Socialism is for Losers

The average American may not think this deeply, but when politicians get up and talk about needing to reign in oil companies, mortgage companies, and other industries that don’t seem to “behave” the way we’d like, they are really advocating some level of socialism. Today I’d like to add my two cents to the following excellent critique of a recent Time Magazine article by Loyola College’s Thomas DiLorenzo:

MISES Article on TIME Magazine

Professor DiLorenzo addresses socialist “solutions” outlined in a Time Magazine article (probably by some English major who doesn’t understand economics). However, I’d like to address specifically the increasing calls to effectively socialize our oil industry.

Let’s get right to it shall we?

How the heck is punishing Exxon with excess profits taxes going to lower oil prices? And what the heck is an ‘excess profit?” And who decides this figure??? What if your boss came to you, and reduced your pay due to an excess paycheck “tax?” Sounds ridiculous doesn’t it?

So let’s analyze this whole oil issue further by looking at where oil comes from – Mexico, Venezuela, Russia, Canada, Saudi, Indonesia, Iraq, Iran – do you think any of these countries benefit from lower oil prices? some of them RUN their country on the recent higher oil prices…

For example, Hugo Chavez would not even BE IN POWER if not for the crack, er, financial handouts he provides for the country. In the meantime, illiteracy rates increase as he develops his people into a bunch of DEPENDENT children waiting on government’s every move for food, housing etc. And where does he get the money to provide these “benefits?” You guessed it – OIL. (THIS ARTICLE in the ECONOMIST SUMS UP NICELY WHAT A SCREW-UP THIS GUY IS). Make no mistake, socialism is for losers since in these types of countries, losers end up in charge and their policies create DEPENDENT losers out of formerly productive people (why is illiteracy RISING there? And do you know that the Venezeulan oil company funds most of their social programs? Low oil prices = low government funds for Hugo). And by the way, I am EXTREMELY happy that Exxon took Chavez to International Court for an injunction after Chavez illegally seized international oil company assets in Venezuela.

Understand this very clearly – if oil were to drop significantly in price, this guy is out of power and he certainly doesn’t want that, not when he ships 1.2M barrels of oil daily to the USA. By the way, because he is a socialist, who tries to squeeze every drop out of an asset rather than invest (what socialist invests???), the oil production of his state owned oil company PVDSA has declined dramatically over the past few years due to deterioration of equipment etc from lack of INVESTMENT.

Additional reading – here is an article by a Lefty magazine gloating over Chavez’s claim that he has eliminated Illiteracy . My favorite line is at the end of this article where it says “We in the West, can learn an enormous amount from the experiences of the Venezuelan government.” Are you freakin’ kidding me?

Here is a nice counterpoint from Foreign Affairs online. written by Francisco Rodriguez, who was the Chief Economist of the Venezuelan National Assembly from 2000-04. He nicely dismantles Chavez’s claims of “progress.”

As an aside: take this however you like, but in THIS ARTICLE, someone actually dares to say that if oil were not mostly controlled (80%) by socialist autocrats, production would be 100m barrels a day – far above the 87m we all consume now – like I said, take this as you please.

Example number 2:

Mexico is another major world oil producer producing 3.4 million barrels/day. Again, we have oil production controlled by a national oil company (PEMEX-created after the government seized oil assets owned by foreign companies). Unfortunately for them, oil production from their largest field (Cantarell) has fallen TREMENDOUSLY. The country produced about 4.5M barrels daily in 2005 but that has fallen to 3.46M last year (see the Wkipedia entry for a quick outline on Mexican oil production HERE and Yahoo for current daily oil production for all countries HERE).

According to the above Wikipedia outline, PEMEX has accumulated MASSIVE DEBT, just as Chavez’s PVDSA has, because the goverment is bleeding the company to pay for its expensive programs. ONCE YOU START HOOKING THE PUBLIC ON FINANCIAL “CRACK,”YOU CAN NOT STOP – PEMEX and PVDSA will likely financially “blow up” in due time. And interestingly, with the increased revenues, the excess funds are being used to fund bureaucratic salaries – now you KNOW how difficult it is to take money from a greasy politician – we have a lot of experience on that topic here in the USA (where term limits would do a world of good).

Socialism in Mexico’s oil industry is creating more waste, declining investment and exploration leading to declining production, and a DEPENDENT population that will probably riot as all socialist countries seem to do when oil production falls so low, that the government will not longer be able to supply the “crack.” If you haven’t already, face it, socialism is for LOSERS.

I could list more examples – Russia which has nationalized most of its oil and gas production over the last few years, and Iran (more of an autocratic regime than a socialist one -Iran has plenty of disgruntled young people with no jobs), but I think I have made my point.

The Problem in Our Country

Now in this country, there seems to be increasing calls for socialism, indirectly, by means of “excess profits taxes” on oil companies and the like. In that line of reasoning, why not an excess profits tax on Microsoft? Exxon produces perhaps 3% of world oil supply and certainly can not swing the market with only 3%. Microsoft on the other hand, can put out a terrible product like Vista (I chose XP when I bought my new computer) and eventually, A MAJORITY of computer users will have to buy this product because besides Apple and Linux, which most individual users still don’t use, there is NO OTHER choice – and their software isn’t cheap! So why the duplicity? Microsoft PROFIT margins are almost 29% (see Yahoo Finance state HERE), Exxon’s are just over 10% (See Yahoo Finance stats HERE). Obviously, we should be hitting Microsoft, if we’re going to be good socialists, right?

The Real Culprits

Why whack oil companies you ask? GREASY POLITICIANS! Let’s make the US oil companies the bad guy even though facts point clearly that they are not. Another example of American “leaders” not educating the people, but simply stirring up emotions to gain popular support – this is pathetic, absolutely pathetic that grown men and women pull stunts like this, for personal political gain. And shame on the average person for depending on of all things, THE NEWSPAPER for education. Writers are typically English majors who studied their topic for a few days or weeks (sometimes less) and whose goal is to create an article that GAINS READERS, but not necessarily to present the facts FULLY. Do me a favor, if you want to learn business and economics, please read books and articles written by people who know what they’re talking about ok? I have a couple of links to recommend listed on my homepage to the right – Bill Fleckenstein’s daily rap is a low cost ($120/year) way to follow markets and investing. Shadowstats can help educate you about government figures and statistics. And hopefully I can provide some needed reflection for you.

Bottom line – the socialist calls from many in this country (oil industry issues outlined in this article, taxes, enterprise creation, and immigration covered elswhere – click HERE for my rant on immigration AND a bit on our tax system), are simply pathetic. I have not heard Americans sounding so lazy, scared, and looking for the easy way out in a long time – being a student of history, I have studied such behavior before and hope the American spirit blows over this episode as it has done in the past.

What I Am Afraid Of

I simply fear that the irresponsibility of our government on spending, and of our Fed on monetary policy are helping to cause this current level of mistrust of our free market system.I hope that changes for even the former Pope, John Paul II, who liked individual control of the means of production, feared it was too centered in corporations (in my mind, big gov’t and big corporations are both dangerous) when he said:

“The Western countries…run the risk of seeing this collapse as a one-sided victory of their own economic system, and thereby failing to make necessary corrections in that system.

I quote this because I feel that both government and big corporations are encroaching on the free market system . A more free market system allows the individual to determine his own life, control his own means of production, and ensure freedom from government tyranny. Remember, if we get to the point where we all depend on government financial “crack” for our daily sustenance, then government controls us. Don’t allow disguised socialist talk to give permission to government to take MORE CONTROL.

DON’T…be a loser…

Chris Grande


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