Why Socialism is Morally Wrong: The Basis of Property Rights

This essay is Part 1 of a three-part series on socialism:

Socialism-raised fists-black on red backgroundSocialism has become more popular in the US recently, at least as a term people use for their political beliefs. Bernie Sanders and many of his young followers claim to be socialists. But what is socialism, really, and is it a moral system or an immoral one? Is it practical or impractical?

In this essay, I will give the definition of socialism as dictionaries and its most committed advocates understand it. Then I will take socialism in its “purest,” most “noble,” most economically reasonable form–which many socialists claim has not been refuted by history–and show you why it is both immoral and impractical.

The Common Definition of Socialism

The Oxford English Dictionary defines socialism as:

A political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

If we are talking about full socialism, as its serious advocates mean it, the “regulated” here is redundant and should be taken to mean complete regulation and control, which is effectively the same as ownership. In a fully socialist society, “capitalists”–those who own “the means of production, distribution and exchange,” like factories and grocery stores–are abolished. Everyone in the society is a “laborer” or “worker,” in the broad sense of “someone who works for wages,” (what I’ll sometimes call a “wage-worker,” as opposed to someone who earns profits from private ownership.)

The “community as a whole” exercises control through some form of governmental institution. In different socialist theories, this may take the form of anything from local direct democracies, to national or worldwide governments of central planners, allegedly representing the collective will of the “working class” (proletariat.)

(In light of this, I will say up front that Bernie Sanders is not a socialist in the full sense of the term: he doesn’t advocate the outright abolition of capitalists. I will have more to say about what he actually is, in Part 3 of this series.)

Many of today’s socialists consider decentralized and direct (or nearly direct) democracies to be essential to socialism as they see it. This element of the system I’ll discuss is what makes it the “purest” variant. What makes it the most “economically reasonable,” is that it is a variant based on the understanding that managers and researchers are important to the productivity of labor. Uncoordinated and uninformed physical labor does not produce much value, so the retaining of managers and scientists is important in this system. Individual workers work under the authority of managers in much the same way they would in a capitalist system. The only real difference from capitalism is that the government treats everyone in the city as though they were an equal shareholder of every company. The government would collect their wealth for labor-saving machinery equally, solicit their equal votes for CEOs, poll them to determine big company decisions, etc. If I can show that this variant of socialism is immoral and impractical, then all less reasonable or more corrupt forms of socialism will fall with it.

Socialists generally distinguish between what they call “personal property” and “private property.” “Personal property” is the material goods that one is currently using for personal consumption, and “private property” is the material goods that one is not currently using for personal consumption, but for wealth production, rental, etc. Socialists generally claim to uphold the societal protection of “personal” property rights, while opposing the protection of “private” property rights. I will discuss both of those and we’ll see if the distinction is meaningful.

But first, because this essay is about the moral status of socialism, I want to briefly discuss the moral viewpoint I’m using to make the judgment.

Morality, Wealth Production and Justice

The goal of morality, in my view, is to promote human life on Earth. Any view that says that morality should be indifferent to human life is fundamentally wrong. Since human life is fundamentally composed of individuals–individuals are the ones who have minds, who think and who act on their thoughts–morality means enabling individuals to survive and prosper. Humans are not like mindless ants or the Borg on Star Trek.

Nature does not automatically give humans what they need to survive and prosper. In order to prosper, individuals must produce wealth by thinking rationally about how to meet human needs and acting on that thought. They must exert effort and plan ahead. Individuals may act in concert with each other, in the form of business firms, but they each only contribute to production to the extent that they individually think and exert effort. Any individuals that don’t think and produce on their own must necessarily depend on those individuals who do. (Note: I argue more extensively for individualism here: What is Individualism? What is Collectivism?)

