Why Socialism is a Good Thing: An Example

Let's imagine a typical American town, let's call it "Mericaville".

Mericaville is pretty tiny, in-fact it has only about 300 residents.

The one major corporate and the only employer in town is "MericaCorp". Of the 300 people who live in Mericaville, almost all of them, some 250, work at MericaCorp.

It doesn't matter what MericaCorp manufactures, cars, food, cell-phones, TVs...let's say MericaCorp makes "Blue Widgets".

In past times, all was fine and good. Mericavile was doing great because everyone had a job at MericaCorp. People made enough money to be able to afford Blue Widgets when they needed them. The company was doing fine and work was plenty and everyone was happy.

One day the CEOs of MericaCorp sat down and thought about ways how to increase profit.

It turned out that they could outsource the manufacturing of Blue Widgets to China or Pakistan, or that they could just build a factory in China where people would work at a 1/10th of what a worker from Mericaville was getting. The CEOs thought that was really a great idea which would drive up their profits crazily!

So it happened that the company laid off almost all of the people with the exception of only five remaining. All the Widgets were now made in China for extremely cheap.

It didn't take long that Mericaville became a dump (similar to Detroit) because now everyone was unemployed and there was no other company to work for. Because people didn't have work they didn't have money.

People stopped buying Blue Widgets since they couldn't afford them anymore.

MericaCorp now got into serious trouble because business literally came to a halt, there were no orders anymore due to the bad economy in Mericaville. MericaCorp was now facing bankruptcy.

The government sat together and realized that something had to be done to save Mericaville and MericaCorp.

Some of the smartest politicians said that the only way to save Mericaville and MeriCorp was to give the people work again because only with steady work and an income the economy would gradually become better again.

So politicians told MeriCorp that the best way to save the company would be if MeriCorp would simply hire all the 250 people again which they previously laid off.

The CEO of MeriCorp was dumbfounded: "Are you kidding me? We have no orders! Even the five remaining workers here in the MericaVille factory are often only sitting around with the finger up their a$$ because there is nothing to do! And you want us to hire 250 new workers? Not to mention we don't have the money to PAY those people their wages. How should that work?"

The government sat down again and then they came up with a plan.

They told MericaCorp that they will pay MericaCorp the wages for the workers they hire, so the money would not come from MeriCorp, but from a government program.

Obviously, a bunch of people got very angry and they shouted "SOCIALISM!! SOCIALISM!! You want the government and tax-payer pay the wages for the employees? This is as bad as in Red China...the government should not and cannot ever interfere in such a way. I mean, it's our tax money you are using there and we're already broke because we're unemployed! This is outrageous!"

Anyway....the government continued with their "socialist" plan regardless of the many nay-sayers. The plan was to pay MeriCorp the full wage for any new employee they'd hire, until MeriCorp would have recovered so they would not require "socialist" government aid anymore and would be able to pay their employees from their own pockets.

Of course, in the beginning...the scene was quite bizarre. The company hired all the people from MericaVilla again and they got their previous wages, as earlier. It was bizarre because in the beginning there was actually nothing to do so the boss told them simply to continue making Blue Widgets and just stock them in the warehouse for the time being.

However, after one month it became clear that the "socialist plan" was actually a good one because people all-of a sudden had money again. Pretty much all of MericaVille got a nice paycheck after one month. Many wanted Blue Widgets and now they could afford them again, unlike previously. So people started to buy MericaCorp's widgets again, something they were not able to do for a long time. Business took off again and MericaCorp within a few months made profit again! MericaVille was saved, everyone had a job and everyone lived a happy life.

The CEOs of MericaCorp however realized how dumb their idea was trying to increase profits by outsourcing work. This was something they never thought-of. The problem was that the big wigs at MericaCorp only looked at their profit and cost cutting - any consequences of what they did was not really their concern as long as it meant less costs and more profit.

**

Ok, hope you enjoyed my story

Capitalism/Socialism: In this example there is capitalism since the well-being of everyone is indeed 100% dependent on the well-being of the company "MericaVille", the company who gives the people work.

There is no question that the only way to recover the economy was that everyone would get work since WORK and a paycheck means people have money, obviously. Only if people have money they can buy and only when people buy companies can survive, hire more people etc.

