Do Socialist Counties Have Balanced Budgets?

First, there are many variations when attempting to describe a particular system of governing, especially Socialism. Below are some reference points from Wikipedia¹ but, for the purposes of this piece, a socialist country essentially reflects the western European variation characterized by a slow growth, high tax economic system with a national government primary mission of social justice.

And the statement often made that Socialist systems do not work is just patently false. As with any system you must accept the good with the bad. Among the larger and long-standing Socialist countries, some individual freedoms are sacrificed in favor of very strong government control of virtually everything and comprehensive government programs of care. Conversely, in Democratic Capitalism, individual freedoms, as well as self-reliance and hard work, are more highly valued and protected at the cost of the lack of an entirely comprehensive, cradle to grave, government “care” system.

In a democratic capitalism economic system, a high growth economy offers the opportunity for career advancement and an improved standard of living based on hard work and achievement. It’s the “American Dream” as it has often been described. Far less dependence on a union boss or government labor apparatus to negotiate pay increases based solely on “membership”. Those with self-motivation, intelligence and a willingness to sacrifice are rewarded. Collaborating with other similarly motivated individuals enables all to succeed and improve their standard of living. This has been, and possibly was, the American way that produced the greatest standard of living for the greatest number of individuals the world has ever witnessed.

One potential assumption that could be made is Socialist countries, with much higher tax rates, must be able to balance their federal government budgets, In fact, virtually none of them are able to balance budgets and must resort to borrowing from Peter to take care of Paul.

Seven out of ten countries with the highest tax rates also have higher national debt totals (as a percentage of GDP) than the US.² In addition, they carry a higher amount of debt burden per citizen than the US. So, they are taxing at higher rates than the US, and, also incurring more government debt than the US as a percent of GDP. Some at rates of between 150% and nearly 300% of GDP. It is comparable to having an individual with a $50,000 per year salary that also has credit card debt of $75,000 to $150,000. No financial organization within its right mind would allow someone to knowingly reach that level of unsecured indebtedness. And with tax rates at their possible maximum, how do you attack your debt problem when increasing taxes would likely plunge the economy into collapse?

Once the point is reached when requests for additional unsecured debt are refused, and tax rates are at their maximum, then spending must be cut to avoid default. And of course, military and infrastructure spending will be cut first; until those chickens come home to roost. A prime example is France’s lamentation, after recent high-profile terrorism attacks, that they just do not have enough national security resources to track all the potentially dangerous terrorism persons-of-interest in France.

NATO members in Europe for many years have not fulfilled their military spending commitment to the alliance. In times of financial distress, with military and infrastructure programs already cut to the bone, the ability to borrow exhausted, and total government spending remaining above revenue receipts, at some point social programs must be cut. French political leaders have for several years attempted to change pension benefits rules or increase hours in a work week. Those proposals have been met with massive civil unrest.

Now, the point is reached where all governmental promises are being broken. Military defense is woefully inadequate. Roads, bridges, buildings, airports, as just a few examples, are no longer even adequate or safe. And now pension payments aren’t enough to support a very modest existence. For those working, work rule changes are infuriating and perceived as unfair. Whether it’s increasing hours worked per week or increasing the retirement age or some other means of reducing social program cost, something must be done. (Maybe they would fare better in a democratic, free-market capitalistic system?)

So, the result is transportation strikes paralyzing the country, or rioting in the streets with burning barricades and entire shopping districts shut down with significant damage to shops and infrastructure. More deadly terrorism attacks and looming infrastructure disasters. In other words, massive government failure to achieve any of their stated goals causing massive disruption, rioting and loss of innocent lives in attacks by terrorists or other calamitous events.

Americans with similar social justice goals as their socialism counterparts around the world, who are supporting Bernie Sanders with feverish emotional enthusiasm and hope in their eyes, will be the same ones erecting barricades and lighting truck tires afire when, in ten years, the social justice/Socialism dream becomes a nightmare.

Or, perhaps, once a single party has complete control of all government functions, they opt for a similar approach to socialism as that adopted by the Chinese. How much of your individual freedoms are you willing to sacrifice for comprehensive social justice? And even if you are not getting it, are you brave enough to demand more? Do you think the French “yellow vest” street riots would be tolerated for a New York minute in China? No, the government knows what is best for everyone; you will like it, or you are remanded, without due process, to a “re-education camp”. The one-party political system is in complete control of EVERYTHING. Do not expect an election to provide an opportunity for change. The government knows everything about you. Should you be observed by an AI-based facial recognition system as someone with an attitude, and the other data about you suggests you are or could be a political dissident, say hello to your confinement in a “re-education camp” as a political prisoner with no due process.

Is this, all of THIS, what this country aspires to?

¹The socialist market economy (SME) is the economic system and model of economic development employed in the People’s Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy.^[1] The term “socialist market economy” was introduced by Jiang Zemin during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China’s economic reforms.^[2] Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or “primary stage” of developing socialism.^[3] Despite this, many Western commentators have described the system as a form of state capitalism.^[4]^[5]^[6]

As a sovereign state is a different entity from the political party that rules that state at any given time, a country may be ruled by a socialist party without the country itself claiming to be socialist, occurring in both one-party and multi-party political systems. In particular, there are numerous cases of social democratic and democratic socialist parties winning elections in liberal democratic states and ruling for a number of terms until a different party wins the elections. While socialist parties won many elections around the world and most elections in the Nordic countries, they did not adopt socialism as the state ideology.³