So a moral society–a society that promotes human life–is one that tends to reward productive effort. To the extent an individual produces wealth, a moral society lets him keep that wealth, or its value equivalent in voluntary trade. This is what societal justice is, in the realm of economics. Justice is individuals getting what they deserve, and, in general, “deserving” means “producing.” (1)

The Moral Importance of “Personal” Property Rights

Let’s imagine that you’re a male carpenter. You have a wife and two children. As a family, you build a cabin for yourselves in the small town where you work. When it’s finished, some frat boys from the local college decide they like your little cabin. They break in while the whole family is away and invite their friends for a party. In a society that bans physical violence, but doesn’t recognize personal property rights, there’s nothing you can legally do to evict them. The best you can hope for is to share what you built with them. If there isn’t enough bed space, some of your family members may have to sleep on the floor.

If, in the course of their partying, the frat boys burn the cabin down, you have no legal recourse.

This is the injustice inherent in the violation of personal property rights: those who exerted the effort to build or create the valuable thing (in this case, a cabin) have to surrender the benefits of it, to some extent, to those who did not exert that effort. To the extent this injustice persists, it damages people’s motivation to exert productive effort and their ability to plan ahead, using their property. In the above example, you and your family might have designed that cabin specifically for your needs. You may have planned to live in that cabin while the children grew up and went to school in the area. You may have planned to add on a little outdoor hot-tub to sit in while watching the sunset. All those plans are ruined if someone comes in and destroys the cabin.

Individual human beings need to produce and use material wealth like cabins, tools, food and clothing in order to survive and prosper in the long term. In order to live well, by modern standards, they have to be able to produce and keep, not only the “necessities,” but also luxuries like cars, airplanes, air conditioning, movies, television sets, and books. (In a modern society, people mostly “produce” these luxury items indirectly, by producing the value equivalent with their work in their job, then trading the monetary product for the items.)

Again, I reiterate: Human life is fundamentally individual. Individuals live or die. Individuals choose to think, or to avoid mental effort. Individuals have different goals and interests that they each choose for themselves. Some individuals strive consistently to produce wealth and support themselves, and others don’t. If morality is supposed to promote human life, rather than demanding its sacrifice and destruction, then basing governmental policies on personal property rights is moral. Choosing to support a society that denies the personal property rights of individuals is immoral.

Socialism and the Moral Importance of Private Property Rights

Let’s say there’s a woman living in the 1890s–call her Jill–who married a man and had one child. Her husband recently died of cancer, and she was left as a single mother. She has a loom and has been making and selling rugs when she can to help support herself and her family. Her rugs are very popular and sell for high prices because they are high quality and people like the intricate designs. After her husband died, Jill decided to invest her savings from selling rugs into an effort to increase the output of her rugs. The increased sales of rugs will help her support herself and her son when the money from her husband’s work runs out.

So Jill chooses a piece of unclaimed land near her home to build a workshop. She uses the money she earned selling rugs to pay for the raw materials and the labor of 4 men to build it. So the men are agreeing to help her in exchange for a monetary wage. They are agreeing to her terms and will be satisfied with that money as their full compensation for building the workshop, while she will get to keep the workshop for her use.

The workshop has six looms, and she finds six young women who are willing to work at her workshop in exchange for a steady wage. In their productivity, they get the benefit of the looms and the workshop that Jill paid to have built, and they are trained by Jill to make high quality rugs. They don’t have to worry about selling the rugs, and they haven’t invested any money in the workshop, so they don’t bear the risk of losing money if the business fails, (whereas Jill does.) The workers all consider the deal to be in their interests, which is why they agreed to it.

Jill doesn’t work at one of the looms, because she thinks her time would be better spent designing the rugs, maintaining the workshop, training the workers, managing the cash-flow of her business, and finding new customers. So Jill spends the extra money to pay a worker to do the physical work of making rugs at the loom that she might otherwise have used personally. Jill gets no steady wage from the workshop. Her earnings vary based on her ability to get customers and run her business well. Her earnings are of the same type that they were when she sold rugs alone: they’re profits. And if she doesn’t run her business well, or is otherwise unable to sell rugs, she may not get sufficient earnings to cover her business expenses, and then she’ll suffer losses. She prospers or suffers based on how much value she adds or subtracts from her company’s output, relative to its total input, (the cost of machinery, maintenance, wages, etc.)

