Socialist policies have a way of freezing their object at a point in time, like taking a snapshot. Take, for example, laws intended to give workers a better income. European governments have been doing this for years, making their companies uncompetitive and raising barriers to new workers. That’s why youth unemployment is so high. Chart by Reuters.
They start with good intentions, of course. Everybody wants workers to have a better wage, time off, health care, and early retirement. There’s a moral hazard, though. Politicians can pass these laws all day long, because they don’t have to bear the costs. They will compete to befriend the working class and, whatever level of largesse might be appropriate, they will overshoot.
Wherever there is a good intention, there must be a tradeoff. Policy is all about balance. If you can’t see the tradeoff, then you haven’t understood the problem (or you have succumbed to a moral hazard).
We think France has the most absurd labor laws – see here, here, and here – though Italy may be worse. When companies can no longer support their “social charges,” they’re not allowed to reduce staff. Like a snapshot, socialist policies froze Europe’s workforce at a point in time. Those who are in, are locked into the good life ‘til retirement. Young workers are locked out.
If you’re a hardcore socialist, you may feel that companies should bear unlimited social costs. Any profit above zero means that workers are being exploited. If “the people” owned the means of production, then every penny could go to the workers. Wherever this has been tried, unfortunately, the result has been a freeze-frame economy.
At the time of the revolution, the Russian economy was all primary production and a little heavy industry. The new Soviet government took ownership of mines, farms, dams, steel mills and crude factories – all labor intensive, the best possible industries for socialism.
Fifty years later, it was the same grainy photograph. Outside the Soviet Union, steel production moved to electric mini mills, farmers enjoyed the “green revolution,” Shockley invented the transistor, and Sony gave us the Walkman. In the free world, competition drove innovation and human progress.
The causes and effects of the Soviet tragedy are well known, and we needn’t go into details. Our purpose is to show a general rule, which is that socialists invariably look at history synchronically. They seek to protect today’s workers in today’s economy – preserving them in aspic, as it were – and they end up condemning the workers of tomorrow.
See also: Second Class Workers