Thanks to reader Robert for sending in this little story on basic economics:
An economics professor at a local college made a statement that he had never failed a single student before but had once failed an entire class.
That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A.
After the first test, the grades were averaged and everyone got a B.
The students who studied hard were upset and the students who studied little were happy.
As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F.
The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.
Could not be any simpler than that.
Comments 20
Ulli,
Wow, what an article today, that is exactly what I have been saying all along that O'Bama's "New Deal" is only going to help the dead beats and hurt the people who provide jobs and those few who will remain in the work force. Can't people see what the Pres. is doing? He is ruining our country and maybe just maybe we will need another revolution to take back our country as our current government is begining to be run like a modified dictatorship.
Thus it's also why this axiom still holds true: "any system that relies on robbing Peter to pay Paul can always count on the support of Paul"
CC, Cincinnati, OH
I have been finding your blog very interesting in terms of financial advice and comments and following it every day.
For this post, while I agree with the basic premise that "socialism" in a certain form is bound to fail, I do not agree with the characterization of Obama's program. Socialism has many nuances but, as can be seen from the recent town hall, it is falsely construed as being Russian socialism (as implemented during Cold War Russia). This form of socialism, with its production quotas and five year plans is absolutely not what is being advocated here. In Western Europe, socialism ideas have translated to the nationalization of certain key industries, a variety of safety nets, and the implementation of certain rights for workers (minimum wage, paid holiday, etc etc) among other things. Health care (as this seems to be the hot topic these days) is viewed as another worker's right.
The US has not gone as far as Western Europe in terms of what is referred to as the welfare state. However, it also has taken elements from "socialism" such as minimum wage and unemployment programs. These artifacts are not capitalistic in nature and stem from socialist ideas.
The injection of capital by the government was indeed a socialist idea as well (and it started under Bush so let's not all accuse Obama of all evils) but it may have been required under the circumstances (I am not expert enough to say one way or another and even experts disagree…). Furthermore, while the stimulus plan(s) were clearly an injection of capital, the US (like other countries) frequently injects capital into the economy through other means. There are many WTO battles over just such injections (into the arms industry, etc).
I find the way the term "socialism" is represented today to be very misleading. It has become the new battle cry for FoxNews commentators and they use it to instill fear in people because it carries a communist (read Russia) connotation to it. Obama is not a socialist in the Russian sense and it could probably be argued that he is not a socialist by European standards either.
Lastly, I would point out that the "socialism" in Europe may have had a positive effect during this current crisis. Although it is clear that a heavy welfare government slows down growth in good times, it is clear that it has played a helpful role during bad times. France and Germany have not suffered nearly as much as the US (and even the UK to a lesser extent). In this case, the socialist ideas seem to have played the role of a dampening agent, slowing down sudden movements in either direction. While this may not be a model people agree with, its merits cannot be discounted.
Ulli,
O'Bama started out with the slogan called "Change" I believe the only change will be what is left in our pockets after he makes most of us poor. O'Bama appears to be like Robin Hood who robbed the rich to give to the poor. This blog seems to have gotten away from investing to making political statements. Oh well if O'Bama remains in office we won't have any money left to invest anyway. Every day I regret having voted for O'Bama.
Hi Ulli,
I am enjoying your political blog. This article is right on and it appears that the O'bama crowd has there heads in the sand. They apparently can't see what was mentioned in the article. People, wake up, before it is too late and see what is happening here. Free choice is slowly and surely being taken away with O'bama's policies. The only ones that will win are the lowest classes and the rest of us will get nothing, probably lose what we have to give to the poor many of whom wouldn't work if a job was presented to them because O'bama will take care of them anyway. What a sick world we live in and nobody seems to care anymore. Well I do care and hope to be a part of the next revolution when it takes place.
Ulli,
A great eye opener message today. I, like a lot of people, didn't realize that our country was being lead down that path of destruction as fast as it is. Today's message makes that very clear.
Thanks.
Ukki,
Total hogwash! Red baiting bull. Stick to economics and investment strategies – your very good at that.
OMG! Aren't these posts, and your original post, Ulli, very simplistic and juvenile?
All this talk of socialism, lack of desire to work, etc. etc. just because the president has said that after the economy recovers we are going back to the tax rates that existed during the Clinton administration. Three points:
1. We all did better in the market under Clinton, as opposed to Bush Jr.
2. I haven't lost any rights, LOL. Do you know anyone who has?
3. My taxes haven't gone up. They might someday, but I doubt they will. They will actually go down now becuase I have a child in college.
BTW-I held my nose and voted for McCain, a man with no message and a poor choice for a running mate, but my above three points are all facts.
British policies that could be considered socialistic have led to these 2 absolute facts:
1) The British healthcare system is $24 billion in the red….and is not very good.
2) They have one of the lowest bond debt ratings in the civilized world.
I think healthcare needs reform. But more in the form of a castistophic safety net for major illness and accidents. And some reform in how the insurance system operates. For example, no way should perscription plans be ingrained completely into a health plan choice. You should have the right to have major medical while still having options about where and how much you pay for medicines. That would incrtease competition and eliminate some of the corrupt alliances/agreements between drug companies and health insurance companies.
Obama's biggest problem is he is not in CHGO anymore and you can't control by just spinning. The shoot first and figure out the details later approach doesn't work on a national scale.