"Socialism" comes into play with the government paying MericaCorp all the wages for 250 new employees, even despite the fact that there was no work in the beginning for those 250 people. (In fact in the first weeks and months workers could've just sit around idly or make "non existent fantasy widgets", as long as they knew they will get paid at the end of the month).

People may say now the idea is entirely absurd that MericaCorp would hire 250 people via some government program where they produce "fantasy widgets"...but does it really matter? What matters is that after one month everyone got paid and that the fact that people had money again also led to MericaCorp making profit because they sold their goods again.

Even with a socialist "aid program" where employees got paid their wages via the government, the essence of capitalism is untouched: People get money from working, employment is the most important factor for a stable economy. So what does it matter, it's a win-win situation for the company AND the people.

And the example obviously also shows what happens when corporates have free reign to cut costs, eg. by outsourcing. Since the company got itself into deep * on their own, obviously they could not hire 250 people since they were facing bankruptcy and could not even afford to pay those people. So that the gvt pays them instead is the only logical consequence, who else would've paid them?

So...I realize that the example is VERY simplified, but if you're very "anti-socialist" and shudder at the idea of the gvt intervening and paying MericaCorp the wages for the workers....tell me WHY it would be wrong?


**

Obviously, we could imagine an alternative scenario where all the 250 people WILL NOT get hired again but instead get direct government aid (welfare), the same amount they made before when they worked for the company. (The idea is of course the same: People having money ----> More buying power ---> Better economy)

The problem with this scenario however is that people would get aid from the gvt but MericaCorp would CONTINUE to outsource, they will never create new employment. The root problem would not be fixed!

So explain to me why the Government needed to save MericaCorp to begin with? It is their own fault that they are failing. What should have happened is that the corporation failed allowing for newer, small businesses to be opened up by the unemployed of MericaVille. The government didn't need to step in at all since the dumb actions of the corporation caught up with them and put them in dire straights. It's their fault for being in that situation and no one needs to bail them out.

Corporate subsidies keep businesses that really need to go under afloat. If these corporations would go under, then many newer, small businesses can fill the void without the resources to outsource overseas and would hire locally. The problem is self-correcting and with government involvement, all you are doing is having the government pay the paychecks of the workers while the corporation continues to pocket the profits from shipping jobs overseas. Meanwhile, the national debt rises each year due to the subsidies. I mean, why go through all the trouble of giving MericaCorp money anyways? Why can't the government just employ the unemployed workers. That is essentially what they are doing anyways.

Does socialism basically mean that everyone gets a slice of the pie? That would explain why capitalists are so afraid of it. "Can't have everyone living well on equal footing now can we ?"

reply to post by Krazysh0t


Its not the corp that needed saving...
It was the PEOPLE working at the corp...

But as a capitalist i didnt expect you to understand that.

But, however, it doesnt matter, socialist or even comunism.

The currencybased society we have to day, is going
to crash. Its doomed and have been since the start.

Not tomorrow, next year or even in ten years, but it
will crash.

There is NO corporation without the employes.
Even if your entire workforce is robotbased.

Who is gonna buy and with what??

Its not a prediction, it WILL happen...
A downward spiral..

And theres NOTHING we can do to stop it.

After reading your example and explanation - I disagree with the title of the thread.
I see nothing "good" about the entire scenario.
Just as long as they get a paycheck - everything's okay... ... ... ?
What if a similar scenario hits 35% of the "typical communities" at/around the same time?
Where will the "revenue" come from...for the National Socialist Government to pay all these salaries?
If the companies were already bankrupt...where will the money come from to purchase the raw materials to produce their Blue Widgets?
If the companies aren't making mega-profits (enough to lord it over the citizenry) what's the incentive to stay in Mericaville...? Why not move to Metropolisville...or China...or Pakistan...?
Who are the 5 people left behind? Employees? Certainly not "owners".
Does the National Socialist Government assume ownership/control of the Blue Widget manufacturing company?
Sorry. I just find the example and explanation too insubstantial to consider your proposition worth...considering.
Thanks for the time & effort, though.

Miccey
reply to post by Krazysh0t

 

Its not the corp that needed saving...
It was the PEOPLE working at the corp...

But as a capitalist i didnt expect you to understand that.

But, however, it doesnt matter, socialist or even comunism.

The currencybased society we have to day, is going
to crash. Its doomed and have been since the start.

Not tomorrow, next year or even in ten years, but it
will crash.

