Anyone who works hard and earns a living wants to keep their money to spend on whatever they choose, right? That is the definition of Freedom. So, if someone says: “Socialists just want free stuff and they want you to pay for it” any rational person would get pissed off at a Socialist.
It makes perfect sense, right? No one wants their money to be taken from them and given to someone who didn’t work for it.
The problem is, the idea that someone is “taking” your money away from you, against your will, is a lie. You are being lied to by people who want to steal both your money and your votes.
The inventor of Capitalism, Adam Smith, told all of the Founding Fathers that the only way for Capitalism to function properly, and to sustain itself in the long term, would be for the public to add an economic counterweight to every rapid rise in corporate profits. Typically, it is the Federal Government that provides this check-and-balance as covered by the U.S. Constitution under the “Commerce Clause”.
What is that counterweight called? You guess it. “Social Services” otherwise known as “Socialism”.
I can hear you freaking out right now: “But Adam Smith is a Capitalist!”
Yep. That’s right. He’s a Capitalist. He invented it! And yet it’s a fact: Capitalism, according to the guy who invented it, needs at least some form of Socialism in order to function properly and sustain itself. You don’t believe me? Well, here’s what he said:
“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” – Adam Smith, The Wealth of Nations.
It is with this single sentence that Adam Smith fully endorses what is now known as “Democratic Socialism”. His central premise is found in the phrase “something more than in that proportion.” In making this assertion, he is stating that he deems it necessary for the rich to pay for public goods and services that other members of the population, having much lesser earnings, are unable to pay for.
That’s right: Adam Smith is asking the Government to tax the Rich in order to pay for stuff that other people will receive for free.
Oftentimes, Republicans will reference only the most obvious public works as being the target of Adam Smith’s taxation model. They argue that Smith’s statement only refers to essential services such as the fire department, police department, roads and bridges, etc. and not a progressive tax of the rich simply because they are too rich and need to accommodate people who are too poor.
But that argument is also not true.
Following his support of progressive taxation, Smith goes out of his way to address two major misconceptions about Capitalism:
1.) that profitability is linked to job creation and
2.) That society benefits from the creation of extremely wealthy people.
Concerning item #1, Smith wrote:
“Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
Smith then goes on to explain that the “pernicious effects of their own gains” are the result of hoarded profits leading to the stagnation of wages.
Allow me to repeat that last sentence, because it cannot be emphasized enough: hoarded profits lead to the stagnation of wages. Why? Because, as Adam Smith explains, the only thing that increases wages is not “Profit” but “Growth“. And Growth in a Capitalist economy only comes about by corporate owners investing into, and growing, their companies. Once that revenue is invested, it is no longer able to be hoarded by just a handful of people, such as the CEOS, hedge fund managers and shareholders. It no longer lines their pockets. And once it’s invested, the company grows and more jobs are created.
Once more jobs are created, there are less people to fill them, and companies have to compete to attract workers by increasing wages.
Simply put, as Adam Smith explains, investment converts profit into growth and that growth is converted into higher wages. If there is no investment, and it is hoarded in the form of profit, then wages cannot increase.
He then goes on to explain how extreme profits not only stagnate wages, but also pose an existential threat to a Capitalist economy:
“But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
Here, the phrase “going fastest to ruin” must be emphasized. All economies throughout the world, and throughout history, have collapsed once the divide between rich and poor becomes too great. Again, this is because wages stagnate when profits are hoarded and not reinvested, raising the price of goods and services until the economy collapses.
Concerning item #2 (the idea that society benefits from creating extremely wealthy people) Smith wrote:
“To widen the market and to narrow the competition, is always the interest of the dealers…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
Thus, Smith does not cast the wealthiest members of the population as heroic “Job Creators” but rather as pillagers of the public trust, out to deceive and oppress the rest of the public to further their own interests.
Unsurprisingly, Smith’s words are nearly verbatim to those of the most notorious Socialist, Karl Marx. Marx described this same power dynamic between the extremely wealthy and the working class. Also similar to Marx, Smith advocated fiercely in favor of laborers having an equal say as to what their wages should be, equivalent to that of the wealthy corporate owners. He writes:
“No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.”
This sentiment is no more clearly reflected than in the bargaining agreements of unions throughout the 20th century, with laborers ensuring that, they too, are “tolerably well fed, clothed, and lodged,” in the form of a minimum wage, workplace safety, social security and welfare.
He then goes on to explain that this is not merely a moral consideration, but a matter of economic importance:
“Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.”
All of these are Socialist ideas and all of them are deemed essential by Adam Smith to keep a Capitalist economy from collapsing.
So, when vital resources such as health care, education, welfare, transportation and infrastructure are presented as matters of public trust, to be funded through taxation, this is not some evil, Socialist plot to take away people’s money and Freedom. Adam Smith addresses all of these public services in “Wealth of Nations” and (as is quoted above) has no problem whatsoever funding them by taxing the wealthy more than the poor – or not taxing the poor at all.
That is because, according to Adam Smith, it is a necessary and essential component of a healthy and functioning Capitalist economy.
And if you don’t believe the inventor of Capitalism, just ask the greatest Republican President of all time, Abraham Lincoln:
“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
Thus, the priority in economic value to maintain a Capitalist economy lies not with the super-wealthy, so-called “Job Creators,” but with the workers and their need to maintain, lobby for, vote for, and increase their living wage.
That is the foundation of Socialism and, by no coincidence, the way in which Capitalism survives.