. Consumers engage in a type of democracy, voting with their dollar, so to speak, to reward companies that give them the desired products and services at high quality, and punish the ones who don’t. In socialism, bureaucrats make all the economic decisions. This cannot work because a small group of people lack the foresight to make economic decisions for massive, industrial economies. Government officials determine the amount of supply and set the prices, meaning they are set in stone and cannot adjust to changing economic conditions (i.e, the real world). As Joey Simnett notes in his article “The top five reasons why socialism doesn’t work,” artificially set prices and supply amounts almost always lead to “economic chaos, shortages and waste.” It’s part of what killed 40-70 million Chinese citizens during the Great Chinese Famine; the Chinese Communist Party (yes, communism is a type of socialism) simply could not supply the needed food for an ever-increasing population.
Socialism encourages government corruption. As the saying goes, with great power comes great responsibility. Socialism operates with a central planning apparatus, which places an immense amount of power in the hands of the state, assigning to it the task of redistributing wealth and creating no accountability system to keep officeholders in check. (Socialist leaders are elected democratically, but once they seize power they never step down, manipulating elections and imprisoning political opponents.) The logic is simple: take from the rich and give to the poor. The government facilitates wealth redistribution, meaning that the money is in the hands of the State for a period of time, before being transferred to the poor. There is only one problem – the money never gets to the common people. It stays in the hands of the State, which begins using it for nefarious purposes. Human beings are flawed and simply cannot be trusted with such wealth and power. They almost always begin abusing it, using it for their own wealth or material gain. Enter corruption. Ergo, bribery, embezzlement and massive corruption-related scandals often plague socialist countries.

Socialism kills economic growth
Apart from the inherently flawed nature of central planning, syndicalism is the chief enemy of economic growth. Collectivism puts a gargantuan amount of regulations on businesses and major corporations, drastically diminishing the private sector. (Just look at what happened in Venezuela: PragerU tells us that Hugo Chavez destroyed contracts with oil and gas corporations and told the businesses to either submit to regulations or leave.) On the other hand, government officials and employees benefit from being on the right side of the massive government bureaucracy. What’s more, these workers have a hedge of security and social benefits around them.
Social benefits are not bad in of themselves, but an excess of them shields workers from the natural accountability mechanisms that exist in a free market economy (i.e., firing bad employees). In other words, people can slack off and get away with it, especially if you work for the government and have the right connections (who’s going to fire you?). Combine this with the inevitable lack of competition generated by private enterprise, and you get economic stagnation, a trademark characteristic of socialist countries. By allowing bad players to stay in the arena, in both the government and the workforce socialism eliminates any chance of economic growth or prosperity. Ergo, the world’s richest, most prosperous countries are market economies.

Scandinavia debunked
When presented with the above arguments, socialism’s advocates claim socialism can still work. They point to Scandinavian countries like Sweden and Norway, contending those are examples of democratic socialism, collectivism that works. However, none of those countries are socialist. The then Prime Minister of Denmark, Lars Lokke Rasmussen, came to Harvard and gave a speech in which he plainly stated that Denmark is a market economy. Scandinavian countries have socialist elements in their economy, as does the United States, but their economies operate under capitalist principles. Many such European countries tried socialism in the past, and it did not go well. John Stossel tells us that when Sweden tried socialism, “[t]he result was high taxes, inflation, and economic decline.” They then rejected it once things went south. The sad truth is that socialism simply does not work.

Conclusion
Socialism, while offering great appeal, is a deeply flawed economic system. Those who claim syndicalism is a good alternative to capitalism ignore socialism’s bad track record. Every nation that tried socialism regretted it. Some economies managed to escape the tyrannical stranglehold of big government; others are still struggling with the devastating effects. It may be a hard pill to swallow, but socialism and success and economic prosperity are mutually exclusive. What we need, instead, is regulated capitalism. Have the free market run the economy, with moderate social benefits and sufficient government regulations to keep major corporations in check. We must learn from Russia, from China, from Venezuela, from all the countries that had unsuccessful experiments with socialism, lest we go down the same path. Those who do not study mistakes from history repeat them.