Why Communism Always Fails: The Leaky Hose

The reader will know that I am writing a series of blog articles on why communism always fails. I have not spent time, and do not intend to spend time analyzing all different species and variations of socialism and communism. That is something I or someone else can discuss later in a different article. In this series of articles, I am trying to crystalize social, political, and economic factors that help explain why communist governments, governments with overweening, centralized control over the economy and the people inevitably fail and have done so scores of times, in countries all over the world, since Karl Marx wrote his 23-page pamphlet, “The Communist Manifesto” in 1848. This article briefly focuses on the notion that centralized governments are incapable of collecting taxes and spending money without massive, inevitable waste, fraud, and abuse. Prominent examples of such waste and fraud in our own government abound. 

The recent COVID epidemic provided an epic hunting ground for government corruption and other forms of waste, fraud, and abuse. 100 billion dollars or more were lost through a variety of government errors and illegal schemes. Numerous people filled out false applications for grants to maintain nonexistent businesses. False claims for unemployment compensation proliferated.  Also, in many cases, the government sent checks to the wrong addresses, the wrong people, and the wrong businesses. Big businesses ignored restrictions on the size of the business that could apply for relief and piggishly captured significant monies meant for smaller businesses. Some renters who could pay their rent deliberately stopped paying their rent, and the government – which should generally not take sides in economic matters – actually sanctioned widespread dishonest and illegal violations of rental agreements – impacting thousands of Americans whose only sin was to have the discipline and patience to invest in a small rental property for their own retirement or to help their children. In the end despite all these inept efforts by government, small businesses withered and died across America in vast numbers.  

Unfortunately, these latest examples of waste, fraud, and abuse during the recent COVID pandemic are not even unusual. Billions of dollars simply disappeared during the Obama administration. Government accountants have been unable to explain where those billions of dollars went. Of course, almost all prominent politicians from recent administrations somehow ended up fabulously wealthy, despite the fact that many of them never ran a business or even had a real full-time job. Take Biden for example. Although he has repeatedly lied about his own academic credentials, it appears that President Biden graduated near the bottom of his class in law school. Like Barack Obama, Biden never worked for a real law firm or even as a lawyer for any length of time. He went right into government, rotted in government for 50 years – presumably earning modest government salaries. Biden’s wife has been a teacher at community colleges. She is not a medical doctor as some media sources have jabbered. Yet, the Biden’s are estimated to be worth over $8 million, and that is without taking into account any efforts to shelter or hide their money and without accounting for all the money that Hunter Biden has been collecting for them for years. Many of our modern politicians have similar stories of corruption and somehow became fabulously rich while supposedly living on government salaries and “serving the people.” Barack Obama is purportedly worth $70 million, despite having a very limited work history. Such well-heeled politicians explain where some of the country’s wealth gets leached out of the people, but the lion’s share of waste probably results from a dazzling array of wasteful government purchases and programs.  

The essential point here is that the leaky hose is inevitable where the centralized government is embarked on massive wealth redistribution. It must necessarily waste and lose money as it collects and redistributes those funds. To collect a bunch of money from the people requires one set of bureaucrats to tally that money, seize it, and send it to the central authority. Then the central authority needs another whole set of bureaucrats to count the money, waste some of it on their own salaries, benefits, and pensions, and then spread it around to various people who did not earn the money and often have no idea how to earn real money in the private sector. Bottom line: a government cannot engage in significant wealth redistribution without significant waste, fraud, and abuse, including corrupt officials lining their own pockets. This is why the richest people in communist systems are always the communist party leaders. They are the persons with political power, and they therefore take what they want, even though they never earned it.  

A clear recent example is the currently proposed IRS scam. During the Obama administration, Obama abused the IRS to go after political opponents, such as libertarians and tea party activists. A current leftist proposal is to hire a staggering additional 87,000 IRS agents, to give them access to the bank accounts of ordinary Americans, and to usher in a new era of harassment of the producing and productive class of Americans. The cost of hiring these additional IRS agents is estimated to be approximately $80 million per year. Such bureaucrats of course create no goods or services that anyone in the private sector wants to buy. They do not make cars or cell phones or beautiful jewelry. They do not offer travel or accounting services. Indeed, their sole purpose is to chase down and harass all the people in the private sector that do offer goods and services that Americans want to buy. Yet, despite their lack of utility, the new 87,000 bureaucrats will get much better salaries and much better benefits than the people running cafes and driving trucks, who will be the subject of harassment by bureaucrats. Remember nothing but the finest for government employees; they refused to even go on Obama care, preferring their own Cadillac benefits.  

So, this is another reason communism always fails. As money is redistributed on a massive scale, it runs through and out leaky hoses, losing as much as 40% of the total value, as bureaucrats, lie, cheat, and steal, and line their own pockets, favor their friends and families in fraudulent schemes, and otherwise piss away the limited wealth earned and generated largely by the hardest working 20% of the population, who pay 88% of the taxes.  

By Paul H. Beattie