Ryan Petris

Socialism and Equality

Socialism is looked to as the future, a future where everyone is equal not only politically but monetarily. Is that true? Is socialism really going to solve any of the problems of inequality? Is it going to reign in those greedy rich people?

Lets take a look at a simple scenario and find out.

Definitions

First, we're going to be looking at socialism from the perspective that everyone is greedy, and that's because one of the common arguments against capitalism and for socialism is that people are greedy in nature and socialism would be more fair.

Next, lets define what I mean by socialism, as there are many different ideas that get thrown around and can be a large spectrum, all the way to communism. What I'm going to be addressing is the socialism where workers control the means of production, i.e. they effectively own the companies they work for. This would be a system where you still earn a salary and you still do whatever your normal job is, but you own part of the company. Also to make things simpler, we'll say that the salary you earn is tied to the percentage of the company you own, and that everyone owns the same amount.

I'm not going to address how this system would work when changing jobs or companies (i.e. where does your stock come from), whether it's fair that everyone makes the same amount of money, or how the internal politics may work. Assume if you need to that everyone that works the for company does exactly the same job if that makes this easier to comprehend.

As already alluded to, lets also assume that this system still has some form of currency; i.e. you still earn some sort of salary for working at the company you're employed by, that company that you own part of. Your salary is merely profit times the percentage of the company you own, and remember that everyone owns the same percent. Thus, your salary is entirely profit driven.

We need currency to be part of this system because a system without currency does not drive anyone to work to their fullest, to excel above their piers, because there's no incentive to do so. In a currencyless system, regardless of how well you do your job, or how much more productive you are than others, you're still only going to get whatever the government gives you. Currency needs to exist and be available to drive a greedy person's ambitions, so that you can get the most out of that person. You, the person reading this article, may be content with doing your best only for recognition, but remember we're taking a greedy person's perspective here, as that's what this system is trying to prevent.

Situation

You work for ACME Widgets Inc., a cooperative made up of about 500 people. This company manufacturers widgets that people can buy, and is rather successful. Last year, the company brought in $1 billion in revenue with a profit margin of 5%, netting the company $50 million in profit. Split among the 500 members of the company, everyone received a paycheck of $100 thousand.

While your company has been growing, you've had to bring in more people to fill orders of widgets, and thus your profit is getting split among more people, effectively making your salary stagnant. You gather the company together to figure out what can be done about this problem.

You end up hiring ACME Efficiency Inc., a cooperative made up of 20 people, to help you make your manufacturing more efficient. They quote you a cost of $1 million to look at your business processes and guarantee that implementing their changes will increase your profit margin by 20% without raising your prices. Looking at what this means for your own salary, it will only cost you $2 thousand this year, but it's going to increase your yearly salary by $20 thousand. That's a great deal! So, you agree to let ACME Efficiency Inc. implement their changes to your business processes.

Over the next month, a couple people per say show up from ACME Efficiency Inc. show up to take a look at your current processes and implement changes. At the end of the month, all of their changes are made and they're on their way. You start to notice that you are indeed making what they guaranteed, in fact you're making even more than they guaranteed; they increased your profit margin by 30%, meaning that your yearly salary is now $130 thousand, along with everyone else.

Introspection

You made out like a bandit didn't you? Along with the rest of your company, you got a significant pay bump without having to do much at all, and you're getting that every year now.

Lets look at how ACME Efficiency Inc. is doing. They made $1 million off you last year, but it only took two people one month of work to earn that. Lets assume that all 20 people at the company are doing the same; that's effectively 10 teams of people making $1 million per month, which is $120 million per year for the entire company. Distributed among the 20 employees, each person made $6 million last year!

You're probably looking at that number, thinking that's not fair, they made a ton of money and I didn't make much at all! Well, that's not how you felt a few minutes ago, when you were salivating over your extra $30 thousand per year. What changed?

Conclusion

Remember, we were taking a look at this from the perspective of a greedy person, and what are greedy people going to do? That's right, do whatever they can to make the most money for themselves. Ultimately, this situation was a net positive for everyone; you make more money per year than you used to, but the people that helped you make that money are making way more than you are. Is that fair? Would you rather have had ACME Efficiency Inc. not exist, and you're still making $100 thousand per year instead of $130 thousand? I would like to think that most people would rather take an increased salary than to deprive themselves of it in spite.

What I'm trying to show here is that any reasonable political system is going to have people that make lots of money, and people that make little money, and a range of people in between. If you try to unreasonably restrict things, greedy people are going to change the game to make things more advantageous to them. If you continue to tighten things down to where they can no longer be greedy, they're still going to be greedy by either not working to their fullest potential, or they're going to stop participating.

Therefore, socialism isn't going to solve the problems it purports to solve, and could even potentially make things worse by splitting corporations up by profession instead of a common goal, turning everyone into some kind of contractor. Any further tightening of the screws leads to communism, and we've already tried that.