Jill has plans to expand the workshop within the next year, to introduce new types of woven goods, and to research new types of fibers with which to weave her products.

At this point, socialists are voted into power. They come in and tell Jill that she no longer owns the workshop; the workshop now belongs to her local community. Everyone in the town will vote on what to do with the workshop she built with her own effort and money. Jill may be kept as a manager and given a steady wage, or not, depending on the voters’ wishes. By their decree, this is now a “people’s workshop”: Jill’s wage will be set by the voters, and any profits will be distributed equally among all members of the community. The voters will determine the future direction of the workshop, and if the workshop even stays open at all.

This is a tremendous injustice. Why should other people in the community, who had nothing to do with the building or management of the workshop, get control of it and a share of the profits? Why should Jill, whose effort and skills were the driving force behind the workshop, be robbed of control and profits? It was Jill, not “the community as a whole,” who built that workshop, and those who helped her were paid by her for their help. Why should Jill’s plans for her workshop be left at the mercy of voters? They didn’t build it, and they don’t have a right to it.

This goes for the workers in Jill’s workshop just as much as for everyone else: They agreed to work in a workshop they did not build in exchange for steady wages, not ownership of the workshop. It was Jill who did the work of creating the workshop, not them. So there is no reason at all why they should gain ownership of the workshop without Jill’s consent.

But that is precisely what the socialists want to enforce: They want to give the returns on Jill’s effort to others who did not exert that effort, and to give control of what Jill created to others who did not create it. By any reasonable standard of morality that promotes human life, rather than human destruction–that holds working and earning things as good–that holds justice as good, this is a moral crime.

And after this initial moral crime of the socialization of people’s private businesses, what will result: a glorious utopia of justice and endless prosperity? Actually, the diametric opposite. What mere manager of a “people’s workshop” is going to make a heroic effort and stick her neck out to introduce dramatic innovations, when the best she can hope for in success is maybe a couple percent raise in her salary (if the voters deign to give it to her) and the probable penalty for failure is the loss of her job? And this assumes that such a manager even has the leeway to make major innovations at all, without the approval of voters. But in fact, managers would almost certainly need voter approval for major decisions.

So anyone wanting to implement radically new ideas or processes would be bound to seek voter approval before starting to research and develop them. Geniuses, visionaries and experts in any given field would be weighed down by the voting decisions of people who are not as brilliant, who do not share their vision, and who don’t know anything about the field. In other words, countless innovations would be stifled before they could be developed and proven.

A young Steve Wozniak and Steve Jobs would have to gain the ear of the local government council and convince them to put their idea for a personal computer before the general population for a vote, before they could set up even a small facility to produce them. If the voters–most of whom know virtually nothing about computers–reject his idea, then Wozniak and Jobs’s dream of developing a mass-produced personal computer dies there.

Even in the purest realistic theory, the result of socialism is poverty and stagnation, not prosperity and progress. The main engine for the creation of productive, steady-wage jobs, where there were none before, is the self-interested pursuit of profit by entrepreneurs. A mostly disinterested and uninformed collection of voters are going to be much less effective at creating productive jobs. Socialism is a recipe for poverty.

Dramatic innovations that push technology forward almost always come from individuals–or small collections of individuals–who disagree strongly with the way things are currently done in their field. Under socialism, the majority view always wins by design: The majority decision has the force of law to prevent the minority from taking action, wherever that action would involve producing anything with wage workers. Socialism is a recipe for stagnation.

The role of “private” property rights in human life is the same as that of “personal” property rights: to enable individuals to improve their own lives through production, free from physical attack or interference by other people. All proper property rights protect individuals’ ability to earn wealth through their own productive effort. This includes Jill, just as much as it includes the weavers at her workshop. People do not lose the right to what they have created, just because they use it for productive purposes or hire workers to use it. So the distinction between “personal” and “private” property is entirely senseless.

