What is Socialism and why does it fail to achieve results

By: Paul Young, CPA, CGADate: November 25, 2016

Disclaimer This presentation is one view of socialism.

Paul Young - Presenter

Bio CPA/CGA 25 years of experience in Academia, Industry and Financial solutions Youtube Channel -

https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

Agenda What is socialism What are social programs What is income re-distribution Private Sector Issues Example/Cuba Example/Venezuela

Socialism

How does revenue flow for government? Government gets money via taxation

Direct Taxation (Corporate / Personal Taxation) Indirect Taxation (Property Taxation, Sales Taxation, Excise/Duties Taxation Income from Crown Corporation User Fees Other taxation

Social Programs Education Healthcare Retirement Child Care Welfare

How are social programs funded? Taxation

Equalization CST/HST Direct funding

Why is business investment important? Business Investment

Capital is required to develop and produce products for both domestic and international exports (FDI and Domestic Capital)

Business requires inputs like labor and material to produce goods for re-sale. Consumer spending drives 2/3 of the economy

Issues with Socialism Productivity

People are not motivated to succeed in life Too much government intervention deters FDI

Companies will invest where they can get a return on investment No emphasis of efficient and effective uses of taxpayers dollars

Value for money Government does not operate in a competitive environment

Examples / Cuba Human Rights ranking low – Source -

https://www.hrw.org/world-report/2016/country-chapters/cuba or https://freedomhouse.org/report/freedom-world/2016/cuba

FDI – “Fixed capital investment in Cuba represents just 10% of GDP, which is half the regional average. This likely won’t change until the embargo is lifted, as that would facilitate the arrival of significant new foreign capital. Cuba currently requires billions of dollars in investment in communication infrastructure, an update to its dilapidated transportation network, and significant capital inflows into key productive sectors”. – source - http://cubajournal.co/investing-in-cuba-the-approval-process/ or https://hbr.org/2016/03/the-potential-and-pitfalls-of-doing-business-in-cuba

Example/Venezuela In the oil fields that dot the country’s eastern savanna, pump jacks sit

idle because of parts shortages, abandoned oil barges rust onshore and drillers earning $9 a week often skip shifts. Overall, the number of working oil rigs in Venezuela declined by a quarter in the 12 months to September, according to Houston-based oil-field-service company Baker Hughes Inc. There are now more rigs drilling in Oman, where proven reserves are just 1.7% of Venezuela’s. “I don’t think this government will be able to stabilize production even if the oil prices start to rise,” said Luisa Palacios, Medley’s Venezuela analyst. Source -

http://www.wsj.com/articles/venezuelan-oil-is-largely-staying-in-ground-or-going-up-in-smoke-1477238401