The Road to Hell is Paved with Good Intentions

In a previous article, “Alternatives to Capitalism”, I offered the proposition that Socialism and the welfare state it produces eventually destroys the wealth of the society.  The reason for this is that the Marxism it is based on creates a situation where citizens become dependent on the government.  With each generation, that dependency grows and ever greater demands on placed on political leaders.  The result is that even if the government can create the ideal mix of capitalism and Marxism the redistribution of the wealth will eventually overcome the production of that wealth.  This can be clearly seen in the economic decline of Western Europe since the introduction of the welfare state 50 plus years ago, which has left most of those countries on the verge on economic collapse.

Unfortunately, we no longer need to look so far away to find further proof how even limited Marxism, in the form of the welfare state, grows uncontrollably until it threatens to destroy its host economy.  In a highly informative article called “The Road to a Downgrade” (July 28,2011) the Wall Street Journal details how Marxist-inspired programs, once introduced into America’s predominantly capitalist economy, grow beyond all expectations and projections.  Two examples are Medicare and Medicaid.

·         When Medicare was established in 1965, it was projected that the program would cost $12 billion in 1990.  The actual cost was $110 billion or almost 1000% more than projected.

·         In 1966, the cost of the Medicaid program was $4 billion or just over one-half of 1% of GDP.  By 1986, it had grown to $41 billion (just under 1% of GDP); last year it was $243 billion (1.67% of GDP).

As the article points out, it is more than rising medical costs that have increased the price tag of these programs.  Just like in Europe, Marxism has resulted in an increasing number of Americans becoming more dependent on government.  They demanded more benefits or entitlements and politicians, willing to trade taxpayer money for votes, were more than eager to oblige.  Over the years, the programs were expanded way beyond their original intents.  Even Social Security, initially designed to provide a safety net for those few seniors who were unable to provide for their own retirement, became a pension plan for all seniors.  In 1960, the cost of the plan was approximately 2% of GDP; in 2008, it had doubled to just over 4%. 

In 1965 total spending on entitlement programs made up about 35% of the federal budget.  Forty years later they have grown to be about 60% of the budget.  This clearly shows that if, by a miracle, politicians are able to create the perfect economy by introducing the ideal amount of Marxism into capitalism it does not stay that way for long.  Marxism will grow and slowly deplete the wealth of the society.  Now America, like its European counterparts, is facing an economic meltdown as Marxism takes its toll.  The question is do we, as Americans, continue to go down the Marxist road to perdition or do we return to the economic system that, for 700 years, has created wealth for its societies?