Fox news doesn't control 50% of the voting publics opinion. In fact 1/3 of America doesn't even have cable. So the poll numbers against the proposed bill goes much broader the the far left and white house wants you to believe.
Democrat or Republican. We need to demand more from our national leadership.
CC, Cincy, OH
This is a silly Republiclown (or is that Republicloon?) little story. Obama the socialist. Please, enough of that crap. Stick to what you do and leave the wacky political crap to Rush and his ilk.
Ulli,
Well Peter the truth must hurt or you would not have made those statements. Sticking your head in the sand won't make this big O'Bama problem go away. We need a nice revolution as was mentioned a couple of times before, clean house and start fresh.
Ulli, could we possibly get back to investment stuff and not post all these controversial political subjects as there won't be any end to this well deserved O'Bama bashing? I want to hear what you have to say not someone elses story all the time.
Joan
Ulli
You are right on and do not pay attention to the many who can not yet see what is happening. Once they realize it will be too late and they will have lost their freedom as well as most of their wealth. Keep up the great work.
Rae
A simplistic analogy for a complex situation. We elected a brilliant man who has been systematically consulting a number of representative groups and adapting the plan to their suggestions. We are a creative democracy that ebbs and flows between the right and left the way the market goes up and down. Unscrupulous exploiters who have destroyed both insurance and banking industries must be reined in, held accountable and removed from their golden toilet seats.
Ulli,
I agree with another blog responder, lets get off this political kick and bring on the investment articles and maybe once lets get something from you Ulli. None of us hear much from you anymore it is always someone elses stories. We want to know what you have to say not some biased journalist. Any time O'Bama is mentioned it will open up a can of worms as he is losing popularity very quickly and people are getting fed up with and his socalled "Change", boy is that a laugh.
It's mind boggling how Americans get socialism and communism mixed up.
The idea that the UK's medical system is so many $$ IN THE RED is just an example. It's like saying that the USA freeway system or the police and fire protection services are IN THE RED. They are services to the people for god's sake.
– JB
"could not be any simpler than that"
Dad always said "for every complicated problem there is a simple solution… which is usually wrong."
this little story shows total ignorance of what socialism is and is not.
If we are talking about health care, surely the story is not intended to point out that sick people pull down the rest of us and should fend for themselves. If it does not refer to health care, please explain what part of our current system is being deplored. I probably would agree.
While we have the most inefficient health care system of all the industrialized countries, except it makes physicians rich and so-called "non-profit" hospitals with tons of money to spend on expanding into home health care and other areas, I don't think this blog should focus on those kinds of issues.
Adam Smith, the person credited for founding capitalism, said that capitalism should be controlled, to a degree. He said that capitalism was too cruel to just be the only economic policy.
I think this blog has gotten into a lot of supporting Republican conservative politics, rather than economics and investing, which I thought were its strength and real focus. As for those who say they are getting poor by Obama's policies, I haven't seen anyone's taxes raised yet, by Obama or the Democrats. The only upcoming tax increase was passed, while Bush was president.
There is so much confusion about what is socialism, because it has a tie in people's mind to communism. Socialism is an economic policy, where communism is a political policy. We have had a lot of socialism, in this country, for a long time — Social Security, public libraries, Medicare, and public transportation, just to name a few. I think almost everyone supports these socialistic endeavors. Sometimes, socialistic policies are necessary in difficult times. But I don't think this blog should get into this area, because it is tied, in many people's minds, with political agendii, rather than economics and investing, which I think are this blog's strengths.
The person in last week's blog who sent the YouTube link about how the stock market ignored the failing economy America and kept surging upward, until it crashed was a great example of what can happen when there is a disconnect between the stock market and the real world of what is happening. When that kind of thing happens, our country has initiated socialistic policies — some being temporary and some being permanent. Again, I think we should be discussing, in our writing, in this blog, investing and the economics of investing, rather than politics, though.
Even when some of the pondits say things are going well — like new home sales. How many new home sales are foreclosure sales? Also, many pondits point out that some aspects of joblessness are not as bad as they were a few months ago, even though some aspects of the jobless situation are worse. However, if we discuss this, in this blog, I think it should be in relation to the economics of investing, rather than politics.
Now, Bernanke says the economy is leveling out. Perhaps he's right and this blog should focus on whether or not he's right. I think it would be great if this blog RE-focused on investing and the economics of investing. I can read political blogs and political opinions in a lot of places. I hope this blog gets back to economics and investing. To me, that's where its worth is.
Ulli,
We haven't heard from you much of late, maybe you can steer this blog back to investing related info. instead of all this political crap.
Thanks
Obama is seeking the middle ground. If he appears socialist to you that's because you are too far right — just like the ecomomic policies of every administration since Reagan. The lessons of the Great Depression have been forgotten and regulation has been relaxed too much. How could you be blind to the fact that the current recession was caused by too little regulation, not too much?
To Just Chuck-
Obama is not Bill Clinton. No one could say one thing and mean another better than Bill. He balanced the budget while acting as a liberal. He was a fiscal conservative. Obama is Obama. Love him, hate him or just ignore him. But he is not Bill. That said, Obama has his hands full now. A good administration needs to be able to do several things well at once. Its not easy, but its necessary for the nation to do well. Are you better off now than 8 months ago? I voted for Obama, but he is no Bill Clinton. Bill had training as a Governor. Senators that are not ex governors have to learn the hard way. I never cut Clinton any slack and I won't for Obama. He needs to get more than Health Care moving.