Is Socialism Ever Sustainable?

Most people support socialism to some extent. Taking care of everyone feels right. Compassionate. Moral. Upto a point. Beyond that, it just feels parasitic.

One attempt at this was through communism. The model turned out to be financially unsustainable. There was no incentive to be creative or innovative. No reward for performance. That system just doesn’t work.

How about socialism funded through a capitalistic model? Can that work? That’s the model that Europe uses. So far, the results are good. But the critical question is whether they can sustain it in future? Does Europe have enough to pay for healthcare and pension even as the number of people needing it increases and the number of people contributing to that kitty decreases? An increasing life expectancy increases the time for which people need to be taken care of. The recession has resulted in stimulus packages and bailouts. Which in turn has added huge debts to the state’s accounts. And has to be paid back. Given all that, I don’t think that the socialism-through-capitalism model will pass the test of sustainability.

Which brings me to the question: is socialism ever sustainable?

Problem #1 is predicting the amount of money that is needed decades later. There are so many unknowns in the equation. Will the rate of population growth drop and decrease the numbers contributing to the cash collection? Will employment opportunities drop and add to the number of dependents? By how much will life expectancy increase?

Problem #2 is ensuring that the state does have the money when it is needed.

Printing more money is always tempting. Unfortunately, it never works. It just drives inflation up. And ends up increasing the cost of everything, including the very things that socialism attempts to provide.

How about collecting all the money needed to take care of a generation while they are still working? And then make it available to them decades later. There are complications in implementing the idea. The first is the tax rate that is imposed. Make the tax rate too high and you lose the next election. Or tempt more people to hide their real income. The second is for a state to invest the money till the time it is needed. Remember Iceland? That’s the country that went bankrupt in this recession! Even without getting to that extreme, remember that markets are inherently risky. Countries could make wrong bets. And lose money. Sometimes, big money.

But what if a state did invest the money wisely? Wouldn’t that do the trick? Not necessarily. There could be massive, unplanned cash outflows from the state between the time the money was collected and the time it has to be given back. Due to a massive earthquake. Or a pandemic. Or a recession. Or a war. Poof! There goes a big chunk of the state’s money. How will they cover the shortfall come pay day?

Couldn’t a state that has a scarce, universally in demand resource make socialism sustainable? Just selling that resource would bring in the money. Like a country having oil. The trouble is that even such resources aren’t going to last forever. Or an alternative to that resource may be found. And then, where will the state get its money?

Worse, any attempt at socialism adds an additional, unintended risk. Individuals in such countries don’t set aside too much for retirement or healthcare. They rely on the state to take care of them. Which make the consequences of a state’s subsequent inability to deliver even more catastrophic. Makes you wonder whether a state that has a “You are on your own” attitude towards its citizens is actually safer for its citizens! Isn’t that ironic!

Socialism is what the heart wants. The head is yet to figure out a way to achieve it in a sustainable manner.

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