The Enduring Popularity of Fraud

Steve’s post earlier today is a great reminder of how over the last 200 years, free enterprise has led to an unprecedented explosion of wealth, individual liberty and creativity. Nothing in human history–putting aside for the moment the claims of religion–has enriched the human race to anything like the same degree. If human history has conclusively established any fact, it is that free enterprise is fantastically successful, while socialism is a pitiful failure. Think of North Korea, the USSR, Maoist China, Albania, East Germany, Nazi Germany, Fascist Italy, Venezuela, Cuba, Argentina, India until it wised up. The list goes on and on.

And yet…the siren song of socialism still lures suckers. Currently, Venezuela is learning the age-old lesson the hard way. But we can’t laugh at Venezuelans, when Bernie Sanders is a serious contender for our presidency and is far and away the campus favorite. How is it that socialism (or the urge toward socialism, anyway) can survive? It is the cockroach of ideologies, seemingly impervious to all efforts to kill it.

It may be helpful to think of socialism as a species of fraud. There are many types of fraud, but nothing new under the Sun. The same frauds that Venetian merchants guarded against persist today. The same con games that flourished hundreds of years ago still work. Charles Ponzi’s financial empire collapsed in 1920, and he was arrested and sent to prison. Yet hardly a month goes by without another Ponzi scheme being revealed. There is only one way in which a Ponzi scheme can end: in disaster. This is a mathematical fact. Yet people fall for them, over and over.

People seem to be drawn to fraud like moths to a candle. When I was in law school, I learned about a relatively ingenious fraud. Someone placed an ad in all of the major newspapers on the East Coast. All it said was: “Friday, March 31, is the last day to send in your dollar. P.O. Box 1234, New York, NY.” Many thousands of people sent in their dollars: they didn’t want to miss the deadline. The perpetrators of the scheme were prosecuted, but it was a close-run thing: what was the fraud? The court accepted the idea that the ad made an implicit representation that there was a benefit to be gained or an evil to be avoided by sending in one’s dollar, but it was a pretty skinny case.

In the realm of fraud, the wisdom of the ages is reflected in the adage that a fool and his money are soon parted. The same, I think, is true of socialism. Socialism is fraud writ large. It is a fraud perpetrated by the cynical and greedy on the ignorant and credulous, just like a Ponzi scheme. Only we can add: a fool and his freedom are soon parted.

Only under socialism could Fidel Castro become the richest warlord, relative to his subjects’ wealth, in recorded history. (And that was the least of his sins.) Only under socialism could Maria Gabriela Chavez, daughter of socialist tribune of the people Hugo Chavez, beloved by the American left, waltz off with a $4 billion fortune. But then, she was a piker: Chavez’s Minister of the Treasury stashed $11 billion in Swiss bank accounts.

Charles Ponzi’s mistake was that he should have gone into politics. He could have gone far as a socialist politician, and could have avoided prison.

Socialism is, I think, a species of fraud, but socialism is also much worse than that. A fraudster like Bernie Madoff will only take your money. A socialist will take your money, but that is just the beginning. When you give power to the power-mad, your freedom and human dignity, and perhaps your life, are soon forfeit. So socialism is a uniquely evil variety of fraud.

The bottom line, though, is that, just as the familiar types of fraud have endured for centuries even though they have repeatedly been exposed and are known to the well-informed, so socialism persists, and will continue to endure, as long as men and women fall for the lies and blandishments of the cynical, the greedy and the power-mad.

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