The implications of socialism

The idea of so-called profit-sharing could have come about from innocent intentions. Why not have prosperous companies, who earned big money during the pandemic crisis, share some of their profits with struggling smaller..

Choi Hoon The author is the executive editor of the JoongAng Ilbo.

The idea of so-called profit-sharing could have come about from innocent intentions. Why not have prosperous companies, who earned big money during the pandemic crisis, share some of their profits with struggling smaller companies and merchants. There are multiple bills built on the idea being proposed, including the Cooperative Profit Sharing Act, the Loss Compensation Act and the Social Alliance Fund Act.

There is no disagreement that our community must unite to combat the unprecedented pandemic crisis together. But there must be a limit to the extent. As a nation is bound by a social contract, the reasoning and means of assistance must be based on free democratic and market economy principles.

Rep. Hong Ihk-pyo, policy chief of the ruling Democratic Party (DP), dismisses criticism of socialistic properties in the state-led relief programs as “vulgar red scare propaganda.” Arguing that all reforms face resistance, he resorts to the classic black-and-white approach favored by the liberal camp. The DP scorns the finance ministry for opposing universal relief handouts and demands a “goodwill act from the private sector.”

All socialistic mandates come from the honorable goal of achieving greater equality and better rights or benefits for unskilled workers, women and to control child labor at the onset of the Industrial Revolution. But why did none of the state-planned economic agendas deliver the “paradise on land” they so ardently promised?

Socialist ideas cannot be measured in numbers. Under socialism, no property can be privately owned, and private means of output also should be shared. Since output factors cannot be exchanged under the system, they cannot be priced. And since they are not priced, they cannot be measured.

The ideal of equality, therefore, is not tangible. Who plans, commands and distributes anyway? In his book “Principles of Political Economy,” one of the most important textbooks on economics from the 19th century, John Stuart Mill argued that unless they are thought to be godlike figures, leaving the decision of who gets more or less to a certain group’s whims and fancies could not be tolerated.

Another fallacy of socialism is that it merely goes after the final output without regards to the production process under the pretext of “justice.” Ludwig von Mises, the leader of the Austrian School of economic thought, described in his critique of socialism why the system must always fail: “Without calculation, economic activity is impossible … All economic change, therefore involve operations the value of which could neither be predicted beforehand or ascertained after they had taken place. Everything would be a leap in the dark.”

The profit-sharing scheme also has come under fire for its renunciation of rational economics. Profits are made from competitiveness in output, cost effectiveness, R&D investment, marketing capabilities, industry trends, global economy, demand and foreign exchange changes, to name a few factors. Accounting for them in the extraordinary context of a pandemic cannot be easy.

How can profit from output be shared without the consent of shareholders who paid for the capital? Stripping them of their rights to dividends would infringe on the right to private property. Korea’s Civil Law bans a property owner from disposing or changing a common property without the consent of other owners.

Fair distribution is even more difficult to define. The core principles behind distribution are four: equitable distribution; appropriate distribution according to the services to an equitable community; distribution out of necessity; and a sharing based on performance. But calculating the damage from Covid-19 cannot be precise nor fair. The finance ministry, too, has given up on methodology for fair distribution of relief checks and resorted to a “universal” handout scheme. Moral hazard also cannot be measured. Unless the deed is done by God, fair distribution is impossible. Disregard for entrepreneurs and employers is also a socialist feature. Lenin called them “parasites who suck the blood of the working people.” Here’s another question: Do our lawmakers and policymakers who used to be student activists know the agonies of employers even though they have never paid salaries to anyone or taxes for business income? If they understand the hardship behind corporate innovation, they would not trot out so many anti-business laws.

Destruction is another socialist character. Their slogans and propaganda can be delusionary. The critical media and public opinion are censured as “fake news” under the pretext of reform. They believe that the prosecution and the judiciary also should be tamed after they took control of the legislature. Alexis de Tocqueville famously said, “Democracy and socialism have nothing in common but one word, equality.” But the difference is that while democracy values equality in liberty, socialism sees equality in restraint and servitude. Those hurt by Covid-19 must be helped to preserve their livelihoods and liberty for the sake of the national economy based on the principles of democracy and free markets. Whatever the cause, the ruling front’s profit-sharing scheme must not fan suspicions of its socialist features.