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Einstein's Socialist Argument and my response

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1 Einstein's Socialist Argument and my response on Wed Jan 22, 2014 12:40 am

For his argument, see here: http://www.exponentialimprovement.com/cms/uploads/Einstein%20on%20Why%20Socialism.pdf

My argument:

First of all, Einstein comes in with an argument based on a previous conclusion that competition is bad. He says that the goal of companies is to destroy each other through legal means and that this is inherently evil. He declares that the sole goal of these corporations is to create profit and destroy other companies. One fundamental flaw is that he ignores the consumer and only talks about the capitalists. While companies try to harm each other, one must realize that at the end of the day, whichever company survives is based off of two factors: Asset management and the consumer. If a company does not manage it's assets properly, the company will fail. This doesn't just apply to a company, but it also applies to governments. The difference is, if one company, unless it has a monopoly which would be unlawful in a capitalist society anyways, goes under, there are numerous other companies to choose from. If a government goes under, one does not simply leave the country. The second factor is the consumer. At the end of the day, it is the consumer who decides which company lives and which one goes bankrupt. Companies compete for the goal of making profit, something they can only get if the consumer feels that the company's product benefits them. If the consumer does not like a product, they have numerous other companies to buy from. In a socialist economy, if they don't like the product, they are still forced to buy it along with everyone else. So while companies may be harmed, ultimately, it is the consumer, the majority, which is benefitted.

Secondly, Einstein gets his argument completely wrong on wages. According to Einstein, workers are not payed based on how much work they do and how much they contribute (their worth), but rather get payed the bare minimum. If this argument were true, you would see 99% of Americans on minimum wage. However, this is not the case. Rather, only about 5-10% of Americans are payed minimum wage. The other 90-95% get payed above the minimum wage plus benefits because that is how much they are worth. A lawyer does not get payed minimum wage because he does a ton of work. A cashier gets payed minimum wage because he just stands there and says "fries with that?" while taking people's orders. These people can easily be replaced, therefore, they are not worth more than minimum wage. In a socialist society, however, this would not be any better. In fact, wages would be even more disproportionate based on work. In a socialist society, a cashier and the president of McDonalds gets the same pay, even though the president of McDonalds, despite popular belief among socialists who think running companies are easy, is much more work and is much more important than a simple, replaceable, cashier. Minimum wage has just created a long line of unemployed people who are worth less than minimum wage.

Next, Einstein discusses the flow of capital and how it generally ends up in the hands of a small few. While this may be true to an extent, this doesn't make it unjustified. Capitalism provides everyone the chance for everyone to become rich. Some succeed, others fail. Not everyone needs to be rich though. Capitalism gave rise to the middle class, a class between the rich and the poor. People in the middle class generally live comfortably without having millions, if not, billions of dollars to their expense. If all capital truly went into the hands of a small few, there would not be any middle class. Also, remember in the first paragraph where I discussed how companies succeed or fail based on consumer needs. The rich generally get rich off of those willing to buy their products. If these people become rich, it is solely because people not as rich as them are willing to buy their products. They got rich off of other people allowing them to.

Fourthly, Einstein discusses labor. He states that no way to ensure that everyone willing to work will get a job. However, there really is no alternative to this. In a socialist economy, jobs do not come out of nowhere and are not created for no reason, just the same as a capitalist economy. If a person is only skilled in one area of which there is no demand for more workers, neither a capitalist nor socialist economy will be providing him with a job in that field. Einstein also mentions that the free market brings forth technology that causes unemployment. The only reason such technology exists to put others out of a job is because it is simply cheaper for companies to use technology rather than actual people. This brings us back to the economic worth of an individual. For example, a fast food restaurant decides it can no longer continue paying it's employees minimum wage because it is causing them to raise their prices and lose business. For this reason, they replace the employees with self check-outs. This is not a product of capitalism, this is a product of social programs destroying the lower income earners. There is no reason to pay someone more than they are worth. Remember that when these employees are replaced by cheaper machines, prices go down and the consumers benefit. Einstein states that unlimited competition leads to a waste of labor, but the truth is, that is the only way to keep so many people employed. The more competition there is, the more companies there are, the more people are employed. If there was no competition, there would simply not be enough areas to keep the majority employed since you only need enough employees to create one company. Only with competition can you keep so many people employed.

Lastly, Einstein states that only a planned economy can possibly work for everyone. Every country in history with a completely planned economy has failed. The USSR had the lowest GDP per capita in the world in 1989. North Korea is in famine. East German vs West German development shows how poorly the planned economy turned out for East Germany. A centrally planned economy is based on the assumption that government will always be in your best interest. Even if it is, one single organization cannot address the needs of every individual. Hundreds of thousands of companies, large and small, are what can provide for every individual need because they need to in order to turn a profit. Einstein continues by saying that education should be based more around social goals than competition. This only works as long as people do not realize that they can essentially do nothing and still be winners. The idea is simple. If there are too many people on the wagon and too few pulling it, you will not progress anywhere. Humans are not stupid creatures and they realize that if they can do nothing and still do as well as everyone else, they will do it. Humans are not ants and bees. Humans do not act purely based on instinct. Humans can think for themselves and for that reason, humans cannot conform to socialism.

I will finish this off by saying that Einstein got it completely wrong on his economic ideology.

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Dang you are right. I had no idea Einstein was a socialist.

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