There is NO corporation without the employes.
Even if your entire workforce is robotbased.

Who is gonna buy and with what??

Its not a prediction, it WILL happen...
A downward spiral..

And theres NOTHING we can do to stop it.

The way to best save the people is not to prop up a business that is failing. After all, it's failing because it doesn't have a good enough model. So basically, rather than get rid of an inefficiency in the system (the business), you want to perpetuate it and make it worse by hiking the taxes of everyone in Mericaville so that they have the privilege of continuing to work for an inefficient and failing business model. Where do you think the government gets the subsidies it will pay to Mericacorp?

It's not like the government hands out free money.

reply to post by ketsuko

You still dont get it...
It doesnt matter if you have a world to sell....

WHOS GONNA BUY IT?!?!?

And with what??

Miccey
reply to post by ketsuko

 

You still dont get it...
It doesnt matter if you have a world to sell....

WHOS GONNA BUY IT?!?!?

And with what??

Exactly, if you're so busy propping up the good company employing people so that they can get a paycheck that they are losing a significant chunk of so that the government can keep the business running ... who will have enough money left to buy the blue widgets?

Maybe only the company owners and the government bureaucrats, but it will be hard for the working poor taxpayers of Mericaville to do it. I suppose you might be able to export them to China and Pakistan ...

Miccey
reply to post by ketsuko

 

You still dont get it...
It doesnt matter if you have a world to sell....

WHOS GONNA BUY IT?!?!?

And with what??

I think it's a vicious cycle. Because of cheap labor, people are out of jobs and can't afford the product. So, the companies have to find even CHEAPER labor to lower the product cost to keep sales going. This cycle keeps repeating itself until it has been run into the ground.

Miccey
reply to post by Krazysh0t

 

Its not the corp that needed saving...
It was the PEOPLE working at the corp...

But as a capitalist i didnt expect you to understand that.

The OP said that the corporation was failing because people didn't have the money to buy their goods because they laid off all their employees. The government stepped in and saved the company so that they can give money to the people they laid off.

I understand PERFECTLY that the people needed saving. But as you can lead a horse to water but cannot make him drink. You can give the people money, but that doesn't force them to get out and be productive. Letting the corporation that did bad business practices fail so that smaller ones can take its place is a central part of capitalism and would do more to restore the economy than anything the OP said. Plus it teaches future business men not to partake in those business decisions lest they end up suffering the same fate. The OP's example REWARDS the corporation for bad business decisions while not addressing the root issues at all and even creates new ones (higher taxes, exacerbates the wage inequality, encourages other businesses to do the same things, etc).

But, however, it doesnt matter, socialist or even comunism.

The currencybased society we have to day, is going
to crash. Its doomed and have been since the start.

Not tomorrow, next year or even in ten years, but it
will crash.

There is NO corporation without the employes.
Even if your entire workforce is robotbased.

Who is gonna buy and with what??

Its not a prediction, it WILL happen...
A downward spiral..

And theres NOTHING we can do to stop it.

I agree, but that is horribly offtopic, so I'm not going to address it.

Unless it reaches far and wide and affects everyone, it can only be considered a company store.

"The company store is one of the most reviled and misunderstood of economic institutions. In song, folktale, and union rhetoric the company store was often cast as a villain, a collector of souls through perpetual debt peonage. Nicknames, like the "pluck me" and more obscene versions that cannot appear in a family newspaper, seem to point to exploitation. The attitudes carry over into the scholarly literature, which emphasizes that the company store was a monopoly."

Now if everyone worked for the same company store...?

Who then can monopolize if there is only one bottom line?

Economics doesn't do anyone any good anymore. It only forces a wedge in between two or more parties already in cooperation with each other, constantly one-upping each other like a flesh-eating cancer.

reply to post by loveguy


Economics is one of the most widely misunderstood branches of math and science there is. It never changes no matter how much people try to write the rules to bend it. Numbers and human behavior are what they are, and they are what define economics.

This is why centrally controlled economies fail. There are simply too many variables, too many individuals, to ever adequately factor in.

Just take one simple product and you can boggle your mind trying to contemplate all the possible decisions and choices and factors that might go into its supply and demand alone.

reply to post by ketsuko

Just take one simple product and you can boggle your mind trying to contemplate all the possible decisions and choices and factors that might go into its supply and demand alone.

Franchise locally?

