by David Shane

Created on: March 26, 2009   Last Updated: May 28, 2009

What is socialism? To determine just what might be wrong with it, we first must determine what it is. In contemporary parlance, the word can mean anything from safety nets like Social Security, to wealth redistribution projects like progressive taxation, to full government control of the means of production. Some of these "socialisms" benefit society, while others are terribly destructive. But all of the nations we call socialist have one thing in common: a government that is strongly involved in one, or all, areas of the economy. So, since I'll be drawing mainly from F.A. Hayek's famous book "The Road to Serfdom," let me use something similar to his preferred definition: socialism is that system whereby the economy of a nation is planned and controlled by the government.

As we've said, a government can engage in this planned economy to varying degrees. They may merely give tax subsidies to preferred industries. Or, they could exercise great control over a single sector of the economy, like a government-run healthcare system. Or, they could go all the way and control and distribute all important commodities. But the more fully this system of socialism is approached to by a government, the greater the reduction in individual liberty.

Why is this so? It has been said that whenever we have a commodity in limited supply, whether it be a natural commodity like coal or a human commodity like healthcare, there are only two ways to distribute it to the population. You can do it via a free market - i.e., the commodity has a price, and whoever pays that price gets it. Or, you can do it by force - the government can decide who gets it.

If you go down this latter path, there will always be large segments of the population that disagree with how the government is distributing the commodity. After all, a government in this situation must develop some scale of values to determine how the commodity should be distributed. For example, the government may find that there is a coal shortage. In a free market, the price would rise, and those who could and desired to pay for the coal would get it. But in a planned economy, the government must decide, let's say, whether it is more important to send the coal to factories in Michigan or Nevada, or whether to send it to power plants or steel mills.

But this value scale will never be universal, and the bigger the nation in question, the more diverse viewpoints will be. It's quite likely that many of those who own or

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