Last Spring I went to Mexico City and found myself in a conversation with members of a family I was visiting about salaries and federal service. Two of the members were working in a department called “Hacienda” that deals with fiscal planning, budgets and tax collection.
It seems that newly elected President Andres Manuel Lopez Obrador (AMLO) was following through on his campaign promise to cut the salaries of federal workers by one-third and two of the members of the family were affected by this. One made up for some of this drastic salary reduction by accepting a promotion and the other left federal service to take a position with the Mexico City government at a wage similar to what he had before the cut.
The bitterness associated with the salary cut also involved the government stated purpose of giving the money taken from the salaried workers to the poor. This was interpreted to mean that people that worked and produced for the country had a large part of their salary taken away in order to give the money to those that did not work or produced.
Although this event represents a microcosm of a much larger economic environment, it is becoming clear that this policy and others that foster government intervention to distort the economic cycle in favor of a social policy, can have dangerous results. Some of these results include a reduction of the Gross Domestic Product (GDP) from 2 percent in 2018 to a growth of only 0.8 percent in 2019 and a projected growth of 1.4 percent in 2020.
In these practices, there are elements of socialism. “The term socialism refers to any system in which the production and distribution of goods and services is a shared responsibility of a group of people.
Socialism is based upon economic and political theories that advocate for collectivism. In a state of socialism, there is no privately owned property.”
Given this, when Bernie Sanders says he is a “Democratic Socialist,” I don’t know what that means. Yet, I do not believe that this includes taking earned money from working people and giving it to those that do not work.
However, there is some of this in his notion of taking money away from “millionaires and billionaires” and using it for the benefit of the other 98 percent of the country. Perhaps President Obama said it best when he often stated that everyone should pay their fair share and that includes the wealthy individuals and private corporations that often find enough “loop-holes” in the tax code to keep from paying any taxes at all.
That is not classic Socialism as it represents a rational way of accounting for our economic, social and infrastructure obligations. There are socialistic tendencies however, practiced by all developed societies when it comes to basic services, general welfare policies and safety nets.
Obamacare and Medicare for all are choices offered to the American public in this vein. We also have private regulated monopolies such Excel Energy that provides electric and gas services in place of government.
Socialism has worked best in China where more than a billion people had to be organized and united into a common purpose. Yet, once the country’s economy rose, it began to develop an economic system that answered to the demands of markets rather than government.
America’s free enterprise system has been a model for the rest of the world to follow. It is also using socialistic tendencies as a convenient and economic way of serving the people.