Before I'm labeled a socialist, check out; equalitarian

reply to post by NoRulesAllowed


OP, I'm going to star you after my reply because I can see how hard you worked at this and put real thought into it. So, it's for the effort and best of intentions...but I must disagree in a giant way for one factor I believe you have overlooked. It's THE factor which often has made socialist systems fail in spectacular ways, eventually. Not all ...but, most would be a reasonable description, I believe.

----

We have your town example, and we have the factory. We have the factory laying everyone off and the reasons for that aren't in dispute, as they don't matter to the fatal flaw. MericaCorp is the bulk of employment, if not the employment for the town...and we're looking at this little down in isolation.

Fair enough, and so we have to truly look at it in isolation, or that fatal flaw remains murky until found in real world practice.

MericaCorp hires everyone back, on Government programs to pay them. That works. Everyone, literally DOES work and money is flowing again. Yes... That tracks and in some ways, is what Unemployment is supposed to be doing ..in round about ways of job training and placement. (supposed to be).

Lets define that Government part though. In isolation, we have the town folk, the businessmen that own MericaCorp and presumably among the town folk, and then we have the Government. In the town, it would be the Mayor, Treasury, Council and so on ...

The problem is..those are also town folk but that isn't the largest problem. See it yet?

-----

The money the Mayor and Co. are able to use to help MericaCorp comes from the same town folk which recieve it back in paychecks. This is a financial scam, if done knowingly. It's very dangerous policy planning, giving truth to the 'roads paved with good intentions leading to bad places', if done with the belief it can work out well in the long term.

Now it will work .... for awhile. If the town started in surplus or has debt means to supply the money to town folk not paying their own back in, it can work as long as those outside sources keep supplying a factor which doesn't belong there. If the town folk DO resume paying for the Government which is, on the other hand, paying them? It quickly becomes a circle of diminishing returns, cycling down to bankruptcy.

-----

I personally think we're reaching a point much like China is reaching and realizing from the OTHER extreme of ideology. Neither extreme works, long term. Neither one, alone, can sustain or avoid being destroyed from within. Perhaps it's really finding the balance between two..seemingly exclusive...approaches?

Sounds like the company was in trouble to start with.

If their sales to locals fell off because of outsourcing, why didn't the product sell nationwide ?

Somethings always missing it seems.

Read the history of the Pilgrims at the Plymouth colony during their first year. They tried Socialism/Communism model for running the new colony. It Failed, and half the Colony died. They abandoned it the following year. The colony thrived!

Socialism ignores human nature. Humans by nature need an incentive.

I can't understand why people fear socialism. It has it's place in a society that actually cares about every citizen, regardless of wealth, intellect etc.

To me, a balance must be in place to compete against the private sector in terms of cost, service and direction.

Capitalism kept in check by socialism is fair to all.

loveguy
reply to post by ketsuko

 

Just take one simple product and you can boggle your mind trying to contemplate all the possible decisions and choices and factors that might go into its supply and demand alone.

Franchise locally?

Before I'm labeled a socialist, check out; equalitarian

edit on (1/7/1414 by loveguy because: (no reason given)

Just saying, think about milk. It seems simple enough to try to control milk, but consider that milk comes in different varieties like whole, 2 % and skim. Then you have people who are lactose intolerant and need that special lactose free milk. Then you have people who prefer products like Silk or Almond milk that are like milk without being milk. Then consider that you have the side products of milk like whipping cream, 1/2 and 1/2, buttermilk, etc. Then consider that each of these is sold at various sizes for consumer convenience to meet their needs. Then consider that every consumer buys those products on a different pattern as their needs demand them.

How would you go about centrally planning for that one product alone?

ProleUK
I can't understand why people fear socialism. It has it's place in a society that actually cares about every citizen, regardless of wealth, intellect etc.

To me, a balance must be in place to compete against the private sector in terms of cost, service and direction.

Capitalism kept in check by socialism is fair to all.

There's your problem. You have to assume that society cares about you. It doesn't. Not at all. To the central planners of the socialist state, you are a number who can work to pay taxes, and that's all they care about you.

There's your problem. You have to assume that society cares about you. It doesn't. Not at all. To the central planners of the socialist state, you are a number who can work to pay taxes, and that's all they care about you.

reply to post by ketsuko


Why does it have to be a Socialist State? Why can't people accept the two working together side by side?

Capitalism AND socialism.