Statism is the gradual replacement of civil society, markets, savings, and individual choice by political control, public spending, regulation, taxation, and monetary intervention.
In most developed economies, and increasingly in the United States since 2008, the dominant force is not free-market capitalism but a model of big government, chronic deficit spending, high debt, rising taxes, monetary debasement, regulatory obstruction, and political interventionism that protects insiders while penalizing new entrants. That is why so many millionaires and wealthy people support socialism. It is the perfect way to eliminate a merit-based system, obliterate competition, and keep privileges provided by political affiliation while demanding even more government control. Few people are richer and more powerful than socialist tyrants and their enablers. Meanwhile, socialism needs poor people that stay poor and remain submissive to the state.
Artificial money creation is never neutral. It disproportionately benefits governments and owners of assets that can protect themselves from monetary inflation. At the same time, it always hurts real wages, deposit savings, and those with no assets. Socialism is often sold as a rebellion against privilege, but in practice it is one of the most effective tools ever designed to entrench it. The bigger the state, the more valuable political access becomes. The more interventionist the system, the easier it is for large incumbents, bureaucracies, and connected interests to dictate regulation, capture subsidies, suppress competition, and decide who receives favors.
Brij Khurana, a fixed-income portfolio manager at Wellington Management writes in the Financial Times: “Perhaps there is no better example of the K-shaped nature of the US economy than the fact that employee compensation has fallen to 50 per cent of GDP, its lowest level since 1947, while household net worth is close to an all-time high of 546 per cent relative to GDP. This dichotomy helps explain the resurgence of socialism among younger Americans. Gen Z depends disproportionately on wages, whose purchasing power has been eroded by inflation, while baby boomers hold much of the country’s accumulated wealth. It is this wealth effect that is increasingly responsible for the inflation that remains in the US economy. Excluding shelter, core inflation has been relatively stable at about 2 per cent for the past three years. The stickiest components of inflation are related to housing, restaurants, travel and other services where demand is tied to wealth.
Socialism replaces success-driven inequality with a politically directed one. However, in statism inequality is a matter of price, not availability. Socialism leads to hyperinflation and scarcity because it ignores economic calculation and uses the debasement of currency to expropriate the wealth created by the remains of the private sector and keep citizens dependent and submissive, while the political leaders enjoy the perks of privilege. When the state spends too much and the central bank disguises the consequences, citizens are told they are being protected. However, they are being impoverished through currency dilution and asset inflation.