Nor does the moral situation change when you have a corporation with shareholders and a CEO paid a salary. The shareholders are still ultimately responsible for the business through their corporate votes, and they have spent their money to acquire the stock they have. That is, they have provided overall direction for the company and used their own money to finance the purchase of goods and the creation of wage-jobs in the company. The corporation is paid for by a definite collection of individuals, not “the community as a whole.” The investors alone earn any profits and bear any losses after bills and wages are paid–and this is how it should be. For socialists to deprive them of their stock would be unjust robbery, just as in the case of Jill.

Conclusion

The rational basis of property rights is the recognition that individuals need to be able use, consume and control physical goods, land, and the products of their effort, in order to survive and prosper in the long term. Without the forceful protection of property rights, other people can deprive an individual of what he has earned, with impunity. Socialism rejects and violates property rights for those who use their property to produce further wealth, at least when they hire wage-workers in the process. Thus, by its essential nature, socialism perpetrates injustices against those owners. It is a profoundly immoral system that strives to give wage-workers what they did not earn: the wealth produced by entrepreneurs and investors. Socialism destroys the incentive and the ability of entrepreneurs to create productive wage-jobs, to advance technology and apply innovations to solve current problems. So to the extent socialism is enacted, it is guaranteed to produce widespread poverty and technological stagnation.

Socialism shackles individuals who would strive to greatly improve both their own lives and those of others, by implementing new ideas and business models. Socialism enslaves the greatest producers to the majority of random strangers around them.

I recommend these books, related to my points in this essay:

Equal is Unfair: America’s Misguided Fight Against Income Inequality

and

Loving Life: The Morality of Self-Interest and the Facts that Support It

In the next part of this series, I’ll examine socialism in real life. I’ll explain why all fully socialist countries (with “public ownership of the means of production”) are despotic, oppressive and corrupt, rather than “free and democratic.” Click here for Part 2: Why Socialism is Always Oppressive, Dictatorial and Corrupt

In the last part of the series, I discuss Bernie Sanders and the partially socialist regulatory/welfare state, and why they are unjust, destructive, and slowly eating away at prosperity in the US.

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(1) Note that in relatively rare circumstances, people can be said to deserve economic value without having produced it. If they exerted effort and acted rationally to produce, but were stopped by an unforeseeable, freak accident of circumstances, then they could be said to deserve what they did not produce. This forms a moral basis for a decision by others who have sufficient wealth, to give the unfortunate person some of it. But in no case can this deserving be morally enforced by government, since those who actually produced the wealth also deserve control of what they have produced. They have the moral-political right to decide what to do with their wealth.

[Edited: 12-19-16: Added second-to-last sentence of last paragraph in the first titled section.

12-31-16: Added section: “Morality, Wealth Production and Justice”]

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Related Posts:

Socialism and Welfare vs. Justice: Why Inalienable Private Property Rights are Required for Justice

“Equal is Unfair – The Inequality Advantage”: A Talk by Yaron Brook

Wealth is Created by Action Based on Rational Thought

The Role of Profits in Free-Market Capitalism, and Why High Profits are Good for a Company’s Workers

How Business Executives and Investors Create Wealth and Earn Large Incomes

What is Individualism? What is Collectivism?

One thought on “Why Socialism is Morally Wrong: The Basis of Property Rights

  1. “A young Steve Wozniak and Steve Jobs would have to gain the ear of the local government council and convince them to put their idea for a personal computer before the general population for a vote, before they could set up even a small facility to produce them. If the voters–most of whom know virtually nothing about computers–reject his idea, then Wozniak and Jobs’s dream of developing a mass-produced personal computer dies there.”

    The corollary to this is just as devastating. Should a local government decide to be ‘forward looking’ and approve work on a new technology, then socialism offers no measure of success, other that political success. Should the company fail to succeed, or experience delays, then there’s no way to know when the project should be stopped, and taken as a failure. Bad projects would drag on for years with the hope that things will change during the next quarter.

    Capitalism allows independent innovation, and destroys bad innovation rather quickly, Tesla being the exception, rather than the rule.

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