United States Sen. Bernard Sanders introduced legislation on June 2 that could change your life. This legislation, the U.S. Employee Ownership Bank Act, is ostensibly an attempt to strengthen the U.S. economy by retaining and increasing jobs through socialistic measures.
How does the bill propose to accomplish this? By collectivizing the economy.
A new, taxpayer-funded, government bank will provide loans and loan guarantees to employees to form collectives to purchase the business they work for through an employee stock ownership plan, or a worker-owned cooperative.
Senator Sanders stated when explaining why the legislation would increase jobs. “When employees own their own companies, when they work for themselves, when they are involved in the decision-making that impacts their jobs, workers become more motivated, absenteeism goes down, worker productivity goes up, and people stay on the job for a longer period of time.””Simply put, when employees have an ownership stake in their company, they will not ship their own jobs to China, they will be more productive, and they will earn a better living,”
Unfortunately, the history of collectivism does not support Sanders’s enthusiasm. Socialism has never led to greater lasting prosperity.
The late economist Milton Friedman stated, “When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union—like public housing in the United States—look decrepit within a year or two of their construction.”
Later Friedman said, “So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”
Consider Argentina. In 2012, the government nationalized the country’s largest oil company, Treasury Petroleum Fields, with the intent to increase its investment in the economy. Fast forward two years: July 30 marked the country’s fourth debt default after it could not pay the $539 million interest payment on its $20 billion debt.
But Argentina wasn’t always such an economic basketcase.
In its pre-socialst days, Argentina was the seventh wealthiest nation on Earth. Gold and silver flowed from its mines. The term “as rich as an Argentine” summed up life for the South American superpower.
Harvard historian Niall Ferguson points out that when Argentine President Juan Peron first visited the nation’s central bank in the mid-1940s, he marveled that “there is so much gold you can hardly walk through the corridors.”
A socialist revolution. The government collectivized and redistributed private property in the name of fairness. The unions and military were the big beneficiaries. Eventually the money ran out, so the government began printing money to distribute to the people. Rampant inflation ensued. The rest, as they say, is history.
“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it,” economist and historian Thomas Sowell said.
The biggest problem with socialism is the disregard for the role of the private property rights in creating incentives, which stimulate economic growth. When a business is owned by the public—who decides its own wages—incentives to promote wise stewardship are eroded. Private property encourages responsibility, while communal property fosters irresponsibility, waste, neglect and mismanagement.
Argentina was once a first world nation, but socialism has pushed the nation toward second world status.
Kentucky Sen. Rand Paul commented in February about America’s trend toward socialism: “It’s that arrogance from Washington that, really, the whole country ought to rise up—Republican, Democrat, Independent—and say, look, this is a free country and we want our freedom back.”
Continuing down this socialist tract will only further exacerbate America’s gargantuan economic problems. ▪